Michael Schwartz

Series A or B wondering when to bring in a VP of Finance or CFO? It’s a crucial decision that can shape the future of your company. At this stage, financial leadership is not just about managing numbers but also scaling processes, securing funding, and driving strategic growth. My colleague Paul breaks down key signs that it’s time to hire and indicators for choosing between VP of Finance and a CFO #FinanceLeadership #CFO #StartupGrowth #SeriesA #SeriesB #NextGenLeadership

6

Is Now the Best Time to Raise a Private Equity Fund? According to industry leaders, it just might be. "I’m much more optimistic at this point in the cycle in 2024 than I was in 2023 and 2022," says Andy Lund, global co-head of Houlihan Lokey's Private Funds Group. Despite expectations of a slowdown, the first half of 2024 has been unexpectedly successful for PE managers raising capital. U.S.-based funds closed on $155 billion by the end of June, slightly ahead of the first half of 2023 (PitchBook Q2 2024 US PE Breakdown). Alex Russ, head of North America for Evercore's Private Funds Group, sees this as an ideal moment for GPs with open funds. "We saw fewer new fundraise launches in 2024 than in 2022 and 2023, leading to a slight easing, which we expect to continue into the second half of this year," he notes. However, challenges remain. LP capital is still largely locked until M&A and exit activities resume. Evercore anticipates flat PE fundraising figures for 2024 compared to 2023. Moreover, other asset classes are vying for already limited institutional capital, with private credit showing particularly strong growth. In this context, Maria Konnikova’s "The Biggest Bluff" offers an insightful analogy. Inspired by "Theory of Games and Economic Behavior" by John von Neumann and Oskar Morgenstern, the book explores von Neumann's belief that poker epitomizes the delicate balance between skill and chance that governs life. Doing well at poker isn’t just about playing well; it’s about playing well relative to everyone else. And even with the best strategies, luck plays a critical role. As Nobel-winning economist Daniel Kahneman notes, "The successful funds in any given year are mostly lucky; they have a good roll of the dice. There is general agreement among researchers that nearly all stock pickers, whether they know it or not—and few of them do—are playing a game of chance." The last two years were like drawing a bad hand in poker for those raising funds. The book also emphasizes the importance of thinking like a Strategist—something I’ve honed throughout my career. Each move requires reassessment based on new information. You need a plan that evolves with feedback and supports long-term, good decision-making. If you’ve lost your chips, was it due to an unlucky situation—or because your strategy was flawed? A recurring mantra of Poker Hall of Famer Erik Seidel is "less certainty, more inquiry." If that becomes your guiding principle, not only will you actively listen, but you will also adapt and grow. For GPs, strengthening relationships with existing LPs is more crucial than ever. Now is the time to leverage your learnings and craft compelling narratives that showcase your commitment to value creation and strategic growth. By highlighting your firm's ability to navigate complex market dynamics, you can strengthen LP alignment and foster the partnerships needed for long-term success.

59

4 Comments

🔍 Want to land a role in private equity or create your own deal? Our playbook for executives offers a comprehensive roadmap to enter the PE field, emphasizing networking, strategic positioning, and leveraging resources effectively. Read more here: https://buff.ly/4flClVy 💼 Learn more about Blackmore Partners: https://buff.ly/42iNmB3 📅 Have questions? Schedule a meeting with our Director Chris Melton here: https://buff.ly/4cpKqHv #PrivateEquity #CareerGrowth #ExecutiveRoles #BlackmorePartners #PECareers

3

Big things on the horizon, we are motivated and blessed to be at the dawn of a new age for the internet. Read more about our journey below or listen to the podcast: https://lnkd.in/eJeNhvVa

13

1 Comment

It’s BOD & AGM season. After 9 BOD meetings and 7 AGMs there is a common theme. “Generally” Emerging Fund 1&2 managers w/o firm building experience; and Founders/ELTs who raised pre-seed generalist and family office party rounds at Seed or crossover/hedge fund capital at Series A. Same general dynamic… experience matters. #venturecapital #emergingmanagers #startups #familyoffices #lps

40

6 Comments

The recently published Institutional Investor Digital Asset Study from Fidelity Investments certainly has some eye opening stats to browse through. Cudos to the team for a clear and concise overview. What stuck out most was the top reason investors cited for their change of view on the space... 💡 increased understanding 💡 This is still a new asset class, demonstrably so in the United States where acceptance has been slow. Increased education and understanding is paramount. Anyone with questions, reach out, always happy to answer incoming messages. Some other interesting tidbits: 1) Price volatility remains one of the largest barriers to entry [more thoughts to share here but at a later date...] 2) 30% of respondents saw digital assets as their own, unique asset class [interesting, what is your allocation to it?] 3) US investors remain the least accepting of digital assets [I think this really goes back to the first point of the post, increased understanding and truly think the tide is turning] If you are curious about the space, here to help through it. As someone who spent a decade working with fintechs and financial companies I get the skepticism. As an investor however, skate to where the puck is going, not where it has been the past twenty years #digitalassets #crypto #blockchain Full Survey (link below) https://lnkd.in/g7h2_Bq8

