Damir Ibrahimagic Kopinic’s Post

If you are the founder or CEO of a growth-stage company, you must understand that the need to provide limited partner investors with liquidity was, is, and always will be a major factor in decisions that PE/VC funds need to make around exit timing. A good article in PitchBook on this topic. Both venture capital and private equity funds have ideal investment time horizons in mind. These schedules are in place to satisfy the liquidity expectations and needs of limited partner investors (endowments, foundations, etc.). In good times, when the capital markets are wide open - this rarely causes an issue - because liquidity is plentiful and there is optionality for exits. However, when the capital markets tighten up - like now - the need to provide liquidity to limited partner investors can have an outsized effect on decision making with respect to exits and further funding rounds. Unfortunately, over the years, we have met many growth-stage companies that thought they knew what factors were driving the decisions for their capital partners (PE/VC). However, when things didn't go as planned, they found themselves in some awkward situations. Make sure you know your capital partner. As important, make sure you know the needs of your capital partner's limited partners. Because ultimately, that is what matters. We created Bennu Partners to help growth-stage founders and CEOs navigate issues just like this. We can help. www.BennuPartners.com Marc Patterson Jonathan Musser Jeff Donaldson FocusedBrands Andrew Thomaides, CEPA® Entegro Business Solutions Andy Shober Adam Whitehead #privateequity #venturecapital #investing #innovation #entrepreneurship #founders #startups #finance #raisingcapital https://lnkd.in/ghMU6n3M

Investors have had to become more creative in finding ways to bring cash back to their pockets and those of their limited partners. Secondary financings have become one way to solve the liquidity crunch facing the venture markets and its backers. G Squared, a growth investor in primary and secondary financings, has seen the market pick up. #vc #startups https://lnkd.in/g3fCVZMF

Navigating the venture capital investment landscape can be a lengthy process, with the average time from initial funding to exit increasing by 2.5x since the early 2000s. Given the subdued exit landscape and the market's demand for a greater variety of liquidity opportunities, both investors and founders are turning to secondary transactions to achieve liquidity before a sale or IPO. In the 19th instalment of Orrick's Founder Series, Jamie Moore and Kristy Hart offer top tips to help UK startups navigate the increasingly popular world of secondary transactions.   https://lnkd.in/eEPpRu9D #VentureCapital #SecondaryTransactions

Today, in Professor Scott Bleier's last class, he shared valuable insights into various aspects of #startup investments, #preferredstock terms, and #exitstrategies. For example, he discussed the role of M&A in providing liquidity for venture backed companies, addressing factors influencing #acquisition trends, #dealstructuring considerations, and the overall M&A process. One of the key topics was the significance of the Certificate of Incorporation (#COI) in #venturecapital #financing. He underscored the importance of understanding the terms and provisions outlined in one of the sample COI documents he presented, as it lays the groundwork for the rights and preferences of preferred stockholders. By deciphering the complexities of the Certificate of Incorporation, #entrepreneurs and investors can navigate funding rounds and negotiations more effectively, ensuring alignment with their respective objectives. Furthermore, Professor Bleier clarified the distinction between traditional Venture Capital and #CorporateVentureCapital (#CVC), outlining their unique characteristics and objectives. While traditional VC firms primarily focus on providing financial backing and strategic guidance to early-stage startups, CVC arms of corporations leverage their resources and expertise to invest directly in innovative ventures. Thus, it is essential to explore the dynamics between these two models and gain a deeper understanding of the diverse funding landscape and the strategic implications for both entrepreneurs and investors. In the last 20 minutes of the class, he delved into the realm of #MergersandAcquisitions (M&A) in Venture Capital financing. He outlined the various exit options available to venture-backed companies, including #bankruptcy, #IPOs, and #acquisitions, with an emphasis on the prevalence of M&A as the primary liquidity event. By dissecting the M&A process, from confidentiality agreements (#NDA) and deal structuring to purchase price considerations and tax implications, he provided the knowledge and insights necessary to navigate me in the venture capital ecosystem.

