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Archive for November, 2018

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Silicon Valley Venture Capital Survey – Third Quarter 2018
Full Analysis
By Cynthia Clarfield Hess, Mark A. Leahy and Khang Tran

View the full report.

Background
We analyzed the terms of 215 venture financings closed in the third quarter of 2018 by companies headquartered in Silicon Valley.

Key Findings
Up Rounds Continue to Dominate, Valuation Metrics Plateau
Valuation results were generally flat in Q3 2018 compared to the prior quarter. Overall, valuation metrics remain strong and are above historical averages, but have plateaued since Q3 2017.

Series B Financings Continue to Show Strongest Valuations
Series B financings recorded the strongest valuation results in Q3 2018, although the average price increase declined from 117% in Q2 to 92% in Q3, while the median price increase was up moderately from 66% in Q2 to 68% in Q3.

Life Sciences Industry Scores Strongest Valuations
The life sciences industry recorded the strongest valuation results in Q3 2018 and the greatest gain from the prior quarter, with an average price increase of 110%, up from 63% in Q2, and a median price increase of 44%, up from 19% in Q2.

Full Report

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San Francisco, November/December 2018

The China Syndrome – The Black Swan Pushes Events to the Tipping Point-Maximizing Enterprise Value in the upcoming Crisis
This article has been updated to reflect the present “China Syndrome” and as it relates to the “Black Swan & Tipping Point”.   Parts of this article were published by Steven R. Gerbsman and Robert Tillman in May, 2007.   To understand the future, one must understand the past and that history is a guide.

Please read, enjoy and “BE PREPARED”.

Best regards,
Steven R. Gerbsman, Gerbsman Partners and Robert Tillman, member of Gerbsman Partners Board of Intellectual Capital

The events in China of the past months have illustrated how completely integrated are the world’s economies. We know that stresses are building in the world and we all see these stresses and imbalances. Based on history, we know that there will be violent and completely unpredictable resets. Nevertheless, we simply cannot predict the specific triggering events or the timing or the exact nature of such resets. As prudent business people, how do we prepare? Two books describe the process of change and our own experience suggests numerous preparatory measures that can be used to anticipate and to manage the unexpected. We have currently experienced one of the best economic times in our country’s history. The stock market, although recently volatile, is at all time highs, unemployment is stabilizing, interest rates are low (although projected higher), money is plentiful and deal valuations are high and getting higher. There are, of course, many worrisome trends: terrorism, excessive government spending, trade deficits, high oil prices, immigration and over the longer term, such issues as an aging population and global warming. Although problems and worries always exist, in historical terms, times are reasonably good.

The big questions for us as crisis management specialists in maximizing enterprise value are:

Will it end?

Yes. Of course. Even fundamentally healthy economies experience frequent and often violent corrections. The current world economy has evolved in many ways over the past decade. All large businesses are international. The primary economies of the world are very tightly linked together. Money is far more liquid and moves around the world with far less “friction” than it did in the past. The pace of technical change continues to increase. Nevertheless, we do not believe that the laws of history, and especially, the laws of human nature, have been repealed.

As always, “The more things change, the more that they remain the same.”

When will it end?

Unfortunately, no one knows the answer to this question. In historical terms, the current economic expansion has continued for a very long time and has survived numerous shocks, including war, a doubling of energy prices and now significant pressure on energy pricing, natural disasters, localized economic downturns, such as the bursting of the sub-prime mortgage bubble and the challenge of Iran, Russia and the Middle East. At this point in time, it appears to be “ripe” for a downturn. On the other hand, inherently unstable situations often persist for far longer than anyone could believe possible. During the 2000 Internet bubble, it seemed to us for quite some that the old rules of business no longer applied and that 25 year-old CEOs knew something us old guys did not know. When the crash occurred, we were relieved to find out that we were not so obsolete after all.

