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It is December 2020, and we are closing out the strangest, scariest, and most interesting year of our lives.

As the year comes to a close, U.S. stock markets are reaching all time highs. To top it off, we are experiencing one of the most robust IPO markets seen in years. Big names like DoorDash and Airbnb are completing long-awaited public market debuts — and doing so at record valuations. Both companies are eyeing valuations north of $40B.

Back in April of this year, I don’t think anyone would have predicted this outcome. Yet here we are.

IPO Activity is Still Historically…


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So, you are getting ready to raise capital for your early-stage company. Well, let’s just get a few things out of the way upfront. There is a good chance that the raise will be challenging, take longer than you hope, and you are likely to be turned down way more than you appreciate.

However, that being said, I have found that following these three best practices can help make the process more effective, efficient, and less painful over time.

Understand the Needs of Your Investors

First, understand the needs of your potential investors. Most likely your round will be a mix of ‘angel/high net worth’ investors and institutional investors (venture capital/private equity funds). It is vital to understand the different needs and behaviors of these two investor groups, and tailor your message to each appropriately. …


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So, you successfully raised capital for your first fund or first round. Congratulations! It was tough. My guess is that it probably took a lot longer than you expected. You were probably turned down way more than you care to admit (and that stings). And, you are not particularly looking forward to having to do it again.

However, before you know it, the time to start raising capital will be here again. If you are an emerging private equity firm, venture capital fund, or growth stage company, the move from the first to the second raise is a big one. …


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Staying private — fad or trend? Probably some of both. But have no doubt, it will continue because the advantages are just too great.

Companies are staying private both more frequently, and for longer periods of time. This is a real thing. I believe that it is a trend that is here to stay. Has the trend gone too far? Perhaps. To that point, we have seen some of the larger private tech companies go public over the previous few months. However, these recent IPO’s are just a drop in the bucket.

Not everyone in the industry believes that staying private is necessarily a positive development. Staying private creates some challenges for companies and for some of the investors on the cap table. Particularly, the earlier investors that have experienced the company success, yet are unable to monetize any of that success. …


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These are challenging times. If even superheroes can’t get the job done alone, what hope do we have?

Over the past few years, I have been lucky enough to do project work and to collaborate with some amazing founders, entrepreneurs, and PE/VC investors here in Colorado. In general these individuals are working their tails off to grow their companies, and usually facing some pretty serious obstacles and challenges to make that happen.

I liken the experience to taking a PhD-level course in overcoming business and investing challenges. However, if one trick continually stands out, it is the importance of being comfortable reaching out to others for help — business or personal. The life of a Founder/CEO can often be isolating. …


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Worried about being an introvert in business? Don’t be, it might actually help you become a better entrepreneur

I am an introvert — isn’t that great? Said no one in business ever. Introversion is generally not considered a valuable trait in business. At least that’s the message I received loud and clear during most of my career. For the last two and a half decades, I have worked in trading, investment banking and investment management. In those arenas, there are no statues erected to the great introverts of our time. Fat bonuses, accolades and promotions go to the bold — the extroverts. …


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Reflecting on entrepreneurs and safety nets

In many ways entrepreneurs have become the new rock stars. Growing up for me it was Vedder, Slash, and Bono (and ok yes, Vince Neil). These days it’s Bezos, Musk and Zuckerberg. But if being an entrepreneur is so amazing, why are there not more of them? If it is so rewarding, why do most people still grind away in corporate America? God knows I spent the better part of two decades grinding it in big companies.

Of course, there are a lot of reasons. However, I think that there is one extremely important reason that we don’t really talk too much about — financial safety nets. I think that the lack of an adequate financial safety net discourages a great many people from taking an entrepreneurial path. …


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I do a lot of investing in the private markets (PE, VC, Early-stage companies). I am often asked why I spend so much of my time in this part of the market, because it does take a lot of effort and patience.

Credit Suisse recently wrote an article that I think helps to showcase why private markets are so important today. It is a long article, so please do not feel the need to read it in its entirety.

The key take-away is the following:

In 1996, there were over 7,300 companies listed on U.S. stock exchanges. By 2016, that number had dropped to around 3,600. In twenty years, roughly 50% of investable stock market companies disappeared. There are now fewer publicly-traded companies in the U.S. than there were in 1976, even though U.S. GDP is now three times larger. …


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Worried about being an introvert in business? Don’t be, it might actually help you be a better entrepreneur

I am an introvert — isn’t that great? Said no one ever. Introversion is generally not considered a valuable trait in business. At least that’s the message I received loud and clear during my childhood and in my career. For the last two and a half decades, I have worked in trading, investment banking and investment management. In those arenas, there are no statues erected to the great introverts of our time. Fat bonuses, accolades and promotions go to the bold — the extroverts. Introverts need not apply.

For most of my career, I thought that this was solely the ‘Wall Street’ ethos. Now that I have been around the block a few times and spent time in other industries, I understand that introversion is not particularly heralded in any industry. So, if you are an introvert, my guess is that you never proclaimed it too openly, or at least tried to suppress that instinct. …


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The need for investment ecosystem partners is now even more important.

Without question, the most frequent conversation I have with Founders centers around how fractured the market for early and growth stage investing has become. Many people assume that investing is static — the way that we invest today has not changed and likely will not change in the future. While some of that is true, investing in early and growth-stage private companies has actually evolved substantially over the last decade. Those markets have fragmented into numerous sub-markets and domain specializations, and the number of players in the space has grown exponentially.

Fortune Magazine’s Term Sheet interviewed Ashmeet Sidana, Partner at venture capital firm Engineering Capital (“Why Venture Capital is No Longer a Lifecycle Business” — link below). In the article, Sidana discussed this market fragmentation and its implications. As he mentions in the article: “From an entrepreneur’s perspective, it is difficult to get attention for a $1 million seed investment from a $1 billion fund — hence the emergence of specialized seed funds.”

About

Marc Patterson

Managing Director at Bennu Partners (Bennupartners.com), an Investment Consulting firm headquartered in Colorado. Marc writes on investment topics.

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