Archive for May, 2012
Posted in Board Of Intellectual Capital, boic, Economy, Entrepreneurship, Fenwick & West, Investments, Market research, Strategy, tagged boic, Fenwick & West, Financing, Gerbsman Partners, Investments, The Fenwick & West Venture Capital Barometer™, VC, VC financing on May 28, 2012| Leave a Comment »
Article from Fenwick & West.
Background—We analyzed the terms of venture financings for 114 companies headquartered in Silicon Valley that reported raising money in the first quarter of 2012.
Overview of Fenwick & West Results
- Up rounds exceeded down rounds in 1Q12, 65% to 22%, with 13% of rounds flat. This showed continued solid valuations in the venture environment, although a small drop off from 3Q11 and 4Q11, when 70% of rounds were up rounds. This was the eleventh quarter in a row in which up rounds exceeded down rounds.
- The Fenwick & West Venture Capital Barometer™ showed an average price increase of 52% in 1Q12, a decline from the 85% reported in 4Q11, but still a solid showing.
- We note some weakness in late stage financing (Series E and higher) valuations, where 37% of the financings were down rounds and the Barometer reported only a 12% increase. Series B financings were also not as frothy as they have been, with a Barometer reading of 58%, the lowest since 4Q09, but still very solid.
The results by industry are set forth below. In general software and digital media/internet companies continued to see the strongest valuation increases, with hardware and life sciences lagging.
Overview of Other Industry Data
- Venture valuations were healthy, but investment was down.
- M&A valuations were up, but the number of deals was down.
- Venture fundraising was mixed, but corporate venture investing was up.
- IPOs were up, and the passage of the JOBS Act is a further encouraging signal for the public market, but continuing global financial uncertainty, especially in Europe, is a concern.
So what is the take-away? Venture fundraising continues to be problematic, and likely contributed to the decreased venture investment the last two quarters. However with IPOs improving, and interest rates still extremely low, there is reason to believe that venture fundraising will improve, if the global economic environment doesn’t further increase risk averseness. The M&A market slowed a bit in 1Q12, possibly to give participants a chance to evaluate the improvement in IPOs, and its possible effect on valuations, but corporate America has plenty to spend, evidenced by their increasing participation in venture investment. And the areas of entrepreneurial focus and innovation are broad, with mobile, cloud, security, big data and of course social media all attracting substantial attention.
Venture Capital Investment.
- Venture capital investment in the U.S. declined for the second quarter in a row, with the decline evident in most major industry segments, including internet/digital media.
- Dow Jones VentureSource (“VentureSource”) reported $6.2 billion of venture investment in 717 deals in 1Q12, a 16% decline in dollars from the $7.4 billion invested in 803 deals in 4Q11 (as reported in January 2012).
- The PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters (the “MoneyTree Report”) reported $5.8 billion of venture investment in 758 deals in 1Q12, a 12% decline from the $6.6 billion invested in 844 deals in 4Q11 (as reported in January 2012).
Merger and Acquisitions Activity.
- M&A activity for venture-backed companies had mixed results in 1Q12, with deal volume declining for the second quarter in a row, to the lowest quarterly amount since 2009, but with Dow Jones reporting a significant increase in deal proceeds.
- Dow Jones reported 94 acquisitions of venture-backed companies in 1Q12 for $18.1 billion, a 12% decline in transaction volume, but a 93% increase in dollars, from the 107 transactions for $9.4 billion in 4Q11 (as reported in January 2012).
- Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 86 transactions in 1Q12, a 7% decline from the 92 reported in 4Q11 (as reported in January 2012). Sixty-eight of the 86 deals were in the IT sector.
- Dealogic reported that Google, Facebook, Groupon and Zynga purchased a combined 34 companies in 1Q12 (not necessarily all venture-backed).
- IPO activity for venture-backed companies improved again in 1Q12, which was the best quarter for number of IPOs since 4Q07.
- VentureSource reported 20 venture-backed IPOs raising $1.4 billion in 1Q12, compared to 10 IPOs raising $2.4 billion in 4Q11 (as reported in January 2012). There were 50 companies in registration at the end of the quarter.
