A New Model to Spark Innovation Inside Big Companies

Impressed by the breakneck growth of digitally-native companies such as Amazon, Alphabet, and Alibaba, established companies are spending enormous energy and money on digital transformation efforts. Many of these projects are led by scrappy “intrapreneurs” who launch a new digital venture inside an existing firm. They have the vision and persuasive powers to convince their company to provide early funding — driven, in part, by the desire of the company’s leadership to pursue a compelling digital initiative. READ MORE

The five questions investors need to ask deeptech startups

Deeptech is high on the agenda of governments and investors as the cutting edge of tech moves away from consumer software to areas like materials science, spacetech and robotics. However, deeptech is different. Both for founders and investors, the parameters are unlike other startups, and so are the risks, which means a different approach is often required.

In the first of a three-part series, drawing on over a decade of deeptech investing at Octopus, we offer a VC’s perspective to give founders the best chance of success. Here we’ll start with the basics on why deeptech is different and what VCs are really looking for when they invest. READ MORE

VC Pitch Deck Bias Is Costing Diverse Startups Funding Dollars

Apparently 35 seconds is the difference between $195,000 and nearly $660,000.

That’s the finding of a study by DocSend, a Dropbox Inc. subsidiary that allows companies to securely store and share pitch documents. Venture capital firms spent 18% more time viewing pitch decks from all-male teams than those made up of only women, DocSend found. That eventually resulted in men’s firms raising 70% more than women did in 2020 -- an even greater disparity from 2019, when women raised about half as much as men.  READ MORE

IPO and SPAC Boom Continues as More Life Sciences Companies Announce Terms

With 2020 holding a record number of biotech IPOs, this year is lining up to come close. Three more Bay Area life sciences companies are just about ready to hit the Nasdaq, adding to the growing list for 2021.  

The most recognizable name on the list is ancestry and health company 23andMe. Known best for their “spit tests” that reveal clients genetic background, the company not only breaks down ethnic roots but also provides important health insights for disease risk.  READ MORE

The art of the SPAC: from sublime to ridiculous

If beauty is in the eye of the beholder, those with a hand in the SPAC market are seeing quite a pretty picture. More than 300 U.S. special-purpose acquisition companies have listed already in 2021, according to Refinitiv, outpacing previous records at this stage in a calendar year by more than 10-fold. They have minted billions for their creators and put an indelible contemporary spin on how companies go public. READ MORE

ESG Metrics Remain Elusive for Private Equity Firms

Months after the SEC’s announced shift toward compiling additional data on companies’ Environmental, Social and Governance metrics, getting hard data on company progress is still a challenge, said panelists at Mergers & Acquisitions’ The Best in M&A Speak virtual event yesterday. The event honored the winners of the 2021 Top 10 Middle-Market Deals of the Year.

A key challenge is standardizing metrics across companies. A Limited Partner with positions across numerous funds could be inundated with ESG reports citing disparate measures, said Women’s Association of Venture and Equity board member and Fordham University private equity professor Sheryl Schwartz. “One of the challenges as an LP is you’re getting all different formats and all different information,” Schwartz said. “To get 120 quarterly reports and then each fund has 20 to 40 companies, there has to be a way of aggregating that data and coming up with conclusions. And that process has not yet been fully developed.”  READ MORE

Private equity is losing its mystique

THERE HAS long been an element of the gentlemen’s club about the private-equity (PE) industry. It is still predominantly male. It has a buccaneering history filled with mystique. It cherishes discretion. And its fees are exorbitant compared with the services it provides. If anything covid-19 has made it even more exclusive. Despite what Preqin, a data gatherer, says was a slowdown in fundraising during the pandemic as in-person meetings stopped, the firms with the longest pedigrees have had the least trouble raising money, doing deals and earning bumper profits. READ MORE

Why venture capital firms might change a startup's leadership

Consider the 21st century's most storied CEOs: Steve Jobs, Bill Gates, Jeff Bezos. All have one thing in common – not only did they run their companies, they founded them.

Each of these corporate leaders, in other words, had to deal with venture capital firms to find critical resources for their firm's success. And it didn't always end well. Jobs was famously fired when Apple's board replaced him with the former CEO of a soft drink company – a disaster from which Apple took years to recover. READ MORE

Will Biden Tax Hikes Torpedo Venture Funding?

