Recently attended a venture capital conference where entrepreneurs, angel investors, M&A lawyers/accountants, and VCs gathered.
Brief summary:
obviously things are pretty slow, valuations are down, initial investment is down and appetite for risk is down.
IPO market has been pretty dead and forecast to continue that way so that eliminates an one exit strategy for VCs. They generally want a 'liquidity event' to cash out in a few years.
That leaves a sale to a strategic buyer (such as selling to google or some established company) or a financial sale to a financial buyer (private equity firm etc..) Strategic sales usually carry higher valuation because the acquiring company wants you as a strategic piece to their business and not just buying your cash flow. (I sold my co. to a fortune 200 strategic buyer in 03)
Valuations are holding up in the health care area(i hate using the word "space" and will throw up if I hear "ecosystem" applied one more time to every industry! LOL). Health care IT is especially pretty hot as well as biotech. It doesn't have to be so high biotech as one company was marketing a plastic coating for keyboards and related equip to interrupt the infection spreading cycle in hospitals, nothing too high tech but marketed to create tons of value as infections are a huge costly problem in hospitals.
Software as a service is very hot. If you can find a niche in business here margins can be through the roof so it doesn't take millions of clients. A couple presenting companies outsourced most of their work and were driving EBITDA margins as high at 80% on a couple million in sales. That's printing money.
Customers are focused on cost cutting and efficiency, not fancy bells/whistles and entertainment. However, yes, there was the one obligatory vestigial "free music for everyone' site presenting from the .com era!
He was a young kid in college and hopefully a fast learner will make him a fast laner on another idea. Most of these businesses were B2B recurring revenue models. Not much direct consumer wham bam thank you maam periodic sales stuff.
Appetite for risk is down as VCs are looking to invest in later stage maturer companies that have some decent sales (hundreds of thousands or a few million), many of them are already profitable or very close to profitability at current run rates. The only pure startup IIRC was one pitched by the founder of Citrix Systems. LOL, the guy has a little bit of credibility and track record I'd say.
Even though the overall mood of the economy is a little bleak, there are fantastic people doing some dynamic things and making a ton of money! Change creates opportunity.
For those that have a bit of capital or can raise it, now is a good time to acquire various assets on the cheap. Domains? Much built out complimentary sites that could be adapted to your use cheaper than you starting from scratch etc... One company told a story of how they bought a competitor who was not profitable and struggling on the cheap and drove out 80% of their cost using their existing outsourcing and POOF, instant profitability and accretive earnings. Pretty much arbitrage.
One real interesting company in the IT area was a company that creates ad exchanges for "sponsored content". You are seeing more and more bloggers for example doing paid or "sponsored" articles. The ad is embedded into the content rather than advertising ads around the perimeter of a page. (Think Rush Limbaugh talking about Zicam etc..or online blog writing paid articles on a particular product) This is something I'd really be interested in and could probably raise some decent money. It seems pretty fragmented and is tougher for advertisers to deploy money in large chunks quickly and efficiently. TV media are increasingly doing the embedded product endorsement as well, to combat time shift and commercial skipping viewing on tivo/recorders.
From the entrepreneur start up the people to probably focus on are angel investors. High net worth individuals, usually from success in their own biz, often team up with others to invest in early stage companies. An angel invested $50k in Internet Security Systems (ISS) and cashed out $200 million when it was sold to IBM for $1.5 billion. The guys who started ISS where a couple years behind me at Georgia Tech, they did quite well! Angels, tend to start out w/ seed capital after you tap out your friends and family. VCs are usually the next level beyond angel investors.
It is good to start a relationship with angel investors as well as VCs early as many of them can offer good free advice and they want a dialog and relationship over a period of time to warm up to investing. They also have incredible connections to help grow a biz quickly. IE, There were several "youtubes" around but high profile VCs with capital and connections vaulted it quickly. That was generally the case for most of the companies who are now household names.
So if you are working hard on your small biz or even if you have a startup idea take a little time to get on the phone to your local angel investors network and do a little promoting.
Brief summary:
obviously things are pretty slow, valuations are down, initial investment is down and appetite for risk is down.
IPO market has been pretty dead and forecast to continue that way so that eliminates an one exit strategy for VCs. They generally want a 'liquidity event' to cash out in a few years.