We did, however, underestimate the staying power of technically insolvent companies with broken or non-existent business models. Many of these companies had significant cash on the balance sheet (offset, of course, by significant liabilities) and investors who continued to infuse more cash far beyond the point of reason. Today, there exist immense pools of uncommitted cash, much of it in the hands of entities, such as private equity funds and hedge funds that are subject to minimal regulatory scrutiny and whose operations are obscured from the public view. In addition, the volatility of the dollar against both the Euro and the Pound Sterling makes U.S. assets potentially more expensive and foreign products cheaper. These factors tend to potentially mitigate against an economic downturn. For how much longer they will continue to do so we do not know (and if we did know, we would certainly would not tell).

How will it end?

Fast, hard and unexpectedly. Two recent books shed a great deal of light on the process:

The first book, The Tipping Point by Malcolm Gladwell describes how human behavior causes events to cascade rapidly once a certain critical mass (the “Tipping Point”) has been achieved. Examples in the business world include periodic economic ?panics? and the spread of certain technologies and products, such as personal computers, iPods, cell phones, etc. It is very difficult to predict in advance when the ?tipping point? in any situation will be reached, but history has shown that, once it has been reached, events proceed very quickly.

The second book, The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb describes how highly improbable, and hence unpredictable, events periodically create massive change. The title of the book derives from the observation that the existence of even a single black swan disproves the assertion that all swans are white. Historical examples include the Fall of France at the beginning of World War II, the rise of the Internet and 9/11.

There are many obvious candidates for a “black swan” event that pushes the world economy over “the tipping point” into a downturn – a war with Iran, a nuclear terrorist attack or a worldwide bird flu or small pox epidemic, but generally, it is what you do not see that gets you. We are fundamentally optimists about the long-term prospects of the world economy. In many highly measurable ways, the world really is improving, driven by technological innovation, a lowering of barriers to trade and increasing economic integration. Nevertheless, we are old enough to have lived through many “bumps” along the road and know that such discontinuities will always occur. We believe that we will see a significant economic event sometime over the next 12-18 months, either localized to a particular sector or geographic region or globally.

Our Advice?

Before such an event occurs:

As a board member, investor or stakeholder:

  1. Implement tight cash flow, receivables and inventory reporting so that you are alerted to problems early.
  2. Focus on the control, preservation and forecasting of CASH on a weekly, monthly and quarterly basis.
  3. Require “bottoms up” forecasting for all aspects of revenue and expense. Have the CEO and CFO defend ALL numbers.
  4. Hold the CEO responsible and accountable for Performance. If you are off the business plan/forecast, re-forecast based on the reality of “what is” today.
  5. Communicate frequently with all parties at interest. Check that the CEO is providing leadership, motivation and morale to the management team and employees.
  6. Review all companies in your portfolio. Identify and define action plans to fix weaknesses now.
  7. Utilize professional resources to assist in maximizing enterprise value, when appropriate.

When such an event occurs:

  1. Face up to reality and act quickly. When things are going bad, waiting seldom improves them. We have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.
  2. Call for assistance early. The earlier professionals can get involved in the process, the better the potential outcome in maximizing enterprise value. Many times boards request assistance only after a company has run out of cash. Many more options exist to maximize enterprise value if a company has some running room.

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 103 technology, medical device, life science, digital marketing/social commerce, cyber and data security, media and solar companies and their Intellectual Property and has restructured/terminated over $810 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 San Francisco, New York, Boston, Orange County, McLean, Washington DC, Europe and Israel.

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Check this out – An oldie but definitely a goodie.

http://yeli.us/Flash/Fire.html

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Terminating/Restructuring Prohibitive Real Estate, License, Payables & Contingent Liabilities

 

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various balance sheet issues for their technology, life science, medical device, cyber security, solar and cleantech portfolio companies.

These companies were not necessarily in crisis, but had cash (in some cases significant cash reserves) and/or investor groups that were about to provide additional funding. In order to stabilize their Go-Forward-Plan and maximize cash resources for future growth, there were specific needs to address Balance Sheet and Contingent Liability issues as soon as possible.