Amidst a decline in M&A and IPOs, venture capitalists are seeking innovative exit strategies to ensure returns for their LPs. Evelina Anttila emphasizes the necessity of a well-functioning exit market for VC success, while Marc Fournier advocates for early exit discussions and strategic alignment from the onset. This approach, along with exploring secondary sales and extending fund cycles, is vital for navigating the current investment landscape. #VentureCapital #ExitStrategies #InvestmentTrends #Startups Sifted

BDA Partners is pleased to be advising Asian corporates and their venture capital (VC) arms on selling their minority stakes in equity startups in the US and Europe.    We are responding to the growing trend of strategics investing in start-ups, often through corporate venture capital (CVC) arms.    BDA is addressing the demand for exits from these minority investments, given tight and challenging market conditions.    Interested buyers, notably secondary funds and family offices, can connect with sellers through this service. BDA's experienced team ensures efficient transactions at optimal prices. #bdapartners #theglobalinvestmentbankingadvisorforAsia

News (article): “We should’ve sold more” says head of Speedinvest, as VC closes fourth fund. VC isn't all about investing capital. It's also about returning capital #speedinvest #vc #capital === ➡️ Proactive exits In the boom years, VCs didn’t need to think too hard about getting exits. Startups were raising big rounds, often giving earlier investors plenty of opportunities to sell at least some of their shares to incoming investors at a tidy markup. “The whole industry — including ourselves — has been a bit naive about this topic,” says Holle, whose portfolio includes unicorns like wefox, GoStudent and Bitpanda. “We had these conversations two years ago when there were lots of up rounds [about how much to sell]. We’d settle on selling 20 or 30% of our shares, or say ‘Let’s make sure we at least have our money back’. In hindsight, that’s not good enough.” “We are all learning that we should have been much more diligent, had a look at hardcore revenue multiples, taken more of an investment banker mindset. We should’ve sold more.” That exit path is now “gone, pretty much” — leaving inbound or outbound M&A as the primary way for VCs to get exits. “VCs rarely have enough energy to proactively manufacture a sale,” says Holle, including finding M&A advisors, building a pipeline of potential buyers, having conversations with founders and coinvestors about whether they’re ready to sell and then running the process. Instead, they wait for a buyer to come along. “That’s where a lot of VC peers fail.” Speedinvest’s two-person M&A team (Werner Zahnt and Lawrence Kilian) “can’t run 100 M&A processes in parallel” either, says Holle — but the goal is to be more proactive than its competitors. Continuation funds — which are currently uncommon in Europe — could be another good option for VCs struggling to get liquidity. For new LPs, “it’s a very attractive proposition”, says Holle. “If you have 10 companies doing well but they each need another 4-5 years until exit, and you’re getting a decent discount on these companies.” “For old investors, it’s a combination of creating some liquidity but being able to reinvest, potentially at better terms than the old fund.” ==== ➡️ Deal readiness New State Ventures operates as an independent deal maker for software and technology-led businesses. We collaborate with high-growth companies, their founders and investors to drive deal readiness and transaction value in preparation for and execution of investments, acquisitions and exits. 👉 Contact: DM (or https://lnkd.in/eFAxZ9W) #newstateventures #founders #investors #venturecapital #privateequity #dealreadiness https://lnkd.in/ecz8Ukzv