That leaves a sale to a strategic buyer (such as selling to google or some established company) or a financial sale to a financial buyer (private equity firm etc..) Strategic sales usually carry higher valuation because the acquiring company wants you as a strategic piece to their business and not just buying your cash flow. (I sold my co. to a fortune 200 strategic buyer in 03)
Valuations are holding up in the health care area(i hate using the word "space" and will throw up if I hear "ecosystem" applied one more time to every industry! LOL). Health care IT is especially pretty hot as well as biotech. It doesn't have to be so high biotech as one company was marketing a plastic coating for keyboards and related equip to interrupt the infection spreading cycle in hospitals, nothing too high tech but marketed to create tons of value as infections are a huge costly problem in hospitals.
Software as a service is very hot. If you can find a niche in business here margins can be through the roof so it doesn't take millions of clients. A couple presenting companies outsourced most of their work and were driving EBITDA margins as high at 80% on a couple million in sales. That's printing money.
Customers are focused on cost cutting and efficiency, not fancy bells/whistles and entertainment. However, yes, there was the one obligatory vestigial "free music for everyone' site presenting from the .com era!
He was a young kid in college and hopefully a fast learner will make him a fast laner on another idea. Most of these businesses were B2B recurring revenue models. Not much direct consumer wham bam thank you maam periodic sales stuff.Appetite for risk is down as VCs are looking to invest in later stage maturer companies that have some decent sales (hundreds of thousands or a few million), many of them are already profitable or very close to profitability at current run rates. The only pure startup IIRC was one pitched by the founder of Citrix Systems. LOL, the guy has a little bit of credibility and track record I'd say.
Even though the overall mood of the economy is a little bleak, there are fantastic people doing some dynamic things and making a ton of money! Change creates opportunity.
For those that have a bit of capital or can raise it, now is a good time to acquire various assets on the cheap. Domains? Much built out complimentary sites that could be adapted to your use cheaper than you starting from scratch etc... One company told a story of how they bought a competitor who was not profitable and struggling on the cheap and drove out 80% of their cost using their existing outsourcing and POOF, instant profitability and accretive earnings. Pretty much arbitrage.
One real interesting company in the IT area was a company that creates ad exchanges for "sponsored content". You are seeing more and more bloggers for example doing paid or "sponsored" articles. The ad is embedded into the content rather than advertising ads around the perimeter of a page. (Think Rush Limbaugh talking about Zicam etc..or online blog writing paid articles on a particular product) This is something I'd really be interested in and could probably raise some decent money. It seems pretty fragmented and is tougher for advertisers to deploy money in large chunks quickly and efficiently. TV media are increasingly doing the embedded product endorsement as well, to combat time shift and commercial skipping viewing on tivo/recorders.
From the entrepreneur start up the people to probably focus on are angel investors. High net worth individuals, usually from success in their own biz, often team up with others to invest in early stage companies. An angel invested $50k in Internet Security Systems (ISS) and cashed out $200 million when it was sold to IBM for $1.5 billion. The guys who started ISS where a couple years behind me at Georgia Tech, they did quite well! Angels, tend to start out w/ seed capital after you tap out your friends and family. VCs are usually the next level beyond angel investors.
It is good to start a relationship with angel investors as well as VCs early as many of them can offer good free advice and they want a dialog and relationship over a period of time to warm up to investing. They also have incredible connections to help grow a biz quickly. IE, There were several "youtubes" around but high profile VCs with capital and connections vaulted it quickly. That was generally the case for most of the companies who are now household names.
So if you are working hard on your small biz or even if you have a startup idea take a little time to get on the phone to your local angel investors network and do a little promoting.
Dislike ads? Become a Fastlane member:
Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)
Membership Required: Upgrade to Expose Nearly 1,000,000 Posts
Ready to Unleash the Millionaire Entrepreneur in You?
Become a member of the Fastlane Forum, the private community founded by best-selling author and multi-millionaire entrepreneur MJ DeMarco. Since 2007, MJ DeMarco has poured his heart and soul into the Fastlane Forum, helping entrepreneurs reclaim their time, win their financial freedom, and live their best life.
With more than 39,000 posts packed with insights, strategies, and advice, you’re not just a member—you’re stepping into MJ’s inner-circle, a place where you’ll never be left alone.
Become a member and gain immediate access to...
- Active Community: Ever join a community only to find it DEAD? Not at Fastlane! As you can see from our home page, life-changing content is posted dozens of times daily.
- Exclusive Insights: Direct access to MJ DeMarco’s daily contributions and wisdom.
- Powerful Networking Opportunities: Connect with a diverse group of successful entrepreneurs who can offer mentorship, collaboration, and opportunities.
- Proven Strategies: Learn from the best in the business, with actionable advice and strategies that can accelerate your success.
"You are the average of the five people you surround yourself with the most..."
Who are you surrounding yourself with? Surround yourself with millionaire success. Join Fastlane today!
Join Today
