Venture Briefing: Avoiding the Early Valuation -- Are you really doing this with Convertible Debt? Venture Briefing: Avoiding the Early Valuation -- Are you really doing this with Convertible Debt?

Venture Briefing: Avoiding the Early Valuation -- Are you really doing this with Convertible Debt?

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Startups Reconsidering Angel Money, Focus Instead on Revenue
Most fast-growing companies, at least at the outset, and sometimes for the entire journey, get the cash they need from revenue -- not costly equity from their customers. They don’t do so because it’s easier, but because of the unwelcome drawbacks created by raising capital too early.
(Source: Forbes.com, 2014-08-18) Read the full article
M&A Among Venture-Backed Companies at Highest Pace in a Decade
Venture-backed companies are busy buying other venture-backed companies, as well-financed businesses are preparing to introduce themselves to the public markets. Through the first half of this year, M&A involving venture-backed buyers and sellers was at the highest pace in at least a decade, data from Dow Jones VentureSource show.
(Source: The Wall Street Journal, 2014-08-11) Read the full article
Investors Received Record $568 Billion in 2013 P.E. Distributions
Institutional investors received $568 billion in distributions from their private equity investments in 2013 -- the highest annual level ever recorded -- and up from $381 billion in 2012, said a report from Preqin. The $568 billion in distributions also surpassed capital calls by 46 percent, the highest difference ever recorded, according to the report.
(Source: Pensions & Investments, 2014-08-14) Read the full article
More Than Half of Recently Public Companies Miss Earnings
Initial public offerings are supposed to be this great opportunity for investors to jump onto the ground floor of the next big thing. But it turns out maybe investors are buying into companies that are about to disappoint and thus cannot keep up with expectations.
(Source: USA Today, 2014-08-14) Read the full article
Venture Capital Investments Rise in Mobile Tech, Cloud Computing
Venture capital investor confidence is on the up and up, and investors are setting their sights on the tech world, according to a new survey by the National Venture Capital Association and Deloitte. The two firms released the results of their annual Global Venture Capital Confidence survey, which shows that investors are increasingly being drawn to top categories in the tech industry, including cloud computing, mobile tech, and robotics.
(Source: CNET News, 2014-08-14) Read the full article
Raising Money Through Crowdfunding Helps Attract Venture Capital
It turns out that people who are good at raising money through crowdfunding campaigns are also pretty good at raising money from venture capitalists. Hardware projects that have raised at least $100,000 through Kickstarter or Indiegogo have gone on to raise $321 million from venture capitalists, according to a report by research firm CB Insights.
(Source: Bloomberg Businessweek, 2014-08-11) Read the full article
Women Raising More Money Than Men Through Crowdfunding
Men and women are still facing some disparities in the working environment. But a recent study shows women actually outperform men in raising money online via crowdfunding sites, such as Kickstarter, where backers make monetary contributions to projects they like in exchange for small rewards.
(Source: The Washington Post (free reg. req'd), 2014-08-18) Read the full article
Global Investor Confidence in U.S. Continues to Soar, Survey Finds
According to a survey by Deloitte and the National Venture Capital Association, global investor confidence in the United States is up for the third consecutive year. The uptick results are due to positive capital markets, a wealth of investment opportunities in forward-thinking businesses and a powerful investor climate, the survey said.
(Source: NJBIZ, 2014-08-13) Read the full article
Alibaba's Anticipated IPO Could Kick Off Wave of More Chinese Firms
Alibaba Group Holding Ltd.'s highly anticipated New York initial public offering will encourage a fresh wave of Chinese Internet listings in the U.S., bankers say. The volume of Chinese Internet-company IPOs in the U.S. has hit $3.4 billion for the year to date, higher than in any previous full year, according to Dealogic.
(Source: The Wall Street Journal, 2014-08-13) Read the full article
Seeking Press Coverage May Actually Backfire on Startups
A lot of startups think they need press to get off the ground. But Scott Belsky, an angel investor in companies like Pinterest and Uber, often advises startups not to announce their launches.
(Source: Business Insider, 2014-08-17) Read the full article
Small Business Owners Too Time-Strapped for Vacations
A study, conducted by the lender OnDeck, revealed that small business owners are too time-strapped to take any vacations at all. Almost half of the people polled -- 200 in all, from a variety of industries -- said they’re not planning to take one this year.
(Source: Fortune, 2014-08-13) Read the full article
 
 
 
Headlines
Avoiding the Early Valuation -- Are you really doing this with Convertible Debt?
Scott Snively

As I am sure entrepreneurs appreciate, fundraising is extremely difficult. Throw on top of the difficulty of just raising capital, the valuation of an unproven idea and discussions with potential investors regarding valuations can be painful. Founders are wed to a high valuation based on potential while investors are not willing to invest on such valuations with no proof of concept or market acceptance. So how do the parties bridge the gap? Read full article online.

 

 

By The Numbers

As valuations and capital invested at the seed stage have quickly climbed each year, so too has seed deal count; the number of seed rounds completed from 2009 through 2013 quintupled from 284 to 1,408.
Source: PitchBook Newsletter PE & VC Edition

 

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Ice Miller has been one of the most active law firms in the private equity industry over the last decade, representing both entrepreneurs building great companies and the private equity firms and individuals that invest in them. We have extensive experience with all types of funds (formations and operations); mezzanine and senior secured financing; leveraged buyouts, roll-ups, build-ups, and consolidations; divestitures and exits; and complex litigation on behalf of investors and privately financed companies. In addition, over the past 10 years, Ice Miller has represented hundreds of emerging growth businesses in various industries on such matters as entity formation, capitalization, capital raising, alternative financing, intellectual property rights and protection, growth and exit strategies, corporate governance, tax matters, and many other legal issues that are critical to the growth and success of an emerging company.

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This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

 
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