In a room full of entrepreneurs, BootstrapLabs founder Nicolai Wadström shared his thoughts on Silicon Valley unicorns, and the speculation of tech bubbles and overvalued startups. He reminded his audience to focus on value, and the fundamentals of the companies being touted as Unicorns.
Nicolai Wadstrom, Founder and CEO of BootstrapLabs will share with Swedish entrepreneurs, local angels and the Connect Angel Network and Minc community his journey with BootstrapLabs.
Attendees will also receive valuable insights and learn how companies like Prezi scale from a small office in Budapest to a 300+ people company in Silicon Valley.
A guaranteed dose of inspiration will be provided to all the attendees!
Nicolai Wadstrom, Founder & CEO of BootstrapLabs
Nicolai Wadstrom, a serial entrepreneur turned parallell entrepreneur as the founder of BootstrapLabs, a Global Venture Capital firm based in Silicon Valley. Nicolai advises all portfolio startups in their day to day operations, connecting founders with industry experts, advisors and investors to increase their likelihood of success, assisting with product design and development, positioning, go-to-market strategy and implementation, partnerships and fundraising.
Multiple time Startup CEO, CTO. Raised capital from Angels, Private Equity, Investment Banks and VC’s. Angel investor and adviser to Internet, Software, Mobile and Digital Media startups in Europe and Silicon Valley, including BootstrapLabs portfolio companies such as Prezi, Zerply, Audiodraft and Witsbits. Nicolai has been writing code since he was 10 years old, and still speaks Java fluently. He is very focused on product and technology development within the Big Data, Analytics, Internet, Mobile and Software/Cloud sectors. Nicolai is a frequent guest speaker, mentor and judge at Universities and Conferences in the US and Europe.
Today’s guest post is from Martin Roll.
I am often asked when entrepreneurs, start-ups and younger companies should start to build their brands. The implicit impression by those asking is that branding and brands are for later, not in the early stages. I could not disagree more. The earlier you start it, the better chances of scaling and globalizing your brands. People don’t buy products and services, they buy brands.
Building and sustaining brands are not a luxury for entrepreneurs and start-ups, it has become necessity in order to compete in a globalized world where brands play an important role in building strong market positions and driving value.
The emergence of global Asian brands and the bold aspirations by Asian leaders should serve as great inspiration for entrepreneurs and start-ups as illustrated in the following.
An increasing number of Asian brands are becoming successful well beyond Asia. But with two-thirds of the global population, growing economies, a rapidly growing middle class with an increasing disposable income, Asia still boasts only a handful of powerful global brands which is a cause for concern, and a great untapped opportunity. But given the size and volume of Asian business today, it is evident that Asia could build many more prominent brands and capture more financial value from better trade power, price premiums, customer loyalty and other important metrics.
Building and sustaining brands are not a luxury for Asian firms any longer, it is a necessity in order to compete in a globalized world where brands play an important role in driving value.
Therefore, in an updated and revised edition of the bestselling book Asian Brand Strategy, I have provided a comprehensive framework for understanding Asian branding strategies and Asian brands, based on new research and supported throughout by a wealth of new case studies from several Asian countries.
Asian Brand Strategy provides insights, knowledge, and perspectives on Asian brands and branding as a strategic tool, and provides a comprehensive framework for understanding Asian branding strategies and Asian brands, including success stories and challenges for future growth and strengths.
Asian Brand Strategy includes theoretical frameworks and models and up-to-date case studies on Asian brands, and I believe it is a must-read for Asian and Western business leaders as well as anyone interested in the most exciting region of the world.
Several indications show rapid progression in the right direction for a selection of Asian companies where branding as a strategic tool has become more recognized and accepted in their boardrooms. This is also driven by the increasing attention on branding and its value-driving capability among stakeholders, media and opinion makers across Asia.
Asian companies can have great intentions and aspirations to move up the value-chain through branding to capture the financial and competitive benefits, but to achieve these objectives successfully, Asian companies must follow a comprehensive brand strategy framework supported by a systematic process throughout the organization.
Successful implementation of these processes will help Asian boardrooms to better compete in the global marketplace, and in achieving sustainable revenue and cash flow streams for the future.
In my book, I use the Asian Brand Leadership model to illustrate the paradigm shift that Asian brands need to undertake in order to unleash their potential:
First, mindsets and practices need to change in Asian boardrooms. Asian Brand Strategy invites a complete shift in the way that Asian boardrooms think of branding:
Second, this new perspective must be grounded in in-depth understanding of consumer behavior patterns. Asia is not a homogeneous entity. More importantly, Asian countries are more and more traversed by cultural flows permeating the region: cinema, music and fashion trends that at present extend beyond national borders to capture the imagination of millions. Branding and brands do not operate in a vacuum; they are closely linked to developments in society, to people and cultures.
