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Venture Investment Statistics 2005

Buddy Will Price has the Venture Investment Statistics for 2005, from VentureSource, a division of Dow Jones and Ernst & Young.

Commitments to VC Funds, $22.2 bn. Up 18.7% from 2004 VC Financings, $22.1bn. Up 2.8% from 2004 IT Financings, $12 bn. Down 4% form 2004 Software Financings, $5.11bn, Down 6% from 2004 Number of Active Firms, 1,417 Down 49% from 2000, 61% if you define active as > 4 deals per year. Number of exits, 397. IPOs: 41, down 38% from 2004, with $2.24bn raised via IPO M&A: 356, down 12% from 2004, with $27bn in total exit value Number of private companies funded since 2000 net of 2005 exits: 5,406 with $132bn invested in them Average of $24.4m invested in companies At current exit rate, will take 13.6 years to get through backlog (amount available to VC firms for investments / total investments per year) Median M&A exit $47.5m Median Pre-moneys (across sectors) Seed … Read more »

How about friends and family financing ?

Quite a bit of discussion took place in the comments and offline following my post on accredited investors, especially as it relates to friends and family financing. These investors will typically be “easier” to convince to support and finance your idea, but at the same time they might not qualify for the accreditation as defined by the law.

So what can you do as a young entrepreneur/team needing some cash? First order: can your savings and credit cards get you anywhere meaningful? Second: in order to avoid being stuck between a rock and a hard place, a loan that will be re-imbursed as opposed to converting into the next round of equity financing might be a temporary solution. Unfortunately for the unaccredited lender, he/she will not be able to benefit from that early support through the perks angels typically get: discount to Series A, warrant coverage, etc. because only accredited investors can acquire equity. And once … Read more »

Why startups must only take financing from accredited investors

Seed stage investing is getting very busy these days, and over the past few months I have started hearing about companies taking money in small amounts from a large number of friends and family investors. Easy money ? Maybe, but…

Whilst it is great to get that kind of support from your close circle, it often involves investors who are not accredited. The accreditation has nothing to do with the sophistication of the investor, nor having gone through a formal exam but a set of criteria clearly defined by the SEC (Rule 501(a) under the Securities Act of 1933) – which are related to a minimum level of yearly income or a minimum NAV (net asset value).

Not complying with this rule, which means – yes – turning money down, will come back and haunt you down the road when it is time to further finance or sell your company. Just as an example: unaccredited investors can rescind their investment at … Read more »

Delaware re-incorporation and entity conversion just got easier

Startup companies sometimes need to re-incorporate in Delaware if they did their incorporation in a state where corporate law is deemed less friendly to business operations or investments. Other times, it is the legal structure which has to be changed (say from an LLC to a C Corp).

Brad Feld has started a useful set of posts on the topic a while back, and just mentioned that both changes got easier in Delaware:

The first innovation (Section 265 of DCGL – Delaware Corporate General Law) creates a simpler process for the reincorporation of non-Delaware corporations in Delaware (through a one-step “conversion” rather than through the traditional but cumbersome reverse merger of the non-Delaware corporation into a wholly-owned Delaware sub.) In English – if you are incorporated in a state other than Delaware and want to reincorporate in Delaware – it’s now a lot easier.

The second innovation allows for the one-step conversion of non-Delaware limited liability companies into Delaware corporations.  These conversions/reincorporations have historically required 2 steps – for … Read more »

Josh Kopelman has avoided it for a long time – but he’s finally done it: he blogs

It is with delight that I have discovered that my friend Josh Kopelman, the Managing Director of First Round Capital, and one of the early stage investors I respect the most, has finally given up and has launched his blog a few days ago. “Redeye VC” relates to the fact that Josh seems to exclusively fly the redeye from SFO to Philadelphia, his home base. Here is his feed.

In his first post, Josh tries to explain why he has taken so much time to give in: #4 rings so true (it is 4:29am as I type this on Sunday morning).

4. I don’t have the time.There are currently 364 unanswered emails in my inbox.  I have 14 phone calls to return.  Six meetings a day.  I’m currently sitting on the redeye flying back from SFO to PHL. I have a wife.  Two kids.  If I had an extra hour a day, I’d rather spend it … Read more »

Riya recognizes 150,000 Benjamin Franklins

I just read on TechCrunch the official announcement of the fund raising Riya has recently completed, and I must admit that I had to check the number twice: $15M is the amount the company has brought in from new investor Bay Partners. Munjal comments on the news, which was sort of pre-announced, or at least eluded to, when the Google acquisition went kapputt.

