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Did Meetup Beat Facebook to Profitability?

Both Facebook and Meetup achieved important milestones recently. Facebook became cash flow positive while Meetup actually had real profits. Facebook’s news came via a blog post from Mark Zuckerberg, while Meetup’s information came from shareholder documents leaked to TechCrunch. While this post doesn’t get into the ethics of leaking, it does take a deep look at Meetup’s numbers. In a nutshell, Meetup is a great example of how a SaaS startup can scale revenues and profits from nothing to probably over $8 million in three years. While it may not be as exciting as what Twitter’s revenues could potentially be someday, Meetup is a great example of what a typical, successful startup can achieve.

So Private Equity Isn’t Evil After All . . . .

Private equity has been compared to ‘swarms of locusts” or “financial wolves” that fall on companies, devour all they can, and then move on. While such statements make good political theater it turns out that the reality of the situation is a bit different. As noted in the EY report “The most significant finding of our research is that, in aggregate, large businesses across Europe achieved impressive growth and performance improvement under PE ownership. Our findings show average per annum growth of 15% in profits, 5% in employment, and 9% in productivity from the time of acquisition to exit.” This post reviews the background behind the infamous locusts and financial wolves myths associated with private equity and explores the key findings of the EY report.

[ More ] September 15th, 2009 | 1 Comment | Posted in Management, Private Equity, Venture Capital |

How to Build an M&A Strategy

This post presents a basic primer on how to develop an M&A strategy for your company.  If your company is interested in leveraging mergers, acquisitions, or divestitures you should have a basic strategy that has been documented and reviewed/approved by key stakeholders such as the executive team, board of directors, key investors, and debt holders.  […]

[ More ] September 10th, 2009 | Comments Off on How to Build an M&A Strategy | Posted in Financial Literacy, M&A Series, Management, Private Equity, Venture Capital |

How Do Angel Investors Really Decide What to Invest In?

A recently completed analysis of angel deals closed in the first half of 2009 showed some surprising results – the quality of a venture’s management team was four times more influential in funding decisions than more traditional factors like the venture’s economic model, deal structure, and projected revenue growth. Check out a detailed presentation from Venture360 on their analysis of angel investments that were analyzed using their new online platform.

[ More ] August 26th, 2009 | 2 Comments | Posted in Management, Private Equity, Venture Capital |

Is Another Credit Bubble About to Burst? In Microfinancing of All Places

When the private equity industry has over $400 billion in uninvested funds, where do they put the money? Surprisingly enough there has been a significant private equity investment in microfinancing. It has reached the point where some experts feel a Bubble has formed that will soon explode and damage what has been one of the more important social experiments in poverty stricken economies.

[ More ] August 21st, 2009 | No Comments | Posted in Private Equity, Venture Capital |

Does Venture Capital Pose a Systemic Risk to the Financial System? Tim Geithner Thinks So . . .

Evidently the $200 billion venture capital industry is a source of systemic risk to the financial system. As part of the financial system regulatory redesign, venture capital firms will be required to register as investment advisers with the SEC. This will impose a significantly higher compliance burden on VCs as well as requiring VCs to comply with anti-money laundering regulations imposed on financial institutions post 9-11. I wonder how long it will be before an enterprising VC funds a SaaS/Business Process Outsourcing company that will provide regulatory compliance services for small to medium sized VC firms?

How to Calculate the Enterprise Value of Your Private Company

This post presents a simple process to calculate the enterprise value of your private company. It assumes that you have access to your firm’s financial statements. This post walks you through the steps of extracting relevant information from your financial statements as well as a process to estimate the value of your company’s equity by analyzing the valuation of some of your publicly traded competitors. The post also provides some guidance on how to find and leverage fairness opinions developed by investment bankers to support acquisitions or mergers amongst your competitors.

Everything You’ve Ever Wanted to Know About Mergers, Acquisitions, Divestitures, & Exits . . . but Were Afraid to Ask

Cisco, Google, IBM, Oracle & Microsoft are masters of the tech M&A game. They have the teams, financial resources, and connections to effectively leverage acquisitions to drive huge growth in their revenues and shareholder value. What about the rest of us? Many small to mid-sized tech companies, however, do not have a lot experience or expertise in mergers, acquisitions, divestitures, or exits. As a result, they tend to shy away from using classic corporate development techniques to grow the value of their business or to achieve a significant exit. Over the next six weeks DevelopmentCorporate is going to publish an eleven part series that is designed to provide a basic introduction to corporate development techniques. The topics include how to build an acquisition strategy, an exit strategy, how to analyze an acquisition candidate, and even how to pitch an acquisition to a board of directors, private equity firm, or VC.
This series begins with calculating the enterprise value of your firm. Decisions about mergers, acquisitions, divestitures, and exits are typically made in context of your firm’s enterprise value. If your company is public, calculating enterprise value is a piece of cake – most stock quoting sites do it for you. If your firm is privately held you need to do a bit more leg work, but you can develop a reasonable estimate in less than an hour. The balance of this post walks you through the steps in the calculation and where you can readily obtain information about comparable firms in your industry.

Tech Private Equity is Like 2003 Again . . . And That’s a Good Thing

The last great wave of technology M&A activity began in late 2003 and came to a crashing end in December 2008. In 2003 and 2004 there were lots of tech companies that had low valuations. Aggressive private equity firms entered the market and snapped up a lot of platform companies using primarily cash and limited debt. By 2006 and 2007 the market had shifted and debt became the primary acquisition currency and debt refi’s became the primary liquidity vehicle for private equity firms. As the credit markets melted down in 2008 so did tech M&A.

It’s been interesting to see in the past few months how aggressive private equity firms have stepped back into the tech market using primarily cash as their acquisition currency. This post takes a look at three recent private equity deals: Symphony Technology’s acquisition of MSC Software, Vista Equity Partners Acquisition of SumTotal, and Infor’s acquisition of SoftBrands. While these deals had a lot in common, there were unique and interesting aspects to all of them. The post ends with a challenge as to how the private equity firms can leverage newly found free cash flow in these deals to build innovative solutions to drive true organic revenue growth in these properties to support prosperous IPO or acquisition exits three to five years from now.

Perception & Persuasion

In technology companies the key to personal as well as corporate success is often dictated by how persuasive you can be to get others to adopt your point of view. If you’re pitching a new feature for your product, assessing the probability of closing a specific deal, or recommending a game-changing strategy, you need to be an expert on having your audience perceive your messages correctly. Jordan Julien, of The Jordan Rules just published a simple, but highly effective presentation on how to improve the perception of your message, communication, and at the end of the day persuasion. Check out the presentation in the full post.

[ More ] August 4th, 2009 | No Comments | Posted in Product Management, Social Media |

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