We note that the new law that permits confidential IPO filings may delay future information on the number of companies in registration, as a substantial number of companies appear to be taking advantage of this alternative.
Thomson/NVCA reported 19 IPOs for $1.5 billion in 1Q12, compared to 12 IPOs raising $2.6 billion in 4Q11. Eleven of the IPOs were in IT and five in healthcare, and 95% were U.S.-based companies.
Venture Capital Fundraising.
- Industry sources reported conflicting fundraising results for 1Q12, with Dow Jones reporting an increase in dollars raised and Thomson/NVCA reporting a decline. Taking an average of the two, venture capital fundraising and venture capital investing were approximately equal this quarter, but the number of funds raising money continues to be low.
- Dow Jones reported that 47 U.S. venture funds raised $7 billion in 1Q12, a 35% increase in dollars over the $5.2 billion that was raised in 4Q11 (as reported in January 2012).
Thomson/NVCA reported that 42 U.S. venture capital funds raised $4.9 billion in 1Q12, a 13% decrease in dollars over the $5.6 billion raised by 38 U.S. funds in 4Q12 (as reported in January 2012). The top 5 fundraisers accounted for 75% of the total amount raised, with Andreessen Horowitz raising $1.5 billion and leading the way.
- The secondary market for venture-backed company shares is in uncharted waters.
- The recently passed JOBS Act made filing for an IPO more appealing to companies, which could decrease the number of late stage private companies whose shares would be available for secondary trading. However, the Act also increased the maximum number of shareholders that private companies could have before registering with the SEC, which allows private companies to stay private longer, which could increase the pool of late stage private companies whose shares would be available for secondary trading.
- Additionally, Facebook, which accounted for a large percentage of the trading on secondary exchanges, and whose shares were also purchased by secondary funds, just went public, and secondary trading of their shares ended at the end of March 2012.
- And the venture-backed IPO market seems to be improving in general, providing more opportunity for late stage private companies to go public.
- Second Market reported that issuers were the buyer in 54% of second market transactions, but only accounted for 1.7% of transaction proceeds, suggesting that issuers are using Second Market to purchase small amounts of shares from numerous sellers, likely to limit their number of shareholders.
Corporate Venture Capital.
- With a challenging venture fundraising environment, we thought it would be useful to provide some information on corporate venture capital (“CVC”).
- In general, CVC declined precipitously in 2009 as a result of the stock market decline and global financial problems in 2008. Since then it has rebounded significantly with corporate venture investment increasing from $1.4 billion in 2009 to $2.0 billion in 2010 to $2.3 billion in 2011. Similarly, CVCs participated in 12.7% of all venture deals in 2009, 13.6% in 2010 and 14.9% in 2011. That said, these amounts significantly lag 2007, the best year for CVC in the past decade, when CVCs invested $2.6 billion and participated in 19% of deals (data from the MoneyTree Report).
- While companies like Intel and Cisco have long been significant players in CVC investing, it will be interesting to see how heavily the current wave of major Silicon Valley companies participate in CVC. One indiciation is that Google started Google Ventures two years ago with the goal of investing $100 million a year, and has invested in 20 start-ups through March 2012. (Data from San Jose Mercury)
- Another indication of CVC activity is that the number of CVCs who are members of the NVCA has grown from 50 to 62 members in the past year, and now comprises 7% of the total membership. (Data from Dow Jones VentureWire)
- CVC investment seems more focused in industries with large capital requirements like cleantech and biotech, which accounted for 23% and 16% of CVC investment respectively in 2010/2011, than are independent venture capitalists. (Data from the MoneyTree Report)
Venture Capital Sentiment.
The Silicon Valley Venture Capitalist Confidence Index® produced by Professor Mark Cannice at the University of San Francisco reported that the confidence level of Silicon Valley venture capitalists was 3.79 on a 5 point sale in 1Q12, a significant increase from the 3.27 reported in 4Q11, and the first increase in four quarters.
Nasdaq increased 16% in 1Q12, but has declined 10% in 2Q12 through May 21.
