9/10/09

Current Anecdotal Trends in VC Funding - From the Trenches

It is amazing that, despite how everything changes, some things never seem to change. Below is an email missive from the trenches in New York from Sheldon Lutch of Fusion IR.

The fundamental sentiment of the note is that after 8 quarters of being brutalized by the market, tech start-ups have become increasingly "pennywise and pound foolish". Not surprisingly, entrepreneurs continue to maintain unrealistic notions of the value of their creations. This has been such a consistent finding for the past couple of decades, that it may simply be in the DNA of entrepreneurs to think that way.


Anyway, we see many of the same trends as Sheldon, and I thought that it would be best to simply re-publish his email.

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"Throughout the summer at Fusion IR have seen many companies stop by/call-in ranging from companies needing "A" round capital to pre-IPO-generating revenues and meeting financial milestones.

1.Use of unregistered/unlicensed financial professionals in search of capital.
2.Requesting solely pay per performance services. Risk not shared-reward impractical or impossible to quantify and justify by expenditures of time or effort and market conditions.
3. Unprepared companies from presentation to presentation skills to business plan and throughout all marketing literature. Yet they believe they are and wonder why others don't see it their way.
4.Unrealistic view of financial markets this is not pre- 2008 or pre- 2003.
5. Use of other service professionals to fill gaps -but no real follow up and or guidance( nice meetings -no results).
6. Mapping out of IP not complete or at the highest level of international standards.
7. IP not as robust -learned during deep drill downs.Unaware of conflicting, competing, complimentary IP.
8. Companies unaware of how many vc's ,private equity etc.. have seen/heard of company/deal/raise out on the street-they have been "shopped".
9.An oxymoron- overexposed companies not using or understanding the value of press releases- tweaked for the financial community.
10.Not identifying a business development opportunity from a venture capital opportunity with a strategic player(s) in their industry. Over emphasizing one over the other or at the exclusion of the other.
11.Companies unaware or sensitive to the Wall Street "calendar' are you in the queue or not?
12. Unrealistic sense of timing of potential investment /grant by government or quasi government economic development arms.

It is a three legged stool- The Company- The Financial Community and Key Service Provider. Matching and meeting the needs of all - to accomplish the mutual goals of a success and mutually profitable business relationship.

We pride ourselves at Fusion IR at working hand n' hand with clients and all Wall Street professionals. No negative surprises. A fully coordinated approach to accessing the capital markets. Utilizing a top down approach to the investment community on behalf of clients. Meeting with heads of investment banking firms and the related specialty investment bankers at the most senior level of the Wall Street firms. For the companies a bottoms up approach making sure assumptions are replaced with facts. Working with companies to assist them in preparation so that their materials are as good as their technology/science. Driving the value proposition to engagement letters, term sheets, and maybe ad nausea if necessary.

To do it right takes time, money and dedication- this is a labor intensive effort. No short cuts,no tricks-roll up your sleeves and work as team to get the mandate accomplished.Time is money for all of us- investing properly in the right resource,working in an organized fashion to get the answers quickly and efficiently as possible. Build on the information acquired ,become as flexible and open to feedback that will allow the company to adjust to market conditions. Investor relations is not a sprint and need not be a marathon- it is about being Persistent and Consistent. It is about execution of a strategy,it is about tweaking and revising. It is presenting the company with strategic alternatives and access to growth capital and growth ideas, perhaps not considered.
If you aren't raising capital properly your competition is-those with the best technology aren't winners necessarily-those with the capital to complete the task ,execute according to plan and ramp up revenues are.

All the best,
Sheldon

Sheldon Lutch, Principal
Fusion IR & Communications, Inc.
62 West 45th-4th floor
New York,NY.10036
(T) 212.268.1816, (C) 917.570.1179
www.fusionir.com"

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