Another problem would be: should the underwriters, led by Goldman Sachs and Morgan Stanley, be responsible for this? If they had seen a sharp divide between private equity investors ($15) and public traders ($10) during book-building, they should have advised the founders to lower the subscription price to below $10 even though the PE people have put in enough subscription at $15 to complete IPO.
To successfully raise a 1st-time fund as an independent VC, like us, it takes superior strategy for building deal flows, carefully hammering out tactics to approach potential LPs, sophisticated orchestrating of timelines, proper and to-the-point PR campaigns that will cost you money up-front, and fundamentally just lots of lots salesmen's skills.
After lots of hard work by the team, we're happy to announce 1st closing of 25M€ for our Fund I.
However, in the case of banking, startups are NOT doing better than traditional banks.
Whatever your B2B offering is, keep in mind that unlike consumers, corporate clients seldom buy your products or services due to pricing. There are tons of other factors that come before pricing.
AI startups that depend on users giving them data have a classical chicken-egg problem that most platform startups. e.g., e-commerce, sharing economy, etc, are faced with.
The main problem for most pure-software AI/ML/DL startups is that: they do not have the input data, otherwise known as the training sets in AI/ML/DL jargons.
Staged financing, which is the nature of VC industry, whips the startup into hitting KPIs in different stages so as to be able to raise new money at higher valuation – huge incentives. Living in the fear of running out of cash as a startup also puts the entire team on a relentless driving mode.
One of the most intriguing behaviors is VCs talking about investment horizons that are beyond normal fund lives, e.g. 10~12 years. They talk about how they are willing to wait another 3 or 4 years before the team rolls out a really good deep tech product. They talk about real disruptions in energy generation, material sciences, etc, as opposed to yet another teenager social networking app. They talk about how the 10-year bet would either monopolize a market or perish.
So much is talking, especially that some of those VCs do not have backgrounds as entrepreneurs or even engineers in the said deep-tech fields.
As 2017 kicked off for the Hardware Club as usual with a grand firework at CES in Las Vegas and a following week in Bay Area, we've done some heat check with our private network. Here are some thoughts for the investment trends in hardwares for 2017.
I believe that this is not the case in FCFF & EV valuations, as there's no effect on how the FCFF is distributed if we exclude tax impacts. I would say that if the Terminal Values in your FCFF models account for huge part of your EVs, the models are still unreliable. This is the case of many LBO modelings where revenue growths are modeled only up to 5 years and also to be low single-digits.
In the case of high-growth startup modeling, it's important to project FCFFs up to 10 years or 20 years until the company hits maturity. If after doing all this a significant portion of the EV still comes from Terminal Values, then this model is just as unreliable as a 5-year LBO one, if not more.