Archive

Posts Tagged ‘private equity’

Glad to see the Hockey Stick Forecast is alive & well….

July 30th, 2009 Comments off

     This morning I attended the 33rd gathering for the Growth Capital Conference in West Los Angeles, which is organized by the Growth Capital Institute. Aside from the standard self-serving pleasantries, which lasted the better part of 20-minutes, the conference showcased a presentation of 5 companies seeking growth capital. This was then followed by a 4-person panel discussing the current lending and capital environment. Although this was the first time I had been to this particular function, there were many of the usual suspects in attendance, which included the Tech Coast Angels, Pasadena Angels, Garage Technology Ventures, and various SBA reps. While a bit annoying at first, the lack of seating for an rsvp fee event was somewhat refreshing and the energy levels were high.

 

     Once of the greatest comments that was made to me by a successful business person, and later expanded on, was “Boring is not bad….”.  Well, that’s a bit of what we had this morning; some boring concepts, but not all bad. Unfortunately, what many of the concepts were lacking was the real “Wow” factor in their presentation and presenting the merits of their concepts in a simple 40k foot level. The presenters were give a simple parameter….7-minutes or less.  Many had problems staying within those confines and infused their presentations with too many details; details that could have been easily covered in a secondary meeting after capturing the attention of potential investors.  What was also somewhat amusing was the collection of hockey stick sales pr0jections without discussing any of the basic elements of a sales effort to achieve revenue goals.  In fact, one company even cited an 8x revenue multiple of a peer, from Q2-07, as a compelling reason for investing in their company. Don’t know if I’d be referencing valuations from 2-years ago….

 

     After the presentations were complete the conference transitioned to the panel of speakers, who would be discussing the current lending environment.

 

With regards to the SBA lending environment there were a number of points worth noting:

          Owners with an equity position of >20% are being required to provide personal guarantees on all loans.

          There is no longer 100% financing available.

          Start-Ups are requiring 30% infusion by Founders

          Ongoing entities are still only getting 80-90% with the remainder contributed by Founders.

 

     There was also a very consistent message by the panelists that they are only investing in entities where there is a unique proposition or offering. They are no longer investing in companies that are simply a variation of an existing and successful venture.  It was also noted, particularly by the Pasadena Angels ($25m / 65 deals) that they are doing more follow-on deals. While their investments in companies have doubled the number of companies in the portfolio has only increased by 50%. Further, the panel commented that “you can never assume that there will be follow-on financing and cite that as a basis for making an original investment”. They clarified that due to the environment, you need to make your investment decisions based on the merits and projections of the entity and not the hopes of bridging to more capital invested.

 

     Although a number of the discussion points were rather rhetorical, it was good to see the entrepreneurial drive alive and well at the conference this morning. It was clear that a number of the presenters really had not done their appropriate homework, or were being given some less than stellar guidance in their preparations, or just discarded that guidance outright. Regardless, I got a kick out of seeing that the Hockey Stick Forecast is still alive and well in funding presentations….

 

Thanks for Reading . . . .

 

Jeffrey Ishmael

Private Equity panel: Definitive info or Hypothesizing?

October 29th, 2008 Comments off

Tonight I had the opportunity to sit in on a panel discussion on Private Equity and their views on the 2009 Outlook. The panel was hosted by the Pepperdine Graziadio School of Business. While not a Top-25 school, they’ve been doing some good work locally in expanding their alumni base and putting on some worthwhile events. The panel was comprised of three MD’s/VP’s with a variety of industry participation between them. The panel was moderated by a Thompson/Reuters contributing editor.

While I typically look forward to these events, I have to say that I was a bit disappointed in that tonights panel lacked some of the definitive information I always look forward to taking away from the event. While the group said they are still pursuing deals, the discussion centered around the common knowledge of lack of credit, lower multiples, lower debt requirements, and the emergence of more seller financing in deals. Thanks, but isn’t this the same information I’ve been reading about in The Deal magazine, hearing on CNBC, and seeing in the WSJ every day? Isn’t this the same information that’s been a topic of discussion at FEI events over the last 6-8 months?

For a Finance professional who is always looking to deliver additional value for shareholders, whether I’m looking to sell the business or not, it would have been more insightful for the panel to discuss how Buyers and Sellers can come to the table at such a difficult time in the market and structure a deal that is advantageous for both sides. If you’re a company that has no near-term pressure to sell or raise capital, how do you explore strategic alliances or structure minority deals in this market without leaving shareholder value on the table? The event would have been a better success if there was more definitive discussion and less hypothesizing about where the market might be headed.

Thanks for reading . . . .

Jeffrey Ishmael