Third, managers wanting to succeed in Asia need to abandon the oriental Asia of the past. Asian consumers are all vying for an Asian type of modernity that has nothing to do with colonial imagery.
Fourth, to create iconic brands, Asian managers will have to become trendsetters. The perspective developed in Asian Brand Strategy is that, in order to be successful, Asian brands need to capture the spirit of the region, and lead the way by creating that spirit.
Finally, this shift can be achieved only if everybody in the company is convinced of the power of branding. This, in turn, can only happen through accountability and systematic monitoring of branding investments and performance. Organizations that utilize data-driven decision-making are more productive and profitable than their competitors.
Martin Roll | @MartinRoll
Martin Roll delivers the combined value of an experienced global business strategist, senior advisor and facilitator to Fortune 500 companies, Asian firms, family-owned businesses and start-ups on how to build and manage strong, global brands as well as leadership of high-performing, marketing-oriented businesses. He is very experienced in engaging and advising clients at all management levels from business owners and C-suite leaders to functional staff across multiple industries and cultures. Author of Asian Brand Strategy.
Victoria Silchenko recently posted an article on LinkedIn, Confession of Venture Capitalists: How to milk a Unicorn where she interviewed some high profile VCs and Private Capital experts on the recent “private IPO” trend. Great topic, catchy title and excited that BootstrapLabs will be joining the discussion live at her upcoming Global Alternative Funding Forum on November 6th in Los Angeles. Don’t miss it!
Having lived in Silicon-Valley for over 16 years as an entrepreneur, investment banker and tech investor, I have had the privilege to work with David Weild, count Will Bunker among my friends and co-investors, and have met with both Tim Draper and Andrew Romans. And I cannot help but wonder what the impact of these billion dollar companies going for Private IPOs will be on the liquidity cycle of Venture Capitalists.
I will skip some of the basic premise nicely outlined (or should I say revealed) by David Weild on his research paper, Why are IPOs in the ICU? and outline some of the basic benefits provided by standard IPOs:
Now, let’s take a look at the benefits provided by “Private” IPOs:
Unicorn are not overnight successes. As the saying goes in Silicon Valley, Overnight Success takes 10 years!
BootstrapLabs-SVB-investment
Unicorn Valuation Surge in the Private Market:
This is a one year old chart: Uber is now worth $10Bn more!
Are Later Stage Investors Valuation Insensitive Due to their Preference?
Andrew Romans had an interesting point in Victoria’s article in that the last money in gets liquidation preference (and sometimes anti-dilution protection in the event of a down round). That would basically make those investors valuation/price insensitive as they would get their money out first in case of trouble and that the valuation of these companies would likely not fall below their investment amounts to begin with. But in case of Qualified IPOs, these liquidation preference would go away and even if the opening price is higher than the last round of funding valuation, nothing would prevent the stock from tumbling down. See this good post on IPO down rounds.
Are Insiders Allowed to Lock-in Profits Quietly?
Another risky dynamic at play here is the liquidity provided to insiders as part of these later rounds. In a public setting, if an insider sells his shares he would need to disclose it to the public; but in those mega rounds of financing, only major investors are posted on the transaction structure, leaving out of the loop a lot of people inside and obviously outside of the company. Wouldn’t you think that knowing that the founder(s) of your company have locked in some of their gains would be important news?
Potential M&A Suitors Evaporating by the Minute
While M&A still represents between 90 and 95% of the return on capital for VCs, the list of potential acquirers for Unicorns is shrinking by the minute as their valuations are significantly higher then those of the very incumbents they seek to disrupt. As an example, Group Accor ($9Bn market cap.) can no longer buy AirBnB ($25Bn).
Ultimately the Losers are Public Institutional and Retail Investors
Maybe a good way to look at what is happening is by drawing a chart with valuation against time, with a typical Unicorn curve, pre- and post- IPO.
In that context, it is pretty clear that a lot of the growth and value that was once captured by public investors (including you and I as retail investors), is now being captured by the late stage growth and cross-over investors, while increasing the risk/return profile of Unicorns in the public market once their valuation has been “maxed out” in the private market.
VC firms are flushed with $75Bn of dry powder
so you can bet they will want to party on!
I remember ringing the bell at the NYSE in 2009 with my startup InsideVenture, for the launch of our new product, dubbed “HPPO” for Hybrid Public Private Offering. At the time, VC-backed IPOs and Wall Street in general had ground to a halt after Bear Stearns and Lehman went down. We talked about ways to fix the IPO market and “orderly transition” of the cap table with top VCs such as Ray Rothrock from Venrock and Scott Sandell from NEA.