20

The lack of exits from both private equity and venture capital funds over the last few years continues to have a significant impact on the behavior of large investors. Per the attached article from Institutional Investor, single family offices have moved more capital into fixed income and liquid equites (ie. the stock market). With yields on fixed income securities now higher, the move into that asset class is easy to understand. I would expect a larger allocation to fixed income to endure, as interest rates are likely to remain at or near their current level for the foreseeable future. However, I suspect that the move into liquid stocks is driven more by the need for near-term liquidity, rather than any structural change in asset allocation philosophy. The truth is that family offices need both access to growth companies AND liquidity. If exits in the private markets begin to uptick again, I would expect family offices to once again deploy capital to PE and VC. Private equity and venture capital continue to be the most effective method to access the return profile of growth-stage companies. That is not going to change. However, the liquidity side of the equation needs to return to normalcy. #privateequity #venturecapital #innovation #entrepreneurship #founders #startups #investing Endeavor Colorado Zeb King Tegan Stanbach Kathryn Dickson https://lnkd.in/g4rqxzhQ

1

Patience and vision - the two key ingredients for successful long-term investment. As a Managing Partner at Black Slate Capital & Advisory, I've seen firsthand how growth capital can transform underperforming assets into billion-dollar success stories. It's not just about the money; it's about having the foresight to see the potential and the patience to let it unfold. In the private investment world, we often talk about the importance of a great vision. But what does that really mean? To me, it's about seeing beyond the immediate returns and focusing on the bigger picture. It's about investing in companies that have the potential to make a real impact, whether that's through innovative technology or by addressing a pressing social need. Of course, this approach requires patience. Rome wasn't built in a day, and neither is a successful investment portfolio. It takes time to nurture and grow a company, to overcome challenges and to realize its full potential. But for those who are willing to wait, the rewards can be substantial. So, to my fellow investors and entrepreneurs, I say this: don't be afraid to think big and play the long game. The most successful investments are often those that are given the time and space to flourish. Let's connect and share our visions for the future – who knows what we can achieve together? #Investment #GrowthCapital #LongTerm

16

2 Comments

What's the fast river in alts? Listen to the latest Alt Goes Mainstream podcast with Mercer's Gregg Sommer & CAIS' Neil Blundell to hear how they are helping advisors approach private markets. Gregg, Neil, and I had a fascinating discussion about how the wealth channel can approach alternatives and how they can think about both diligence and customization. We covered: * The case for alternatives. * How advisors currently approach alternatives and how they can think about it differently going forward. * How to think about portfolio construction that includes alternatives. * How alts can help advisors differentiate their practice and attract clients. * Following the fast river in a career and why alternatives are “the fast river.” * The meaning of “structure over strategy.” * The rise in popularity of evergreen funds. Thanks Gregg and Neil for sharing your thoughts and expertise on private markets. Thanks to our sponsor, Ultimus Fund Solutions, for making this episode possible. https://lnkd.in/eBtyw6Fm

31

2 Comments

Great NYT article about the US private secondary market highlighting an early mover I co-founded, Forge, and another I invested in and advised that's bringing things to the next level, Destiny (D/XYZ). A couple of my heroes and colleagues, Sohail Prasad and Kelly Rodriques, are quoted extensively. Written by Erin Griffith, a veteran journalist who has followed private markets for nearly two decades, the good insights outweigh a few things that beg for clarification. The public comments, by contrast, are mostly misunderstanding and misinformation. If you've ever worked for a long time at … well, anything… and then you read a news article about it, you probably know the feeling. Private markets are not "shadowy and often enigmatic." It's not that mysterious or complicated, people. It's just a fresh approach to an old business. * rant about Stripe * The article amplifies and conflates misleading claims by Stripe disparaging forward contracts as possibly worthless with others questioning secondary stock solicitations as likely scams. Stripe is twisting stock ownership legalities as if it doesn't want its employees to benefit from shares it's been awarding them for the last 14 years, not unless and until Stripe says they can. We used to run into that at Forge, companies granting equity awards then pulling them back with hidden strings, threats, and bluster to keep control over when, where, whether, and how employees could raise cash from the stock they fully earned as compensation for their loyalty and hard work. Say an employee wants to buy a home or car, pay for medical bills or their children's education. Or leave to start their own company. Sorry, those shares management paid you in lieu of cash, they didn't really mean it. The pinnacle was Airbnb's hired gun CFO calling us "bottom feeders" for facilitating employee stock sales without his permission. As if Airbnb wasn't doing the exact same thing, in their case illegally, monetizing tenants and their apartments. Happily awareness has grown. The Airbnb guy was soon out, and the general understanding came to acknowledge that once an employee earns their stock fair and square it's theirs. Market participants see this as a matter of fairness, but more to the point as a benefit to everyone involved including the company that issued the stock. So most companies encourage a secondary market. Rather than tensions rising, the long term trend is a growing acceptance of stock sales initiated by employees and early investors. Forge, for its part, has found it more effective to work with the companies and honor their wishes rather than butting heads with them as we sometimes did in the early days. I guess Stripe didn't get that memo. Or the people who post comments to New York Times articles.

