Editors Note: Gerard is a well regarded Angel Investor and thought leader in early-stage investing in Toronto, Canada. As a result this piece not only has interesting commentary on potential trends in 2015 from the conference he attended, but it also has interesting comparisons of the U.S. vs Canadian startup scene.
Having returned from The Future of Money and Technology, a FinTech conference in San Francisco, I had some thoughts on trends as we embark on 2015 for financing and growth of start-ups. There were clearly several trends in addition to Bitcoin and other cyber currencies that emerged in the various panels. In summary those trends are dominated by a focus on big data, regulatory changes in capital formation, an increase in investment by strategic investors or mainstream companies like Citi Ventures and the evolving collaborative consumption economy and the start-ups it is spawning like Instacart of which there are 387 listed for investment on Angel List.
The family office, a product of the early twentieth century, is rapidly evolving in response to a number of factors: the turmoil from the recent consolidation and personnel changes in financial services firms, a heightened sense of the need for improved risk management and objectivity and the high cost of attracting and retaining the professional talent needed today to advise and serve family members on a wide range of issues.
Just a couple of decades ago a fortune of $50 million was more than sufficient to justify directly employing a staff of accountants and investment managers to keep track of the family finances, including the holdings of various trusts and foundations. Today, the “break even” point is closer to $250 million and climbing. Hence, many former single-family offices have grown into multi-family offices (“MFOs”), offering unrelated families the ability to share a CFO, CIO, tax professionals, and experienced administrative staff as well as valuable intellectual and technology resources.
In many ways it has parallels to the emergence of fractional jet ownership as high net worth individuals ask, “Given my needs, would I rather own all of a single engine plane or a share of a private jet? And, would I like to pay someone else to worry about hiring the people to fly it and care for it, handle security, do the safety checks, update the insurance and all the other hassles of maintaining a group of personal employees?” Similarly, contracting for a “share” of the staff at an established MFO often can securely provide access to talent, processes, intellectual capital and systems that simply cannot be justified at lower asset levels.
In our travels, we’ve talked with many folks who work at startups and two common threads have emerged:
The former is a primary reason why EquityZen does what it does and the latter is the topic of this post. We will break down the basics of incentive compensation at startups, survey tax considerations, and identify key points to raise with employers during compensation negotiations.
Entrepreneurs and investors have a growing interest in building and funding companies that integrate people, planet, and profit. But despite market demand for goods and services with environmental and social value, startup ventures based on these values are typically perceived as higher-risk or lower-return, and often struggle to maintain their unique identity as they trade equity for capital.
Crowdfunding can be a powerful tool that enables a socially responsible company (SRC) to overcome these challenges, resulting in more and better opportunities for socially responsible investing (SRI). But how does the power of “the crowd” empower new startups and reduce risk for investors?
After closing our seed round a few months back, my co-founders and I decided to figure out what traction we’d need to reach the next fundraising milestone: Series A. I was surprised to find that there’s not a great single resource on the internet that sets out current market VC expectations for Series A companies. So we’re now providing that resource. We did a lot of digging into this, including asking mentors, current investors, and prospective investors. Here’s what we found. Read More
If you’re marketing your next (or first) big fund or deal – we know that you’re probably wondering about crowdfunding, deal portals, TPMs, investment banks or taking the family office route as some of the best angles to get funded. Chances are you’ve already done at least one of these in the past on a prior transaction or are contemplating them right now.
The questions to consider in pursuing the great balancing act of marketing your deal in 2014 and 2015 are designed around what best practices to use to successfully complete your raise, do it in an efficient manner, and be safe in your approach. Read More
This article, by James F Coffey, a partner at Nutter McClennen & Fish LLP, discusses the key principles an early-stage startup requires to move from an interesting concept to a company worthy of securing angel funding. Perhaps even more interesting is the overall concept that a company’s value lies not in its idea, but in it’s actual solution, or execution to a given problem. Read More
As the Alternative Asset Class continues to mature and evolve, the increased interest and scrutiny on the sector has led to more transparency. But data is still more difficult to come by than it is for the public securities. As a result, professionals rely on certain key information resources on an almost daily basis.
From our perspective at the DTCC – Alternative Investment Products Division, we are constantly analyzing and evaluating these informational news digests and data feeds in depth. We have found that there are many pretenders, and only a few resources that have stood the test of time (or show promise). What follows is our/my go-to list for real value-add information for news, research, and data.
In privately-held companies, realizing previously created equity value is often a secondary strategy until a succession planning, estate planning, or a business-ending liquidity event is under consideration. Cash, or other assets, must be distributed to your shareholders to “realize” shareholder value. In public companies, this is easy to accomplish: sell your stock in the market! This strategy is not available for privately-held companies–particularly family enterprises.
In fact, the topic of realizing shareholder value is seldom addressed. I know this from my experience as a family enterprise business consultant and prior board member of 14 such companies. The focus by such enterprises is always on creating shareholder value. The big disconnect is, until shareholder value is realized, any created value is just a paper gain; these are unrealized paper stock gains that can disappear in your investment portfolio like paper into a wastebasket.
The fundamental question CEOs and board members need to ask is “are you spending your most valuable resource — your senior executive team’s time — addressing issues that both create and realize equity returns to your shareholders?” An understanding of the key levers that impact shareholder value is critical to developing the right business strategy, operational focus, and prioritization of work assignments among the senior management team. Any other focus results in suboptimal financial returns and increased investment risk for your shareholders.