Ringing the Bell in 2009 at the NYSE for our Product Launch:
HPPO – Hybrid Private Public Offering
With new regulations such as Reg A+, allowing private companies to crowdfund up to $50M and trade their shares on secondary markets, it looks like the future might be just that, a world where public investors are finding their way back into ventures, earlier in the growth curve!
As Bill Gross told us last Thursday, “Timing is everything”…we were just 7 years too early!
There are about 150,000 extra people in San Francisco this week. Once again it is time for DreamForce, Salesforce’s annual conference for customers, vendors, and developers. Billed as “the premier event in the tech community” and San Francisco’s largest tech event, DreamForce attracts people from around the world.
On Monday, we hosted a Silicon Valley Insider program for a large group of French business people who were here for DreamForce. Representing companies such as Accor Hotels, Pernod Ricard, SNCF, and AXA, these senior managers and executives wanted to get behind the scenes introduction to Silicon Valley before heading off to the exhibits, workshops and after-hours parties.
BootstrapLabs’ co-founder, Ben Levy, started the morning with a presentation titled “Silicon Valley: Unicorn Factory”. Ben covered topics such as disruption and innovation, explaining why what happens here in Silicon Valley is not yet replicable anywhere else in the world, and why creative entrepreneurs are still motivated and obligated to come join this vibrant and exciting ecosystem. At BootstrapLabs we have been talking about many of the important trends we are seeing – IOT, FinTech, and the Future of Work – and Ben shared some interesting facts and stats, stressing the importance of execution.
The event for our French visitors continued with some short presentations from startup companies working in location tracking technology (Navisens), on demand marketing software (Doz) and supply chain security solutions (Vantage Point Analytics). We concluded with a presentation on data science, and the need for more trained data-scientists to manage, understand and derive business metrics from all the “big data” that is being created daily. As they heading back into the crowds of DreamForce, the attendees of our program left with a better understanding of the technology, startups, and investors that come together to make Silicon Valley happen.
Today’s guest post is from Tommaso Di Bartolo.
Startup is an amazing crazy ride. Unlike corporate business, every moment in startup makes you remember you live because of the thrilling paths and the amount of emotions you experience. The most compelling phase in a startup is the period of time before the product finds its product-market-fit. The time where you think you know what problem you are solving – but the market is not reacting the way you thought and the value you offer still hasn’t been proven out. This occurs usually in the third phase – out of four – of a startup life cycle. It’s the phase where the vision is being squeezed, where getting funded is hard if there isn’t enough traction, where releasing a sexy product is challenging if the right people aren’t on board, and the time where adding the “right core team members” is tough. But what does “the right” people mean in this case? What are the key attributes, skills or even qualifications the handful of key people you’ll call core team members will have?
Once upon a time, there were 3 friends that met at Stanford: a computer science engineer, a design guy and a business grad. During lunch time on a spring afternoon they, all together, came up with an idea, the prototype of which they released short after. They easily got traction and therefore funding from TOP Tier investors on Sand Hill Road. With the money they hired a stunning team, invested in developing a great working product which scaled globally and were acquired only 36 months later for a $1B …
… and then we all woke up … good morning!!!
The startup ride is a very turbulent one and “luckily” not for everybody – otherwise we would have even more competition ;-). Often we read about “overnight” successes – but it only was overnight for those who were not part of the journey… as stories like the one above don’t exist! Nor are most of the startups representing an “A-Team” that have already done it before. More often, early stage startup teams are a bunch of inexperienced hustlers, hackers and hipsters driven by the sentence to “change the world”, and more than 50% of them split up within the first 12 months… that’s where the shit hits the fan. Now, only teams who’ll write the most painful stories actually really make an impact. But what is it they do differently?
While upcoming entrepreneurs have guidelines on how to build a lean startup or how to build a demand engine for products – there’s a lack of blueprints for how / what to consider to put the right people together, and therefore we underestimate the importance of how much business relies on relationships and their communication. And that behind every “tongue”… there is a mindset that is responsible for letting us do things the way we do… or simply don’t do. Mindset is often the make or break deal, especially in the early days. In other words, the people’s strength of mindset is what at the end makes a startup succeed or die. It’s what makes startup teams keep fighting and finding ways, or give up.
After 15 years of entrepreneurial experiences on three continents and four startups, I’ve learned the hard way that core team members’ soft skills were more important than their educational background. While I’m not saying that education doesn’t matter, make sure specific characteristics within core team players exist, especially during the initial delicate phase where things are not settled.
