Technology

Join Me Monday Night to Talk Digital Healthcare

As many of you know, I help lead the Tech Council at Boston College.  It is a strong group with active chapters in NY, SF and Boston.

Monday the 12th we have a great event in Boston. Healthcare is becoming the foundation of the Boston economy and it is being transformed as technologists tackle the problems of improving care and improving the economics of care.

Come to District Hall, the innovation center of The Seaport, to talk with 100 local tech and healthcare investors & execs about how to build HCIT businesses in this turbulent regulatory and reimbursement environment.  We’ll get started with a strong panel featuring PE leader Matt Carroll from Westview Capital & the Founders of Imprivata, Cyft & Definitive Healthcare.

Open to any and all, even folks that went to Holy Cross.  Details here:  http://bit.ly/2sGLssD  Hope you can join me.

 

VCs Work for School Teachers

The New York Times awoke to the surge in private market investing yesterday with an article that contributed relevant quotes about why many CEOs prefer to avoid an IPO.  They even found a tech CEO who admitted to being “terrified” of the public markets.  Ouch.  The NYT article can be found here

The article highlighted for me how often the public –  and even experienced journalists – forget the fundamental structure of our industry.  The NYT writes:

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The author, and much of the population, are forgetting the basics.

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Are the Unicorns Deceptive?

The private market is so healthy that even Silicon Valley journalists are publishing the “B” word (“Bubble”, not the one that rhymes with rich).  The robust private market has made the tech IPO an after thought; so much so that we are headed for the lowest issuance since 2009.  The chart below highlights how the Unicorn wave is so strong that 41 private companies raised illiquid private rounds ABOVE where Box priced its initial public offering in a liquid market at a very respectable SaaS multiple of about 7.5x run rate revenue.

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Are we in a bubble?  Journalists are hitting the Wayback Machine and dusting off old S-1s to find Year 2000 metrics we can compare to today’s market to answer the “Bubble / No Bubble” question.  In all the looking backward, they might have missed the reality of today’s market.

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Tech Market Update – Gartner CEO Summit

Include PE Buyers in your M&A Process Curious Incident of the Disappearing IPO

Our friends @Gartner_Inc invited me to speak yesterday at their Annual CEO Summit. I met some interesting people. Two of the speaking Analysts are leading projects around B2B buying processes and behaviors. Gartner has done some interesting analysis here, including creating a framework of Enterprise Buying Personalities. Worth checking out if you are a B2B marketer.

My segment was an update on the Tech Capital Markets generally, and the fundraising environment in particular. The slides from the discussion can be found here.

While reviewing our market data in preparation for the talk a couple of points jumped out at me:

  • The IPO market overall, but particularly in tech, is really off this year. Take a look at the data beginning on Page 12 of the deck. Dan Primack forecasted yesterday in his daily post that we are headed for the lowest number of VC-backed IPOs since the 2009 recession.
  • Public investors like Fidelity may not be crossing over into the private markets in search of outsized returns. They may be doing it as the lack of tech IPOs is offering them fewer alternatives to add new tech names to portfolios.
  • Take a look on Page 22 to see what investors in the latest round for @Snapchat could have bought instead….

Your VC’s Cap Table Math Could be Hurting You

This post includes some geeky accounting issues, but read it. It can change how much dilution you take in the next round.

Later-stage investors are delivering our companies attractive valuations. Just look at the latest Unicorn list.

However, many companies are not really getting the headline valuation in their term sheet. Ultimate ownership and dilution is driven by pre-money share price, not a headline valuation. When follow-on investors are calculating share price, many use an outdated method that is adding dilution to existing shareholders, most often hurting founders and employees.

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2015 Tech Growth Equity Outlook

What is in store after a transformational year in 2014?

Predictions for the tech growth equity market in 20152014 was a banner year for tech companies raising growth equity in the private market. Investors committed $74B to drive growth and provide liquidity. At least 21 new companies joined the “Unicorn” club with valuations in excess of $1,000,000,000.   Uber raised capital late in the year at a $41B value, a market cap that would rank it 32nd among all NASDAQ listed companies were Uber public. The private market universe expanded with mutual funds, hedge funds and corporate investors increasing their private portfolios. Marc Andreessen and Bill Gurley began to raise alarm bells about the market and company burn rates overheating.

So how does a company considering raising funds plan for 2015?  Read our full report here.

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Up Rounds & Simpler Terms – Q3 Tale of the Tape

Investors are Pricing Rounds Up, but Fearing the Bubble

Analytics are out on the private financing market during Q3.  We should all appreciate that Wilson Sonsini and Cooley each make the effort to aggregate and publish term sheet analytics.  The law firms can only report on transactions where they advise, but the collective data are by far the most detailed view into trends in term sheet structure.

The big takeaway for CEOs thinking of funding is that capital remains available – 80+% of all financing rounds were up rounds in Q3.  WSGR reports it is the highest level of up rounds since they began tracking data.  The WSGR graph below shows the recent quarterly trend:

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It is unlikely that 80+% of portfolio companies are making their budget numbers.   Therefore, the wealth of up rounds suggests investors are giving companies the benefit of the doubt and placing credence in future growth plans.

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What Market Slowdown?

Busy week in our market.  Private tech growth investors of all flavors – corporate, financial and crossover – deployed $2.5 billion since last Friday.

Week of Oct 20

Interesting to note how active the corporate investors were.  Strategic priorities such as mobile and virtual reality were backed by significant balance sheet commitments.  The snapshot of this past week also reinforces how broad and how global the market has become.

 

Late Stage Bubble? – Data Say Maybe Not

Unicorns and bubble fears are making headlines, but private growth investment in tech actually declined in Q3 relative to the same period last year. The market is still active and healthy. Investment volume increased 18%. However capital committed dropped a bit as average round size contracted from $67M to $50M. Our numbers are growth deals – those over $15M – so it is not intended to capture angel, seed, typical Series A, etc. We track the volume of growth investing in North America and Europe.

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Are You Ready to Be a Unicorn?

Joining billion dollar club is a decision to go public

2014-08-04-unicornThe private financing market is favorable.  So much so that we now have Facebook pages set up to count and follow the unicorns – venture-backed companies that have raised capital at valuations above a billion dollars.  This is not a bad thing.  It means the private market has the depth to finance a company on attractive terms for as long as the Board decides the company should stay private.

However, the expansion of available private company valuations has implications a Board and a CEO should consider when pricing the next round.  A big step up in valuation means the collective team – leadership, employees and existing investors – are signing up to produce a much bigger outcome.

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