Angel investors typically invest in seed or early stage startups that are seeking between $150,000 to $1M. Often, a group of six to twenty angels will pool their funds to make such an investment. The average check written by angels is ~$30,000. They are typically accredited investors that are investing with the intention of engaging with the management team in some capacity (advising, coaching, consulting and possibly even becoming a member of the board).
Angel’s seek startups with a premoney evaluation of $0.5M to $3M and typically seek 20%-40% ownership. Angel’s are looking for returns of 10X+ in less than 5 years. Angels are typically uninterested in anything less than a 10X potential return as the investment will not balance the deals that go south in their portfolios. Along the same lines, Angels look for exits of $30M-$50M. Angels typically undergo extensive due diligence prior to closing a deal.
Earlier, we wrote a blog post on California passing legislation creating new business structures for social enterprise. In this post, we’ll discuss what exactly the triple bottom line approach to sustainable business (social enterprise) really is.
Triple bottom line refers to the 3 “P’s” – Profit, People, Planet. It is a term often connected to companies that are actively engaged in eco-friendly policies or community interests. Like any business, a triply bottom line oriented business will focus on generating profits for its shareholders. However, it will also focus on people, often by hiring immigrants or under-served members of the community. Additionally, these companies will focus on providing the most ecologically friendly products and services and conducting business operations in a manner that is as friendly to the planet as possible.
Generally, the triple bottom line makes good business sense. Though, the degree to which companies to proclaim a triple bottom line mission actually execute on the people and planet side of the equation is unique to each company. While incorporating these key words to the company’s mission is a great way to gain support from certain market niches, its important to actually execute these practices so as to not alienate these same market segments.
More information about the triple bottom line principles can be found here.
As an aspiring entrepreneur, you will want to launch your startup in a fertile environment with ample funding and quality of life (for good employees and good prospects likely seek out this characteristic in determining where they will put down their roots).
To gauge the health of small-business lending in each city, NerdWallet analyzed business loans made by community banks in 2012. The researchers also considered business friendliness and assessed the local economies based on the average income of residents, the unemployment rate and the cost of living. Education levels and population growth measured available talent. More information can be found here.
#5 – Oklahoma City, Oklahoma
- Small-business lending in 2012: $118.5 million
- Businesses per 100 residents: 10.3
- Average income: $25,450
- Population growth rate: 2.1%
#4 – Tulsa, Oklahoma
- Small-business lending in 2012: $125.5 million
- Businesses per 100 residents: 10.7
- Average income: $26,727
- Population growth rate: 1.2%
#3 – Austin, Texas
- Small-business lending in 2012: $28.4 million
- Businesses per 100 residents: 10.8
- Average income: $31,170
- Population growth rate: 3.8%
#2 – Raleigh, North Carolina
- Small-business lending in 2012: $43.9 million
- Businesses per 100 residents: 10.5
- Average income: $30,377
- Population growth rate: 3.1%
#1 – Atlanta, Goergia
- Small-business lending in 2012: $62.2 million
- Businesses per 100 residents: 9.8
- Average income: $35,884
- Population growth rate: 3%
Despite the concerns about a crunch, the reality is that the level of Series A activity is holding steady. At the same time, the number of seed deals have exploded. As a result, the Series A Crunch is nothing more than excessive demand for a limited supply of Series A financing. While the number of startups receiving funding overall declined in 2012, they raised 22% more capital on average and closed 30% faster than in 2011.
According to an analysis published by The Big Data Group and SiSense, the number of Series A deals actually increased in 2012, and those deals closed faster than they did in 2011. However, fewer Series B deals were done in 2012, with 45 more days on average needed to close the deals.Dave The Big Data Group reports, “It’s more of a Series B crunch than a Series A crunch.”
The “Series A Crunch” myth boils down to supply and demand; with a fixed number of Series A investments to go around and a lot more entrepreneurs fighting for them, many will go unfunded. It’s not that there is less funding (supply), there are just more entrepreneurs (demand), causing those who do not find funding to blame it on a mythical “crunch.”
Online and mobile developers use a number of tools to collaborate on, facilitate and track their projects from bug tracking and API management to code sharing networks and mobile back-end services. Investors are beginning to take notice of the relatively young market categorized as developer tools, or any program or application that helps developers devise, debug, test, or in any other way support code. Over the past year, $646M has been invested into developer tools across 94 deals.
The majority of funding growth into developer tools start-ups is coming at the seed and Series A stages, which may explain why average funding per quarter over the past two years trended just below $20M.
More information about this develop tool investment trend can be found here.
With limited legal designation for social enterprises, social entrepreneurs are forced to struggle with which legal form to choose for their ventures. Traditional legal entities are not well-suited to blend the social and profit-making purposes of a social enterprise. Management of for-profit companies are liable to shareholders for failure to maximize profit. On the other hand, management of non-profit organizations are liable to the IRS when they reward investors.
Fortunately, California Governon Jerry Brown signed into law Benefit Corporation (!B 361) and Flexible Purpose Corporation (SB 201) legislation. The passage of this law creates two options for socially responsible business models in California.
Generally, Benefit Corporations are corporate entities that are required to pursue social and environmental objectives in addition to seeking profits. Flexible Purpose Corporations are corporations that seek profits and at least one broader social or environmental goal. For more information about the two entities, visit this site.