The biggest “bug” in an early stage startup is a “mismatched mindset” – Tommaso db
There’s a difference between the way you recruit a CFO for when you are scaling business and between “handpicking” a Senior Backend Engineer for an early stage startup. For the CFO you mainly consider qualifications, experiences and assure yourself with reference checks. For the Senior Backend Engineer the story is quite different. In an early stage startup it might be the case that you do have an MVP – but still not enough traction to prove assumptions and enchant with business success. Or – like in many early stage startups – you don’t have deep pockets and sweat equity is the compensation model to go to.
Even though on one hand your funds might be low and the pressure to move ahead with product development is high, you better make sure the person you decide to add as a core team member qualifies mindset-wise – before you match educational skills. This helps you avoid investing time and creating expectations with a candidate that sooner or later might leave if their mindset simply doesn’t fit. Don’t let circumstances hurry you on everything you are doing or pressure your decisions.
Don’t delude yourself because of an educational background or due to lack of options – but seek for genes that are crazy enough to go through the real side of your daily business.
…continue reading “5 skills founders better verify before deciding to add a core team member” on Tommaso’s blog WhatItTakes
Tommaso Di Bartolo | @todiba
Expert in Residence, BootstrapLabs and CEO at swaaag.
Tommaso is a serial-entrepreneur with 2 exits, an advisor & an angel investor. He lives with his family in Silicon Valley.
The venture world is changing profoundly and over the next few months we will see a huge increase in “big” seed stage (Pre Series A) deals.
As Ben Levy, co-founder of BootstrapLabs, mentioned in his recent blog post “Seed is the New Series A”, we will over time see more and more seed stage investors creating syndicates and inviting fellow angels to co-invest in their deals.
The number of angel deals, crowdfunding platforms and micro VCs is growing dramatically.
Number of active Micro-VCs
*the majority of these funds of this size are closed without any traditional institutional LP backing. Source: CBInsights; graphic BootstrapLabs.
Learning the ins and outs, strategies, and best practices needed to be a successful angel investor is not easy, but here are a few steps you can follow in order to get started in this exciting new world of “private is the new public”.
Angel investing is often considered by many people to be like a poker game, but with the new market structure and the emerging models of crowdfunding, I believe that Angel investing is becoming more of a team game than a solo gambling endeavor.
One of the most important steps for an Angel Investor is gaining access to quality investment opportunities and spreading their risk by diversifying investments (into a minimum of 10/15 deals if you are active and closer to 30 if you are passive). To invest in 10 good deals you should meet and evaluate at least 100 startups, and this is not easy thing if you are doing angel investments on the side!
You should probably not make 10 investments at once or in a short time span by the way…each deal you invest in will teach you something, and you definitely want your later deals to benefit from your early ones.
This is also why joining a syndicate on a crowdfunding platform or investing alongside or in a Venture Capital fund is recommended. Participating in deals with experienced and expert investors will reduce your risk and save you the time of doing due diligence.
In any case, if you have not already done so, the first thing you need to do to become an angel investor is to verify your Accredited Investor status for a variety of reasons, not the least of which is to make sure the startups do not get into hot water with the SEC for selling private securities to “naive” investors.
To be an Accredited Investor you need to be eligible with one of the following criterias:
For more information read the SEC documentation.
Angel investing is buying equity (or convertible securities that can be converted into equity) in a startup company at the earliest stage of a company’s lifecycle. These investments are high risk but also potentially the most profitable since investors benefit from lower valuation and their relatively small check still buys a decent amount of ownership. On that note, angel investors should not aim to “own” or “control” a business if they want to ensure the long term success of their investment. If you should feel you have to do this for the company to succeed, you might be better off investing in another company altogether.
Because good deals are mostly funded by people who do angel investing as a full time job, and includes a few friends in their trusted network, the financing round will be filled very quickly and will be closed before anyone else even knows about it.
Today, competition is very high in this space and the majority of good startups are participating in accelerator programs and/or having their deals syndicated on platforms like AngelList by expert seed stage angel investors and even Micro-VCs.
applications to YC by batch for the past 17 batches: pic.twitter.com/nBtC86wMZA
— Sam Altman (@sama) July 7, 2015
To pay for their initial expenses and to provide capital to build the first version of their product. Also for many startups, finding an Angel Investor is a good way to prove that their endeavor is or will be valuable. Validation by expert and successful Angel Investors is considered by other angels or seed stage VCs as almost a requirement these days to rise above the noise level.
