3 Reasons Why A Lack of Funding Could Become Your Startups' Secret Weapon

Every startup begins with a vision. But to make that vision a reality, entrepreneurs and aspiring leaders need more than a dream — they need money. This typically leads to a chase after what many consider the holy grail: funding. However, with venture capital (VC) funding hitting a decade-low in 2023, funding has become more scarce and especially hard to secure for those companies in their early stages.

Many young companies don't realize that funding is not the only path to success. In fact, a lack of funding can be a company's secret weapon. READ MORE

7 questions founders should ask when choosing their first investor board member

I’m a VC and a common question I get from early stage founders is how to set up a board. Should it include all of the founders?  How large should it be at each round?  And in particular: Who should be the first investor to join?  Choosing the right first investor board member is crucial for the long-term success of your startup.

In the frothy zero-interest-rate days of 2020/2021, startup capital flowed freely.  Many early-stage companies raised seed through series A rounds, often opting for party rounds with no meaningful lead investor, while sometimes altogether avoiding adding an investor board member. This approach may have some merits, though as markets shift and things get rocky, here’s my advice for founders: It’s more important than ever to have someone on your cap table (and your board) who is deeply committed to your company over the long term. READ MORE

Hardware as a service will be the next big venture capital trend

The technological landscape is constantly evolving, and with it, the business models that drive innovation. While Software as a Service (SaaS) has already transformed industries, a new paradigm is emerging: Hardware as a Service (HaaS). This model has been widely adopted by major public companies such as Amazon and Microsoft and the market has given a resounding stamp of approval.

The next big wave of opportunity in the venture landscape is HaaS with a public market primed to welcome venture-backed HaaS companies with open arms into the public markets for years to come. READ MORE

VCs are so eager for AI startups, they’re buying into each others’ SPVs at high prices

VCs are increasingly buying shares of late-stage startups on the secondary market as they try to get pieces of the hottest ones — especially AI companies. But they are also increasingly doing so through financial instruments called special purpose vehicles (SVPs). Some of those SPVs are becoming such hot commodities that they are commanding premium prices.

While that’s good for the VC selling an SPV, it’s a riskier choice for the buyers. And all of this is another sign that AI startups are brewing a bubble. READ MORE

U.S. startups should be wary of knowledge theft disguised as investment

Foreign governments are increasingly using venture capital investment to spy on U.S. companies and pilfer their intellectual property, or IP. That’s according to the National Counterintelligence and Security Center, an agency of the federal government. Private investment from overseas is vital to sustaining U.S. startups and innovation, but it’s also a method used by other countries — primarily China, but also Russia, for example — to harm the U.S. economy and compromise national security.

Michael Casey, director of the National Counterintelligence and Security Center, discussed the problem with “Marketplace Morning Report” host Sabri Ben-Achour. The following is an edited transcript of their conversation. READ MORE

Are Continuation Funds Losing Their Allure?

After a surge of growth in recent years, a segment of the private equity secondaries market — called GP-led continuation funds — has been slowing down as investors become increasingly concerned about conflicts of interest and other issues.

In 2023, GP-led secondaries hit $51 billion, down from $68 billion in 2022 and are now less than half of the total secondaries market, according to a new report by Churchill Asset Management. READ MORE

Minimum Viable Quality Is The Heralded Rising Star For AI Startups And Venture Capital Funding

In today’s column, I am continuing my ongoing and extensive analysis regarding what’s trending for the latest in AI startups, especially so for founders seeking venture capital (VC) funding, see my series at the link here. The focus of this discussion is the advent of minimum viable quality (MVQ) as a crucial keystone and essential AI go-to-market strategy that can determine the worthiness and success of any new AI startup. I’ve been talking about MVQ for quite a while and I’m excited to see that traction is taking hold on this all-important approach.

Allow me to emphasize the catchy phrase again, this time with added emphasis: Minimum Viable Quality (MVQ). READ MORE

Startups Are Booming--but So Are Bankruptcies

Moxion Power, a Bay Area battery startup, once had cash coffers of $110 million. But last week, when it filed for Chapter 7 bankruptcy, it had just $201,980 in the bank. The company collapsed this summer, putting nearly 350 people out of work.