Not every business leader is wary about President Joe Biden’s proposed tax hikes. Alan Patricof, a veteran venture capitalist, says the VC world can stomach higher levies—which puts him a odds with a good number of his peers.

“I believe that the amount of money that will be put into startups will be just as strong as it is now,” said Patricof, who helped seed Apple and many other now-powerful Silicon Valley companies back when they were getting started. “Entrepreneurs are not going to stop and say, ‘Gee whiz, the capital gains rate is going up. I better not start my company.’” READ MORE

Proposed Changes to Capital Gains Likely To Affect Early- and Late-Stage VC Differently

President Joe Biden’s American Families Plan unveiled last week included a substantial increase to the capital gains tax — taxes on earnings from investments — but its effect on venture capital may not be as straightforward as it appears.

Biden’s proposed tax overhaul includes hiking the long-term capital gains taxes from 20 percent to up to 39.6 percent for high earners (or 43.4 percent if one includes Medicare surtax) — basically taxing investment earnings as income. READ MORE

Private equity and venture capital fundraising falls in 2020

Private equity and venture capital fundraising in Europe in 2020 hit €100.5 billion ($123.4 billion), down 12.2% vs. 2019, due to the coronavirus pandemic.

A report by Invest Europe, a trade association that represents Europe's private equity, venture capital and infrastructure sectors, showed Thursday that although fundraising fell from 2019's record high of €114.5 billion and was lower than the €103 billion raised in 2018, the 2020 figures were still higher than results recorded for most of the last decade. READ MORE

A bigger role for venture capital

TO UNDERSTAND WHAT was a risky venture in 19th-century America, visit the Whaling Museum in Nantucket. The industry thrived on this Massachusetts island, now transformed from an outpost for coarse sailors into a swanky beach spot. Two centuries ago, whales were valuable because of the lucrative oil in their head-cases. Captains amassed fleets of sloops and dozens of men armed with harpoons to hunt them. For lucky crews that found their “white whales” the rewards were enormous, but so were the risks of losing ships and souls in the hunt. In “Moby Dick” Herman Melville admonishes the reader: “for God’s sake, be economical with your lamps and candles! Not a gallon you burn, but at least one drop of man’s blood was spilled for it.” READ MORE

Capital-Intensive Agriculture Sector Plants Seeds For More SPACs In 2021

When CEO David Rosenberg wanted to take AeroFarms public, he considered a traditional IPO, but soon decided that a merger with a special purpose acquisition company provided a better path to the public markets for his startup, which grows crops in vertical indoor farms.

He soon found a match with Spring Valley Acquisition Corp., a $232 million SPAC that went public last November and was looking for a business in the sustainability sector to acquire. In March, the companies announced that AeroFarms would go public via a merger with Spring Valley in a deal valued at $1.2 billion. READ MORE

The Market Minute: SPAC Regulation May Be On The Horizon

If you’ve been keeping tabs on the public markets the past few weeks, you’ve probably noticed that the number of SPACs forming and filing for initial public offerings has slowed down dramatically.

It’s a quick turn of events, considering how hot SPACs have been the past few months. Back in February, it looked like SPAC IPOs would outpace traditional IPOs this year. And in 2021 so far, 312 SPAC IPOs have been completed, generating more than $101 billion in gross proceeds, shattering all previous records, according to SPACInsider, a website that tracks such deals. READ MORE

Proposed Changes to Capital Gains Likely To Affect Early- and Late-Stage VC Differently

President Joe Biden’s American Families Plan unveiled last week included a substantial increase to the capital gains tax — taxes on earnings from investments — but its effect on venture capital may not be as straightforward as it appears.

Biden’s proposed tax overhaul includes hiking the long-term capital gains taxes from 20 percent to up to 39.6 percent for high earners (or 43.4 percent if one includes Medicare surtax) — basically taxing investment earnings as income. READ MORE

Is Early-Stage Venture Becoming A Growth Investor’s Game?

Global venture funding hit an all-time high in the first quarter of 2021, per Crunchbase data. That sort of increase in venture funding is typically attributable to growth in late-stage funding. 

But, along with a surge in late-stage funding, we also saw a marked increase in early-stage funding last quarter, with $39 billion invested in nascent startups, up from $25 billion in the fourth quarter and $22 billion in the first quarter of 2020.  READ MORE