From a startup’s perspective, it is very important to have respected and value-add Angel Investors on their cap table at the beginning of their journey, especially when the time to raise another round arises, and it will always be sooner than a founder would like to admit.
As described above, one of the most important steps to becoming a successful Angel Investor is having access to good deal flow. Angel Investing is a high risk investment and you have to invest in at least 10 deals (would recommend even more with small checks) over time in order to diversify your risk.
While the typical Angel Investment is between $5K to $25K; the return of a successful Angel investment can be up to 500x but you will also face the very real fact that 50% of the investments you make will have a low or even zero return, as many startups fail.
To reduce your risk and increase your chance of investing in the next unicorn at an early stage (500x return) as a new Angel Investor, the best thing to do is to participate in deals with other trusted investors or invest a bigger check into a VC to start building your network and knowledge in this space!
Learn more about BootstrapLabs Syndicate here
I will publish more articles regarding this topic soon, so if there is anything you would like to add or ask, please contact me @luigicongedo !
Also I would like to recommend this NY Times article to learn how the world of angel investing has changed in Silicon Valley in the last decade.
Nicolai Wadstrom, Founder and CEO of BootstrapLabs and Magnus Bergman, Venture Investment Partner at BootstrapLabs will share with Swedish entrepreneurs, local angels and the SUP46 community their journey and best tips on how to become the next unicorn!
Attendees will also receive valuable insights and learn how companies like Prezi scale from a small office in Budapest to a 300+ people company in Silicon Valley.
Guaranteed dose of inspiration will be provide to all the attendees!
Nicolai Wadstrom, Founder & CEO of BootstrapLabs
Nicolai Wadstrom, a serial entrepreneur turned parallell entrepreneur as the founder of BootstrapLabs, a Global Venture Capital firm based in Silicon Valley. Nicolai advises all portfolio startups in their day to day operations, connecting founders with industry experts, advisors and investors to increase their likelihood of success, assisting with product design and development, positioning, go-to-market strategy and implementation, partnerships and fundraising.
Multiple time Startup CEO, CTO. Raised capital from Angels, Private Equity, Investment Banks and VC’s. Angel investor and adviser to Internet, Software, Mobile and Digital Media startups in Europe and Silicon Valley, including BootstrapLabs portfolio companies such as Prezi, Zerply, Audiodraft and Witsbits. Nicolai has been writing code since he was 10 years old, and still speaks Java fluently. He is very focused on product and technology development within the Big Data, Analytics, Internet, Mobile and Software/Cloud sectors. Nicolai is a frequent guest speaker, mentor and judge at Universities and Conferences in the US and Europe.
Magnus Bergman, Venture Investment Partner at BootstrapLabs
Entrepreneur and investor building global mobile internet companies. Has founded and invested in several successful companies including Prezi and Truecaller.
Specialised in mobile internet with a general knowledge of the special business logic of the Internet and its implications to many business verticals (e.g. telecommunications, media, financial services, retail, automotive and more).
Strategic computer scientist, product developer and general manager with 20+ years of experience covering many areas of information and communication technologies. One of the pioneers in the Internet revolution, now specialised in the field of moble applications.
Magnus’ role as a Venture Investment Partner at BootstrapLabs is to identify and develop companies in Sweden and make them ready to move to San Francisco and BootstrapLabs with the aim to become Unicorns in the future. He is based in Stockholm at SUP46, but travels every month to SF.
As most you know I have been an early supporter of what Naval and his team is doing with AngelList, I think AngelList is disrupting the whole angel and early-stage Venture Capital landscape, and thus we are also an investor in AngelList.
Because I get a lot of questions about how AngelList works in general and about how our syndicate works, I thought I should share a quick Q&A here on our blog, please ping me with any additional questions, and I will add them to this blog post.
Because only if you back our syndicate you will have access to our deal flow, get notify about new deals and have access to future co-invest opportunity with us in the deal.
This varies with every syndicate, for BootstrapLabs syndicates (our Seed Syndicate and our A+ Syndicate) the minimum investment is $2,500. Usually Angels back the syndicate with amount from $10K to $25K. Please note the amount you choose when you back a syndicate represent the maximum you will be able to invest and you will have the ability to opt-in or opt-out on every deal that is syndicated (and you can always pick a lower amount for a particular deal).
For example if you back a syndicate with $10k you can also invest $2.5K on the next deal but you have a limit of $10K for all deals syndicates on that syndicate.
In a world where access is king and real “value-add” to startup founders creates true differentiation, some Series A (and even Seed) VC firms are in for a rude awakening.