News (article): “We should’ve sold more” says head of Speedinvest, as VC closes fourth fund. VC isn't all about investing capital. It's also about returning capital #speedinvest #vc #capital === ➡️ Proactive exits In the boom years, VCs didn’t need to think too hard about getting exits. Startups were raising big rounds, often giving earlier investors plenty of opportunities to sell at least some of their shares to incoming investors at a tidy markup. “The whole industry — including ourselves — has been a bit naive about this topic,” says Holle, whose portfolio includes unicorns like wefox, GoStudent and Bitpanda. “We had these conversations two years ago when there were lots of up rounds [about how much to sell]. We’d settle on selling 20 or 30% of our shares, or say ‘Let’s make sure we at least have our money back’. In hindsight, that’s not good enough.” “We are all learning that we should have been much more diligent, had a look at hardcore revenue multiples, taken more of an investment banker mindset. We should’ve sold more.” That exit path is now “gone, pretty much” — leaving inbound or outbound M&A as the primary way for VCs to get exits. “VCs rarely have enough energy to proactively manufacture a sale,” says Holle, including finding M&A advisors, building a pipeline of potential buyers, having conversations with founders and coinvestors about whether they’re ready to sell and then running the process. Instead, they wait for a buyer to come along. “That’s where a lot of VC peers fail.” Speedinvest’s two-person M&A team (Werner Zahnt and Lawrence Kilian) “can’t run 100 M&A processes in parallel” either, says Holle — but the goal is to be more proactive than its competitors. Continuation funds — which are currently uncommon in Europe — could be another good option for VCs struggling to get liquidity. For new LPs, “it’s a very attractive proposition”, says Holle. “If you have 10 companies doing well but they each need another 4-5 years until exit, and you’re getting a decent discount on these companies.” “For old investors, it’s a combination of creating some liquidity but being able to reinvest, potentially at better terms than the old fund.” ==== ➡️ Deal readiness New State Ventures operates as an independent deal maker for software and technology-led businesses. We collaborate with high-growth companies, their founders and investors to drive deal readiness and transaction value in preparation for and execution of investments, acquisitions and exits. 👉 Contact: https://lnkd.in/eZKu6K_N #newstateventures #founders #investors #venturecapital #privateequity #dealreadiness https://lnkd.in/ekVByv8G

If your venture is confronting a down round, you should not wear it as a badge of shame. Even in normal times, few ventures make an uninterrupted march up and to the right on the valuation curve. More importantly, if you are doing a down round, it still means you were able to raise capital. Although a down round will dilute your economics, no venture has ever died from excess dilution, the same cannot be said for lack of funds. Down rounds can be a fiduciary minefield for officers and directors and require a lot of advance planning. For details see the attached article. https://lnkd.in/gSXCPs42

To Pari Passu or Not to Pari Passu: A Key Liquidation Waterfall Decision in UK Venture Capital Deals In the world of UK venture capital, founders and investors often face a crucial decision when structuring preference shares in a funding round: should new preference shares rank senior to existing ones, or should they rank pari passu (equally)? Why does this matter? When a startup goes through multiple funding rounds, each new investor typically wants to ensure their capital is protected in the event of a liquidation. This is where the concept of the liquidation waterfall stack comes into play. It dictates the order in which investors are paid back their investments, and whether newer investors have priority over earlier ones can significantly impact the returns. The Seniority Approach: If preference shares issued in an increased value round rank senior to existing preference shares, this means that newer investors will be paid first in a liquidation scenario, ahead of the earlier investors. While this provides a safety net for the latest investors, it can dilute the recovery potential for previous investors and founders. The Pari Passu Approach: On the other hand, if preference shares rank pari passu, all preference shareholders (regardless of when they invested) share the same priority level. This approach can be seen as more founder-friendly, as it aligns the interests of all preference shareholders, encouraging a more collaborative approach to growth and exit strategies. However, it might make it less attractive for new investors looking for a greater degree of protection for their fresh capital. Which is better? There's no one-size-fits-all answer. The decision should be tailored to the specific circumstances of the company, the stage of investment, and the investor profiles. For founders, pari passu can help maintain balance and incentivise long-term commitment from all parties. For investors, seniority can offer greater assurance of return, especially in uncertain markets. Navigating these complex decisions requires careful consideration and expert guidance. If you’re contemplating your next funding round or investment, reach out to speak with me and follow us at Avery Law. #VentureCapital #Startups #PreferenceShares #Founders #Investors