Automotive Ventures’ Post

Fractured cap tables almost always backfire in later funding rounds... 👇🏼 Now why is this? 👇🏼 🟪 Having to align a bigger group of SMALL investors is more difficult 🟪 Smaller ticket investors are different and often less professional and more emotional. 🟪 Smaller ticket investors also often have a romantic dream about operational involvement. 🟪 Another dynamic to this, is the transformational and decisive moments of a company, when choices have to be made that decide it’s future. I’ve seen such investors over and over again, going for the “safe” bet. 🟪 Have to buy them out at some point or consolidate them in a Stack. 🟪 New investors don’t like their half of the money going to buying out investors 🟪 Buying out investors is money that is NOT going to the business at that point 🟪 This causes a lot of stress and friction among all stakeholders. A reality is that most companies wait to long to organize a next funding round - or are confronted with being less up to not investable as they planned to be. It’s not something you can’t come back from, but it does make it very hard to land a new funding round. And when things would work out, it comes at a steep price. Having put the organization and all stakeholders through that, plus the new capital that needs to be allocated to do so again - can’t go to the business. So remember 💡: you can either avoid or fix it. And as a (professional) investor, you can skip it 🏃🏼♀️💥 🏃🏼♂️➡️, What are your experiences there & what do you think?

Before joining SDC Startup School , conversations around venture capital (VC) funding would have felt complex and hard to grasp. But thanks to @Cynthia E. Chisom, I’ve gained a clearer understanding of what VC is all about—debunking the myths, explaining the technical terms, and shedding light on how VC funds actually work. I wanted to share 3 Myths about Venture Capital that Cynthia clarified for me: VCs take a big risk when they invest in your startup: Not quite! VCs aren't investing their own money; they're investing other people's money, which changes the risk dynamics. Most VCs offer great advice and mentoring: Not necessarily. Some VCs are more like financial analysts and may not have in-depth knowledge or hands-on experience with startups. VC is the primary source of startup funding: Actually, it’s not! While VCs get a lot of attention, data shows they contribute to only about 1% of the funding startups receive. Other options like grants, friends and family, and bootstrapping are often more common. VC is just one of many concepts Cynthia helped clarify, and it’s been an amazing journey learning how to build, grow, and scale a startup. Through real-life case studies and Cynthia’s teachings, I’m gaining a deeper understanding of the startup ecosystem. What VC myths have you heard? I’d love to hear your thoughts in the comments! #SDCStartupSchool #VentureCapital #StartupMyths #Entrepreneurship #FounderJourney #LearningAndGrowing

I have had the privledge of working with several different private equity firms as a CEO, during the past decade. Centre Partners private equity are absolutely best in class, combining incredible financial engineering prowess with the best in class industry expertise and operating partners in their respective markets. This combination and balance creates amazing performance and equity creation in the mid and micro cap marketplace. #private equity #finanical #best in class

New Insights from Blackrock! 🚨 More than 70% of adult children will leave their parents’ advisor. Blackrock's latest article on winning HNWIs highlights the challenges posed by the Great Wealth Transfer. The key to attracting the new generation of HNWIs lies in personalization and offering a wide range of services. Advisors addressing emerging areas like tax planning and estate planning are winning the business. At Veritas, we believe that advisors who adapt to these evolving needs will see tremendous growth in their books over the next decade. Veritas is here to help you identify these opportunities swiftly. #fintech #advisors #financialadvisors #startup #wealthmanagement

#alternativecapital is changing: we invented the ability to invested directly in *people and teams*, at a project finance level where you’re funding already successful sales teams and where you get paid first, alongside sales commissions. 30-60%+ YoY IRR, debt-like risk profiles, and paid first, with successful companies growing > 50% YoY. What’s more, this helps founders and investors greatly. They are excited to avoid debt and avoid equity dilution in exchange for paying royalties on accelerated revenue Silver Birch Growth goes and gets, 100% turnkey / fully delivered revenue and new label deals on top of existing growth plans. Infinity LTV/CAC for the company since it’s 100% incremental and the cash we deliver is fully baked: execution + capital baked in. #Founders and #CEOs, why are you considering expensive equity rounds with sub $10MM - $20MM in revenue when there’s another way? SBG can use your addressable market and your product to create capital and scale. No investment process or adjudication—we care about sales velocity, product market fit, and founder quality. First SBG Finance royalty notes kick off this summer. Invite only. #highnetworth #alternativeinvesting #privatecapital

