The Pitfalls of Venture Capital Valuations

Have you ever wondered how WeWork, valued at $47 billion in January 2019, fell to $12 billion in September of the same year when they planned to IPO? As tech unicorns, privately held companies with an initial valuation over $1 billion, become more and more commonplace, it is important to ask if these valuations are accurate or if they are artificially inflated without regard to their intrinsic value.

Venture capitalists are not looking to invest in companies and run them into perpetuity. Their business model is to invest in numerous companies, double down on companies that do well, and sell them for a big payday. The only way this model works is when their portfolio companies are successful in raising capital at higher valuations in each subsequent funding round.  READ MORE

Confessions of a Venture Capitalist

There's always been an aspect of the job that is like a beauty contest. There’s this old line that being a VC was 99 percent saying “No” and 1 percent begging. And now, it's more like 10 percent begging. You spend a lot of your time trying to convince some 23-year-old little shit that you are better than some internet celebrity who they think is going to be more effective than you are because they have more Twitter followers. READ MORE

Top Startup Ecosystems in 2021: Ranking 1,000 Cities and 100 Countries

StartupBlink, a global startup and innovation research center, has launched the Startup Ecosystem Rankings Index 2021. The 2021 Index ranks 1,000 cities and 100 countries worldwide, tracking both momentum and trends within the startup ecosystem since 2017. This year’s report also features many new sections including sections on Industry rankings, the Top Island Cities Ranking, Analysis by Sub Score, Analysis by Population, City Ecosystems in Unranked Countries, and even a ranking based on special entities such as Unicorns and Pantheons. READ MORE

Evaluating Early-Stage Startup Potential: 33 Key Questions Investors Ask

Startup investors pride themselves on being good judges of potential. Betting on what founders can become and build. Hoping that their investment will unlock some of that future growth.

At the earliest stages in a startup’s life, when there’s often not enough data to extrapolate from, investors need to master the art of asking the right questions and knowing what to look out for in founders’ answers.  READ MORE

Private Equity Has Definitively Entered the World of Professional Sports

For years, as sports franchise values have exploded, industry participants have been saying that private equity ownership is coming to major sports teams. And now it is happening.

In the last 20 months, Arctos Sports Partners has taken stakes in 12 U.S. teams, including Major League Baseball’s Boston Red Sox and the National Basketball Association’s Golden State Warriors. READ MORE

Private Equity Firms All Want the Same Thing: British Companies

It began as a market stall in West Yorkshire, selling eggs and butter just before the turn of the 20th century.

Today that market stall is Morrisons, Britain’s fourth-largest supermarket chain, with nearly 500 stores and the prize in a 7 billion-pound ($9.6 billion) bidding war between American private equity groups. READ MORE

Venture Capital Takes Aim at Startups Promoting the Circular Economy

There’s a cost to making supply chains sustainable — but there are big opportunities for profit as well.

Just ask any of the numerous venture capital firms that have sprung up in recent years to support startups dedicated to creating “green” supply chains and address the threat of climate change.

A particular area of focus for investors today is the so-called circular economy — a system designed to generate zero waste in production and distribution, and dedicated to the recycling and regeneration of materials. READ MORE

Venture Capital and the Art of the Deal

Imagine a Baskin Robbins where you can get any flavor you want, as long as it is vanilla. Based on recent data provided by the National Venture Capital Association in partnership with Aumni, the market for venture capital deal terms seem to be that kind of store.

In connection with the release of an updated version of its Series A Model Term Sheet last year, the NVCA included survey results provided by Aumni based on data from “100,000 venture transactions, representing over 40,000 investors with a combined network of over $1 trillion in assets under management.”   This summer, Aumni released an updated version of the data companion that includes 2020 data and more data fields. READ MORE

Diversity, equity and inclusion can transform VC and private equity – here is how

An “awakening” is taking place across venture capital (VC) and private equity (PE) firms, says Kurt Merriweather, The Diversity Movement’s head of product and partnerships.

In the wake of global racial protests and the Black Lives Movement, he says leaders are motivated like never before to help underrepresented founders and emerging companies gain access to capital. READ MORE

Why Early-Stage Founders Should Be Wary Of Big VC Checks

Global VC investment is exploding. In the first half of 2021, capital increased by at least $288 billion compared to the previous year. Checks are getting bigger, founders are closing deals faster, and VCs are scrambling over one another to secure the top startup picks.