47

2 Comments

PE - Hedge Funds Hit by Lack of PE Exits (and one way that PE firms can boost exits) Financial Times: https://lnkd.in/edACss_X FYI - one way to get more PE exits is for the PE fund to have a domain expertise GTM and have deep knowledge on how to increase the Revenue Growth of portfolio companies which boosts cash, profits and margins. --- #pe #privateequity #business

24

4 Comments

In a new op-ed I penned for Institutional Investor, I discuss the changing strategic buyer landscape for enterprise software companies. With software continuing to grow well in excess of GDP, and digital transformation at the top of C-suites’ agendas, the trend of multi-billion dollar software companies being acquired by non-traditional buyers should continue to accelerate. As always, all comments are welcome!

436

12 Comments

⛳ Emerging fund managers pulse check. PitchBook tracks over 10,000 funds that are raising money, with 45% being emerging fund managers (defined as firms with less than 3 funds). Despite a dip in available capital—down to 16% from the pre-pandemic 23%—these managers are finding creative ways to stay competitive, like partnering with larger firms. 💼 Joanna Drake (founder turned investor) shared how "wildly different" it is raising a fund versus for a startup. One key datapoint she shared on the fund side was how little feedback you get along the way (and the years you can wait for it). The “long-winded and challenging process to raise capital” inspired Drake and Ben Black to create RAISE Global, a community for emerging fund managers and the “forward-thinking LPs” who back them. (A decade later, several hundred emerging managers with AUM under $200m are on the platform) They've found the newest emerging managers are more diverse and geographically dispersed than Silicon valley, and more were able to crack the ceiling and raise larger $100m funds (although this is still a small % of the market, requiring partnership with larger funds at the late stage). ▶ And not a hugely surprising datapoint: A lot of action is in the sub $49 million range, where roughly 50% of emerging managers are raising. Theresa Sorrentino Hajer, Head of U.S. venture capital research at Cambridge Associates warns that past success isn't actually a strong indicator on it's own to assess emerging managers. We've had a valuation reset. And newer managers with investments during the 2019-2021 "party days", need to build relevant track record and play to their strengths. A lot of emerging managers are specializing (70% who applied for Raise had a thematic focus), and betting on getting in as early as possible in the startup's lifecycle (Raise: 31% at accelerator/ pre-seed stages, and 47% at seed stage). “Emerging managers have to compete on a different dimension,” Nick Moran from New Stack Ventures. You're no longer just dealing with capital. Emerging VC's need to be as innovative and nimble as the startups they invest in, having a unique thesis and insights. They also play a role at the top of the deal-flow funnel: helping larger firms find promising companies, so finding a thesis, sector or philosophy aligned partner at a larger firm is helpful. Onwards! #EmergingManager #Startups #VC

24

1 Comment

Very similar and a complement to Independent Sponsor led transactions targeting $15 million to $100 million plus EV, search fund deals target acquiring companies for around $15 million EV, priced at approximately seven (7x) times EBITDA or less. Over the years, companies tracked by Stanford have shown annualized equity returns exceeding 30%! The target universe for search funds and Independent Sponsors is substantial, with nearly 200,000 businesses valued between $10 million and $100 million, according to NAICS Association data. Search funds often seek out companies with retiring family founders looking for liquidity. Middle and lower-middle market financial sponsors generally avoid targeting companies worth $15 million due to high overhead costs and the need to deploy significant amounts of capital. However, for individual entrepreneurs, these micro-sized deals are not only accessible but also offer attractive bargains. This has led to the emergence of specialized search PE funds alongside Independent Sponsor transactions. Great article by the FT. #privatecapital #privatemarkets #privateequity #buyouts #growthequity #independentsponsor #searchfund #middlemarket #smallbuyout #sme #institutionalinvestor #alpha #moic #irr #privatecredit #privatedebt #familybusiness #founderowned #fT