Read more here.
As Memorial Day 2012 approaches, please take a minute to remember, say “thank you” to our service men and woman and please, never forget, that Freedom is not FREE.
May God Bless and Protect those who serve and are in “harms way”.
Quotations for Memorial Day from http://quotegarden.com
On thy grave the rain shall fall from the eyes of a mighty nation! ~Thomas William Parsons
Although no sculptured marble should rise to their memory, nor engraved stone bear record of their deeds, yet will their remembrance be as lasting as the land they honored. ~Daniel Webster
With the tears a Land hath shed
Their graves should ever be green.
~Thomas Bailey Aldrich
Are they dead that yet speak louder than we can speak, and a more universal language? Are they dead that yet act? Are they dead that yet move upon society and inspire the people with nobler motives and more heroic patriotism? ~Henry Ward Beecher
Green sods are all their monuments; and yet it tells
A nobler history than pillared piles,
Or the eternal pyramids.
~James Gates Percival
Is’t death to fall for Freedom’s right?
He’s dead alone who lacks her light!
For love of country they accepted death… ~James A. Garfield
They fell, but o’er their glorious grave
Floats free the banner of the cause they died to save.
~Francis Marion Crawford
Death leaves a heartache no one can heal, love leaves a memory no one can steal. ~From a headstone in Ireland
Blow out, you bugles, over the rich Dead!
There’s none of these so lonely and poor of old,
But, dying, has made us rarer gifts than gold.
The brave die never, though they sleep in dust:
Their courage nerves a thousand living men.
~Minot J. Savage
The legacy of heroes is the memory of a great name and the inheritance of a great example. ~Benjamin Disraeli
And I’m proud to be an American,
where at least I know I’m free.
And I won’t forget the men who died,
who gave that right to me.
They are dead; but they live in each Patriot’s breast,
And their names are engraven on honor’s bright crest.
~Henry Wadsworth Longfellow
Peace to each manly soul that sleepeth;
Rest to each faithful eye that weepeth…
But the freedom that they fought for, and the country grand they wrought for,
Is their monument to-day, and for aye.
~Thomas Dunn English
And they who for their country die shall fill an honored grave, for glory lights the soldier’s tomb, and beauty weeps the brave. ~Joseph Drake
Perform, then, this one act of remembrance before this Day passes – Remember there is an army of defense and advance that never dies and never surrenders, but is increasingly recruited from the eternal sources of the American spirit and from the generations of American youth. ~W.J. Cameron
How sleep the brave, who sink to rest,
By all their country’s wishes blest!
When Spring, with dewy fingers cold,
Returns to deck their hallow’d mould,
She there shall dress a sweeter sod
Than Fancy’s feet have ever trod.
By fairy hands their knell is rung,
There Honour comes, a pilgrim gray,
To bless the turf that wraps their clay;
And Freedom shall awhile repair,
To dwell, a weeping hermit, there.
The patriot’s blood is the seed of Freedom’s tree. ~Thomas Campbell
Decoration Day is the most beautiful of our national holidays…. The grim cannon have turned into palm branches, and the shell and shrapnel into peach blossoms. ~Thomas Bailey Aldrich
Better than honor and glory, and History’s iron pen,
Was the thought of duty done and the love of his fellow-men.
~Richard Watson Gilder
We who are left how shall we look again
Happily on the sun or feel the rain
Without remembering how they who went
Ungrudgingly and spent
Their lives for us loved, too, the sun and rain?
~Wilfred Wilson Gibson
A hero is someone who has given his or her life to something bigger than oneself. ~Joseph Campbell
Who kept the faith and fought the fight;
The glory theirs, the duty ours.
I have never been able to think of the day as one of mourning; I have never quite been able to feel that half-masted flags were appropriate on Decoration Day. I have rather felt that the flag should be at the peak, because those whose dying we commemorate rejoiced in seeing it where their valor placed it. We honor them in a joyous, thankful, triumphant commemoration of what they did. ~Benjamin Harrison
Cover them over with beautiful flowers,
Deck them with garlands, those brothers of ours,
Lying so silent by night and by day
Sleeping the years of their manhood away.
