Entrepreneurial finance, venture capital don’t have enough money to new works

cloud network hunting note: it is said that in the new era, enterprises and venture capital as two single wing giant, bundled together to take off, but only the right strong enterprise, to the capital’s powerful left-wing solicit. Indeed, both in personal investment and investment groups in stare big eyes to find the most profitable business opportunity, this was what was staged in silicon valley boom.

recently, silicon valley in the industry are a promising big business, follow the entrepreneurial firm value soared in recent years the east wind, a good situation!

some vc firms such as Andreessen Horowitz and FirstMark Capital, as well as many outstanding entrepreneurs and executives who have joined in a start-up company shares directly increase the tens of millions of dollars in funding.

these funds often within a few days are all in place, can greatly promote the development of enterprises, accordingly, also can give financial institution investors, friends and business partners to bring profits. In addition, still can let venture capitalists see security, and then invest more money in this business. In general, start-ups are grateful for the funds, and the effective ways to make this quick cash.

usually, in promoting the investment of time, everyone will say “this village is not this shop” “opportunity knocks but once”, but this does not mean that there is no risk investment. Regardless of how these investors take investment way, fund of funds, family offices or pension funds, in fact they for the company’s financial information is not aware of, the company also won’t let them know so much. In addition, they still have to pay performance fees, basically are extracted from funds profit share of about 20%.

when standing Pinterest company intends to raise $500 million in February, it is the earliest investors FirstMark Capital, also want to join this round of financing.

but Pinterest company valuation is $11 billion, data is staggering, almost more than two times the valuation in May last year, the risk enterprise FirstMark Capita total fund is $225 million, amount of it there is no way to transfer more to keep up with the pace of the Pinterest. Risk and, in most cases, the company will be reasonable allocate funds, don’t put all the chips are concentrated in an enterprise.

so FirstMark managing director and Pinterest board observers Rick Heitzmann with the San Francisco startup drew up a deal, hoping to set up a special fund, that I can collect money from each big investors and directly points shares.

according to people familiar with the matter, Rick Heitzmann raised $200 million in just three days, most of the money comes from FirstMark seven investors, there are a few from the main fund of the company.

Rick Heitzmann can financing is successful, the key is he can make good for people, at the time of signing the agreement he promised to do not charge any fund management fee, this is to give up 2% of the total fund! , of course, also is not Rick Heitzmann individual incentives, FirstMark company will bear the cost because of owning stocks, also means that the company investment profit will be cut. But this loss is temporary, because they believe that after this, Pinterest public or be acquired funds must higher than 11 billion dollars.

in the eyes of some investors bet this is the simplest way to make money: Pinterest will likely follow the same trajectory Facebook, eventually become a millions of users of social networking platform, will also be a investors rushed to chasing prey. But the investment Pinterest nor foolproof. After all, it started from February officially sell ads on the site.

the agreement details the start-up investors is how to use the new financing structure to help them grasp the most promising bet. Now they are using a technique called “Special Purpose Vehicle” (Special Purpose Vehicle, SPV). This kind of financing structure is different from the traditional risk fund, investment risk fund usually said in a few years dozens of enterprises, while the former refers to investment in different period of time from the same company.

in order to ensure that you don’t be late for large investors to clean out completely, the SPV will make investors spend big competing at all costs. Vc firms found that with the rapid growth of valuation, they are not always have enough reserves to maintain their stake in start-ups.

in the interview, Dow Jones VentureSource, said in the past 12 months, at least 70 private companies in the billions or even higher valuations worldwide frenzy to raise money. During that time, a lot of companies, including Pinterest, valuations are rapidly expanding into twice before.

familiar to this aspect of the personage inside course of study says, this trend has been extend from large companies to small groups, a group of one of the few outstanding entrepreneurs and executives are using the time for some of the SPV company set up more effectively, in terms of their identity, contact development situation good startup is an easy thing, it makes them throughout the process like a duck to water. As the grocery distribution company Instacart and COINS Coinbase.

