Tag Archives: Creating Value

Venture Capital V Private Equity – A Guide for the Entrepreneur.

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As a leading London business base  for entrepreneurs, we are often asked “what is the difference between venture capital and private equity?”  An interesting question that many may not readily appreciate if you haven’t been to Harvard Business School or LSE.  One of the clearest discussions on this topic was recently published in Forbes magazine with an excellent article by  Alejandro Cremades.  Here is what he says.

Startup Fundraising

Whether you are still juggling a startup idea or already have data and revenues and are ready to scale, it’s vital to understand who the investors are that will take you to the next level, and what your following milestone or exit is likely to be.

Fundraising and navigating potential exits can be incredibly time consuming and stressful. It can be confusing. The lines have certainly blurred. Far more so in the last couple of years. Different capital sources are playing a larger role in the startup ecosystem. Various players are stretching how and at what stage they will participate.

So, what are the differences between between VCs and PE firms? Who else is providing capital to this space? Who are the leaders that startup founders should be focusing on?

Private Equity

This space has become a little cloudier, with private equity firms diving into all types of new channels like single family rental homes and mortgage lending through conduits. Yet, in their most traditional forms, private equity firms are consider those who buy or get involve with more mature companies.

This means they are looking for established companies that already have established revenues. In some cases these are companies that may have even peaked and need new management to be optimized. Think classical music, farms and assembly lines in contrast with the typical jazz, disruption, or street art style of fast growth startups. They prefer predictability and lower risk. Even if that means lower returns.

This space is also differentiated by leveraged buyouts, in which PE firms utilize debt to complement their equity to acquire more corporate ‘real estate’. These firms are best known for taking majority stakes, if not full buyouts.

According to rankings from Private Equity International top private equity firms include:

Private equity is more likely to be your end game, or at least a large part of your exit as a startup founder, rather than an early investor. Though these firms may flow down debt that can be used for some ventures.

Venture Capital Firms

In contrast, venture capital firms are equity investors at an earlier stage in the lifecycle of a startup. Just not as early as most think.

For the most part VCs are funding startups at their latest stages in their businesses. This is changing some. More are participating in earlier funding rounds as they gain experience and competition grows for returns and opportunities. You may find them involved at Series A through D fundraising rounds. Or perhaps even at the seed stage.

VC firms will typically take much smaller portions of companies than their private equity counterparts. They are still investing at a much riskier stage and mostly try to spread their bets as wide as possible.

This demonstrates more crossover between traditional private equity and the VC world. Though before you go waltzing into one of these firms in your pajamas, know that they still expect a good amount of solid data and due diligence to make a decision on. They aren’t going to be your first investors on day one.

VCs are also typically looking for a shorter term exit. They have deadlines on their funds, and need to get results quickly. They are often going to push you hard to deliver on their promises to their own investors.

PE is more about numbers while VCs are more about people. However, with both PE and VCs everything starts with a solid pitch deck where the story of the company is told in 15 to 20 slides. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million .

Angel Investors

Angel investors are a much more likely funding partner for most startup founders. Angels are getting better funded, are grouping together, and are making more investments.

Angels are willing to participate in the earliest rounds of fundraising. They are typically basing their investment as you the entrepreneur and the idea, versus any data or profits. Expect to be raising from angels for a round or two before you even approach any VCs. PEs are probably four or five rounds of financing away at this point.

Other Startup Investors

Startup accelerators and incubators are another rising form of early funding. They may invest anywhere from $10,000 to over $100,000 and offer an array of intensive programs, resources and training opportunities. These include names like The Founder Institute, Angel Pad, Y Combinator and 500 Startups. They can get you going if it is a good fit and you can get in. Then help you show off your startup to other investors.

Family offices are increasingly investing in startups as well. They don’t want to miss out on the game that VCs and big private equity firms are enjoying. Though they often like the advantage of investing directly, rather than losing returns to middlemen.

Family offices can be quite different when it comes to what they want and their future expectations though. They may be more likely to offer patient capital or to seek cashflow than other types of investors.

