An excerpt: ”
IV: Fund Vision and Goals: Cash on Cash Return vs. IRR
I set the fund’s vision to become the best performing fund. I was told numerous times by institutions and others that the best fund managers have a stellar first time fund. I was not going to escalate my commitment to this without understanding the bar. With my experience in SURGE and after numerous meetings with institutional investors (discussed below), I believed that Cash on Cash Return was the best metric to measure and to plan for in our fund. (There is a longer discussion about how to “game the system” when investing (i.e. investing into a late stage deal for the quick hit) but we never got this far. Andreessen Horowitz’s first time fund which was marketed for early stage put money into Skype ($50M loan) and Fusion-io ($45M Series C) and was able to show a greater than 2X return. Again, Cash on Cash speaks louder than any other metric.
I pulled data from a local institutional investor to look at actuals. For example, this report from 2011 shows UTIMCO’s private equity investments…SCF Partners (Houston’s icon and the best oilfield services investor) is the best performing fund manager when it comes to returning cash back to UTIMCO. And investors love to get paid. While Union Square is the best performing fund manager in regards to IRR (an academic metric), they have only returned 38% of the cash taken from UTIMCO while SCF Partners has returns almost 2X the cash.”
]]>Find the abstract below, and the full article online here for free: http://www.tandfonline.com/doi/full/10.1080/13691066.2016.1229772
Abstract
“University spin-offs have increasingly received attention from academia, governments and policy-makers. However, there are only a limited number of studies within the university spin-off context which fully understand the contribution made by the founding team to fundraising, specifically how they use their social networks and capabilities. Employing resource-based theory and social networks approach, this paper examines whether a founding team exploits its social networks and capabilities to signal the value of a university spin-off. Capabilities are analysed through a set of constructs – technology, strategy, human capital, organizational viability and commercial resource – that have been derived from previous literature. The contribution made by social networks is evaluated using three dimensions – structure, governance and content – which form the construct of relationships within a network. Based on data from 181 university spin-offs in Spain, this paper empirically demonstrates that by exploiting social networks a founding team can improve its capabilities which, in turn, enhance its fundraising ability.”
]]>The transformation of the business angel market: empirical evidence and research implications
See the link here for the full article: http://www.tandfonline.com/doi/full/10.1080/13691066.2016.1229470
The abstract is below.
Abstract
“Business angel investing – a key source of finance for entrepreneurial businesses – is rapidly evolving from a fragmented and largely anonymous activity dominated by individuals investing on their own to one that is increasingly characterised by groups of investors investing together through managed angel groups. The implications of this change have been largely ignored by scholars. The paper examines the investment activity and operation of angel groups in Scotland to highlight the implications of this change for the nature of angel investing. It goes on to argue that this transformation challenges both the ongoing relevance of prior research on business angels and current methodological practices, and raises a set of new research questions”
]]>Abstract
Are women less likely to ask for help financing their businesses? This study investigates whether gender is a factor that impacts the propensity to ask for financing among nascent entrepreneurs. We also investigate if start-up helpers, who do not have an ownership share, have an impact on the likelihood of asking for financing, specifically between men and women. Our findings suggest that being female significantly decreases the probability of asking for financing and the presence of start-up helpers significantly increases the incidence of asking for financing in the nascent stage. In addition, among those who created new firms or were still in the start-up process, the number of start-up helpers exponentially increased the incidence of asking for financing among female founders. We use the Panel Study of Entrepreneurial Dynamics II data, the largest, nationally representative, and longitudinal database on nascent entrepreneurs for the United States.
]]>Authors are Gunter W. Festal and Sven H. DeCleyn
See the abstract below and the link here: http://www.tandfonline.com/doi/full/10.1080/13691066.2013.807059?scroll=top&needAccess=true
Abstract:
“Some important hurdles hamper the commercialisation of (scientific) knowledge, especially in Europe. Currently, the support provided by investors and technology transfer offices seems insufficient for new technology-based firms (NTBFs) and academic spin-offs to overcome these. Both from a financial perspective and from an operational perspective, opportunities are emerging for investment models to support their development. This paper introduces the founding angels’ (FAs) concept as an emerging subtype of the angel investment model and provides empirical evidence based on 16 case studies in Germany and Switzerland to elucidate the potential of this investment model. FAs join the start-up teams of NTBFs, complementing the scientific members coming mainly from universities and research institutions with business expertise and scientific understanding. They make significantly fewer investments than in the case of business angels (BAs), but because of their very early engagement, they hold more shares and are much more engaged operationally. FAs have more the role of a founder and an entrepreneur and less that of an investor because of their early engagement in the venture. They complement BAs and venture capitalists and normally support the start-up’s efforts to raise funding.”
There are some potentially interesting business models for Founding Angel efforts or organizations. But how does a new spinout or startup in the high-tech arena go about finding and engaging a Founding Angel (FA)?
]]>Some excerpts are below:
The Modern Lehman is the most commonly used today:
Double Lehman:
The Original Lehman (also called the Lehman Scale) was as follows: