A VC Explained the Biggest Mistake Entrepreneurs Make Pitching Startups — It Wasn’t What I Expected

I was invited to speak at a startup panel about fundraising, and, by some strange coincidence, I found myself sitting next to the first venture capitalist I ever tried to raise capital from. I couldn’t help but chuckle at the situation. There I was, in front of a room filled with hundreds of entrepreneurs, and I was going to explain how to raise money while sitting next to the first guy who rejected me.

To be fair, even though I recognized the VC, he surely wouldn’t have remembered me because our one and only conversation had taken place nearly 20 years prior. Heck, the only reason we even talked all those years ago was thanks to a mutual connection. But entrepreneurs never forget the first venture capitalist they pitch, so the sting of my rejection from this particular VC still felt as fresh as if it had only just happened a few days earlier. READ MORE

New SEC Private Equity Rules

On February 9, 2022, the Securities and Exchange Commission (“SEC”) proposed new rules under the Investment Advisers Act of 1940 regarding the regulation of private funds. A private fund is an investment company, usually a limited partnership, that does not solicit investments from the general public and meets one of the exemptions from being regulated under the Investment Company Act of 1940. The new rules were designed to provide “enhanced information about costs, performance, and preferential treatment,” and to “help an investor better decide whether to invest or to remain invested in a particular private fund, how to invest other assets in the investor’s portfolio, and whether to invest in private funds managed by the adviser or its related persons in the future.” READ MORE

Instacart's IPO price target delivers startups a dose of reality

Instacart's IPO is seen as a bellwether for public investors' demand for startups. So far, it's telling the entrepreneurial world what was already obvious—that revenue multiples of formerly VC-backed companies have cratered as investors lack faith in their future growth.

Instacart is targeting an IPO valuation of up to $9.3 billion on a fully diluted basis, 76% below its last $39 billion private market valuation and a fraction of what it would have received if the company had gone public in 2021. READ MORE

Being An Emerging Manager In The Current VC Environment

Almost 500 meetings. That is the figure cited by an acquaintance of mine when we were talking about the number of conversations it took for him to raise his first venture capital (VC) fund. The explosion of seed funds over the last three years means limited partners (LPs) are flooded with options, making it hard to stand out. This leads to emerging managers taking anywhere from six to 18 months to raise the necessary funding.

In the present down market, I am seeing the flight-to-safety mentality dominating. One large foundation made it clear to me that their appetite is only for brand-name funds that are perceived as lower risk. LPs do not want to take the risk on emerging managers in this market. Understandably then, raising venture capital from family offices is now the primary target of 46% of emerging managers. READ MORE

Setting a valuation: Why this VC prefers priced rounds to SAFEs and convertible notes

Startups typically receive their first formal round of funding from friends, family and angel investors. Depending on the startup’s funding needs, the investment can range from a few hundred thousand dollars to a few million. This funding is critical for scaling business operations and building a customer base.

Seed rounds or friends and family rounds often are completed using SAFEs or convertible notes. The benefit of these instruments is that both the founders and the early stage investors can “kick the can” down the road in terms of setting a valuation for the startup. Unlike a preferred stock financing (sometimes called a “priced round”), SAFEs and convertible notes do not require the parties to put a specific valuation on the startup — even if there is a “valuation cap.” READ MORE

Company unveils huge valuation as it tries making an everyday errand easier

Instacart is going public more than 10 years after launching in California and is hoping Wall Street will appreciate its goal to bring "the grocery industry online and help make grocery shopping effortless."

The San Francisco-based company filed paperwork Monday with the U.S. Securities and Exchange Commission (SEC), estimating that its stock price will be between $26 and $28 per share, valuing the company between $8.6 billion to $9.3 billion. READ MORE

Coaching The Private Equity-Backed Management Team

Executive coaches who understand how to help management teams perform at their best while offering insights on building productive working relationships with these leaders can accelerate value creation.