Some of these areas where Gerbsman Partners has assisted, these companies have been in the process of termination, restructuring and/or reduction of:

 

Prohibitive Executory Real Estate Leases, Computer and Hardware-related Leases and Senior/Sub-debt Obligations

 Gerbsman Partners was the “innovator” in creating strategies to terminate or restructure prohibitive real estate leases and senior and sub-debt obligations.

To date, we have terminated or restructured $810 million of such obligations for private and public companies, and which has allowed them to return to financial viability.

 

Accounts/Trade Payable Obligations

 Companies in a crisis, turnaround or restructuring situation typically have account and trade payable obligations that become prohibitive for the viability of the company on a go-forward-basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize value based on the reality or practicality of the situation.

 

Software and Technology-related Licenses

 As per the above, software and technology-related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant, successful track record in these areas.

 

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 103 companies in a wide and diverse spectrum of industries. In the process, GP has successfully restructured/terminated over $810 million of real estate executor contracts and equipment lease/sub-debt obligations, and has assisted 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, McLean VA, San Francisco, Orange County, Europe and Israel.

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Silicon Valley Venture Capital Survey – Third Quarter 2018
First Look
By Cynthia Clarfield Hess, Mark A. Leahy and Khang Tran

View the full report.

Background
We analyzed the terms of 215 venture financings closed in the third quarter of 2018 by companies headquartered in Silicon Valley.

Key Findings
Up Rounds Continue to Dominate, Valuation Metrics Plateau
Valuation results were generally flat in Q3 2018 compared to the prior quarter. Overall, valuation metrics remain strong and are above historical averages, but have plateaued since Q3 2017.

Series B Financings Continue to Show Strongest Valuations
Series B financings recorded the strongest valuation results in Q3 2018, although the average price increase declined from 117% in Q2 to 92% in Q3, while the median price increase was up moderately from 66% in Q2 to 68% in Q3.

Life Sciences Industry Scores Strongest Valuations
The life sciences industry recorded the strongest valuation results in Q3 2018 and the greatest gain from the prior quarter, with an average price increase of 110%, up from 63% in Q2, and a median price increase of 44%, up from 19% in Q2.

Full Report

Read Full Post »


As we begin Veterans Day/Week 2018, we say “Thank You” to the men and woman of our armed services and suggest that it is time for all to “step up” and find ways to support our Veterans. To often we say “thank you for your service” and then do nothing more. Please think about supporting various Veterans groups with donations, food, clothing and moral support. The have “Earned” it and we “Owe” it to them.

In the late summer of 1967, I was on my way back to Basic Training at Fort Dix, N.J. I was in New York City and an older couple came up to me and said “Thank You” for serving and then gave me $ 20 to enjoy a dinner on them. The gentleman said he served in the Korean War and understands and appreciates what men and woman in uniform go through. I said thank you, enjoyed a great dinner and to this day, remember their kind gesture.

On this Veterans Day/Week, our family will support the Wounded Warriors program and will provide moral support and friendship to Afghanistan Veterans. On Veterans Day, I will also continue to remember that couple and honor them by buying dinner for soldiers in uniform. I will ask them to do the same thing, 5, 10, 20 and 40 years later.

May God Bless our troops and provide our leaders with the courage and strength to do what is Right and what is Just in supporting them.  Many talk about sanctuary cities, places of worship and immigration, how about more focus and respect for those Veterans in need.

Please always remember – FREEDOM IS NOT FREE

What are YOU doing to HELP?

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The Funded: 16 VC-backed businesses raise nearly $650M in Bay Area deals

By  – TechFlash Editor, Silicon Valley Business Journal

Nearly $650 million in funding was disclosed by 16 Bay Area startups at midweek, along with a pair of M&A deals and new venture funds.

Here are the details:

Funding

• Coinbase Inc., San Francisco, $300 million: This digital currency wallet and platform is now Y Combinator’s fifth most valuable alumni after getting an $8 billion post-money valuation in this round led by Tiger Global Management. It was joined by Y Combinator’s Continuity fund, Wellington Management, Andreessen Horowitz and Polychain Capital. Read more here.