Corporate investors are playing a bigger role in the startup ecosystem today too. They are setting up their own accelerators and are making more strategic investments in startups that can propel their growth and extend their reach.

Despite the confusion and ambiguity out there, there can be distinct differences between private equity and venture capital when it comes to raising money and exiting a startup. There are many more options for fundraising and exiting than there used to be too.

I hope that this clarifies some key points in the whole topic of business fundraising – problems you might face when building your London business empire at Hold Everything Virtual office.

Why Using a Virtual office in London Makes Good Business Sense.

One would imagine that in this virtual world you never had clients meetings face to face.  Vendors of software such as gotomeeting.com would certainly say that.   But for all our virtual advances there are still times when you have to welcome a client to your place of work. That real life meeting is a good opportunity to show you and your business to its best advantage.   But what if your office is a branch of Starbucks or your brother’s garage?  You will not look as smart or as cool as your website or brochure.

Luckily, you have a virtual office package with us on Regent Street and as part of that package you have use of our boardroom/meeting room whenever you need it.  You just book and turn up.  The receptionist and secretarial will treat you with the respect accorded to a serious business client and will make sure that you and your associates have all you need for your meeting.

If you are giving a presentation then you can turn up with just your laptop because we will provide the overhead projector and the whiteboard and, of course, a fast secure connection.   Your client will see you as a serious business executive and this will increase trust – the basis of any business relationship.

So, as you can see, Hold Everything is more than just a mailbox or a phone answering service it is a full service basis for everything you wish to achieve in your business life.

A message from richard Cooper – Treat me how I want to be treated, right?

Virtual Office - Customer Service Image

Treat your  customers how you would like to be treated.  That’s right isn’t it?  After all we all want to be treated well when we buy products and services from others.

I have always lived by this philosophy and found that I have been extremely successful in business as a result.   In my last blog I spoke about my Honeymoon in Thailand and the difference in the culture and approach that I experienced.

I began to think about their concept of customer service.  It was somehow different.  They treated my new wife and I exceptionally well but I wondered if they were treating us how THEY would like to be treated themselves.   From my observations, their culture and lifestyle wasn’t based on the same materialism that we take so seriously here.  So what was it that made their service different?

Then it dawned on me.  Some of the best companies I know all over the world DON’T treat their customers how they would like to be treated themselves.  They treat their clients how the CLIENT would like to be treated.   I felt special because I was treated in accordance with MY expectations not the perceptions of the person I was buying from.

I remember a long time ago – at least five years – at a conference hearing a speaker talk of this and to be honest, it went in one ear and out of the other.   After all I was providing great service and it was working.

What I now realise is that whilst my service was and is still one of the best in the virtual office industry, there are no limits to the way in which we can take our business to the next level by adopting the principle of treating the customer how THEY would like to be treated.

In your business, it’s likely that you will want to grow and build a company.  This will mean adding to your team of employees or, indeed, taking on your first member of staff.  How much simpler will it be to coach them to listen, empathise and treat the client how the client wants to be treated.

We are all different and the way that my team want to be treated as customers will often be very different to mine as will the expectations of our clients.  Therefore one of our company goals this year is to treat our clients just how THEY would like to be treated.

If you “get “this, then I know it’s something that you will see as amazing value to your business.  If you don’t it’s OK.  Sometimes these concepts take time.  Come back to this particular blog in around three months, it may be the right time for you then.   Remember I first heard this concept over five years ago.  That’s how long it’s taken me to understand the true value in this concept, and it was at a time when I least expected it.

As always if I can ever be of any help in relation to anything you read on my blogs then just contact me through this site.  I am happy to help you achieve your goals.

Have a great week.

Richard Cooper -Virtual Office Visionary

Follow me @holdeverything1

Happy New Year from Richard Cooper….

I hope you had an amazing festive season.

As we begin a new year I am pleased to announce (for anyone who doesn’t know) that I married in December.   A day I will remember for the rest of my life.