While these structures are ideal for corporations that would like to be held to a higher standard of social and environmental responsibility, neither will provide tax advantages to the organization. Nonetheless, board members and management can now be shielded from violating their fiduciary duties of maximizing shareholder profits. Also, while both have been signed into law and they are not mutually exclusive, it is unclear which structure will produce the best results.
In today’s increasingly globalized society, so too are M&As occurring cross borders. The top acquirers of U.S. tech companies span Europe, Asia and Canada. Over 2200 private tech companies were acquired across the glove in 2012.
A deeper dive into cross-border M&A activity of US technology firms in 2012 shows Canada and the UK were the top acquirers. India, Japan and Germany round out the top 5.
Nearly 50% of these cross-border tech M&As occurred in the internet sector followed by software which represented nearly 20% of deals globally.
Lastly, the majority of cross-border M&A deals (32%) consisted on companies based in California, followed by New York at 12%.
*Data and graphs courtest of CB Insights.
Generating a business idea takes creativity. Fortunately, we can exercise our creativity like a muscle. And it can even be fun. Try these three games to inspire new ideas. Who knows, it might lead to the next million-dollar startup!
1. Mix and Match
What two products could be brought together for the first time to create a new one? For example, take license plates and dry erase boards. People can custom their very own license plate! While this couldn’t work from a legal standpoint, you get the idea. Try some of your own.
2. Solve It
Begin by questioning everything around you and constantly asking yourself, how could things be better? Listen to complaints from friends and families and determine how you could fix these problems.
3. What If?
Let your mind wander and dream. What do you really wish were possible? What if you could snowboard uphill? What if you could monitor growth among children?
For more information on these simple brain games use to help exercise the creative model, click here. If you have your idea it’s time to learn how to write a business plan.
There are strong signs that investor confidence in private real estate funds is returning, with 49% of investors having made new commitments in 2012, and 53% planning to make new commitments to the asset class in 2013. The improvement in the performance of private real estate has encouraged some institutions to return to the asset class, while an increase in the rate of distributions from their existing commitments means that many investors also have more capital available to invest. The majority (54%) of investors also expect to commit more capital to the asset class in 2013 than they did in 2012.
While a large proportion of investors focused primarily on core investments following the downturn, many are now increasingly looking at opportunities higher up the risk/return spectrum. Investor interest in core remained strong during 2012, but there was also increased appetite for core-plus, value added and opportunistic strategies.
Real estate remains an important part of many sophisticated investors’ portfolios, with 93% of institutional investors active in the asset class targeting exposure to property of at least 5% of their total assets.
The use of separate accounts is also continuing to increase, with some investors viewing this as a way to invest significant amounts of capital while retaining a greater level of control than they might have with a commitment to a blind-pool fund.
More information about the real estate investment outlook for H1 2013 can be found here.
The private equity institutional investor universe is made up of a diverse range of investor types, each with different allocations and expectations of the asset class. Encouragingly for private equity fund managers looking to source fresh capital in the year ahead, there is a wealth of different investors actively searching for new fund investments over the next 12 months.
Types of Investors Seeking New Investments
Public pension funds have consistently issued a large proportion of mandates each quarter. With historically low interest rates, traditional asset classes have become increasingly less appealing to public pension funds, and in order to meet their annual returns targets, they are allocating more capital to private equity. The $51bn pension fund is looking for up to 10 new private equity funds to commit to within the next year, and anticipates committing between $500mn and $1bn in total to the asset class. Foundations and endowments have also accounted for a large proportion of fund mandates issued over the past four quarters, in particular in Q2 2012 and Q4 2012, when these investors accounted for a combined 28% and 29% of all new fund mandates issued in these quarters respectively.
How Much Capital Can We Expect to Flow into Private Equity?
43% of investors planning to commit fresh capital to private equity funds over the next 12 months are looking to commit up to $49mn. A third of LPs expect to commit between $100mn and $499mn to the asset class over the coming year, while a further 7% plan to commit more than $500mn to new private equity funds, indicating that a number of LPs are looking to commit large sums of capital to the asset class in the year ahead. Thirty-one percent of investors that plan to make new commitments over the next 12 months plan to make one or two new private equity fund investments, while a further 37% are seeking to commit to three to fi ve new private equity funds. A fi fth of mandates issued by investors in the past 12 months are solely for funds being raised by existing managers within their portfolio, as shown in Fig. 3, which can save LPs both time and resources. However, automatic re-ups are a thing of the past and GPs now have to look increasingly further afi eld for new investors. Nevertheless, 67% of investors that issued fund searches in the past year are considering allocating a portion or all of their capital to new managers, with many LPs looking to do so in order to gain exposure to a new strategy or geography. A further 13% are approaching fund manager selection opportunistically.
Private Equity Fund Types Sought in the Year Ahead
Two-thirds of LPs that have issued fund mandates in the past 12 months have indicated a preference for buyout funds in the year ahead. Venture capital funds are being sought by over half (55%) of LPs looking to make new fund commitments in the year ahead, while 45% of investors have stated growth funds as a preference for future private equity fund investments. Thirty-six percent of investors looking to make new investments over the next 12 months have stated a preference for distressed private equity vehicles.