When a private equity portfolio company CEO invites her executive coach to also coach her management team, she is inviting the coach to serve as a convener and centralizing force that continually reminds the players that “we’re all on the same team and we win together.” This can accelerate value in a way that nothing else can, especially when you consider the human elements (ego, fear, mistrust, etc.) that can run amuck under the kind of pressure that will surely come with growth and scale. READ MORE

Best Places to Work in Private Equity

Mergers & Acquisitions is recognizing eight firms for the inaugural Best Places to Work in Private Equity. The latest in our award series honors private equity firms who stand out amongst their peers in demonstrating leadership and innovation in their workplace cultures, policies and internal operations. They have also taken proactive measures to adapt to the changing demands of a post-pandemic world, as well as building environmental, social, and governance (ESG) and diversity, equity and inclusion (DEI) programs at their firms and portfolio companies. READ MORE

A Look at the High Demand for Top CFOs for Private Equity Firms

In times of volatility, financial stability becomes an understated hallmark of business success. Private equity firms have, appropriately, responded to the severe macroeconomic challenges of recent years with caution, making unprecedented pullbacks in investment and reaching record levels of dry powder, according to a new report from Slayton Search Partners’ Dan Dunn.

“Today’s firms are steadying their balance sheets and preparing for long-term growth by building quality over quantity — a process that will increasingly require proactive CFOs,” he said. “CFOs are key drivers of sustainable value creation for PE firms and their portfolio companies. As portfolio sizes remain limited and the need for exceptionally successful exits grows, the role of the chief financial officer will expand in the coming years. Subsequently, demand for experienced private equity CFOs is certain to rise.” READ MORE

Have You Heard About The Herd Of Failed And Struggling AI-Focused Unicorns?

These days, we hear a lot about companies seeing soaring valuations as a result of their artificial intelligence prowess. It’s easy to get the impression that an AI-focused business model is the most direct route to investors’ hearts.

In reality, however, investors aren’t so easily swayed. Scores of venture-backed companies touting artificial intelligence technologies have shuttered or seen valuations plummet in the past few quarters. Such cases are particularly visible among those that went public during the 2021 SPAC boom. READ MORE

Global Startup Funding Remains Subdued But IPO Market Sparks Hope Of Rebound

Global venture funding settled around $22 billion in August 2023, up around 19% month over month but down 16% from the $26.2 billion invested in July 2022, Crunchbase data shows.

Last month’s startup funding total was on par with what’s emerged as the new normal for venture capital. So far in 2023, funding has averaged just over $23 billion per month as active investors have cut back their funding pace at each stage. READ MORE

15 Biggest Startup Failures in the World

Startups are young companies founded with a new idea looking to disrupt the market. Entrepreneurs are driven by innovation and want to create entirely new products or services to cater to existing deficiencies in the market. We can also say that a startup has two main characteristics; innovation and growth. A startup's ability to scale really defines its potential impact on different markets. That’s why most of the startups are known for the disruption in their respective industries. But, not all startups succeed and the majority of them are prone to failure. According to Startup Genome, about 90% of startups completely fail, while 1.5% of startups end up with a successful exit of $50 million across the top eight U.S. startup networks. READ MORE

US private funds industry sues securities regulator over new rules

Six private equity and hedge fund trade groups on Friday sued the U.S. Securities and Exchange Commission (SEC), arguing the agency overstepped its statutory authority when adopting sweeping new expense and disclosure rules last week.

SEC Chair Gary Gensler said the rules will increase transparency and competition in the private funds industry, which oversees around $20 trillion in assets and has been accused by advocacy groups of opacity and conflicts of interest. READ MORE

Keep your equity (and your sanity) while you’re growing your business

There’s no doubt about it—fundraising is the most difficult part of launching a business and being an entrepreneur. But depending on who you are, that part of the journey can be even more daunting due to bias and a system that doesn’t see every entrepreneur as an equal.

So many disparities exist in the world of venture capital, but one thing is and has always been clear: Women, especially women of color, don’t have the same access to capital that their white male counterparts do because of bias that exists within the system. In 2021, Black founders only received 1.2% of venture capital funding in the United States. This is absurd. READ MORE