February 7, 2020 Alex Danco : Debt is Coming
The Financial Capital all-equity stack, as powerful as it is for creating something out of nothing, is and has always been at odds with the Production Capital mentality of a business builder and operator. There is nothing inherent to tech companies that requires that so many of them fail to live up to their aspirational valuations, aside from the way they’re funded. (read more…)
CATEGORY: alternative financing, debt, risk, valuation
January 21, 2020 TIMIA Capital : As Over-Funded Unicorns Lose Their Shine, Is Bootstrapping Finally Becoming Newsworthy?
The phenomenon of celebrating funding rounds is baffling. And it sets a poor example for new founders. We need to take the focus off the funding and place it back on enterprise value creation, revenue growth, and capital efficiency. I’m not saying that you should never take venture capital. It’s just that there’s a time and a place for it and, for the most part, early-stage founders are hugely disadvantaged by it. For early-stage founders, it’s in the best interest of the venture capitalist if you rapidly fail. Compounding returns make time your enemy—when you fail to meet the unrealistic growth targets, the VC will cash out and move on to the next shiny object. In this scenario, the founder is left with nothing and all the enterprise value creation (or potential for value creation) is destroyed. (read more…)
CATEGORY: alternative financing, capital, debt, profitability
January 20, 2020 Tristan Pollock via Medium : The New VCs: Revenue-Based Versus Shared Earnings
The tides are turning. That is, non-dilutive. No longer are startup founders limited to traditional venture capital that gives only a 1% chance of “success.” Entrepreneurs are in revolt and paying attention to new models of financing that give them refreshed optionality when looking to fund their growth. (read more…)
CATEGORY: alternative financing, resilience
January 9, 2020 Wall Street Journal : Money-Losing Companies Mushroom Even as Stocks Hit New Highs
The combination of forces has pushed the percentage of listed companies in the U.S. losing money over 12 months to close to 40%, its highest level since the late 1990s outside of postrecession periods. This time there’s no recession, and stock market indexes are at or near record highs. That sounds scary, although it’s mainly worrying for investors in smaller companies. (read more…)
CATEGORY: downturn, profitability, risk, valuation
December 12, 2019 Kauffman Fellows : Venture Returns With Abe Othman of AngelList
In a blockbuster conclusion, you found that seed stage investors should put money into every credible deal – this is a surprising finding! Yes, we found that investors could benefit from indexing as broadly as possible at the seed stage, by putting money into every credible deal, because any selective policy for seed-stage investing—absent perfect foresight—will eventually be outperformed by an indexing approach. We did do some simulations, not in the publication, on what indexing at seed actually looks like over human timescales. Over a ten-year investment window, indexing beats 90-95% of investors picking deals, even when those investors have some alpha on deal selection. So the idea that there are some terrific seed investors that soundly beat indices is not inconsistent with our results. (read more…)
December 6, 2019 Entrepreneurship Theory and Practice : ADHD-Related Neurodiversity and the Entrepreneurial Mindset
Our results suggest neurodiversity from ADHD is meaningfully related to aspects of an entrepreneurial mindset. Our results suggest entrepreneurs with ADHD employ a more intuitive cognitive style and demonstrate higher levels of entrepreneurial alertness and RICH, while no significant differences in metacognition were found. (read more…)
CATEGORY: leadership, risk
December 6, 2019 SaaS Capital : SaaS Industry 2019 Observations and Thoughts for 2020
We continue to believe that the economy and capital markets will tighten over the next several years. However, there is now a large pool of committed PE dollars to support the stronger SaaS companies through a downturn. Related, we have recently seen more support for profitability, or at least more controlled losses, among the VC and startup communities that have previously decreed growth at all costs. (read more…)
CATEGORY: alternative financing, profitability, SaaS
December 3, 2019 Aaron Dinin via Medium : Venture Capitalists Don’t Invest in Magic. Neither Should You.
Instead, the kinds of growth companies should be studying, charting, and analyzing is intentional, controlled growth. That means growth driven from things like replicable marketing campaigns, sales funnel optimizations, and improving your company’s customer success process. Simply put, when you can attribute a sale to a specific and intentional action your team has taken, and when you can consistently repeat the action to achieve similar results, that’s when it’s reliable, predictable, investable growth. Everything else is just magic: fun to watch, but not something you can invest in. (read more…)
CATEGORY: growth, leadership, product-market fit, VC
November 24, 2019 Tristan Pollock via Medium: : The Emergence of Revenue-Based Venture Capital
“The advent for start-ups to seek alternative investment from qualified investors is due to both the myopia of VC companies, which they believe fit in their portfolio and highly inflexible terms for founders,” explains Carolina Abenante, the founder of contract management platform NYIAX. This myopia is what has brought about the rise of new venture capital firms that are focused on more than just growing fast in hopes of raking in a big return when the company goes public. (read more…)
CATEGORY: alternative financing, debt, resilience
November 20, 2019 Runway Growth Capital : These are the Companies Most at Risk if Venture Funding Dries Up
Companies with soft, monetizable assets such as intellectual property in the form of patents, software code and contracts that are interested in securing debt growth funding should move quickly because most commercial banks do not find their collateral as attractive as that of brick-and-mortar businesses. And, frankly, they simply do not have the wherewithal to understand these forms of collateral and the confidence to stand by these companies when the economy is turbulent. (read more…)