Emerging Enterprise Center Blog - Commentary and Analysis For Entrepreneurs and Startups

I was skiing on Cannon Mountain the other day.  Below is what I saw.         This is the time of year when pundits look forward and make predictions.  So, I decided to do the same.  Here are ten predictions for next year:  1)     The Pats will beat the Eagles in the Superbowl  2)     Angels will continue to invest at a torrid rate.  3)     There will be continued modest improvement in numbers of VC financings (but not enough to get back to 2007 levels).  4)     Cleantech and renewable energy start-ups will continue to have difficulty raising venture money.  5)    ... More

VentureWire had this to say yesterday: A perceived opening of the IPO markets is the focus of most of investors' optimism. There were two venture-backed IPOs in the quarter, A123 Systems Inc. and LogMeIn Inc., one fewer than the last quarter. Public-offering activity is not expected to pick up quickly because of the "time it takes to run the SEC gauntlet," Ward said. However, a small number of successful offerings from companies like Ancestry.com Inc. and Fortinet Inc. - a Meritech portfolio company - could "set the table in the fourth quarter for what should be a good 2010." The... More

It is a truth universally acknowledged that investors in tech companies get the best exit valuations in IPOs. This has been accepted as axiomatic as long as I have been practicing law. As far as I can tell, when public companies get acquired the buyer usually pays a premium over the public valuation. This premium, often referred to as a control premium, suggests that there is “extra” value in not being public. If companies typically command a premium when control is sold, why are they not valued at a discount when they go public and control becomes diffuse? I can imagine a number of rationalizations... More

LogMeIn has now successfully opened trading – the fourth IPO of a venture backed company since RackSpace in August of 2008. Four is better than zero. But if you consider how many there were in 2007 (fifty something, if memory serves me well), we still have a long way to go before there is an IPO market that will sustain the so-called venture model. In the meanwhile, consider a recent article in VentureWire to the effect that there were 137 M&A exits for venture backed companies in the first half of 2009, and – here is the truly alarming news – only 2... More

In case you needed another signal that times are tough in the entrepreneurial world VentureWire has published and article entitled Turnaround Firms Busy As Start-Up Woes Mount. The gist of the article is as follows: The number of aging start-ups facing a shortening runway has grown in recent months, these firms say, and some venture capitalists are losing patience with longstanding portfolio companies that have no exit in sight. That's especially true for venture firms with large funds dating back to the tech bubble years of 1999 and 2000 that need to relieve congested portfolios before reaching the traditional 10-year funding... More

With reference to IPOs and exits, TechCrunch had the following to say:  So far the downward spiral of credit and financial markets seems to have left venture capital firms and startups relatively unharmed. Even though the IPO market closed completely in the second quarter (and opened again only slightly in the third), venture capital firms continue to raise money and invest in startups at a healthy pace. During the first half of the year, venture capital firms raised about $16 billion in 141 funds and invested about $15 billion in nearly 2,000 deals. and this: On top of that, the... More

Anecdotal evidence indicates that in the current environment there are a lot of "extension" rounds or bridges from existing investors.  The obvious reason for this situtuation is that it is hard to attract Series B and later round money in a climate where there is as much uncertainty as there is right now.  By extension rounds, I mean selling additional shares of the previous round at the same valuation as the previous round to the same players.  I suspect our research  will show that Series B and later round activity in the second quarter was basically flat.  We wont be able to... More

It will come as no surprise that the number of exits (IPO and M&A transactions) for venture financed companies is way off this year -- compared to last year. As I noted in a prior posting, Series A transactions are off year on year. Although some industries are faring well (greentech for one), on a macro level, series A deals in New England are down approximately 30% in the first six months of 2008 compared to the first six months of 2007. You can get more detail on this in our EEC Perspectives October 2008 issue. In addition, however, the... More

One refrain I have started hearing from some entreprenuers is that they have now gone a long time without a paycheck or angel funding -- let alone venture funding, and they need to pay the rent so they will soon have to put their ventures on hold. It will come as no surprise that the continuing crisis in the finance sector has put an end to the little IPO activity that seemed to be cropping up just a few weeks ago.   According to an article in the September 23 edition of VentureWire entitled "IPO Flow Perked Up Until Wall Street... More

There is a lot of money sitting on the sidelines right now.  According to the National Venture Capital Association, 235 venture funds raised nearly $35 billion in 2007.  This is after a string of steady growth years beginning in 2002.  Furthermore according to the NVCA, 130 venture funds have raised more than $16 billion so far in 2008.  This seems to me to be a very high number.  It provides support for the anecdotal evidence that a lot of funds, including early stage funds, have been raised in the last few years. The National Venture Capital Association also reports that venture... More