private equity Archives

On this week’s TWiC podcast, we interview the guys behind Crowdability — a great resource for investors thinking about getting a bit more serious about equity crowdfunding. Matt and Wayne are 2 extraordinary entrepreneurs in their own right and have a bold vision of providing an educational and decision-layer to help investors make better decisions when investing in startups online via equity crowdfunding.

In this week’s news roundup, David and Zack look at the differences between raising money via crowdfunding or turning to more traditional sources of capital. BitTorrent is using its massive network of 170 million users to crowdfunding new forms of content. Lastly, is beer the most perfect of crowdfunding projects? David thinks it just may be…

We review CrowdBrewed, a crowdfunding site that encourages (you guessed it), funding of beer-related enterprises.

Listen to the FULL episode

Resources mentioned in the podcast

Crowdability
Crowdfunding vs. VC Seed Rounds: Which makes sense? (BetaBoston)
CrowdBrewed
BitTorrent to tray a paywall and crowdfunding (NYT)
Beer: The Best Use of Crowdfunding or The Most Best Use of Crowdfunding?(TechCrunch)

Recommended resources for investing in startups from Crowdability

**You can now listen to TWiC on iTunes (nice!). If you’re listening to our podcast and enjoying it, finding some value, or just using it to stay on top of everything crowdfunding, please give us a good rating on iTunes. We’ll mention you on the show with a shout-out. We’re really appreciative of your feedback and continued listening — we’re all in this together and your support helps keep our show fresh and growing.

The size of the opportunity

We’re gearing up for some really interesting activity in the IPO market in 2010. To put things in perspective, in 2010, IPOs returned 72% more money than the companies that exited in 2009 (although at $40B, that’s still about 40% less than peak levels in 2007).

According to Sarah Lacy’s recent article in TechCrunch, Exits Lag in the 4th Quarter, but IPO Hype Boils for 2011:

There is a lot of hype swirling that 2011 is going to be the big comeback year for the venture-backed IPO. And we’re talking about big, gaudy IPOs, not small ones that essentially function as another funding round. And interestingly, pundits and investors expect some new $1 billion companies to debut in both cleantech and Internet sectors.

Certainly firms like LinkedIn, Groupon, Facebook, Pandora, and Zynga have raised lots of VC money from investors who would welcome public liquidity.

Private Equity also benefits from IPO window

Venture backed firms — those started from scratch and basically birthed into existence for large splashy IPOs — aren’t the only ones benefiting from the opening of the IPO window for increased investor demand in new offerings. Companies that received funding/buyouts from private equity firms are also gearing up for an exciting 2011.

According to Renaissance Capital

The past year has seen an modest uptick in offerings of companies backed by buyout firms – 37 in total, more than the two previous years combined

Big firms like HCA, TXU, and Harrah’s Entertainment are poised, waiting for the right opening to go public and make their PE-backed investors richer.

But…

It’s not all clear sailing for a couple of reasons

time and money to exit: In spite of the rah-rah of VCs saying how easy and quick it is for companies to prosper in the social media era, the inverse is actually true — successful companies may require more money and time to prepare for public markets. According to TechCrunch’s Lacy, “The venture-backed economy is rapidly becoming polarized between quick flips or a long, hard-fought slogs even for the hottest companies.”
fuzzy pricing for private firms: Investors in pre-public firms frequently talk their books, inflating performance and valuation of their portfolio companies. Without a public mechanism to discover pricing, it’s hard to line up institutional investors for a large offering. The NYT has an article today about energy company, TXU and how pricing analysis by KKR and TPG has differed wildly.
rise of secondary markets: Companies like SharesPost have provided necessarily outlets for founders and investors to cash out. With the ability to take some money off the table and enrich themselves, certain companies would rather persist as private firms without the necessary headaches and scrutiny of running publicly-traded firms. Xpert Financial, recently launched, will play into this dynamic as well. It’s possible that Facebook doesn’t go public for a loooong time.

Performance into 2011

While total IPO numbers still haven’t returned to 2007 levels in the US, performance is best since 2006, as average IPO rose by 23% this year. Renaissance Capital is predicting a big year in small cap tech, consumer, and health care sectors.

Given last year’s result and if we see continued momentum, Asia Pac and Latin America look poised to not only float more new firms but good firms, with nice sized returns.

And this makes sense. Many of the hottest Internet firms continue to find willing and able investors in the venture capital world (and out, as witnessed by Goldman’s interest in Facebook). Other firms that have spent the past few years developing great products and even more interesting business models will tap the markets because they’re ready to grow into being real firms.