Venture Capital Archives | Page 8 of 9

Evan Vitale – What Is ‘Royalty’ Financing?

February 4, 2016 by Evan Vitale

By Evan Vitale

As a good alternative to venture capital funding – and a funding that is hardly ever discussed – is “royalty funding.”

What exactly is royalty funding?

Royalty funding is described as a relatively new funding concept that offers an alternative to regular debt financing (i.e. loans and trade credit) and equity financing (i.e. venture capital and stock sales). Instead, in royalty funding, a business receives a specific amount of money from an investor or a group of investors.

Rather than have an equity stake in your business, the investors lend funds for a guaranteed percentage of your revenues for whatever the business is selling. Business owners guarantee investor(s) a percentage of their revenue over a period of time and pay them back the advance of cash (and some more). Deals usually run at 2% to 6% of increased revenues.

Typically, royalty financing is more common in well-established industries, such as music or mining, where revenue is steady but unpredictable.

Royalty funding is great for businesses who need a quick infusion of cash, but don’t want to give up control to equity investors. In addition, if the business suffers a down month in sales, payments are tied to a percentage of revenues, so there’s less need to worry about making a set loan payment, etc.

However, royalty funding can be expensive and businesses could eventually pay substantially more if sales take off. Remember? The funding is based on a royalty of your sales.

Some private equity firms and angel investors are willing to make royalty investments.

As always, seek advice from your team of experience professionals: your accountant, your lawyer and your banker. They may also be able to refer you to a firm that is interested in providing royalty funding.

Evan Vitale – Latest Venture Capital News

February 3, 2016 by Evan Vitale

By Evan Vitale

Here’s the latest and greatest on venture capital news:

From the Tampa Bay Tribune, local startups are already kicking into high gear and earning some notice from venture capital firms from Silicon Valley with many new programs getting some attention in Clearwater and St. Petersburg.

Check out the full article here: bit.ly/1PbBG8P

In Boston, Assemble.VC is looking to raise a $75 million initial fund, according to a recent SEC filing. Word has it the fund is more than halfway closed so far. More information and other Boston VC news can be found here: bit.ly/1Qrbvfj

iNovia Capital Inc., Montreal, says it has raised $175 million (Canadian dollars – US $120.2 million) for its latest venture-capital fund, overcoming the challenge of a sinking currency that puts Canadian firms investing in startups at a disadvantage to their United States counterparts.

Previously, iNovia attracted $110 million (Canadian) for each of its two previous funds.

The full Wall Street Journal article is here: on.wsj.com/1OGHyDn

Orange County continues to make venture capital headlines with startups landing $1 billion in venture capital in 2015, a first since the dot-com bust in 2000. Software and medical device firms made up most of the closed deals a year ago.

According to a MoneyTree report from Pricewaterhouse Coopers and the National Venture Capital Association, investors last year put their money into 88 deals in Orange County as compared to 148 deals (and $1.7 billion) in 2000. Two years ago, $683 million was invested in 89 deals.

In July 2015, Google Capital led a $100 million investment round in CrowdStrike, an Irvine-based cyber-security technology company, to expand its reach across the United States and internationally. This investment tied for the 10th-largest in the country since 1995.

According to PwC, venture capital in Irvine, California has increased 85% since 2010.

The full article is here: bit.ly/1lFovkt

Evan Vitale – The SBA and Venture Capital

January 28, 2016 by Evan Vitale

By Evan Vitale

The Small Business Administration has, among other informative web pages helping businesses on a variety of topics, an interesting section explaining venture capital.

The SBA’s “Venture Capital” page (https://www.sba.gov/content/venture-capital) features several sub-sections including:

About Venture Capital
Understanding Venture Capital
Angel Investors
Understanding Equity Capital
The Venture Capital Process

The primary “About Venture Capital” page fully defines venture capital and how it differs from other traditional financing. For example:

“Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that for reasons of size, assets, and stage of development cannot seek capital from more traditional sources, such as public markets and banks. Venture capital investments are generally made as cash in exchange for shares and an active role in the invested company.”

“The Venture Capital Process” section offers detailed information on submitting a business plan, conducting due diligence, investment, execution with VC support and exit.

The information, while accurate and short, doesn’t offer any opinions as to the positives and negative reasons why a startup would want to seek out (or avoid) venture capital.

The Venture Capital section is a sub-section of the “Finance Your Business” which also includes sub-sections on loans and grants – all of which is a chapter in the SBA’s “Starting a Business” category.