Seed is the New Series A captures much of what is going on in the startup and VC world these days. The cost of building technology startups has plummeted by a factor of 5 – 10x in the last decade, resulting in founders often needing far less capital and time to achieve similar results.
A startup typically remains in its seed stage until it has tested and validated a scalable product market fit. Then they shoot for a Series A round of funding from a top VC firm that could ideally take them all the way to an IPO or an exit.
In many respects, the level of maturity and risk associated with these Series A companies would be equivalent to the Series B and C rounds from a decade ago. Yet, VCs are still calling them Series A rounds since it is usually the first investment they would make in a startup.
The chart below is an attempt at visualizing the shift that took place in the equity value creation acceleration curve in relation to the various financing rounds of a successful, but not out of this world (e.g. Uber, Slack, etc.) startup.
The reduction in Series A risk profile certainly explains some of the increased Series A round size and associated valuation. You would think that the much talked about Series A crunch would have kept the valuations in check, but truth be told, not every company can clear the Series A bar, and when they do, every investor wants in.
If Series A VCs were previously rewarded for taking risk, having the ability to “pick” potential winners early, and help the founders craft and shape their companies, that know-how appears to have now migrated toward the seed stage investors.
Naval Ravikant recently addressed VCs, saying: “you can lie to your LPs but don’t lie to yourself, you are doing series B and C rounds these days.”
Another brilliant quote came from Sumon Sadhu (wrongly attributed to Dave Morin in the article) who said during the NVCA annual meeting that: “today, when VCs get involved in a startup, 900 of the 1000 first critical decision have been made.”
So how much value are VCs really providing entrepreneurs these days?
Fred Wilson recently wrote on his blog about What VC can learn from Private Equity, “there is a lot of talk about value add from VCs, but often that is just for show during the process of winning the deal. The number of VCs who actually add a lot of value to their investments is much smaller than you would think.”
In another interesting twist, Silicon Valley startups can and must go global faster than ever before if they want to avoid being copied by professional cloning factories such as Rocket Internet. Which brings up another troubling fact: the vast majority of VC firms, including some of the most well known in Silicon Valley, have little to no experience helping their startups scale globally.
Some critics have even gone as far as accusing traditional VCs of becoming money managers and that the only benefit one would find in raising money from a VC is the size of the check they can cut.
In today’s world, a good entrepreneur has the ability to pick his investors. If the ones providing the most help are their seed investors, then it is likely that these same seed investors will be invited to participate or even lead their Series A round.
Our latest blog post on The Rise of Angel(List) definitely shows how Syndicates and SPVs can be leveraged by angels and earlier stage funds in order to participate and even lead in later stage rounds.
BootstrapLabs follows these trends closely and after years of providing high-touch hands-on value-add work with the founders of each of our portfolio companies, we are on the verge of launching a very tangible, scalable, and disruptive way to deliver value to all our founders. Stay tuned for more …
Two weeks ago, we wrote about how AngelList is disrupting the angel investment landscape with its syndication model, and last week we announced our own AngelList syndicate in partnership with Gil Penchina, the #1 AngelList Syndicate lead. Today we would like to tell you about Trusted Insight, a company that is applying the same disruptive syndication model, but to the entire alternative asset industry, not just startup investing and venture capital.
Our recent posts created a lot of engagement and sharing on social media (thank you for that) and were recently reinforced by a series of conversations and posts that emerged from interviews of Naval Ravikant and Gil Penchina at the NVCA Annual Meeting in San Francisco and the Collision Conference in Vegas.
Alternative assets usually include illiquid and private investment opportunities such as Venture Capital, Private Equity, Real Estate, Hedge Funds, Infrastructure, and Illiquid Credits. Institutional investors, including family offices, professional fund managers, endowments, pension funds, and other wealth managers, invest in these “assets” as part of their allocation strategy, either directly or via specialized funds.
Globally, the alternative assets industry represents $6 Trillion each year, dwarfing the $30Bn US Venture Capital Industry.
Last year, AngelList, the leading startup investment platform, enabled over $100M in private financing, and while not all of these were syndication deals, it is fair to assume that the vast majority were. On average, a syndicate financing on AngelList is ranging from $150K to $500K per deal, with individual angel investor checks ranging from $1K to $100K.
In contrast, a typical investment opportunity at the institutional investor level ranges between $25M to $1Bn per deal (e.g. fund, real estate project, buy-out), with each investment check in the millions, if not tens of millions of dollars.
In other words, the market opportunity is 100 to 1000x bigger than angel and venture investing.
Traditionally, players in this space have been entrenched in the private placement business model (i.e. broker-dealers regulated by FINRA / SAIC) as it provides them with the following benefits:
Fee percentages tend to range from 7%+ for smaller private placements to 1-2% for larger transactions. In the example above, we assumed a 2% fee, given the $100M financing amount.