But before founders get caught up in the rush and succumb to the charm of deep-pocketed VCs, they need to consider what their early-stage business really needs to thrive long-term. Capital alone isn’t sufficient. Young startups need the added value of an investors’ expertise, connections, mentorship, and time. Accepting hefty investments that emphasize rapid growth can expose a startup to the risk of an early flop, as its foundations aren’t yet strong enough to sustain the pressure. READ MORE

Frictions arise between Wall Street and private equity clients

In the legal mudslinging between Leon Black and a woman with whom he once had an extramarital relationship, a curious third party appears: Goldman Sachs. In legal papers, the Apollo Global Management co-founder and the woman, Guzel Ganieva, agree that the venerable investment bank interviewed her for an entry-level position in 2014 at Black’s behest. Remarkably, Goldman even gave her face time with two of its most senior dealmakers despite Ganieva’s youth and professional inexperience. Top fee-payers such as Apollo have long had considerable sway with big Wall Street banks. But the power imbalance may be tipping even further. READ MORE

How to make VC investors fall in love at first sight

As early-stage investors we spend a lot of time reading pitch decks. In fact, if you don’t like reading, you should probably consider a different line of work. What often strikes us: even though founders share tremendous amounts of data with us – from product data to TAMs, SAMs and SOMs to various KPIs – we often learn very little about the strategic narrative of their companies. In contrast only a few years ago it was still customary to find mission and vision statements in pitch decks, but lately this has become more the exception rather than the rule. READ MORE

For Startups, It Pays to Partner With a High-Quality VC

The number of venture capital (VC) funds has exploded in recent years, giving entrepreneurs more options than ever to finance their startups. There are now close to 2,000 VC firms in the U.S. alone, with over $54 billion invested in early-stage startups each year. Finding the right VC to partner with can be make or break for a young company, determining how much money it raises and the advice, networking and resources it gains access to. How can entrepreneurs identify the best VC for their company and avoid becoming one of the vast majority of startups that don’t make it? READ MORE

China venture capital deals shrink amid regulatory concerns

Overseas investors scaled back venture capital deals in China in August as the country's regulatory crackdown on the tech sector prompted many to rethink their approach.

The latest figures from market research company PitchBook represent a sharp break from earlier in the year. READ MORE

A SPAC Winter

2020 marked the year of the SPACs, and 2021 has continued with a surge in SPAC IPOs after extremely high investor appetite in the space last year. At the end of Q1 2021, SPAC deal volumes had already exceeded 2020's total, reaching about $170 billion compared to $157 billion. SPAC IPOs, proceeds and deal volumes have continued to surge higher this year, but investor appetite looks to be waning, after the most popular SPAC segment of automobiles and components has seen many names continue to tumble, some reaching far below their respective SPAC floors. Whereas the SPAC realm was a way to capitalize easily off euphoric behavior, the tide is turning into the end of the year, and a dim SPAC winter could be coming. READ MORE

U.S. law firm group pushes back on lawsuits calling for SPAC regulation

The legal tussle around special purpose acquisition companies (SPACs) intensified on Friday as a group of U.S. law firms hit out against lawsuits last week that called for blank-check firms to be regulated as investment companies.

SPACs are acquisition vehicles that use IPO capital to take a private company public, and can make investments and sell stock without restrictions before such a merger. READ MORE

Women still have a venture capital problem. This is how we actually fund female entrepreneurs

I had an interesting experience during our recent fundraise when a male VC friend remarked that our team should consider changing the name of the fund. “Your returns are great,” he said, “but funding only women-led companies is a hard sell to institutional investors.”

His comment encapsulated exactly what continues to be the most significant hurdle for female entrepreneurs today. Many investors view female-founded companies as “impact investments,” versus an opportunity to generate alpha returns—or excess returns earned on an investment above the benchmark return—within an asset class that has been historically under-appreciated. READ MORE

Diversifying startups and VC power corridors

Startups have a seemingly intractable problem: a lack of diversity. Despite research showing that diverse founding teams have a higher rate of return than white founding teams, one characteristic of startups remains relatively unchanged: the dearth of BIPOC and women founders, investors, board members, and counsel in the venture capital (VC) ecosystem. READ MORE

How Venture Capital Can Join the ESG Revolution

ESG has become increasingly mainstream for investors in recent years, as part of a broader wave to embrace purpose and stakeholder capitalism: More than $100 trillion in assets under management (AUM) globally are managed according to ESG principles. This push is at least partly driven by what some call the “business case” for ESG: Empirical studies from as early as 2010 onwards show companies with high ESG performance outperform their peers financially, while 2020 has been a record year for influx into funds performing strong on ESG-principles (justified by the parallel finding that those funds financially outperform their lower-ranking equivalents). READ MORE

Corporate venture capital follows the same trend as other VC markets: Up

As the global market for startup investing presses to new heights in terms of dollars invested this year, and deal volume ticks up in several regions, corporations are diving into the action.

Data from CB Insights and Stryber indicate that corporate investors are taking part in deals worth more than ever, even if corporate venture capital (CVC) deal activity is not up uniformly around the world. READ MORE