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What is wrong between VCs and Corporates?

Lately I encountered the historic discussion about the „dark side“ (venture capital) and the „darker…

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Lately I encountered the historic discussion about the „dark side“ (venture capital) and the „darker side“ (corporate venture capital) with fellow VCs several times. I wish this discussion would come to an end for the benefit of founders, startup companies and innovation. But I guess this is wishful thinking for some time being.

When do VCs do like corporates?

In the first place VCs tend to like corporates
for revenues in their portfolio companies. While VCs are all out and about to tell the world startups are
disrupting the corporate world –  at the
end of the day they like corporates being customers of their portfolios and
bringing in sustainable revenues. The rise of B2B startups has shown this trend
lately. In a world of dominating Internet platforms, the B2C space is becoming
more expensive in terms of customer acquisition costs and unreliable when those
big companies will copy a successful startup business model and compete with
their investments (music streaming, messaging, communication, e-commerce, etc.)
In B2C investments those private investors also like corporates in a partnering
approach. It puts them in a struggle how to value partnering deals e.g. music
streaming + Telco’s, e-commerce + TV broad caster, fintechs + banks because
there is a lot of good support but still it is like a deal with a devil from their
V VC perspective. Especially the net neutrality discussion raised those
contradicting views of several VC investors. While it supports some of their
portfolios some partnering deals might harm others from their perspective.
While defending the majority of their companies it will harm a few companies,
who would benefit from certain deals. In any case private VCs will love
corporations as an exit channel – because those are the only ones who can pay a
high amount for their investments to return their funds.

When do VCs don’t like corporates?

Several VCs openly declined to make deals with corporates as
part of a funding round. Exits are OK – minority investments are not. I do
understand this perspective when corporate investment arms would demand special
rights, which would influence the exit terms negatively for a portfolio company
and its shareholders. Also as a minority shareholder, as a potential buyer this
corporate would have insider information on the business, which will not help
to initiate a price acceleration during negotiations. However, there are terms
in shareholder agreements to make sure all parties are playing by the book in a
correct way. I would accept a consistent behavior of VCs in declining corporate
minority investments. But VCs as any other shareholders cannot control their
portfolio companies and need to serve fiducially duties to protect the company
as a shareholder.

Following exceptions can be seen by VCs, who officially
don’t like corporates in their deals:

  • A
    partnering deal is linked to an investment:
    The advantage of the partnering
    deal with a corporate for sales, reach or branding is that important, that the
    investment has to be accepted.
  • The
    valuation/investment is that high
    : Corporates will invest from a different
    perspective and calculate the overall impact on their business. In some cases,
    the terms and conditions from a corporate investment arm are just too good to
    be true. Founders most likely and investors to a certain extend just take the
    deal while it has the advantage on their own economical metrics (book value,
    equity stake, etc.). Mainly we have seen this behavior in unicorns in 2014/15.
    Corporates were invited to invest in those 1bn companies giving a nice book
    value and secondary chances for private investors or founders.
  • There is
    no other investor:
    There are just those times where private investors don’t
    accept a valuation (or an investment at all) based on the figures and business
    case presented by the portfolio company. While private VCs are always pushing
    their interests in risk for founders and innovation – there is a limit they are
    accepting. I could be the stage or size of the investment or even too risky for
    them. They just don’t want to bet more money on that founder or company.

In all fairness this could be acceptable as long as all
players in the market will be honest about this metrics. Otherwise there is a
misunderstanding between the involved parties, which is never good in a close
partnership as in shareholding in a company and siting together on a board.

In Europe there is another issue why VCs don’t like
corporates investing in startups: They need corporates as limited partners in
their own funds. So instead of raising VC funds from those corporations, the
VCs will meet them in a competitive bidding for a stake in a promising startup
and founder. VCs will approach CEOs of corporations to convince them to become
a limited partner in their fund instead of running their own corporate
investment arm. While this is a bias discussion by nature, it still has the
challenge of proving to be a better investor than their corporate arms.
Especially in Europe with low exits proceeds and rather small fund returns over
recent years the numbers are not supporting those arguments of being a better
investment fund.

We see more corporates focusing on direct investments linked
to their own business rather than using VCs to nurture many startups and
picking up later the best plants in the industry. As we see in facebook,
Alphabet and Apple the trend is already shown clearly in those investments.

