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Every person who's founded a business knows that financing your idea is one of the hardest but most important early steps. In fact, creating a stable financial nest for your new company might be the difference between a company that thrives and one that fizzles out.
There are two primary methods of financing: looking for venture capital and bootstrapping. Choosing which financing method you go with is a crucial decision that may have long-term impacts on your business. READ MORE
Venture capital is a very specific asset class designed for a very specific purpose: generating exceptionally high returns for the limited partners who provide the capital to the VC firms to invest on their behalf. Limited partners require these high returns from venture to complement the rest of their portfolio, which is spread across lower risk investments. Thus, VCs are under pressure to find the moonshots that have the potential to drive these outsized returns.
You have to be in exceptional shape for this to be a viable path. The total addressable market (TAM) you aim for has to be enormous in order to capture a chunk of the market that is still meaningfully large enough for the VC math to pencil. READ MORE
Anyone who pays attention to the world of investing knows of the disparity between different demographics of founders when it comes to raising. For example, women-founded startups got just 1.9% of all VC funding in 2022, TechCrunch reported, a figure that was down from the previous year. Founders of colour have also seen their share of funding decline from an already low starting point, according to research conducted by BLCK VC and Silicon Valley Bank. That’s an issue, not only because it means entrepreneurs receiving funding don’t represent society’s makeup, but also because it means VCs are highly likely to be missing out on the best deals — it’s proven that more diverse founders are more successful. READ MORE
Our choices are influenced by our history—from how we engage in our environment to the relationships we build. Each investor’s decisions are based on their worldview, which is molded by their own environment.
I’m the grandson of an Indian farmer, was born in the U.S. and am an established Singapore venture capitalist. Each of these parts of my life has created a sense of being both an outsider and an insider. In today's interconnected world, the boundaries that once confined us are fading away, giving rise to a new era of global collaboration and innovation. READ MORE
After filing to go public, most companies either go through with an offering within a few months or formally withdraw it.
But some do neither. Rather, having mistimed the market or misjudged their own IPO readiness, some companies continue to lie in wait, prepared to restart the process when conditions improve. READ MORE
Generative AI is Silicon Valley’s new shining star, and private equity (PE) investments in AI startups have taken over Wall Street. However, the potential of AI for PE firms can be much more than just an investment outlay. Dealmaking within the PE industry requires significant intuitive and analytical understanding across multiple dimensions. These dimensions cut across people, products, competitive landscape and financial projections. READ MORE
I met Sam while researching my forthcoming book on the ethics of venture capital (VC) investors.1 I asked all of the nearly 250 VCs I meet a simple question to start our conversation: What is the crucial factor that drives you to invest in a start-up?
Like many others, Sam explained that his decision-making was based on emotions rather than a simple business calculation: READ MORE
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
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 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
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
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
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
There's a buzz phrase that’s existentially ruling the startup fundraising ecosystem: The best domestic defense can be the prime global offense.
Yes, we are talking about the state of global venture capital funds and networks. But why is this shift happening, and what does it mean for startups? The answer lies in the changing dynamics of the global economy. READ MORE
Private equity firms are like old soldiers: they never die, they simply fade away.
“There’s no big sign that gets hung on the door that says they are dead, but they just end up not raising new funds. It can take years and years to play out,” according to Hugh MacArthur, chair of Bain and Company’s global private equity practice. READ MORE
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
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
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
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 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