Mika Kasumov’s Post

There are a few firms in the Share Options space. 🔄 What do they all have in common? 📶 They represent the companies / founders... Many people think that share incentives always align the interests of labour and capital. 🍉 This is not always the case: 🍓 - There can be tricks such as 'fall away clauses' (you don't get your vested equity if you leave) 🥑 - 'Intermediate leaver' (performance-based milestones could be challenged) 🫐 - 'A liquidation preference above 1' (investors get outsized gains from an early liquidity events) The good news is that in the top tier startups, these are uncommon. Companies often act in good faith. 🌏 The key misalignment is actually more intrinsic. 🏝️ - Founders want to exit for the best possible valuation 🌋 - They'll be pushed to do so by investors, particularly late stage ones who have outsized control 🏛️ - VC is a long term game that needs a fund returner over a 8-10 year period. That means that companies will wait 2-4 years, if they have enough runway, to IPO. For option-holding employees, this means they either have to stay until then, sell secondaries at a cut price, or do a costly, risky excercise. 🏦 There is another way. We've seen it in the US And we're about to see it here.

One investment segment has the potential to significantly outperform “big tech”. And most people don’t even know they could join in…👇 The data is clear: Over the last 10 years, the Top 20 private tech companies have outperformed their publicly-traded peers. While some of the “big tech” firms may seem like a safe haven… Most of their upside may already be priced in, and they don’t offer the level of pureplay access to new tech many are betting on. In other words: There are better ways to invest in “the next big thing”...  👉 pre-IPO companies. Now, for many people, they seem like a high-risk black box full of unknowns. In fact, we know quite a lot, especially about companies just a few years away from going public. There are many positive indicators out there. For example, more and more of these companies are opting to provide secondary tenders to employees rather than to raise money for themselves. SpaceX, Revolut, Canva, or Stripe, for example. No need to raise new capital means their financial position is extremely strong. Shifts in secondary market prices also give reason for optimism. Secondaries hit their bottom in the late summer of 2023. Since then, we’ve seen a strong and steady rebound. In our portfolio (which includes the Top 20 tech unicorns), 80% are in established uptrends. The opening of the IPO window is on the horizon. Our prediction: Don’t be surprised to see potential double—or even triple-digit gains from many of these firms until the end of 2025. Disagree? Let us know why in the comments and we’ll be happy to start a conversation👇 If you liked this post, you’ll enjoy our newsletter:  https://lnkd.in/ec7RS2aS #secondaries #disruption #stockmarket #investing #growthpotential

When looking to break into VC, it’s important to understand the different types of firms you can join. TLDR: Not all VC firms are the same 👇 1/ Institutional VC Managed funds with $25M+ under management to invest in companies with high-growth potential. Objective: Financial Source of Funds: Limited Partners Stage: Early to late-stage Control Level: Mid to high Examples: Harlem Capital 2/ Corporate VC Independent arm of a company or a designated investment arm off the company’s balance sheet. Objective: Strategic Source of Funds: Balance sheet Stage: Early to mid-stage Control Level: Low Example: PayPal Ventures 3/ Family Office A private wealth management advisory firm that serves ultra-high-net-worth individuals (HNWI). Objective: Financial (more opportunistic) Source of Funds: Single-family or multi-family capital Stage: Early to mid-stage Control Level: Low to moderate Example: Emerson Collective 4/ Angel Syndicate A private group of accredited investors who agree to invest together in a particular startup. Objective: Financial (more opportunistic) Source of Funds: Pooled capital from individual investors Stage: Early stage Control Level: Low Example: Gaingels To sum up, all VC firms are different. They vary by more than just investment criteria, including by capital source, objectives, control levels & more. It’s important to know which type of firm is right for you before jumping into your VC recruiting journey. Follow me on other media channels to learn about all things VC 🪄➡️ https://lnkd.in/gc3XdvVJ #venturecapital #startup #recruiting