Private credit is having its moment and it’s about time. Over the past few years, we’ve seen the venture capital market get shaken up. Couple that with the recent laser focus on AI, and it’s clear that access to capital is shifting. One of the things I enjoy most about working in the credit sector is that variables like your company's industry, where you're based, and your background / track record matter less in the approval and diligence process. What matters most are the quantitative fundamentals driving your business - revenue, growth rate, NOI/EBITDA, and so forth... "Build a predictable business" + "get rewarded with capital" become a lot more synonymous when you're raising credit vs. equity. We love working with companies in New York and Nebraska alike 🏙🌻 We love working with founders who hold Ivy League degrees and have risen through the ranks of Wall Street, Big Corporate Law, etc. but we also love working with the scrappy "found a way" non-credentialed founders just as much. 👨🎓🦸♂️ Building the next frontier of AI/LLM's? 👩💻 "Awesome, let's talk" Building a consumer products / retail business? 📦 "Awesome, let's talk" Building a plumbing business? A tile business? 🚽 "Awesome, let's talk" Not at all intending for this post to be a dig at VC (half of the founders we help have/will raise some equity - it too, can be wonderful) but it's a great feeling to offer capital in a way that's meaningfully less constrained :) #businessfinancing #venturecapital #venturedebt #privatecredit #growthdebt #workingcapital #debtcapitaladvisory

An interesting area of reflection by Joan Solotar of Blackstone The “unintended underweight” to privately owned companies and assets What do you think it should came from? - a lack of #financialeducation (on both #investors and #financialadvisors) - a lack of #innovation in your traditional #assetallocation - a lack of appropriateness in your financial objectives and real liquidity needs The “opportunity cost” of these (unintended) lacks can be huge in the long run - reflect with your #banker on this new #assetclass #wealthmanagement #privateequity #privatecredit #realestate #privatemarkets

“Which business do you think will be better in five years?” I fell off my chair when I first heard this question which is from an open ended discussion between the likes of Buffett, Munger, Combs, Weschler. I came across this excerpt a couple of years ago and observed that there are no numbers here, no talk of higher revenues, higher profits or cash flows. It’s a succinct expression for which business would have a wider moat after five years and encapsulates Berkshire Hathaway’s thinking. As Charlie Munger said, “Invert, Always Invert.” As an investor, one is used to ask companies (atleast the late stage ones), what’s your competitive advantage or moat but haven’t paused meaningfully to ask what’s your (An investor’s) moat. In private investments, most firms would have either deep history or expertise in specific areas and wouldn’t venture beyond the identified areas given the size of checks involved or the thesis on which they raised the capital from LPs. However, in public markets, I don’t think you can or should have such hard boundaries on where you can or should go. Given the nature of auction driven public markets, the areas of opportunity can arise anywhere in the world and in any sector. What’s needed is the agility to move or learn quickly unless you are a big fund where you can have members of team looking at a particular sector/geography. In this case, you have virtually replicated the PE style diligence. To go back to the question of what’s an investor’s moat, as Charlie Munger said, “ The more you learn, the more you earn.” #investing #investing101 #publicmarkets #saas #fintech #technology #technologyinvesting #software

In this Financial Times article by Sujeet Indap, discover how Mosaic is redefining private equity with a platform that makes deal modeling fast, insightful, and defect-free. Learn how industry leaders like Warburg Pincus LLC, CVC, New Mountain Capital and more are leveraging Mosaic to save time and reduce errors in commoditized financial modeling tasks - freeing up their deal teams for more strategic work: Read more: https://on.ft.com/4dXEvth

A good example of why founders should lean conservative in early funding round valuations. While we're now in a somewhat unique environment (bubble followed by it's similar opposite) founders who are early and with clean cap tables should prioritise access to capital for growth rather than being aggressive in their valuation discussions with investors. Get money in the door and grow, you'll eventually get to the valuation you want more efficiently. You'll have more resources, both money and people (yes, investors can be very useful partners) and be more likely to hit your goals. On the flip side, if you attain a high valuation early, it 1) Usually takes longer to fundraise because your price is high 2) Makes it harder to raise the next round if you don't grow at a rapid pace and 3) Gives you more risk of having a down round, which is often fatal or at the very least can be extremely dilutive to the existing investors (which includes the founders). So somewhat paradoxically, you can end up with more equity later as a founder if you take a lower valuation now.