Give them the meed they have won in the past;
Give them the honors their future forcast;
Give them the chaplets they won in the strife;
Give them the laurels they lost with their life.
Life hangs as nothing in the scale against dear Liberty! ~Lucy Larcom
All we have of freedom, all we use or know –
This our fathers bought for us long and long ago.
~Rudyard Kipling, The Old Issue, 1899
Our battle-fields, safe in the keeping
Of Nature’s kind, fostering care,
Are blooming, – our heroes are sleeping, –
And peace broods perennial there.
~John H. Jewett
These heroes are dead. They died for liberty – they died for us. They are at rest. They sleep in the land they made free, under the flag they rendered stainless, under the solemn pines, the sad hemlocks, the tearful willows, and the embracing vines. They sleep beneath the shadows of the clouds, careless alike of sunshine or of storm, each in the windowless Place of Rest. Earth may run red with other wars – they are at peace. In the midst of battle, in the roar of conflict, they found the serenity of death. I have one sentiment for soldiers living and dead: cheers for the living; tears for the dead. ~Robert G. Ingersoll
Their silent wounds have speech
More eloquent than men;
Their tones can deeper reach
Than human voice or pen.
Their own souls rose and cried
Alarum when they heard the sudden wail
Of stricken freedom and along the gale
Saw her eternal banner quivering wide.
~John LeGay Brereton
The dead soldier’s silence sings our national anthem. ~Aaron Kilbourn
Our cheer goes back to them, the valiant dead!
Laurels and roses on their graves to-day,
Lilies and laurels over them we lay,
And violets o’er each unforgotten head.
But fame is theirs – and future days
On pillar’d brass shall tell their praise;
Shall tell – when cold neglect is dead –
“These for their country fought and bled.”
Let no vandalism of avarice or neglect, no ravages of time, testify to the present or to the coming generations, that we have forgotten, as a people, the cost of a free and undivided Republic. ~John A. Logan
Your silent tents of green
We deck with fragrant flowers;
Yours has the suffering been,
The memory shall be ours.
~Henry Wadsworth Longfellow
The story of America’s quest for freedom is inscribed on her history in the blood of her patriots. ~Randy Vader
Spirit, that made those heroes dare
To die, and leave their children free,
Bid Time and Nature gently spare
The shaft we raise to them and thee.
~Ralph Waldo Emerson
Alas, how can we help but mourn
When hero bosoms yield their breath!
A century itself may bear
But once the flower of such a death.
~S. Weir Mitchell
They hover as a cloud of witnesses above this Nation. ~Henry Ward Beecher
These martyrs of patriotism gave their lives for an idea. ~Schuyler Colfax
They saw their injured country’s woe;
The flaming town, the wasted field;
Then rushed to meet the insulting foe;
They took the spear, – but left the shield.
For death is no more than a turning of us over from time to eternity. ~William Penn
Ah! never shall the land forget
How gushed the life-blood of her brave –
~William Cullen Bryant
“Dead upon the field of glory,”
Hero fit for song and story.
~John Randolph Thompason
Knights of the spirit; warriors in the cause
Of justice absolute ‘twixt man and man.
~Richard Watson Gilder
Fold him in his country’s stars.
Roll the drum and fire the volley!
What to him are all our wars,
What but death bemocking folly?
~George Henry Boker
The Flag still floats unblotted with defeat!
But ah the blood that keeps its ripples red,
The starry lives that keep its field alight.
The hero dead cannot expire:
The dead still play their part.
We come, not to mourn our dead soldiers, but to praise them. ~Francis A. Walker
How important it is for us to recognize and celebrate our heroes and she-roes! ~Maya Angelou
San Francisco, May, 2012
The Perfect Storm Revisited 2012
by Robert Tillman, Member of Gerbsman Partners Board of Intellectual Capital
The term Perfect Storm refers to a rare combination of circumstances that aggravate a situation drastically. I believe that a number of situations may well come to a head simultaneously by the beginning of 2013.