In contrast, the syndication model provides a profit share return on work performed only if the opportunity that was syndicated in the first place is an overall success, meaning that cash or liquid securities are being delivered to the investors as a result of their ownership of the asset.
An average timeline to exit or return on investment might be 7 years, with some being shorter (rarely) and some being much longer (especially real estate or infrastructure deals). As the platform facilitating these syndicated financing deals, your are now sharing the investment risk but are also looking at a much higher return potential.
Additionally, that increased risk is being mitigated in a few ways:
Trusted Insight is a New York-based big data alternative asset management platform disrupting the way institutional investors discover, connect, analyze, and ultimately syndicate deals with one another across different verticals and geographies.
Since its inception, the company has experienced continuous growth and engagement from its user base including many of the world’s largest asset management institutions and family offices, representing over $18 trillion in assets under management globally.
At BootstrapLabs we have known Alex Bangash, the founder of Trusted Insight, for many years and have been tracking the progress of the company since its inception. We have great respect for the work Alex and his team have accomplished thus far and we look forward to contributing our technology and fintech expertise to help the company reach the top.
We believe the winner in the space will need to bring 3 core components to the table:
Overall, the alternative asset industry is ripe for disruption and represents a massive opportunity for those who dare to try.
Alex and his team at Trusted Insight are leaders in this space and we are truly excited to be working closely with them, in true BootstrapLabs’ fashion, to shape the future of the global alternative asset investment space.
Learn more at www.thetrustedinsight.com
(Disclosure: BootstrapLabs is an investors in both AngelList and Trusted Insight.)
BootstrapLabs is partnering with Gil Penchina, the #1 Syndicate Lead on AngelList with over $6.5M in backing (more info below), and launches its syndicates.
Last week we published the blog post “The rise of Angel(List)” because we felt it was important for the world to wake up to AngelList and its disruptive potential when it comes to angel investing.
At BootstrapLabs we have been early adopters, advocates and investors in AngelList and we have watched the platform evolve and grow. Launched in the fall of 2013, it took some time for the Syndicate business model to take off but it is now here to stay.
By launching our syndicates on AngelList, BootstrapLabs will be able to provide its investors and portfolio companies additional value, which has always been our goal.
Initial Seed Investment – BootstrapLabs Seed Fund
All our Seed Investments are made out of BootstrapLabs Seed Fund, where we curate, cherry pick and lead investments into some of the world’s most promising and innovative technology companies. All our portfolio companies go through our 12 months hands-on Lab model.
Follow-on Seed Investment – BootstrapLabs’ Syndicate ($25K lead; $2.5K min. backing)
As our seed portfolio companies start to grow and seek additional capital (before a Series A), we will systematically syndicate a tranche of their new financing to our backers on AngelList using our BootstrapLabs’ Syndicate.
Series A (and up) Investment – BootstrapLabs A+ Syndicate ($25K lead; $2.5K min. backing), in partnership with Gil Penchina
BootstrapLabs will syndicate a tranche of all the Series A (and up) rounds it will participate in (including pro-rata rights from its seed portfolio investments).
It is interesting to note that until now, very few deals promoted on AngelList have been Series A and up. Angels and accredited investors have historically only been able to access Seed and Pre-IPO stage deals (mostly via secondaries with the right connections), the growth phases – Series A, B, C, D, etc. rounds – have usually been the exclusive playground of VCs and their Limited Partners. Arguably, Angels were left with the two riskiest parts of the equation, very early stage deals with high risks and high rewards, and supposedly lower risks and (most certainly) lower return – due to high pricing – pre-IPO opportunities.
Now, with BootstrapLabs A+ Syndicate, our backers have the ability to invest alongside us across all stages of venture investing.
To engage with the exciting opportunity of AngelList, explore our AngelList Syndicates below:
Our Seed Syndicate Our A+ Syndicate Our AngelList Profile
Gil has held several executive positions in the Bay area, including eBay, GE and as the CEO of Wikia (now a top 50 website). He has been investing in over 70 companies as an angel investor over the past 17 years and is today one of the most well-known and respected startup investors in Silicon Valley and globally. Some of his well-known investments include companies like LinkedIn, PayPal, AngelList, Evite, Couchsurfing, Wealthfront, Indiegogo and many more. He is currently the #1 Syndicate Lead on AngelList with over $6.5M in backing.
Note: Some information on AngelList may not be available to you if you are not deemed an accredited investor.
Disclosure: BootstrapLabs invested in AngelList, see our profile here.
