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PE, VE, Angel investing -- Tom Beusse (FairCo TEEM - 10-27-10)

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Interactive Capital's Tom Beusse's analysis of the Venture Capital, Private Equity and Angel Investing landscape as of 10/27/10. ...

Interactive Capital's Tom Beusse's analysis of the Venture Capital, Private Equity and Angel Investing landscape as of 10/27/10.

If you are near Westport, CT and would like to join the FairCo TEEM Meetup, please visit http://bit.ly/9Z0Jgk

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    PE, VE, Angel investing -- Tom Beusse (FairCo TEEM - 10-27-10) PE, VE, Angel investing -- Tom Beusse (FairCo TEEM - 10-27-10) Presentation Transcript

    • Trends in private equity, venture capital and angel investing
      Presented by Tom Beusse
      FairCo TEEM Meet up—10/27/10
    • Traditional financing solutions
      Private Equity--focusing on investments in cash flow positive companies
      Venture Capital--focusing on early stage start ups that may be revenue positive but not cash flow positive
      Angel investors—high net worth individuals who like to invest in early stage businesses
      Note: All smart investors are considering exit before deciding to enter.
    • Current trends
      Private Equity
      Credit markets were tight but are loosening up again. Can’t get as many turns of leverage but can borrow at 3-4%
      25-40% of firms shut down as a result of shakeout
      Remaining PE firms sitting on piles of cash and waiting to hit the bottom (PWC says $850 Billion in unused capital)
      Multiples have come way down so sellers aren’t selling unless they have to.
      Debt heavy balance sheets are creating “distressed asset” sales.
      Many PE firms have raised VC funds
      Strategic buyers have a huge advantage in acquiring assets now
      Most active categories are healthcare, IT, energy and banking/finance.
      Software, media, electronics and telecom is starting to pick up again
      Obama Cap tax laws providing incentive to sell this year
    • Current Trends
      Venture Capital
      High unemployment has increased entrepreneurial activity
      Funds have become very hard to raise after the economic collapse
      Limited partners are cash strapped
      Still placing bets on Management and ideas
      “A round” financing is harder and harder to raise and cost of capital is increasing
      “institutional venture capital” comes with aggressive terms attached to it.
      Many small/early stage companies are seeking earlier exits. Less “b and c rounds” are taking place.
      Multiples/valuations have come way down reducing the upside for investors and entrepreneurs
      Investors looking for clear indications of traction
    • Current Trends
      Angel Investors
      Most common way to finance an early stage business
      Cash available on more agreeable terms for the entrepreneur
      Some days it feels like 1999 all over again. Investors placing lots of “small bets” hoping for a few wins
      Cash often comes with expertise
      Vanity investments are common
      Arrival of the “Super Angel”
    • Things investors are looking for
      Intellectual property
      Barriers to entry for competition
      A clear customer need/challenge to be solved
      Recurring revenue
      Scalability
      Obvious exits
      Opportunities to disrupt markets
      Executional ease
      Strong management teams
      Clear metrics for success
      And Ultimately………ROI
    • Things to consider when seeking financing
      Sector expertise of the investor
      “patience” of the capital
      Age of the fund
      “growth equity” or not?
      Operationally oriented or not?
      Attitude toward management
      Strategic portfolio investments that might be helpful
      How much money do you really “need”?
      Do I like these people?
    • Things learned along the way
      West Coast VC firms are extremely reluctant to invest in East Coast start ups
      There is a strong and growing group of East coast media and tech VCs (Boston/DC/NY)
      There is a growing number of CT based PE and VC firms
      Strategic investors can complicate exits
      Working with PE firms is like working with the mob. If you say you will have $5oo by Monday, don’t show up with $300 on Tuesday.
      20% of something is better than 80% of nothing
    • QUESTIONS?