Private Equity Indigestion Relief Is Meant to Hurt

Helping an investor cash out of a gummed-up buyout fund used to be a niche business. Now it’s mainstream. So-called secondary funds, which offer to buy unwanted private equity holdings, have become widely accepted. It would be a shame if normalization overshadowed one of the key reasons they have flourished — to remedy seemingly ill-disciplined investment in private markets during the era of easy money. READ MORE

Venture capital spring is here

As the summer winds down, American venture capital is enjoying a new spring.

Though venture investment remains depressed compared to recent heights, green shoots are emerging quickly for those paying attention. Good deals are back. And from inside the world of venture capital, a pervasive, privately acknowledged sense of “investment thesis” disarray among experienced investors is a counterintuitive signal of an impending massive startup dawn. READ MORE

FTC Challenges Private Equity Roll-Up Acquisition Strategy

A recent U.S. Federal Trade Commission (“FTC”) antitrust lawsuit against a private-equity owner of a large anesthesiology practice in Texas demonstrates that the FTC has begun to implement its more aggressive focus on the perceived competitive harms caused by certain “roll-up” acquisition strategies.

Private equity firms commonly employ roll-up strategies involving the serial acquisition of multiple companies in a single market and consolidation under a single entity. This strategy is frequently seen, for example, in the health care industry. According to the proposed Merger Guidelines released by the U.S. Department of Justice (“DOJ”) and the FTC on July 19, 2023, “a firm that engages in an anticompetitive pattern or strategy of multiple small acquisitions in the same or related business lines may violate [the antitrust laws], even if no single acquisition on its own would risk substantial lessening of competition.” READ MORE

Angel Investors: An Answer To The Lack Of Venture Capital Funding For Women

Despite the progress made by women in business over the past several decades, women entrepreneurs still have a more challenging time raising capital than their male counterparts. According to PitchBook, in 2022, companies founded solely by women garnered just 2.1% of the total capital invested in venture-backed startups in the US.

However, there is hope for women seeking funding for their startups in the form of angel investors. Speaking with Loretta McCarthy, Co-CEO of Golden Seeds, a discerning group of investors seeking and funding high-potential, women-led businesses and creating lasting impact, who stated that angel investors are “popping up everywhere.” READ MORE

Party rounds fall out of favor with VC downturn

Party rounds have been a controversial topic in the venture industry, but the economic downturn will likely limit their use.  

In the last decade, the average number of investors per round had been increasing steadily, reaching a peak in 2021 at 5.84 per deal, according to PitchBook data. At the same time, party rounds—deals in which smaller amounts of capital are raised from multiple investors in the double digits with no lead—also grew in number. READ MORE

Before You Fundraise, Here’s the Most Important Thing to Know About How Venture Capitalists Think

“I’m going to start raising money for my startup,” a student explained as she chatted with me at the end of one of my entrepreneurship classes. “You mentioned you’ve raised money for startups in the past. Before I begin fundraising, what’s the most important thing I should know about venture capitalists?”

The student surely wanted a constructive, actionable answer she could use to help her with the unfamiliar and complex process of fundraising. But she asked for my advice just as I’d finished a two-plus hour class in front of a bunch of Gen Z-ers. It’s an entire generation that learns best by watching 30 seconds video clips, so I was probably in the wrong mindset to answer such a complex question. Rather than giving her the thoughtful, detailed answer she needed, I gave something more akin to a pithy, tweetable quip. READ MORE

How To Raise Corporate Venture Capital

If you can remember back as far as I can, you might remember the good old days of raising capital. You’d load up your 10-slide pitch deck and visit numerous two- or four-story buildings on Palo Alto’s Sand Hill Road, hitting multiple potential investors in one day.

That’s how it was for Sterling Pratz’s first venture, Autonet Mobile. But as times have changed, Sterling takes another tack when pitching investors today. Not only does he craft pitches differently, but he approaches different targets: strategic investors. READ MORE

Convenience-focused startups adjust to tighter money, lower expectations

Years of zero interest rate policy (ZIRP) gave the world ambitious venture capital-stuffed companies that sought to make everyday tasks and chores as easy as the tap of a button. But the reality of those business models is much more modest now.

Why it matters: We were promised a new world of hyper-convenience while VCs dreamed of billions in investment returns.

Driving the news: Just in the past week or so, a number of those companies have entered new corporate chapters. READ MORE

3 Tips For VCs With Struggling Portfolio Companies

With VC investment remaining slow, especially for late-stage investment, we can expect higher than usual startup failure rates, which generally already average 30% of an investment firm’s portfolio.

When this happens, venture investors generally have two tactics to mitigate risk: Developing those portfolio companies with better chances of succeeding or abandoning those that are performing poorly, but helping them if you see they can survive. READ MORE

Adding Venture Debt As A New Strategy By Large Credit Firms And Technology-Focused Growth PE Firms

In my previous articles, I’ve written to a founder audience on venture debt for fast-growing businesses and how venture debt differs from traditional commercial bank offerings. In this article, I speak to large credit funds and growth PE firms looking to learn more about adding a venture debt capability to their existing platforms.

While venture equity has been the standard source of capital for technology companies, venture debt financings have grown over the last decade, from $8.1 billion in 2013 to $35.5 billion in 2022, according to PitchBook. READ MORE

China VC deals plunge, on track for worst pace in more than seven years

Slowing growth and geopolitical tensions are stifling the Chinese startup world that once spawned unicorns such as ByteDance and Didi, according to a PitchBook report Monday.

China’s economic rebound from the pandemic has slowed. U.S.-China tensions have spilled over to finance, dampening already subdued market sentiment. Chinese regulation in the last two years has also made it harder for companies to go public overseas. READ MORE

Questions every VC needs to ask about every AI startup’s tech stack

From fraud detection to agricultural crop monitoring, a new wave of tech startups has emerged, all armed with the conviction that their use of AI will address the challenges presented by the modern world.

However, as the AI landscape matures, a growing concern comes to light: The heart of many AI companies, their models, are rapidly becoming commodities. A noticeable lack of substantial differentiation among these models is beginning to raise questions about the sustainability of their competitive advantage. READ MORE

Bootstrapping vs. Seeking Venture Capital — How to Decide the Best Avenue for Your Business

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

State of startup fundraising: Do you need venture capital?

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

Why There Needs To Be More Allyship Among Investors To Diversify Venture Capital

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