Randy Churchill and his team at PricewaterhouseCoopers meticulously prepare a quarterly report detailing the venture landscape, called Shaking The Money Tree. The data consistently confirms that: (i) venture capitalists are typically not adventuresome, and (ii) most startups lack the three intoxicating factors which cause venture capitalists to pull out their checkbooks. Continue reading
Startup blogger and venture capitalist extraordinaire Fred Wilson recently published a great article on Venture Debt, which I strongly suggest you review HERE. Go ahead, I will wait…
…welcome back. As Fred points out, many entrepreneurs hear the word “debt” and promptly run the other direction. In the past, venture debt was often viewed as a funding vehicle of last resort. When the current investors were tapped out and a bigger fool could not be brought into a venture, all eyes turn towards debt. However, when deployed judiciously, venture debt can mitigate investors’ and founders’ dilution.
At Rincon Venture Partners, we are in the midst of negotiating a term sheet with a cash-positive startup that is growing aggressively. The nature of the company’s business model requires it to fund certain costs before it is paid by its customers. Thus, even though the company is cash flow positive, its growth is constrained by the amount of payables it can fund. Enter venture debt.
By combining our equity investment with a tranche of venture debt, the company has avoided a larger equity round, which would have significantly diluted the Founders’ ownership share. Continue reading
In the early 1970s, the Seven-Up Company devised an ingenious plan to market its flagship soda. The campaign was so successful it eventually catapulted 7-Up’s sales to rival that of both Coke and Pepsi, making it the third most popular soft drink in the US.
The company hired the Dominican actor Geoffrey Holder, who delivered the commercial’s signature tagline with memorable panache, “Maaarvelous, absolutely maaarvelous.” Overnight, “maaarvelous,” spoken in an exaggerated Caribbean accent, became a national catchphrase.
What made the commercials noteworthy was not their charismatic pitchman. It was the fact that the Seven-Up Company defined its product by describing what it was not, via the “UnCola” label. When evaluating a potential Institutional Investor, entrepreneurs should consider what they are not, as much as what they are. Entrepreneurs in search of startup capital are well served to seek an UnVentureCapitalist (UnVC), an investor who understands and appreciates the unique benefits of capital efficiency.
Below is a talk on New Venture Investing from the University of California Santa Barbara’s Technology Management Program, by Jim Andelman.
In this video Jim Andelman explores venture capital investing and the emergence of capital efficient businesses.
Bio:
Jim is a co-founder and General Partner of Rincon Venture Partners. In this capacity, he is responsible for driving the fund’s investment activities, as well as the firm’s operations. Jim has more than fifteen years of experience in venture capital investing, technology investment banking and advisory services and strategic business consulting.
Previously, Jim led software investing at Broadview Capital Partners, a $250 million expansion-stage venture capital firm. Jim was responsible for developing investment themes, sourcing investment opportunities, performing company assessments, negotiating and executing transactions, and advising portfolio companies. Jim led the assessment of over 300 investment opportunities, participated in the deployment of $78 million across five portfolio companies, four of which exited via acquisition despite a challenging macroeconomic environment.
During the late 1800’s, American author Horatio Alger wrote 129 novels, most of which recount the deeds of impoverished young people who overcome their modest means to establish independent lives as self-sufficient, middle class citizens.
Years after Alger created this new genre, it was derisively (and incorrectly) termed “rags to riches.” A common critique is that Mr. Alger’s heroes succeeded by conveying a simplistic formula comprised of honesty, cheerfulness, virtue, thrift, and hard work.
Dismissing Mr. Alger’s works as juvenile rags to riches novels misses the author’s primary point and the reason why the books had such a tremendous impact on several generations of American entrepreneurs.