News > Venture Capital

The rise of a new type of down round
Venture Capital
<p>For venture capital-backed startups there is nothing worse than having the black mark of a down round against your name. Now new data suggests that such rounds – which happen when a startup raises capital at a lower valuation than their previous round – are on the up.</p> <p>This week a report by Fenwick &amp; West showed that while up rounds still exceed down rounds by 86% to 4% (with the remaining 10% representing flat rounds), the number of down rounds is creeping up again. In the third quarter, the percentage of down rounds for companies at the Series E  stage or later spiked to 11%, up from 7% the previous quarter.</p> <p>Looking at the number down rounds from a year ago – 27%- the most recent figure are not that bad. But it’s not the whole story. Focusing on private markets misses the bigger picture. TechCrunch reports that more VCs are now talking about a new trend, the so-called “IPO down round.”</p> <p>Recently listed payments firm Square – which has lost a third of its worth since its Series E round – is the most recent example of this. Other in include Groupon and game designer Zynga, both of which have seen their value drop since listing.</p> <p>Some maintain these companies are the exception rarther than the norm. There is also a danger of reading too much into a company’s IPO price, as many – like Facebook – have recovered from a rocky debut. That said, Max Wolff, chief economist at Manhattan Venture Partners, predicts more “IPO down rounds” in the pipeline, and it not necessarily a bad thing. He tells TechCrunch:</p> <p>“We will see several unicorns come public below their highest late stage private rounds. This is part of an overdue and long-term healthy reset.”<br /> Photo: Joe The Goat Farmer <br /> &nbsp;</p>
Jet.com said to raise $350M with another $150M on the way
Venture Capital
<p>It wasn't easy, but Jet.com has managed to raise $350 million and says another $150 million is on the way, reports ReCode. At the last round, the company was valued at a magical $1 billion.</p> <p>The Amazon challenger says the fund-raising environment has gotten much tougher. That must be a relative term. The startup hottie has already raised a total of $570 million from a mix of heavy-hitters, including Fidelity Investments, Alibaba, Bain Capital Ventures, and Google Ventures.</p> <p>How does Jet.com make money? Here's what ReCode has to say:<br /> Jet’s founder Lore believes his company offers something different: A unique discounting structure that rewards shoppers when they put more items in their checkout basket. Orders that contain multiple items, ideally located in warehouses close to their delivery address, are more efficient and cost less to process.​ That allows Jet to pass along those savings to the customer.<br /> &nbsp;</p>
Video: Due diligence, infrastructure a challenge with China partners
Venture Capital
<p>&nbsp;</p> <p>In expanding his business into China, DriveWealth Director of Strategy Michael Fitzgerald says both due diligence was  the infrastructure posed unique challenges for his startup. In this interview at the NexChange event "Going Global: Startups paths to funding and expansion in Asia," Fitzgerald discusses what was most surprising about going into China.</p>
Greycroft Partners closes fourth fund
Venture Capital
<p>Greycroft Partners, the venture capital firm behind The Huffington Post and Venmo, has closed its fourth early-stage fund.</p> <p>The New York firm's latest venture fund, Greycroft IV, brings the firm's total capital under management to $800 million, reports Business Insider. For the new fund, Ellie Wheeler was promoted to partner. The firm has a 20 person investment team across New York and Los Angeles.</p> <p>Greycroft was started by Alan Patricof in 2006. Patricof has worked in venture capital since 1969 when he founded Patricof and Co. Greycroft has invested in Maker Studio, Trunk Club, Munchery, and The Skimm.<br /> Photo: Internet Week New York</p>
Startup founders see a lot of question marks
Venture Capital
<p>First Round Capital polled more than 500 startup founders about the state of the industry. Here are the top takeaways, as reported by Business Insider:</p> <p> It's only going to get harder to raise capital. 95% of Series Seed, 97% of Series A, and 99% of late-stage founders say it's going to be the same or harder to raise capital in the next 12 months.<br /> Most think we're in a bubble. Nearly three-fourths of founders say we're in a bubble. But enterprise company founders deny the bubble twice as often as their consumer company peers.<br /> No one knows what the heck is going on with IPOs. A third of founders say there will be more IPOs next year. A third said fewer. And a third thinks things will be the same.<br /> Women-led companies are more diversity focused. About 44% of women-led companies have a 50/50 gender ratio. Only 25% of men-led companies do. 87% of women-led companies have a diversity initiative, while 62% of men-led companies do.<br /> The power will be in the hands of the investors soon. 63% of founders say entrepreneurs have the upper hand now compared to investors, but in the next few years, 54% say investors will be the lead.<br /> Top founder concerns are hiring the right people and revenue growth. Building the right culture and having happy talent ranked a higher concern than raising money or losing customers.<br /> Younger founders are more likely to partner up, but also have strained relationships. Founders over 30 are 40% more likely to be solo founders, but also have more friendly relationships with co-founders when they have them.<br /> Elon Musk is the most admired leader in technology. More than 611 different names were submitted as the most admired tech leader, but a whole 22% of people wrote Musk. The next most popular was Jeff Bezos with 7.5%.</p> <p>Photo: Thomas Hawk<br /> &nbsp;</p> <p>&nbsp;</p>
People Moves: FirstMark Capital co-founder leaves; Revolution Growth hires 3 vps
Venture Capital
<p>&nbsp;</p> <p>Co-founder leaves FirstMark Capital. Lawrence Lenihan has left for Rsonance Companies, a new company he co-founded that will focus on fashion startups. He will continue to provide capital in exchange for equity in fashion startups, but will alo provide operational help.</p> <p>DC firm hires new vps. Revolution Growth, co-founded by Steve Case, has hired Kristin Gunther, Ashley Larson, and Chris Hughes as vps. They join from Perseus, ABS Capital Partners, and Boston Consulting Group, respectively.</p> <p>Photo: ©iStock.com/ooyoo</p> <p>&nbsp;</p>
Many startups delay IPOs too long, says Google's Maris
Venture Capital