The VC world is changing — even being disrupted from several edges. But the traditional VCs with their opposing view on corporates are contributing to support this trend. In Europe this negative perception of corporate investors will lead to a downturn of the general VC market and it will harm innovation, founders and entrepreneurship.

It is obvious but not seen by those who could change it.

Source: https://thomasgr.tumblr.com/post/147999696570

Private Equity

20VC: Sequoia’s Roelof Botha on His Biggest Lessons Working Alongside Don Valentine, Mike Moritz and Doug Leone, Leading Sequoia’s US Business and What Sequoia Do To Retain Their Edge at the Top & The Crucible Moments That Define Startup Success

Roleof Botha is a Partner @ Sequoia Capital, one of the world’s leading venture firms with a portfolio including the likes of Airbnb, Instacart, Stripe, UiPath, Zoom, the list goes on. As for Roelof, at Sequoia he has led rounds into the likes of YouTube, Instagram, Eventbrite, Square, MongoDB, 23andMe and Unity Technologies to name a few. Before joining the

The post 20VC: Sequoia’s Roelof Botha on His Biggest Lessons Working Alongside Don Valentine, Mike Moritz and Doug Leone, Leading Sequoia’s US Business and What Sequoia Do To Retain Their Edge at the Top & The Crucible Moments That Define Startup Success appeared first on The Twenty Minute VC.

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Roleof Botha is a Partner @ Sequoia Capital, one of the world’s leading venture firms with a portfolio including the likes of Airbnb, Instacart, Stripe, UiPath, Zoom, the list goes on. As for Roelof, at Sequoia he has led rounds into the likes of YouTube, Instagram, Eventbrite, Square, MongoDB, 23andMe and Unity Technologies to name a few. Before joining the world of venture, Roelof was the CFO @ Paypal playing a key role in their hyper-growth from 2000-2003.

CLICK TO LISTEN ON ITUNES

In Today’s Episode You Will Learn:

1.) How did Roelof go from actuary in South Africa to CFO @ Paypal? What were his biggest lessons from seeing Paypal burn $10M per month? How did Paypal lead to his joining Sequoia as a Partner?

2.) Market Evaluation: Does Roelof agree that the market is crazy today? How does today compare to prior vintages? How does Roelof assess the compression of fundraising timelines? With compressed timelines, how does he build relationships of trust with founders?

3.) Founder Evaluation: What were Roelof’s lessons on founder assessment from Don Valentine? What matrix did Don teach Roelof to assess founders on? How does Roelof feel about the rise of competitive rounds? When should founders take them vs remain heads down on execution?

4.) Investment Mentality: How did Roelof prevent becoming too confident when early investments went well? How does Roelof prevent relying on past failures as a reason for turning down opportunities today? What can investors do to retain a very flexible mind? Why does Roelof believe you are only as good as your next investment?

5.) Sequoia’s Edge: How does Roloef think about what it takes for Sequoia to retain it’s edge at the top? How does Roloef measure the success of the Sequoia scout program? How did they structure it? How has the structure changed? What do they plan to do moving forward?

6.) Board Membership: How would Roloef evaluate his current style of board membership? How has that style changed over time? What elements did he find challenging? What advice would Roelof give to new board members adopting their first board seats?

Items Mentioned In Today’s Show:

Roelof’s Favourite Book: Man’s Search For Meaning

Roelof’s Most Recent Investment: mmhmm

As always you can follow Harry and The Twenty Minute VC on Twitter here!

Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

Source: https://thetwentyminutevc.com/roelofbotha/

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Private Equity

Private equity investor Centerbridge Partners backs Syncapay’s acquisition of Wirecard North America

From: FinTech Global Syncapay has announced that it has bought Wirecard North America, marking another page in the story of the collapse of the scandal-ridden former FinTech giant. Wirecard imploded this summer after a suspected multi-billion dollar fraud was unearthed. Since then the company, which was once hailed as one of Germany’s biggest FinTech success […]

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From: FinTech Global
Syncapay has announced that it has bought Wirecard North America, marking another page in the story

Source: https://www.altassets.net/private-equity-news/by-news-type/deal-news/private-equity-investor-centerbridge-partners-backs-syncapays-acquisition-of-wirecard-north-america.html

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Private Equity

Gulf Capital backs CWB as part of $60mln IP platform build

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The post Gulf Capital backs CWB as part of mln IP platform build first appeared on https://africacapitaldigest.com.

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