Category: capital
September 26, 2016 John McDuling at Financial Review : Everyone wants to be a VC now
Venture capital has become [one of] the most glamorous and exciting corners of finance. Rich heirs used to open record labels or try their hand at producing films, now they invest in start-ups. (read more…)
CATEGORY: capital, leadership, VC
September 20, 2016 Industry Ventures : A Graceful Exit – Managing Shareholder and Limited Partner Liquidity
Most investors and companies invest significant time and energy in securing capital, hiring a CEO, or finding a strategic partner. But they devote considerably less to lining up the right shareholder or limited partner when they want to sell or leave a job. When an employee or other shareholder is looking to cash out, how are they treated? How does the exiting partner or management team member treat the company and remaining stakeholders? For whatever reason, most leavers simply want to move on; they give short shrift to the personal and professional benefits of maintaining relationships and connections. More often than not, the exit process is an afterthought or is seen as a waste of time. (read more…)
CATEGORY: capital, leadership, VC
August 11, 2016 Wall Street Journal : In Tough Climate, New Investors Scoop Up Startups and Revamp for Sale
After trying for four years and not generating enough growth, Walter Chen decided to sell his work productivity startup, iDoneThis. The Las Vegas company couldn’t raise new funding or find a suitable strategic buyer after initially raising $900,000 in seed funding. So in November Mr. Chen and his co-founder sold to an unconventional hybrid venture capital-private equity investor (read more…)
CATEGORY: alternative financing, capital, downturn
April 21, 2016 Bill Gurley : On the Road to Recap
The reason we are all in this mess is because of the excessive amounts of capital that have poured into the VC-backed startup market. This glut of capital has led to (1) record high burn rates, likely 5-10x those of the 1999 timeframe, (2) most companies operating far, far away from profitability, (3) excessively intense competition driven by access to said capital, (4) delayed or non-existent liquidity for employees and investors, and (5) the aforementioned solicitous fundraising practices. More money will not solve any of these problems — it will only contribute to them. The healthiest thing that could possibly happen is a dramatic increase in the real cost of capital and a return to an appreciation for sound business execution. (read more…)
January 15, 2016 National Venture Capital Association : $58.8 Billion in Venture Capital Invested Across U.S. in 2015, According to the MoneyTree Report
“With almost $60 billion deployed to startup companies in 2015, the venture capital ecosystem is strong and healthy, and committed to helping entrepreneurs get their breakthrough ideas off the ground and into the marketplace,” said Bobby Franklin, President and CEO of NVCA. “While a handful of unicorns and late-stage funding rounds by nontraditional investors continue to grab the headlines, more than half of all deals in 2015 went to seed and early stage companies, with more than 1,400 companies raising venture capital for the first time. Entrepreneurs in 46 states and the District of Columbia raised venture capital in 2015, a testament to the reach of the venture capital industry and the strength of startup ecosystems across America.” (read more…)
CATEGORY: capital, valuation, VC
November 1, 2015 Will Gornall and Ilya Strebulaev : The Economic Impact of Venture Capital: Evidence from Public Companies
Over the past 30 years, venture capital has become a dominant force in the financing of innovative American companies. From Google to Intel to FedEx, companies supported by venture capital have profoundly changed the U.S. economy. Despite the young age of the venture capital industry, public companies with venture capital backing employ four million people and account for one-fifth of the market capitalization and 44% of the research and development spending of U.S. public companies. From research and development to employment to shear revenue, the companies funded by venture capital are a major part of the U.S. economy. (read more…)
April 14, 2015 Saints Capital : A Guide to Secondary Transactions: Alternative Paths to Liquidity in Private Companies
The sale of private company shares on the secondary market is becoming increasingly prevalent as the timeline to reach a liquidity event has lengthened over the last decade. In order to proactively manage secondary transactions, the boards, management teams, and investors of these companies need to be aware of the relevant issues, challenges and considerations. (read more…)
CATEGORY: capital, secondaries, valuation
June 20, 2014 Capital Dynamics : Introductory Guide to Investing in Private Equity Secondaries
The average high bid from 2006-2007 was above 100% of the reported NAV, i.e. buyers paid premiums to NAVs across all strategies, betting on further appreciation potential for the acquired funds. In 2008, following the collapse of Bear Sterns in February, the dramatic events in September 2008 and the ensuing ‘great financial crisis’; prices in the second half of the year fell sharply and continued to be at a very compressed level through 2009, reflecting widespread financial distress that some Sellers found themselves experiencing while the Buyer community experienced uncertainty and risk-aversion. At the prices offered, only the most liquidity-pressed Sellers actually sold. Consequently, the overall transaction volume pulled back and ended up at an estimated USD 10 billion, or merely 50% of the levels seen in 2008 (see Figure 2). In 2010, markets and economies around the world started to recover, as did pricing in the secondary market. Transaction volumes and pricing quickly rebounded to more normalized levels. Since 2010, as market participants became increasingly optimistic, both transaction volumes and initial high bids have risen to 90% of NAV for all strategies in the second half of 2015. (read more…)
CATEGORY: capital, secondaries
September 18, 2013 Todd Hixon via Forbes : Spring In Venture Capital
What we are seeing here is the end of a long, painful correction. The venture industry and the entrepreneurial world grew extremely fat in the late 1990s, when money was very easy, and it has taken almost 15 years for the surplus capital, funds, and companies from that era to exit or fade away. My old boss liked to say: “When everyone runs to one side of the boat, the other side will likely be drier”. Warren Buffett has a saying like this too. It’s very hard to call the exact bottom of a cycle. It’s reasonably possible to know when a sector has fallen far below its long-term norm and is due for recovery before long. That’s the way I see venture capital now. (read more…)
May 7, 2012 Kauffman Foundation : We Have Met the Enemy…and He is Us: Lessons from Twenty Years of the Kauffman Foundation’s Investments in Venture Capital Funds and the Triumph of Hope Over Experience
VC returns haven’t significantly outperformed the public market since the late 1990s and, since 1997, less cash has been returned to investors than has been invested in VC. Our research suggests that investors like us succumb time and again to narrative fallacies, a well-studied behavioral finance bias. (read more…)
CATEGORY: capital, VC, winner take all