• Deliv Inc., Menlo Park, $40 million: Investors in the Series C round of this crowdsourced same-day delivery service include Google, Clayton Venture Partners, UPS, General Catalyst Partners, The Macerich Company, PivotNorth Capital, RPM Ventures and Upfront Ventures.

• Handshake, San Francisco, $40 million: EQT Ventures led the Series C funding of this career network for U.S. college students. It was joined by Chan Zuckerberg Initiative, Omidyar Network and Reach Capital.

• The Athletic Media Co., San Francisco, $40 million: Founders Fund and Bedrock Capital co-led the Series C funding of this digital sports media startup. They were joined by Comcast Ventures, Evolution Media Capital, Courtside Ventures, The Chernin Group, YC, Advancit, Luminari, Amasia and BDMI.

• Quid Inc., San Francisco, $37.5 million: REV Ventures led round for this provider of a platform for analyzing large volumes of text. It was joined by Julian Robertson, Henry Kravis, Lixil Group, Artis Ventures, Salesforce Ventures and Founders Fund.

• AppZen Inc., San Jose, $35 million: Lightspeed Venture Partners led the Series B funding of this AI-powered expense report auditing automation startup that was featured in The Pitch four years ago. It was joined by return backers Redpoint Ventures and Resolute Ventures. (Read more here.)

• Ethos Technologies Inc., San Francisco, $35 million:  Accel Partners led the Series B funding of this life insurance company. It was joined by investors including GV (formerly Google Ventures), Sequoia Capital and Arrive.

• Concord Worldwide Inc., San Francisco, $25 million: Tenaya Capital led the Series B round of this contract management platform provider. It was joined by Alven and CRV.

• Clear Labs Inc., Menlo Park, $21 million: Menlo Ventures led the Series B2 round of this food safety testing platform provider. It was joined by Wing VC, Dentsu Ventures, Felicis Ventures and Khosla Ventures.

• HeadSpin Inc., Mountain View, $20 million: Investors in the Series B round of this mobile app performance software startup include Iconiq Capital, Battery Ventures and EQT Ventures. The round was reportedly done at a valuation of $500 million.

• Sentieo Inc., San Francisco, $19 million: Centana Growth Partners led the Series A round of this financial research platform.

• Waterline Data Inc., Mountain View, $14.5 million: Menlo Ventures led the Series C round of this provider of data cataloging solutions and applications. It was joined by investors including Jackson Square Ventures, Partech Ventures and Infosys.

• Intabio Inc., Newark, $9.5 million: Northpond Ventures led the Series A round of this analytical platform provider for the development of biotherapeutic drugs. It was joined by investors including Genoa Ventures and Vertical Venture Partners.

• ZypMedia, San Francisco, $5.6 million: Archer Venture Capital led the Series C round of this creator of a programmatic advertising platform built specifically for media companies. It was joined by investors including U.S. Venture Partners and Sinclair Broadcast Group.

• Visla Labs, San Francisco, $3 million: Lux Capital led the seed round for this radiology diagnostics platform provider.

• Aura Health Inc., San Francisco, $2.7 million: Cowboy Ventures and Reach Capital co-led the seed round of this emotional well-being app provider. 

M&A

• San Francisco-based Atlassian Corp. plc (NASDAQ:TEAM) agreed to sell Jitsi, an open-source chat and videoconferencing tool it bought in 2015, to San Jose-based 8×8 Inc. (NYSE: EGHT).

Carbon Health, a San Francisco-based platform for ongoing care management and virtual appointments, has merged with Direct Urgent Care, a network of Northern California urgent care centers. Carbon Health raised $6.5 million from investors who include Builders VC. (Read more here.)

Funders in the news

• Palo Alto-based True Ventures raised $350 million for its sixth early stage fund and $285 million for its Select Fund.

• Larry Cook joined Omidyar Network as head of fund operations. He previously was Intel Capital’s finance director.

•  Lynne Chou-O’Keefe, who has invested in healthcare for five years at Kleiner Perkins, has raised $50 million for a new firm she is forming called Define Ventures.

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