The Loans section references SBA Loans; a Business Loan Application Checklist; SBA Loan Application Checklist, and Acquiring Financing.

The Grants section offers a brief explanation about grants and notes that the federal government does not provide grants for starting or expanding a business. Some grants, however, are available through state and local programs.

Of note, the “Starting A Business” guide does include a section on “Filing and Paying Taxes” as well as sections covering “Business Law;” “Hiring Employees;” “Registering Your Business” and more.

You can see the full section here:

https://www.sba.gov/category/navigation-structure/starting-managing-business

Evan Vitale – What’s New in VC News?

January 27, 2016 by Evan Vitale

By Evan Vitale

Good news is coming out of Washington, DC as venture capital deals have hit their highest point since 2001.

According to the Washington Post, a few large deals during the fourth quarter, helped 2015 become a big year for investors and startups. In all, 29 DC firms received over $550 million in venture capital last quarter, a 53% increase from 2014, according to a report released recently by Pricewaterhouse Coopers and the National Venture Capital Association.

During 2015, DC companies were able to secure 169 deals totaling $1.41 billion – up from 197 deals totaling $1.09 billion in 2014.

You can read the full Washington Post article here: bit.ly/1WqBC6B

* * *

Meanwhile, companies in Wisconsin raised $87.8 million of venture capital in 2015, according to a national report printed recently by the Milwaukee Wisconsin Journal Sentinel.

In all, 23 Wisconsin companies pulled in $87.8 million, which is only a fraction of the $58.8 billion in venture capital that went into high-potential companies across the United States.

While Wisconsin’s numbers were better last year than in 2014, the state’s share of the national venture capital continues to remain low.

Biotech and medical device companies raised a combine $56.8 million, or 64% of all the state’s venture funding in 2015.

You can read the story here: bit.ly/1ZJHo8V

* * *

According to The Seattle Times, the state of Washington – which generally ranks among the top five states in venture capital investments – dropped to No. 12 during the fourth quarter of 2015.

Startups in Washington raised $167.7 million with 25 deals during the quarter – a 57% drop from the same period a year ago, when $389.6 million was invested in 29 deals, according to the MoneyTree report released recently from PricewaterhouseCoopers and the National Venture Capital Association.

You can read the full article here: bit.ly/1U9csYQ

Evan Vitale – Venture Capital News

January 19, 2016 by Evan Vitale

By Evan Vitale

Let’s take a look at recent Venture Capital (VC) news!

According to GeekWire.com, there was good news and bad news for venture capital activity in the Pacific Northwest. Here, venture capital activity was down 59% in the fourth quarter. However, overall, VC activity was up for 2015.

Last year, a record $2.4 billion was invested in 374 Pacific Northwest startup firms – up from $2.3 billion in 2014 and $1.4 billion invested in 2013.

Not bad!

From the Wall Street Journal, Healthline Media Inc. has raised $95 million from Summit Partners to compete with WebMD.com in the market for consumer-health information. Healthline.com was launched 2006 and provides health information to users through content licensed from third parties. The company was relaunched in 2012 with original content.

Also from WJS, a wine app called “Vivino” has raised $25 million in a Series B round of venture funding. Vivino Inc. is a mobile app for wine reviews and shopping. It lets users scan the label on a bottle of wine using their smartphones and access user-generated ratings and reviews. The new round of funding was led by SCP Neptune International. Other investors included Balderton Capital and Melo7 Tech Partners.

From the Houston Business Journal, a new venture capital fund has launched in Houston, Texas. Digitech is a crowdfunding-meets-private-equity style of venture capital where unaccredited investors will invest $50 to $100 per month. Digitech is targeting both software and technology-based companies, as well as biotech and healthcare. You can read the full article here:

http://www.bizjournals.com/houston/blog/2016/01/exclusive-new-venture-capital-fund-launches-in.html

KidPass, Inc., according to the Wall Street Journal, has started to sell $49 monthly subscriptions that give families access to many children’s activities, including sports, music classes, indoor play spaces, museums, and more. The idea, says co-founder and chief executive Solomon Liou is to give parents a “starting point whenever they are looking for any kind of activity for their children.”

You can check out KidPass here: http://blogs.wsj.com/venturecapital/2016/01/11/seed-funded-kidpass-launches-childrens-activity-subscription-service/

Evan Vitale – VC Money Tight in 2016?