🗣️ Post-Election IPO Surge? Historical Data Suggests Potential 2025 Market Revival ➡️ Analysis of Crunchbase data from 2000 to present reveals a trend of increased IPO activity in years following U.S. presidential elections. Four out of the past six post-election years saw an uptick in public offerings on NYSE and Nasdaq. 🟥 However, market cycles play a crucial role too, as evidenced by the IPO boom in 2021 amid historic highs in tech valuations and venture investment. 2024 is on track to be one of the slowest IPO years recently, with only 32 U.S. venture-backed companies going public so far, despite relatively strong tech stock performance. While election year uncertainty may be dampening 2024 IPO activity, historical patterns and the current backlog of mature startups suggest a potential IPO surge in 2025. VCs should prepare their portfolio companies for this possible window of opportunity, focusing on operational excellence and growth metrics to capitalize on a potentially more favorable market environment post-election. #VentureHighlight

Post-Election IPO Surge? Historical Data Suggests Potential 2025 Market Revival Analysis of Crunchbase data from 2000 to present reveals a trend of increased IPO activity in years following U.S. presidential elections. Four out of the past six post-election years saw an uptick in public offerings on NYSE and Nasdaq. However, market cycles play a crucial role too, as evidenced by the IPO boom in 2021 amid historic highs in tech valuations and venture investment. 2024 is on track to be one of the slowest IPO years recently, with only 32 U.S. venture-backed companies going public so far, despite relatively strong tech stock performance. While election year uncertainty may be dampening 2024 IPO activity, historical patterns and the current backlog of mature startups suggest a potential IPO surge in 2025. VCs should prepare their portfolio companies for this possible window of opportunity, focusing on operational excellence and growth metrics to capitalize on a potentially more favorable market environment post-election.

#venturecapital #cashflow: Negative or Positive!!!I In the context of #venturecapital (VC) returns, distinguishing between positive and negative cash flow is crucial for understanding the health and success of investments. #positivecashflow in VC Returns: 1. Successful Exits: This includes scenarios where portfolio companies are either acquired or go public (#ipo), resulting in significant returns on the initial investment. 2. Dividends or Distributions: Some companies might return profits to investors in the form of dividends, indicating strong performance and #profitability. 3. Revenue Growth: Portfolio companies experiencing rapid #revenuegrowth often indicate positive cash flow, suggesting a successful business model and market fit. 4. Recapitalizations: Events where the company restructures its financial assets in a way that benefits investors, often through dividends or #buybacks. #Negativecashflow in VC Returns: 1. Company Failures: #startups that fail and cease operations lead to a loss of invested capital, reflecting negative cash flow for the VC. 2. #Downrounds: When a company raises additional funding at a lower valuation than previous rounds, it often indicates struggles or decreased market confidence, affecting returns. 3. High Burn Rates: Companies with high cash burn rates relative to their revenue or growth prospects can signal potential future negative cash flow. 4. Market Downturns: External #economicimpact causing market downturns can negatively impact the valuation and liquidity of portfolio companies, affecting cash flow. LinkedIn Family - Is there anything missing from this information, or could you provide specific examples? #venturecapital #privateequity #startup #business #micmirthandmarkets #firsttimeceos #theceogurukul picture courtesy #googlebaba

“The #venture industry grew rapidly over the past decade because it outperformed other asset classes. That size is now a liability, raising the bar for returns at a time when exits are hard to find. Cash #distributions—the money flowing back to LPs—continue to decline as a share of assets, sinking to the lowest level since the global financial crisis. Distributions amounted to 5.1% of the net asset value overseen by US VC firms last year, down from over 30% in 2021, according to the latest PitchBook-NVCA Venture Monitor. The combination of large portfolios and low exits suggests that a massive turnaround in tech IPOs is needed to return VC to the performance that underpins its reputation. Over the last decade, the rate of distributions-to-NAV at US VC firms averaged 17.1%. The #IPO market has yet to open broadly. And the smattering of recent unicorn IPOs—like Astera Labs and Reddit—simply don’t move the needle for an industry that now requires a high volume of large offerings to generate meaningful returns. While major stock markets have notched new records, that performance has been driven by a handful of names at the center of the #AI mania. Revenue multiples for newly public VC-backed companies remain near decade lows. Many LPs have been focusing on #DPI because prior cash distributions are a concrete measurement of returns for investors, rather than future cash flow projections like IRRs that could vary in practice. DPI is the ratio of distributions to the amount paid into a private fund. LPs’ bias for backing VC firms with a track record of cash returns has harmed emerging managers while benefiting the best-known firms. Established managers captured 77% of LP capital in the first half of 2024. The median fund from the 2019-2022 vintage years has no cash returns to show for its efforts.” (Read that last sentence again) Credit: PitchBook 🤒

