Growth capital by venture capitalists and private equity firms can enable small and mid-market companies to grow to the next level. Venture capital money is typically for startup and early stage companies that are not yet profitable. Private equity firms provide growth capital for later stage, profitable companies, and may even let the owners take significant money off the table, if desired.
CEO Advisor, Inc. focuses primarily on private equity firms for growth capital for its clients. Just this month, I secured a $5 million Term Sheet for a client at a very favorable valuation. Finding the right investment partner coupled with negotiating the terms of growth capital investments are critical. The expertise and experience of a funding advisor like CEO Advisor, Inc. is a must for growing companies.
In this article we will recap venture capital activity in 2015. Venture capital investments in startup and early stage companies tightened in 2015 compared to 2014, valuations in 2015 peaked on most investments, and valuations on new investments are tapering off according to the latest data available from Pitchbook Data, Inc.
Initial venture capital fundings in 2015 consisted of nearly 2,000 investments totaling $7 billion compared to 3,368 investments totaling $7.5 billion by venture capitalists in all of 2014.
Exits, or the sale or initial public offering (IPO) of venture-backed companies, were off dramatically in 2015 at $64 billion on 860 deals versus $93.8 billion on 994 deals in 2014 further demonstrating that the public markets for IPOs are in limbo. Many IPOs are being priced at lower than expected valuations. Less IPOs also mean less money available to invest in new deals.
The value of IPO deals through December, 2015 was just $36 billion versus $95 billion in 2014. Poor or stagnant performance in the major stock markets are holding back IPOs. Fundamentals in technology are weakening, such as revenue for software and services being down 2.4% in Q3, 2015 vs. the same quarter a year ago according to Moody's Analytics.
On the other hand, demand in VC funds by investors continues to be strong with investors pouring in $37 billion compared to $34 billion in 2014. This influx of venture capital funding is partly due to large later stage or follow-on investments for unicorn type of investments (rare startups valued at $1 billion or more) such as Uber and Snapchat.
With venture funding still at levels that are higher than 17 of the last 20 years, it will be extremely interesting to see how 2016 unfolds.
CEO Advisor, Inc. advises small and mid-market companies on the preparation for fund raising, fund raising, growth, strategy, value building and mergers and acquisitions.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today for a no cost, no obligation meeting at your office at (949) 629-2520 or email MHartsell@CEOAdvisor.com.