It is great news for the Riya team, and this financing round makes the company one of the largest Web 2.0 “capitalization” – $19M raised across two rounds. The amount strikes me as very large in a context of “cheap” startup build-up costs, and it can only mean two things: Munjal, who’s been around the block already once with Andale, was able to command a high valuation (one can only assume that the rumored take-out valuation range has been a useful benchmark), and Riya has some serious development ahead of them, and infrastructure to … Read more »

The GapingVoid on Business Models

I met and hung out with a ton of cool people during my trip to Paris, and one of them was Hugh MacLeod from GapingVoid fame. We had crossed each other’s path at Les Blogs 2.0 a number of times, and had a chance to chat for a while at Fon‘s Martin Varsavsky’s place. Hugh was kindly drawing some of his famous cartoons for some of the guests, and inherited this one – based on some of the topics covered during my panel.

No comment :-P.

Also worth the read: Hugh’s thoughts on Les Blogs.

Paul Graham on the Venture Capital Squeeze – or will founders be able to get VC funding AND partially cash out ?

Paul Graham has a provocative suggestion in his post, “The Venture Capital Squeeze” [via Kevin Burton]: as they fund the working capital of a startup, VCs should consider acquiring a small portion of Founders’ equity in order to provide them with a (sometimes much needed) bit of cash. Paul’s thesis is that this would make “early take-out” offers from large companies less interesting:

Whatever they say, the reason founders are selling their companies early instead of doing Series A rounds is that they get paid up front. That first million is just worth so much more than the subsequent ones. If founders could sell a little stock early, they’d be happy to take VC money and bet the rest on a bigger outcome.

So why not let the founders have that first million, or at least half million? The VCs would get same number of shares for the money. So what if some of the money would go to … Read more »

David Beisel on Seven Questions Employees Should Ask Before Joining a Startup

David Beisel is bringing to us another great post in his Startups series: Seven Questions Employees Should Ask Before Joining a Startup.

As usual, very relevant and worth a read for anyone considering joining a startup. Amusingly, a friend of mine asked me the same question last night, as she interviewed today with the CEO of a young venture-backed company. I would add:

How is the company positioned in its ecosystem: client/users, partners/channels, competitors ? What are the 3 top reasons for clients/users to buy/use the company’s products/services ? How are our competitors funded ? If there is a major difference in stage or size of funding, enquire about the future financing strategy ? If the position is a senior one, ask to meet the VC/board members – if ever they were not part of the hiring process.

I had the pleasure to meet David face to face … Read more »

Facilitating a trade sale from the get go, or at least, avoiding any potential issue

Bill Burnham has again a great post regarding the things startups have to pay attention to in order to avoid any problem when they will be negotiating their exit through a trade sale. Summarizing Bill’s 10 rules, and adding my own twists, I should state one thing – even if I agree with Bill, many of these points are easier said than implemented:

Don’t take an investment from a company that could be a legitimate acquirer, and if you need to get a strategic investor involved, avoid side letters, right of first offer, etc. as much as possible Drag alongs are important (which essentially means that no single class of equity can block a sale) Limit the number of class of shares to 3, or recap to get down to 3. And if it takes more than 5 minutes to understand a cap table (who owns what) and a payout structure (who gets what, taking into account liquidation preferences, conversion prices and warrant … Read more »

In memory of the dot-com era

A good Sunday read from that features its Top 10 dot-com flops:


Not too sure how the list was compiled, since some of these companies did not go down the hole after spending “that much” money, but they were certainly icons of the bubble era: shutting down within a few weeks of launch, or that became famous through the feature film

They might also have done a top 50 including the likes of [email protected] (though one could argue that it was an ISP), – which raised about $100M – and sold its assets to eVineyard,  NetCentives ($130M VC/IPO – Chapter 11), ($120M VC/IPO – Chapter 11), ($100M VC – Chapter 11), etc.

Even though they were not dot-com themselves, I would also mention two firms that were closely involved with these companies, and had the same fate: lawfirm Brobeck Phleger and Harrison, and merchant bank Comdisco. Just to complete the … Read more »

French startup CEOs have been busy over the past couple of weeks

I am pleased to report that there have been a handful of noticeable deals over the past couple of weeks in France:

I received yesterday a note from the CEO of Glowria (the French Netflix), Mihai Crasneanu, announcing the successful raise of a $5M series B (press release here, and more from Rodrigo here). Boonty announced a $10M round last Wednesday. Photoways announced at the end of June a $30M round co-led by Index Ventures and Highland Capital Partners, a mix of a buyout of early stage investors and an injection of growth capital.

Congratulations to Mihai, Romain and Mathieu, and Michel.

I hear that there is a lot more coming, and I hope to get briefed on some of the projects at our upcoming Entrepreneurs dinner in Paris.