It’s fair to say that in the run up to the big day, there was a huge amount to plan and it was a very stressful time for both of us and even our families.   But the day went perfectly, and we enjoyed an amazing honeymoon in Thailand.  For anyone who hasn’t visited Thailand, I highly recommend it.

The thing about being on a break is that I usually have my best business ideas when I finally stop to relax.  This break was no different, but that isn’t what I want to share today.

What I found in Thailand was an extremely service orientated culture.   Nothing was too much trouble. There wasn’t one person I met who didn’t go out of their way to make sure my break was the very best it can be.    The people I met weren’t cash rich or money orientated which surprised me even more.  I spent a lot of time thinking about how they do this, because it looked so effortless.      I really wondered how they managed this balance, and genuinely meant their kindness.

I met  with one of my suppliers on my return and was explaining this to her.  I asked her if she had any ideas as to how such a calm outlook on life, and business could be achieved, even when it was clear that in some areas, they lead a life that some of us would look at and consider very simple, possibly even underprivileged.    She looked at me and said “Maybe they don’t sweat the small stuff – and you know, it’s ALL small stuff”.

Asking where on earth she got this phrase from, she shared that she had read a book entitled exactly that.  “Don’t sweat the small stuff – and it’s all small stuff”. By Richard Carlson. I have now started to read this book.

It’s based on simple ways to stop the little things taking over your life.  My supplier was right.  The people I was privileged to meet didn’t sweat the small stuff!  They didn’t “sweat” anything!  They seemed to have this understanding that life is more than profit, money, and stress. Ironically they had a profitable life as a result.  The culture, the relaxed atmosphere and the impeccable service was perfectly balanced.

My goal for 2013 is to learn from the Thai culture and build this into my business. I truly believe that business can profit and also be laid back.  If you had told me this before I went on honeymoon I would never have believed you.  Now I can see the vision.   How about you?

 

Read this book, enjoy and make your business better for it.

Happy New Year

 

From Richard Cooper – virtual office visionary

Follow me @holdeverything1

 

EXCLUSIVITY !

Christmas Lights on Oxford Street

As London begins its Christmas lights switch on this week – Monday saw the switch on of Oxford Street lights.  What was different this year was that it was a ticket only event.  The organisers have taken a public street, sealed it off and issued tickets.   Now before you all comment about profiteering, money making and the like, these tickets are free!

So why bother with all of the hassle?   Well, think about it.  They are creating an exclusive event.   Anyone can attend but only if they have a ticket.    It doesn’t have a monetary value, but yet it has created a desirable event and by the looks of the forums practically begging for tickets… its worked!

Similarly someone I know has recently had a break at Center Parcs.   They have taken the concept of creating value and exclusivity and applied it to their business fantastically.   The prices for their accommodation are not budget but one thing that is practically guaranteed is exclusivity.  I had a really good look at their website and through networking also know a client who has worked with them.

You can’t just walk onto a Center Parcs village and you can’t even visit for a day (unless you pay and you are visiting someone who is on holiday there).  They don’t hold public open days and even their fireworks display is strictly for their customers on site only.   They have themes such as “winter wonderland” and events to tie in with the time of year such as Halloween, Bonfire Night and so on.

That’s why they can charge what they do and why people return year after year because they have the exclusivity and have created a product of value.

So, think about your business.  Do you have a product launch or an event?   Are you networking like crazy to get people through the door to buy your service or product?

My advice this week is to create exclusivity in your business.  What do you do that you can make exclusive.   I have a client who has completely changed one of her business models that she will only take on recommended clients and if you aren’t recommended directly by another client, then she won’t take your business.   Sound crazy?   That business is the most profitable it has been in five years!  It’s also Financial Services, which is extremely competitive.

It may take some thinking.  Many business mentors and coaches can support you with this, but if you are looking to grow your business, maybe its time to think “exclusive”.

Until next week

Richard Cooper and the team at Hold Everything

Follow us @holdeverything1