January 12, 2016 by Evan Vitale

By Evan Vitale

The venture crystal ball, according to the Silicon Valley Business Journal, reveals that investors are predicting fewer unicorns and tighter purse strings for the upcoming year.

TechFlash Editor Cromwell Schubarth says most of the investors he interviewed at the conclusion of 2015, says the booming trend of venture capital funding is slowing down. Perhaps, we’ve been on a good ride for such a long time, that it’s likely things are going to calm down a bit.

You can read the entire article here:

http://www.bizjournals.com/sanjose/blog/techflash/2015/12/vc-crystal-ball-investors-predict-fewer-unicorns.html

Meanwhile, the Wall Street Journal says the Federal Reserve’s quarter-point rate increase will have very little immediate impact on the startup fundraising environment. However, gradual tightening is expected over the next 12 months. Will this leave companies short of startup cash before they start to see a profit?

Check out what capital investors are saying about this potential cash crunch here:

http://blogs.wsj.com/digits/2015/12/17/vc-mailbag-startup-funding-crunch-is-likely-in-2016/

However, once you dig down far enough, you’ll always be able to find some positive news from a venture capitalist.

According to CNBC, New Enterprise Associations general manager Rick Yang says 2016 will be a big year for companies working in virtual reality, edtech and e-commerce.

VC money might be tight, he says, in the first part of 2016 as compared to 2015, but he doesn’t see early-stage companies slowing down. Facebook and Apple, he predicts will look to “acquire more startups to maintain growth and obtain new technologies,” Yang says.

“I don’t think that any of the big tech companies are scared of acquiring companies right now, they still have quite a bit of cash on the balance sheets. And as I kind of mentioned in one of the previous questions, I do think they’re looking to other services outside of their core products for growth in the next year,” he said.

You can read the full article here:

http://www.cnbc.com/2015/12/31/one-venture-capitalists-predictions-for-2016.html

Evan Vitale – Latest VC Headlines

January 12, 2016 by Evan Vitale

By Evan Vitale

Here’s some of the latest venture capital news being discussed and shared online:

According to the OC Register, Irvine, California is a quite the “mecca” in Orange County when it comes to winning venture capital funds. A recent report says Irving-based companies raised more money than any of the county’s other 33 cities combined.

The Register went on to say that during the first nine months of 2015, Irving-based companies raised nearly $278 million in venture capital. Newport Beach was next in line with $57 in venture capital funds raised. The report was released by Jones Lang LaSalle Research and PricewaterhouseCoopers MoneyTree.

You can read the full article here:

http://www.ocregister.com/articles/million-698761-capital-companies.html

Recently, Indiegogo unveiled a new service that could “prove to be controversial among its core users by giving an edge to large corporations engaged in crowdfunding.”

In a blog post by the Wall Street Journal, “Goliaths have long since infiltrated crowdfunding sites, trotting out new products and promotional campaigns on platforms like Kickstarter and Indiegogo. But Indiegogo’s new Enterprise Crowdfunding service aims to help increase their chances of success on the platform.”

The blog post is here:

http://blogs.wsj.com/venturecapital/2016/01/06/indiegogo-courts-corporate-crowdfunders-with-new-services/

Monsanto Growth Ventures, the venture capital arm of the Monsanto Company announced for the first time its growing investment portfolio; nearly a dozen independent companies that are active in key areas of agricultural productivity, digital agriculture and biologicals.

StreetInsider.com has the news here:

http://www.streetinsider.com/Corporate+News/Monsanto+%28MON%29+Venture+Capital+Arm+Launches+First+Investment+Portfolio/11197249.html

From Bloomberg Business, growing peer-to-peer lending and online money transfer services helped raise a record $3.6 billion in venture capital funding for the UK technology sector last year.

The largest single investment in the industry was attracted by London-based small-business lending platform Funding Circle, which raised $150 million in April. London continues to have an expanding financial technology sector, which had a record year in 2015.

The full article is here:

http://www.bloomberg.com/news/articles/2016-01-06/u-k-tech-startups-raise-record-venture-capital-in-2015

Evan Vitale – Non-Tech Firm Raises $13.5 Million

January 7, 2016 by Evan Vitale

By Evan Vitale

A Chattanooga, Tennessee startup has raised $13.5 million in venture capital – the largest one-time VC capital investment of any Chattanooga startup company.

And it has nothing to do with technology; medical; devices or apps.