<p>Here's a timely warning for Silicon Valley startups. A Google boss reckons too many have taken too long to go public, and they'll lose out by being too greedy or arrogant.</p> <p>Some start-ups may rue their decision to exploit the booming private markets to push for high headline valuations, rather than selling shares to the public, said Bill Maris, head of Google Ventures, one of California’s most active VC firms to the Financial Times. (paywall)<br /> “They’re setting the bar so inordinately high they’re making life difficult for themselves,” he said in an interview with the Financial Times. “There’s going to be some fallout: some of them will lose a lot of money.”</p> <p>Next year, many will be unable to raise more cash in the private markets or be forced to accept lower valuations, he predicted. Google Ventures, which is changing its name to GV, has backed more than 300 companies since its creation six years ago.</p> <p>The warnings signal a reversal of what became received wisdom during the latest tech boom, as venture capitalists courted entrepreneurs with promises of leaving them free to stay private rather than pushing them to cash out by taking an “exit” like an initial public offering.<br /> Photo: Charis Tsevis </p>
7 mistakes startup founders make when pitching investors
Venture Capital
<p>From making everyone you talk to sign nondisclosure agreements to burying bad news, here's what to avoid.</p> <p>No one who's trying to get their startup in front of a venture capitalist needs to be told how challenging that can be. But some of the trouble can come unwittingly from entrepreneurs themselves.</p> <p>Startup founders often make decisions that they think will protect their ideas but end up sabotaging them instead. Here are some of the most common and how to avoid them.<br /> 1. Opening The Conversation With An NDA<br /> My first time around as a startup founder, I refused to show my business plan to anyone without them first signing a nondisclosure agreement (NDA). I’m sure I missed funding opportunities as a result. I can’t offer many more details than that, though, because my company never had a chance to develop that far. By the time I got around to starting my second business, I couldn’t have cared less about NDAs. I knew that no one had the ability to execute my plan as well as I did. Sure, they could read my blueprints, but building it was another story.</p> <p>Entrepreneurs all need that confidence. Ideas are a dime a dozen. For all you know, the investor you're pitching might already be talking to another startup with similar ideas. Your team, your plan, and your ability to execute are more important than your "secret sauce."<br /> 2. Assuming Your Business Plan Is More Important Than Your Team<br /> Revenue projections, competitive analysis, and vision are all important, but they're all forward-looking. Investors want to know who's driving the bus right now. Are the goals of everyone on your team aligned? How have their past experiences prepared them to execute your business plan? Be able to explain how your team's track record sets your new venture up for success.</p> <p>3. Obsessing Over Control</p> <p>Stories about founders losing control of their companies to investors are ubiquitous. But most startups fail anyway, and captaining a sinking ship is cold comfort. Investors want to see startup founders delegate and share responsibility. You won’t be able to do everything yourself forever, and investors need to be able to see that you can accept help.</p> <p>Money is the same no matter who you get it from. When you’re looking for investors, look beyond the term sheet for other factors that differentiate them. Do they understand your space and your vision? Will they be able to make introductions to the right people on your behalf? Are they invested in you, or just in your company? When something isn’t going as planned, will they offer support and guidance, or just cut their losses and run?<br /> 4. Trying To Hide Bad News<br /> Your investors are on your side. When you win, they win. You’re running a startup, which means that investors don’t expect everything to go smoothly. No one likes hearing bad news—or delivering it. But investors would rather hear bad news now, when there’s an opportunity to fix things, than later when there isn't. Problems can compound quickly, and it’s easy to get in over your head. But whatever is happening probably isn’t as insurmountable as it seems.</p> <p>Good investors value consistency and transparency. They want to know you’re going to be honest about roadblocks and bring them up as early as possible.<br /> 5. Predicting Rapid Growth<br /> Anyone can draw a chart projecting rapid growth. It doesn’t mean anything, and it only makes you look naive and cocky to investors. Do the research and be sensible in your projections. VCs are looking for sustainable businesses, not pie-in-the-sky dreams. Realistic growth projections tell investors that you’ve carefully considered the market you want to enter and have done your homework.<br /> 6. Waiting To Think About Marketing<br /> Marketing should be a core part of your business plan from the beginning. This doesn’t mean starting an advertising campaign before you’ve written your first line of code. It means that if you don’t have a go-to-market strategy, then it doesn’t matter if you have a product. Investors need to see th
Deal flow: the technologies receiving the most investment from VCs [Chart]
Venture Capital
<p>Angel investors and venture capitalists put up with a lack of liquidity in there investments for a good reason. The ability to fund private, early-stage ventures allows these investors to get a pulse on industry trends before they fully materialize in front of the general public. If they play their cards right, it allows this group to get in on an Uber or an Airbnb years before anyone even knows it exists to receive a lucrative return.<br /> Deal Flow: The Technologies Receiving The Most Investment From VCs</p> <p>Here’s the geographic breakdown of venture capital by continent:</p> <p>Lastly, the majority of deals were led by the same usual suspects such as Sequoia, KPCB, and Andreessen Horowitz.:</p> <p>Original graphic by: Raconteur</p> <p>This story first appeared in ValueWalk.<br /> Photo: Patrick Nouhailler</p>
Startups don't actually create that many jobs, say economists
Venture Capital
Technology startups create jobs. It's the well worn mantra used every time governments extol the virtues of a booming startup industry.  But how many job do they create? Not that many, say the experts. Re/code has highlighted a recent paper from Oxford economists Thor Berger and Carl Benedikt Frey that is just one of several pieces of research that show tech