Are VCs and Founders Getting Along? The relationship between founders and investors is becoming increasingly strained, particularly during economic downturns. Sifted surveyed with the #founders back in 2023, and here were the key outputs. 51% of surveyed founders responded that they’d been getting on worse with their investors since the downturn hit. Valuations started getting slashed, funding began drying up and investors abruptly switched their interest from growth (at all costs) to profitability. 86% of surveyed founders said that they were under more pressure to prioritize profitability/revenue compared to 2022. Investors are scrutinizing founders more closely (micromanaging more than ever), at times leading to conflicts over business strategy and decision-making. Founders are finding it difficult to maintain open lines of communication with investors, leading to misunderstandings and frustration on both sides. Founders are keen to find alternatives to VC cash, with many complaining about investors dragging their feet on pumping fresh funds into the business. 78% of surveyed founders had been advised by their investors to make cutbacks in 2023, with over half being told they should reduce their headcount. However, the silver lining is that 61% of surveyed founders did confirm that their investors had been more empathetic in the downturn.

Venture capitalists are eyeing 2024 with cautious optimism. Here are some key market insights from Crunchbase as we step into the new year: ⏺ Experts anticipate a right-sized market in 2024, rebounding from recent fluctuations. ⏺ Increased IPOs and M&A activity are expected, driven by public companies with substantial cash reserves. ⏺ AI funding is anticipated to slow down due to high valuations, regulatory challenges, and skepticism about sustainability. ⏺ Layoffs and closures will continue as startups face financial challenges and look to reach breakeven. ⏺ Change is coming in the venture capital industry, with fewer new firms opening, existing ones adapting, and potential closures. ⏺ Unforeseen geopolitical events or economic shifts also have the potential to impact the private market landscape. Check out this article for more - https://lnkd.in/gwv4dRVy #startupbusiness #mergersandacquisitions #artificialintelligence #vc #venturecapital #innovation #foleyforward #garage2global Foley & Lardner LLP

Three reasons we love capital-efficient investing: positive selection bias, easier exits, and win-win valuations for founders and investors: 1. Positive selection bias. The best software businesses often need the least capital. Zoom burned $7M before IPO (1). Zoom raised much more than that, but they did not need to. Veeva Systems burned $4M pre-IPO (1). Investing in businesses that don’t need a lot of capital often means investing in better than average businesses. 2. Exiting earlier is easier. When companies are smaller, there are more potential acquirers. There are 60-70 times more exits below $250M than above $1B.  In 2022, there were 30,083 exits below $250M and 398 over $1B (2). 3. Capital-efficient valuations tend to be more reasonable, so that founders and investors both win on a “modest” exit of $50-$250M. Traditional venture investors may block a $50M exit that produces a $30M outcome for a founder because the VC need an “outlier” exit (100x) to return their fund. Our model works on a 5-15x, so we can be happy with a $50M exit. If you are interested in this model and have >$100k in ARR, please reach out at [email protected]!  We invest in fintech, accounting tech, bank tech, wealth tech, SaaS plus payments, and the intersection of healthcare and fintech. We typically only invest in the US and Canada. Sources: 1. https://lnkd.in/gCvzuYP8 2. Pitchbook 2022 Annual M&A Report