Posted by Anonymous on 2008-10-10
Tags: Preparation Late Stage
The declining economy and difficult IPO markets have made it increasingly hard for venture funds to price late stage equity. As a result, less and less late stage deals are getting done.
First, existing investors in late stage companies can not easily lead an internal round without a new investor pricing the round to satisfy the appearance of objectivity among their own investors, the limited partners.
Second, new investors have difficulty pricing later stage deals because evaluating the range exit opportunities is impossible right now. There have been no venture funded IPOs in the last quarter, and traditional public acquirers have seen a dramatic decrease in equity values and an inability to raise debt. Without public comparables or reference M&A deals, pricing equity is a guessing game.
On the other hand, early stage investments are largely based on pursuing market opportunities and owning certain percentages of preferred stock. A strong management team with a good market opportunity can raise capital without problem in today's market.
Your best shot as a late stage company is to conserve capital through cost savings and find a "friendly" to price your deal. Once a price is set, there is plenty of money for investment. The price is the hardest part to get. Any suggestions on some ways to land a "friendly""PRIVATE: Members Only