The cost of building technology companies over the past decade has decreased by a factor of ten. Software has been eating the world, yielding incredible productivity gains that empower entrepreneurs to execute two to five times faster. Globalization, standardization and connectivity have all been driving unprecedented scalability, allowing a small group of people to reach millions, across the globe.
In a world where it takes less capital to do more, the winners are the entrepreneurs – as they can hold on to more of their companies (especially early on) – and angel investors – whose smaller checks when combined with many others, represent a significant enabler for early stage companies.
The Job Act of 2012 dramatically broadened the definition of who could invest in private companies as long as they invested within certain boundaries and through registered broker-dealers. Equity crowdfunding and the technology platforms that support them became a hot topic of conversation (and still is). In effect, the rank of potential angel investors had just been multiplied to accommodate a flood of new, mostly inexperienced aspiring angel investors. As players started to jockey for position, two camps formed on the platform side. The ones that were or sought to become registered broker-dealers in order to leverage the new regulation and capture upfront success fees, and the ones, like AngelList, that decided to forgo the short term focused success fee model and instead share the risks and rewards with fellow investors by capturing a small share of the profits (a.k.a. carry), if any.
AngelList was started by Babak Nivi and Naval Ravikant, first as Venture Hacks, a blogging website bringing the startup community together and aiming at increasing the transparency of the VC world. After crawling under the avalanche of requests from entrepreneurs to connect them with angel investors, Naval suggested to “simply list them online”. AngelList was born. (Image: AngelList co-founder, Naval Ravikant)
AngelList is designed to make capital raising less taxing and more flexible for entrepreneurs, and at the same time more efficient, transparent and scalable for angel investors. One of the unique and disruptive element of AngelList is its Syndication Business Model, launched in the fall of 2013. Instead of registering with FINRA / SIPC as a broker-dealer in order to charge commissions, AngelList sought and received a No Action Letter from the SEC to deploy its disruptive syndication model.
AngelList’s technology platform delivers value to all players involved; founders, backers and angels.
High profile angels usually build a group of “backers” – fellow angel investors – for their syndicate so that they can easily share investment opportunities with them and receive carry in exchange for providing them access, vetting and post investment value-add to increase success/outcome.
These top angels have formed Syndicates that are potentially capable of funding startups to the tunes of several million dollars, elevating themselves to the ranks of Super Angels or Micro-VCs. In this context, strength definitely comes in numbers and the trends are in favor of platforms like AngelList that are leveraging technology to deliver values to all players involved; startups, angels and backers.
Interestingly, in this very fast changing landscape, the venture industry and its economic model have seldom changed, with General Partners raising money for 10 years from institutional investors, charging 2%+ annual management fees and 20% carry after repaying the LPs’ principal. The funds usually get invested within 3-4 years and the General Partners then seek to raise another fund, hopefully on the early successes of the prior vintage funds.
In another post, we will cover the disruption happening among the VC firms, how some are leveraging platforms such as AngelList and what the benefits are for the angel investors/backers. Stay tuned and as always, stay foolish!
At BootstrapLabs we invest in the best entrepreneurs from all over the world with a focus on Software Powered Innovation or “Software will Eat the world” – as we see a huge opportunity for disruption and value creation when software and data meet in an innovative way that can change the world as we know it.
“Essentially every process will be virtualized by software and driven by data, even the wearable device and hardware 2.0 revolutions that are happening now are powered by commodity hardware, generic components (or “virtualized”) that innovators are using to quickly build and iterate on to develop game changing ways to apply technology”.
This can sometimes be very complex to explain, especially when you live and breathe the idea that software is the main innovation driver for almost everything on this planet, but somebody clever made this very visual video showing how our physical desks have been transformed from hardware to software over the past 30 years. The most amazing thing is that most of these changes only happened in the last 5-10 years:
Simple but telling and credit to Marc Andreessen, that coined the term of Software will eat the world.
Happy New Year!
Dear Bootstrappers,
It has been a terrific year for BootstrapLabs and no doubt 2015 will be even greater!
The quality of our deal-flow is incredible and we are privileged to be in a position to invest in, and work side-by-side with, some of the best entrepreneurs the world has to offer.
Prezi’s latest round of funding was just further validation (for the outside world) that our model to take the founders of a startup early on to Silicon Valley to build global while maintaining their development team back home could mean the difference between global success or local failure.
On that note, we thought we would share with you a short and fun holiday video about startups and founders:
Wishing you happy holidays and best wishes for 2015.
As always, stay hungry, stay foolish and keep your eyes on the ball!
from
The Team at BootstrapLabs