“Bellhops” uses approximately 8,000 college students, who are employed as independent contractors, to help consumers move household goods and furniture in 88 cities across the United States. About 4,500 of those students are working activity as moves are ordered through a web-based, on-demand service.

The company is the brainchild of Auburn University grads Stephen Vlahos and Cameron Doody who started Bellhops in 2011.

Bellhops gained initial funding of $6 million in November 2014 from the Lamp Post Group in Chattanooga. Recently, Canaan Partners, a Westport, Conn.-based investment fund helped arrange the most recent round of venture funding to help the growing company add more staff and enter more markets. The recent funding including Lowercase Capital, Bullet Time Capital and Binary Capital.

Currently, Bellhops employs approximately 65 employees at its 12,000-square-foot rented headquarters in Warehouse Row in Chattanooga and provides a unique, lower-cost moving option.

While revenue numbers weren’t disclosed, Doody says Bellhops has been growing five-fold every year. The two original owners will maintain majority ownership and the company plans to stay and grow in Chattanooga.

Bellhops offers a variety of moving services and charges an hourly rate. The firm doesn’t own any trucks, but supplies the labor to help others move with their own or rented trucks.

Bellhops won the Chattanooga “Spirit of Innovation” award in 2014 from the Chattanooga Area Chamber of Commerce. You can visit its website at https://getbellhops.com/.

Evan Vitale – What is Venture Capital?

December 3, 2015 by Evan Vitale

By Evan Vitale

(This is Part IV in our series on different types of capital, including debt capital, equity capital, private equity, venture capital, angel investors and investors).

Venture capital is another type of funding for businesses and startups. However, with venture capital (sometimes called “risk capital”), dollars are typically earmarked for startup or growing businesses.

These funds usually come from venture capital firms that specialize in building high-risk financial portfolios. In these cases, venture capital (also known as “VC”) is given to the startup company in exchange for equity in the company.

These investments are made to firms that have long-term growth potential for above-average returns.

Evan Vitale – Florida Reaps Sliver of US Venture Capital

November 1, 2014 by Evan Vitale

Florida reaped just a tiny sliver – about a third of 1 percent – of the U.S. venture capital pie in the third quarter, according to statistics released Friday. In the state, $36.7 million was invested in six deals. That’s down considerably from $113.9 in 13 deals last quarter and the lowest total since the first quarter of 2013.

Florida companies receiving dollars in the third quarter were: Sancilio & Company ($20 million); LensAR ($7.85 million); Informed Medical Decisions ($5 million); OBMedical ($2.1 million); Neoreach ($1.5 million); and Contactus.com ($300,000).

Next quarter’s Florida numbers are likely to look off the charts with reports that Google Ventures and Andreessen Horowitz are involved in a $500 million round for Broward-based Magic Leap, the cinematic reality company founded by Rony Abovitz, cofounder of Mako Surgical. Magic Leap closed a $50 million Series A round in February.

So far in 2013, $232.3 million has flowed into Florida-based companies.

Nationally, venture capitalists invested $9.9 billion in 1,023 deals in the third quarter, according to the MoneyTree Report from PricewaterhouseCoopers LLP and the National Venture Capital Association, based on data provided by Thomson Reuters. Quarterly venture capital investment declined 27 percent in terms of dollars and 9 percent in the number of deals, compared to the second quarter when $13.5 billion was invested in 1,129 deals.

The third quarter is the sixth consecutive quarter of more than 1,000 companies receiving venture capital investments in a single quarter. With more than $33 billion invested through the first three quarters, total venture investing in 2014 has eclipsed total venture investing in all of 2013, which totaled $30 billion.

“The emergence of non-traditional investors, including hedge funds and mutual funds, is contributing to the increase in venture investing this year. Another factor that can’t be ignored is the changing nature of our economy, where startup companies are disrupting entrenched industries and, in some cases, creating new industries altogether,” said Bobby Franklin, president and CEO of NVCA, in a statement.

“Another factor driving the strong investment levels is the increasing prevalence of mega deals, deals exceeding $100 million, which we’ve seen over the past few quarters. We’ve already counted more than 30 mega deals in 2014 compared to only 16 in all of 2013,” said Mark McCaffrey, global software leader and technology partner at PwC.

The biggest deals were Vice Media ($500 million); Palantir ($165 million), Houzz ($165 million), Box ($158 million) and Lookout ($150 million). Next quarter Magic Leap will likely be joining the top five list.

MoneyTree Report results can be found at www.pwcmoneytree.com and www.nvca.org.

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