Startups Led By Women Do Better

ShareBrian Cohen, chairman of New York Angels, first investor in Pinterest and a true friend of mine, recently published a must read book What Every Angel Investor Wants You to Know: An Insider Reveals How to Get Smart Funding for Your Billion Dollar Idea. The book focuses on teaching entrepreneurs how to raise angel funding effectively as well as helps angels be more successful making angel investments. I recommend that all entrepreneurs, VCs and ecosystem players pick up a copy. He makes a strong case about why startups led by women do better. DowJones VentureSource conducted a study of 20,194 US-based companies that raised funding between 1997 and 2011 and found that women led companies have a greater chance of going public, operating profitably, or being sold for more money than they’ve raised. Successful companies had 7.1% female executives compared to 3.1% at unsuccessful companies. Women consumers make the majority of purchasing decisions in the US. Women are behind 85% of all consumer purchases and 55% of consumer electronics. Companies with women leading product design and marketing tend to outperform companies lacking gender diversification. The Nielsen Company estimates almost all income growth in the US over the past 15 to 20 years has been generated by women exercising their growing economic influence. Brian then goes into more subjective depth as to why women led companies outperform the market for instance arguing that women are more concerned with the well being of their team and that they are more likely than men to consider feature-sets, market segments, or brand statements designed to appeal to women. No doubt diversity builds strength....

Think Before Leaving Home to Raise Funding in the Silicon Valley

ShareStefano Bernardi emailed me out of the blue when he was a VC in Milan, Italy working at dPixel a few years ago and I had lunch with him when I was in Milan for a conference in March of 2011 shortly before he moved to San Francisco. He wrote a great blog post linked below. I have witnessed this exact occurrence of strong and ambitious European entrepreneurs coming to the Silicon Valley chasing their dream to raise funding here and be a big fish in the big pond. I think it applies to entrepreneurs who have a strong power base at home in Dallas, Miniapolis or anywhere considering relocating to the Valley. Read this blog post from Stefano as it might save your life and your company not to mention your reputation and relationships at home. The summary of what I have witnessed is that a strong entrepreneur that possibly raised VC funding for her last company in her home country in Europe decides that she wants to move to the Valley, raise funding from Ron Conway and the other big name angels that backed the many great tech titans and then fast track to working with VCs in SF and the Valley that are 2.5x smarter than the VCs she got to know and tolerate in her home country. She moves to the Valley and goes through a honeymoon period of how great it is to be in this ecosystem where everyone is so helpful making introductions and giving feedback and advice. It feels like being in the Garden of Eden for this European entrepreneur. She thinks...

Time to exit has doubled – Stay private longer!

ShareI saw this data from Private Equity Info and discussed this trend with Kendra Jalbert who authorized me to blog this. Note that these data points are medians not average. I think the actual time delay between series A to exit grew from 2 years in 2002 to 7 years by the end of 2008 and then that last quarter was a disaster and no one wanted to sell their business at low market prices in 2009 making the real ride 9 years for series A VCs and longer for angels. Now the time delay from series A to exit is clearly coming down, but the new mantra in the Valley is “Stay private longer!” Smart, well connected, high growth privately held companies are providing liquidity programs selling $5m to $50m or more each year as they need some liquidity on an otherwise long march to the definitive liquidity event for the company. This means that investors are investing into later stage companies providing some cash out for the founders, early employees and investors. The money is not going into the company, but insiders are selling a small percentage of their position for some liquidity while the company soldiers on. Here’s what Private Equity Info found: Private Equity Holding Periods Nearly Double Intuitively, we know that private equity firms tend to hold their portfolio companies longer during recessionary periods – delaying exits during recessions and accelerating exits during boom years to capitalize on enhanced valuations. An analysis of portfolio company data from www.PrivateEquityInfo.com shows the median holding period significantly affected by overall economic conditions. Interestingly, the median holding period...

Liquidity Deals – Transformational Culture Shift

ShareThe founder of a later stage company recently asked me if a liquidity transaction was a fire sale or if he would get the actual value for his stock. I can see that many folks still have not understood the transformational culture shift in the Valley and around the world with founders taking some early liquidity; so I am summarizing my points to him here: So to answer your question – no, this is not a fire sale. This is not selling at a discount to the true value of your stock or the value of the company. These types of deals are evidence of the world changing from the dot-com days where I was personally worth over $100m on paper based on a $50m private equity financing leading into an IPO with Morgan Stanley for my company. The IPO got pulled with the crash of the dot-com melt down and my stock crashed. Today when a seasoned entrepreneur sees the value of his personal stock reach $100m, for many mature guys it makes sense to sell 10% of that for $10m and leave the remaining $90m of stock for the definitive liquidity event of the company. As the mantra in the Valley “Stay Private Longer!” becomes more pervasive, some founders complete an annual liquidity financing round. So the founders and big shareholders may want to take 10 to 20% of their chips off the table every year. This keeps all the earnings of the company going into growth, no dividends and the investors of the company mature to include not just venture capitalists and angel investors but a...

Smart Angels Flock Together

ShareAngels often form angel groups to increase their deal flow, share the due diligence (DD) work involved and team up to raise larger amounts of capital.  If one angel finds two new deals per week and joins forces with 24 other angels, then their combined deal flow increases from two to 50.  By joining forces they start to be able to invest enough money to truly capitalize their startups.  Putting $25k into a $1m investment round with several other angels makes sense.  An angel would be smarter to make 20 investments of $25k each than two investments of $250k each.  This is why we created Georgetown Angels.  Our mission is to unite the most powerful angels to create a formal network of angel mentors to add value beyond just commodity cash. Register for our next events in New York City, Washington DC, San Francisco, Silicon Valley and Austin, Texas. Our group is totally open to non-Georgetown angel investors and non-Georgetown startups seeking funding.   Typically the angel group creates a new Limited Liability Corporation (LLC) for each investment or a series LLC structure. As angels wire money into the LLC account, the LLC issues ownership units in the LLC or series. This way the angel group becomes one single shareholder in the startup and the startup has a clean cap table and easy to manage single shareholder. When it comes to voting rights, the LLC votes and there is no need for the CEO of the startup to track down 15 different angels that are all spending the winter on their sailboats in the Caribbean. Pledge funds can operate on...