All in + Finance

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. 

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.

Like many hot startup subjects, crowdfunding is an oft-misunderstood one. At the Hardware Club we have more than 20 startups that broke $1M on Kickstarter or Indiegogo. In our portfolio companies along we have 3. We consider ourselves knowing the art of crowdfunding better than most average investors.

However, I constantly run into hardware founders that have very distorted views on crowdfunding. This article is to share my opinions on this subject as an investor. 

While most outsiders think a VC's job is the same as a stock picker, which is to make better decision in buying stocks than others. It could not be further away from the truth.

90% of our job is sell-side, if not more. Making the buy-side investment decisions is key to our eventual financial performances. However, without the 90% of sell-side effort, we may never get to choose, to exit and even to have the money to invest!

This article was first published on RudeBaguette.

When I joined my partners at the Hardware Club to re-focus myself on investments in hardware startups, my former boss at my previous VC firm warned me, out of concerns about my career, that hardware startups were capital inefficient and would not be able to generate the investment returns as well as lean startups.

At the time I did not try to refute him, party due to that there were not enough data back then. Since then various hardware startups such as NestGoProOculus VR and now Fitbit made their way to great exits either through IPO or M&A, making generous returns for their investors. In addition, various young hardware startups have nudged their way into the realm of unicorns, led by the ridiculously fast rising Xiaomi. I feel that it’s time to do an official analysis and refute this popular myth of capital inefficiency in hardware startups compared to their lean brothers.

Let me jump to the conclusion first: successful lean startups are as capital efficient, if not more, as their lean counter parts. They will generate as good, if not better, returns for their VC investors.