Private Equity
3 min read · 07 December 2008
David Weild and Edward Kim recently produced a report for Grant Thornton, titled IPOs in the ICU. The entire report is available here, but David has permitted us to reprint this conclusion about current and future alternatives to IPOs for private companies: There has been no shortage of effort to find an alternative to an IPO for private U.S. companies. Among these are the NASDAQ Portal Alliance (144A PIPO), InsideVenture and Entrex markets. To date, most of the major U.S. investment banking initiatives have been focused on the 144A PIPO market in efforts to create institutional-only markets for private placements of equity that would be issued to qualified institutional buyers
3 min read · 03 December 2008
Everyone in the VC business is looking hard at their fund reserves right now. Very hard. That's because the two key assumptions regarding how much money a portfolio company would require from start to finish (the exit) have changed: (1) The length of time before exit; and (2) The number of portfolio companies that would attract outside capital to lead follow-on financing rounds. The new planning assumption being embraced by VC fund CFOs and senior partners is that each portfolio company's exit forecast should be pushed out two to three years. Moreover, funds should assume that inside rounds will be the prevailing method for raising additional capital within the portfolio. For the strongest portfolio companies, it will be a privilege to close a flat round with an outsider. In other words, "flat is the new up.”
4 min read · 01 December 2008
3 min read · 25 November 2008
1 min read · 24 November 2008
2 min read · 21 November 2008
Adeo Ressi, founder and proprietor of TheFunded.com, made waves this week, after the PowerPoint slides of a private presentation he gave was leaked to bloggers. peHUB has asked Adeo to expand on the presentation, and to give a fuller understanding of what his slides were intended to present. We thank him for the contribution: "The Canary is Dead" presentation was delivered to a group of Harvard Business School professors to encourage classroom dialogue about better models for venture capital, before students graduate and enter the workforce with bad training. The Model is Broken Investing in growing companies has proven to be economically and socially rewarding to a broader society. However, the venture capital model of delivering preferred equity investments in the $1 to $15 MM range is broken for three specific reasons. First, over 90% of companies that require investment in this range do not receive the capital they need, because they are rejected by the model, discouraged by the process or unaware of the rules. Second, the process of raising the capital has anecdotally proven to destroy shareholder value through enormous time commitments, significant legal fees and deteriorated morale. Lastly, the venture investment model, in its current form, does not generate returns for any of the stakeholders when examined in aggregate or on average. Despite this broken framework, the venture capital model has resisted change. More and more money has flowed into venture capital, and partnerships continue to receive the same management fees and economic rewards. The bursting of the Internet bubble eight years ago was an obvious
4 min read · 14 November 2008
2 min read · 12 November 2008
3 min read · 30 October 2008
4 min read · 21 October 2008