- The fall of the Euro. Given the recent elections in France, Germany and Greece, the dissolution of the Euro zone is looking far more likely. European voters are consistently rejecting austerity and turning left, but European governments are running out of money to pay what those voters demand. The result is a mess. Read more here.
- A war in the Middle East. The recent formation in Israeli of a strong coalition government under Netanyahu has cleared the way for an attack on Iran. The various Sunni governments, and even Hamas, have signaled their approval of such an attack. It must happen soon or it will be too late. With it will come a major spike in oil prices.
- A slow down in growth and a bursting of the economic bubble in China. This past month China showed a decline in imports. The downfall of Bo Xilai shows the rottenness in the Chinese system. Given the corruption in their system and the opaqueness of their accounting, the Chinese do not themselves understand the financial reality of their situation. See more here.
- The end of the Bush tax cuts beginning 2013, resulting in a large tax increase in the United States. The result will be substantial downward pressure on stock prices. Who would not consider selling stocks when Federal capital gains rates will increase from 15% to 25% and Federal dividend tax rates will increase from 15% to 39.6%. See more they will hurt greatly in the short term.
- The necessary decrease in both the Federal and State budgets. California is in particularly bad shape with a estimated $16 billion shortfall that is almost certainly understated. While such spending reductions are absolutely necessary in the long term, they will hurt greatly in the short term.
- After the November election, the largely liberal press will no longer have an incentive to tell us that the economy is getting better, when the opposite is true. If Obama is elected, they will need to start telling the truth so as to preserve the shreds of their credibility. If Romney is elected, they will have a great incentive to portray the economy as even worse than it is.
Each of these events will be hastened by the others and will also cause major unforeseen consequences. We are living in an incredibly interconnected and interdependent world. We are also living in a world in which governments have no reserves and in which they have already used up the tools that that have to influence events. There will be no TARP III or a larger European Bailout Fund. We are about to enter a very bad period and we are tapped out.
Hold on. It will be a rough ride.
About Gerbsman Partners
Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 70 Technology, Life Science and Medical Device companies and their Intellectual Property and has restructured/terminated over $805 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.
Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Orange County, Europe and Israel. For additional information please visit http://gerbsmanpartners.com or Gerbsman Partners blog.
This has been a challenging day of sorrow.
The niece of our Israeli family fell, while rock climbing and did not survive. She was 20 years old.
We mourn with them, we share our love and prayers with them and our family will say Kaddish this Friday at Temple.
May the memory of one so young, be in our hearts and minds forever.
with the respect and love of the Gerbsman family
Kaddish (קדיש, Qaddish Aramaic: “holy”; alternate spellings, qaddish, ḳaddish) is a prayer found in the Jewish prayer service. The central theme of the Kaddish is the magnification and sanctification of God‘s name. In the liturgy different versions of the Kaddish are used functionally as separators between sections of the service. The term “Kaddish” is often used to refer specifically to “The Mourners’ Kaddish”, said as part of the mourning rituals in Judaism in all prayer services as well as at funerals and memorials. When mention is made of “saying Kaddish”, this unambiguously denotes the rituals of mourning.
The opening words of this prayer are inspired by Ezekiel 38:23, a vision of God becoming great in the eyes of all the nations. The central line of the Kaddish in Jewish tradition is the congregation’s response: יְהֵא שְׁמֵהּ רַבָּא מְבָרַךְ לְעָלַם וּלְעָלְמֵי עָלְמַיָּא (Yehei shmëh rabba mevarakh lealam ulalmey almaya, “May His great name be blessed for ever, and to all eternity”), a public declaration of God’s greatness and eternality. This response is an Aramaic translation of the Hebrew “ברוך שם כבוד מלכותו לעולם ועד” (Blessed be His name, whose glorious kingdom is forever), which is to be found in the Jerusalem Targum (יְהֵא שְׁמֵיהּ רַבָּא מְבָרֵךְ לְעָלְמֵי עַלְמִין) (Genesis 49:2 and Deuteronomy 6:4), and is similar to the wording of Daniel 2:20.