26

2 Comments

Here's a piece from Fortune (behind a paywall) on the use of secondary transactions by VC firms. Mark Suster from Upfront Ventures notes the secondary market is emerging as a critical tool for VC's, and that VC's might need to emulate their PE peers in the use of GP-led transactions. I agree this will become more common, and in some ways, VC use of secondary transactions is a more natural fit. VC funds don’t need to maintain controlling interest, so selling partial stakes is easier. Conversely, it’s also easier for a VC firm to buy a minority stake. If exits remain muted, the need for a secondary solution will undoubtedly increase. Venture capital firms often hold anti-dilution rights during fundraises, yet many dated funds lack the capital to exercise those rights. Worse, in some situations, ‘pay to play’ rounds can threaten to zero out investments made in funds without additional investment capital. Secondary transactions offer a viable solution, allowing firms to manage their portfolios effectively, harvest value and mitigate risk. The issue has always been pricing. Secondary funds have always had much more comfort with the valuation methodology (rooted in financial performance) of private equity portfolio companies, than the valuation 'art' of venture capital. Perhaps more VC funds entering as buyers or partnering with secondary funds is the answer? #VentureCapital #SecondaryMarkets #InvestmentStrategy #Liquidity #PrivateEquity #GPLedSecondary https://lnkd.in/gM3bzTdv

6

Great analysis of recent #vc trends. Thank you Kaela Roeder and Technical.ly for including my thoughts in the piece. My "expanded" two cents below for anyone curious... It is easy to get excited by what is happening in venture capital these days given the advent of AI. However, for early-stage startups, the numbers tell a more nuanced story. Early-stage deal volume in Q4-2023 was down 66% from the peak (Q4-2021) and a quarter of the deals were down rounds. In 2024, volumes stayed fairly flat relative to 2023 levels (signalizing a normalization to pre-pandemic VC activity) and 32% of deals were down rounds in Q1 (a worsening since year end). Early-stage valuations have spiked back up this year – a pleasant boon for some founders. But, this inflation is largely driven by the excitement around AI and strong demand for capital-efficient, high-growth companies. Many startups have tried to become “dot AI” businesses overnight; however, such tactics are not the “silver bullet” to fundraising challenges and growth. With limited time and capital, funds are on the hunt for companies with bulletproof fundamentals or those with exponential growth potential. If you don’t check one of these two boxes, the VC world looks fundamentally different for you. Locally, there are some positive tailwinds. The D.C. area has outpaced other metro areas in adding AI jobs due in large part to the defense industry and an increasing number of tech companies opening-up federal outposts. Over the long-term, this will be very positive for D.C. startup growth and talent.

29

2 Comments

CRV is returning $275m from its $500m Select fund to its LPs. Get fit and nimble, not just for startups, but also for VCs. "Some limited partners have been frustrated with the expansion of venture capital funds in recent years. In 2021, 28 firms raised funds of $1 billion or more, up from just eight such funds five years earlier. There is an incentive for venture capital firms to raise bigger and bigger funds, since they typically charge a 2 percent management fee. Larger funds means larger fees, regardless of how well the investments do. But bigger funds also tend to have middling investment performance. Smaller venture capital funds have historically minted the highest returns, according to data from Cambridge Associates, an investor in venture capital funds since the late 1970s. Many of CRV’s limited partners have backed the firm for decades. Lawrence Rusoff, a managing director at Performance Equity Management, said other venture capital firms had been talking about the issue of venture capital funds that get too big. But so far, only CRV has opted to return any money." https://lnkd.in/eSUigr7Z

17

1 Comment

Tune in to the upcoming webinar by Shils Entrepreneurial Fund on July 16th at 7 pm Eastern Time. The webinar, titled "Raising Capital and What it Takes," will feature Jane Levy, the Co-CEO of Plan Forward. This webinar is an invaluable resource for anyone looking to gain confidence in the process of raising capital from angels, family offices, and venture capitalists. #FamilyOffice #VentureCapital #Investors #Invest #Capital #Finance #ReverePartners #FundRaise #Tech #PrivateEquity #Equity #StartUp #Founders

8

2 Comments

New research by Cambridge Associates and BCG shows that private equity and venture capital firms whose ownership is predominantly women or people of color may unlock access to differentiated deal flow for their limited partners and other investors. Read the full article here: https://ow.ly/TlZC50RQxvt

12