SEC Issues New Rules for Hedge Fund and Private Equity Disclosures

On May 3, the Securities and Exchange Commission approved a new rule that will require hedge fund advisers and private equity advisers to disclose more information to regulators on Form PF about their stability risks and investment strategies, including litigation finance, and to report that information on a more frequent basis. The SEC and the Financial Stability Oversight Council use the data provided by hedge fund advisers and private equity advisers on Form PF to assess the US’s systemic risk to the private fund industry. The new information required to be reported on Form PF will enhance the SEC’s ability to monitor systemic risk. The new disclosures will also strengthen regulatory surveillance of private fund advisers and enhance investor protection, including by identifying examination and enforcement concerns and priorities. Recent market events, including COVID-19 effects and broader market volatility, have showcased the importance of the SEC possessing current and robust information from market participants. READ MORE

The fall of Vice: private equity’s ill-fated bet on media’s future

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When private equity investors put nearly half a billion dollars into Vice Media in 2017, co-founder Shane Smith hinted that the cash would help his digital media company achieve a public listing that “would look very sexy”. Speaking at an advertising festival in Cannes, with sunglasses on and the French Riviera behind him, the blustering media executive joked with reporters that he “rounds up” Vice’s $5.7bn valuation to $6bn “because it’s easier to say”. READ MORE

10 Things Founders Say and What VCs Think (according to Ai)

Founder: “We’re leveraging disruptive technologies to create a paradigm shift in the market.”
VC: “Ah, so you’re banking on a buzzword bingo strategy, hoping no one notices the lack of substance?”

Founder: “Our platform employs cutting-edge AI algorithms to optimize user engagement.”
VC: “Translation: we’re using fancy tech to keep people hooked and glued to their screens.” READ MORE

Will the bubble in private markets hiss or pop?

The economist Hyman Minsky believed the financial system was prone to instability: tranquil conditions would inevitably give way to speculative excess. He observed that lengthy bull markets stoked complacency over risk. Recently, analysts have been debating whether private capital, where some of the greatest excesses have been evident, would soon meet their so-called “Minsky moment” — the point when the excess implodes. It has not happened, yet. READ MORE

Private equity groups sell stakes at discount on expectations valuations will stay low

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Private equity groups are increasingly selling shares in portfolio companies at a discount to the price at which they went public, in a sign they do not expect stock market valuations to regain their previous highs soon. So-called follow-on offerings of shares in previously listed companies are a key way for private equity groups to monetise their investments and return cash to investors. Sponsors traditionally sell a fraction of their portfolio company in an initial public offering, then try to sell down the rest of the stake at increasingly high prices over the following years. READ MORE

Cold Calls To VCs And Perseverance Bring Digital Board Game Console To Market

There is a lot of potential—more than $200 billion—for a device that combines the best of tabletop and board games with video games. But finding investors who understood the potential took grit, determination, and perseverance.

Ultimately, Shail Mehta, cofounder and CEO of The Last Gameboard, did. She raised $6 million in venture capital. The company came out of beta testing at the end of February, and the tablet began shipping in March. READ MORE

Why aren’t venture capitalists flocking to fund cybersecurity startups?

n the back of pretty strong earnings reports and valuations, public cybersecurity companies are outperforming the broader technology segment. Yet, funding for cybersecurity startups has flatlined.

It’s an interesting issue that is worth taking a moment to consider. This morning, let’s look at how cybersecurity companies have performed, as well as a number of datasets regarding Q1 2023 venture capital investment to understand why investments have been tepid in this sector despite stellar results from the companies. READ MORE

Tax Court Decision Interprets Profits Interest “Safe Harbor” under IRS Rev. Proc. 93-27

The Tax Court’s May 3, 2023, decision in ES NPA Holding, LLC v. Commissioner (T.C. Memo 2023‑55), upholding a taxpayer’s position to characterize a partnership interest as a profits interest under the “safe harbor” of IRS Revenue Procedure 93-27 (as clarified by IRS Revenue Procedure 2001-43), provides helpful guidance to issuers of profits interests, including private equity funds and other investment partnerships and their portfolio companies. READ MORE

How PE and VC Firms Can Develop a Go-to-Market Recruitment Strategy

Private equity and venture capital firms are closing more and more deals particularly. As a result, competition for talent among start-ups, emerging technologies and portfolio companies has never been more competitive, according to a report from Chapel Hill Solutions’ Julian Rives. “Typically, most PE and VC firms approach recruiting and talent acquisition reactively – or hiring when a new role or need arises,” the study said. “In order to beat competitors and hire the best athlete talent, HR leaders at PE and VC firms need to shift to a more proactive approach through talent mapping.” READ MORE

Discerning Venture Debt From Commercial Banking: Key Tools For Young Companies

In March, the media was inundated with analysis of the Silicon Valley Bank (SVB) collapse. One perspective that seems to be more soft-spoken than others is that of venture debt funds (VDFs), which are distinct from commercial banks (CBs), lending to technology companies.

This difference between these two financing sources is important. With the recent news, the word “venture debt” seems to be conflated across CBs and VDFs, but the two can be quite distinct for borrowers or a venture equity investors or board members. For example, an asset-back revolver (such as an inventory line) from a bank might be called venture debt, but so might a senior secured term loan from a private debt fund, even though the latter is twice as expensive and far more flexible. READ MORE

Abolish Venture Capitalism

Capitalists are desperate to look beyond the impending disintegration of humanity’s ecological niche and the unraveling of already threadbare social programs to imagine something more hopeful (and profitable). For those eager to usher in a better future, the private financing of technological innovation has long been a source of optimism. After all, it created Apple, Google, Facebook, and most of the rest of the American tech companies that have swept the world. But if you inspect it at all, the sheen rubs right off. READ MORE

Venture capital investment in clean energy startups soars

Global venture capital funding for clean energy startups jumped to $12.3 billion last year, up from $1.9 billion in 2019, propelled by investment in battery technology and new government subsidy schemes in the United States and Europe, new data shows.

An analysis from consultants Oliver Wyman based on data from Crunchbase showed that investors in North America led the way in recent clean energy investments, providing 57% of last year's total, with European players behind on $3.5 billion. READ MORE

Tips for Fundraising in an Economic Downturn

The stock market faced significant challenges in 2022, with the S&P 500 dropping by nearly 20% and the tech-heavy Nasdaq falling more than 33%. This market volatility drove valuations down and led to a 65% reduction in both IPO and M&A activity, resulting in a liquidity crunch for private-market investors. Consequently, the venture deal count for private companies declined 29% year over year, and early-stage venture deal activity in Q1 of 2023 witnessed a six-quarter consecutive drop in deal value, despite the common assumption that early-stage companies are insulated from market turbulence. READ MORE