Elad Gil was one of the Twitter and Google executives, in response to Instacart target of $220 million in financing in January, he from Google, Facebook and Twitter raised tens of millions of dollars into new and old staff, thus will Instacart company mentioned $2 billion valuation of the market, from a person familiar with the above stated, and Elad Gil did not comment.

a spokesman of Coinbase confirmed, in January, the financing of the SPV does have to participate in, and said its $75 million in the total investment, the share of less than 3%, almost but Instacart didn’t respond to requests for comment.

as all stable, and the deal done quickly, but also further narrowed the executive club access to emerging enterprises. A venture capitalist before deciding to invest in often will take a closer look at the startup of income, expenses, and financial projections. And SPV buyers usually need not so demanding, they only need to stand on a higher level, analysis under the company potential prospects slightly, but not contact the company details of the financial indicators. The above content from the two different investment mode of practitioners, and considered the two investment way of investors.

once part-time Brad Garlinghouse Yahoo and AOL executives said: “but it is also likely to bring some bad results.” For his part, he invested in some SPV but later transferred to others. He said: “when you put all the money I have in the above, you will be disappointed at the small financial returns.”

a growing number of startups are using such financing mode, and so some investors, the company cannot do this company has introduced from abroad the strategic value of the investors.

“entrepreneurs should focus on those who can bring them benefits of investors,” VC company SoftTech VC partner eff Clavier said. “When you put all experience come out just to make a SPV maintain operation, that is a problem.”

the SPV in companies such as Facebook and Twitter is very popular, because they are heading for large-scale financing stage, a former Google executive Chris Sacca moves will surely promote the development of this trend. He bought from other executives and early investors Twitter hundreds of millions of dollars in private equity, which in a few years have been well ahead of the company in 2013, the amount of sales of securities publicly. These represent the j. p. Morgan and vc firm Rizvi, icarda Traverse by Management buy stocks, now on Twitter’s share price will be $4.2 billion.

of investment Banks also offer their most affluent customers special hot trade channels, such as Goldman Sachs for Facebook in 2011 established a SPV, let the customer participate in the company’s market share, valued at $50 billion. After just one year, the most popular Facebook social networking, valuation of the market soared to $100 billion.

Rick Heitzmann is a venture capitalist, observers Pinterest company’s board, he used three days just raised $200 million from investors, used to buy Pinterest shares in their company.

although many of the early SPV all employees from the company and early investors to buy shares, but many startups, like Uber tech companies have been trying to avoid the so-called secondary stock trading, regulators are trying to suppress the middlemen buy and sell stocks in order to earn returns.

however, now startup for SPV with more open attitude. Some companies investors in the form of SPV, direct purchase company issued shares for the first time.

, according to people familiar with the Pinterest launch site from 2010 to now, has raised $1 billion, helped us a lot of SPV in. Besides FirstMark, another Pinterest supporters of Andreessen Horowitz has also recently in the management of their own special fund.

interview someone says, the company will sell funds to certain partners as well as the “family and friends,” management takes high low, but 15% of carry has not changed. Even so, and than normal main fund financing from the company. Andreessen Horowitz and called PinAH, according to a document management LP funds it has raised $37 million in the middle of march alone.

Andreessen Horowitz, a spokesman declined to comment on this round of financing

last year, is still at the stage of seed fund SV Angel, under the guidance of San Francisco financier Ron Conway, led Pinterest round of $200 million in financing, and valuation of $5 billion.

in recent months, other companies have also turned to the SPV to raise funds.

in September last year, data analysis provider Palantir valued at $15 billion, it has also turned to risk investment company raised Fund founded by SPV, and, according to people familiar with the raised Fund, headed by billionaire Peter Thiel is a venture capital firm in San Francisco. In march of this year, Lyft by SPV from investment fund GSV Capital for $10 million in financing, in addition, in the round in the amount of $530 million in financing, its valuation to $2.5 billion.

Source: WSJ

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