Around the same time, A&A Express (a.k.a. AA Temperature Controlled), a small refrigerated trucking company, announced it was winding down operations in South Dakota, laying off 111 employees. And in June, electric vehicle manufacturer Fisker filed Chapter 11, laying off 15 percent of its workforce, pausing work on future projects, and warning there were doubts about its ability to remain in business. READ MORE

How AI Is Helping Venture Capital Investment Decisions

Venture capital drives startup growth. However, traditional methods of evaluating and selecting projects for venture capital investment are often prone to bias. According to startup failure research, roughly 75% of venture-backed startups fail (though some estimate the total number is higher). Therefore, venture investments are associated with a high risk of financial losses.

Unlike the public market, private companies are not required to disclose financial information. As a result, many investors often refer to the venture capital market as exclusive and opaque. READ MORE

Corporate Venture Capital: Is A CVC Unit What You Need?

Picture being the captain of an aircraft carrier—the pinnacle of a country’s power and influence. As the commander of one of the largest ships at sea, you’d be responsible for upholding national defense. Yet because of the sheer size of the vessel you command, you wouldn’t be able to navigate narrow channels. As such, you’d need speedboats to explore the unknown.

CEOs of large organizations aren’t that different from captains of aircraft carriers. At the helm of massive enterprises, they steer their companies through complex global markets and, likewise, face a similar challenge—corporate innovation requires agility. READ MORE

What’s the most popular private equity sub-strategy, according to advisors?

New research conducted among financial advisors using the Crystal Capital Partners platform found that clients are particularly interested in more mature companies undergoing transformation or expansion.

Although the overall share of clients that are investing in private equity strategies is low, around a quarter of advisors said that half of their clients are focused on growth equity along with 38% of clients who are very interested in doing so and 7% who are extremely interested. READ MORE

Silicon Valley venture capital money pours into presidential campaigns

Money from Silicon Valley's venture capital community has been flowing into both sides of the presidential race.

As Vice President Kamala Harris rallies support, venture capitalists and executives like Victoria Watkins have been rallying for her.

"She wants this country to continue to thrive and move forward, and that's exactly what VC is," Watkins said. "It's finding new ways and innovative ways for the country and people and all the things that we use to move forward." READ MORE

DEI backlash: Stay up-to-date on the latest legal and corporate challenges

The Great Rollback is here. The phrase refers to Big Tech starting to slash some of the diversity, equity and inclusion (DEI) programs that were implemented shortly after the murder of George Floyd. Most recently, Zoom announced that it laid off its DEI team. Google and Meta have started to defund their DEI programs, and funding to Black founders continues to dip. Lawsuits have been filed targeting DEI programs, forcing companies to now hide their inclusion efforts while billionaires are arguing on X about whether DEI initiatives are discriminatory or not. READ MORE

How One Entrepreneur is Disrupting Venture Capital

In the competitive and often rigid realms of venture capital and private equity, traditional diligence processes can pose significant barriers to rapid investment decisions and efficient resource utilization. These processes, which are designed to scrutinize and evaluate potential investments thoroughly, often end up being protracted and cumbersome. This not only delays funding but also diverts entrepreneurs’ focus away from their primary business activities. A pioneering entrepreneur, Nicole Loftus recognized these challenges and sought to address them through innovative solutions. 

Her creation, “The Locker,” a fully automated diligence software, stands as a testament to the potential for technology to streamline and transform established industry practices. Her approach and the success of her venture offer actionable insights and valuable lessons for other entrepreneurs aiming to effect change within their industries. READ MORE

Private Equity’s Fundraising Skid Continues

Higher interest rates and uncertainty about the future of markets has made private equity and venture capital fundraising the pits so far this year. If the trends continue, 2024 will be one of the worst for those asset managers in several years.

Through the first half of 2024, PE and VC firms globally raised $365.75 billion in new capital, according to data from S&P Global Market Intelligence and Preqin. At that pace, the total amount raised will be about $731 billion, roughly 20 percent less compared to the $919.27 billion raised in 2023. READ MORE

Family offices are giving top staff equity and profit shares in battle for talent

Family offices are increasingly offering lucrative shares of equity and deal profits to staff amid a growing battle for talent, according to a top family office attorney.  

As family offices surge in size and number, and compete more directly with private equity firms and venture funds for top staff, they’re sweetening their compensation plans. Along with salaries and bonuses, many are now offering equity stakes and various forms of profit-sharing to give employees more upside and incentives. READ MORE