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

View the “First Look” report.

Background
This report analyzes the terms of 200 venture financings closed in the first quarter of 2018 by companies headquartered in Silicon Valley.

Overview of Results
Valuation Results Remain Strong But Have Flattened
Valuation results were generally flat in Q1 2018 compared to the prior quarter. Overall, valuation metrics are well above historical averages, but have plateaued since Q3 2017.

Up rounds exceeded down rounds 75% to 15%, with 10% flat in Q1 2018, an increase from Q4 2017 when up rounds exceeded down rounds 70% to 19%, with 11% flat.

Internet/Digital Media Continues to Score Highest Valuation Results
Similar to the prior quarter, the internet/digital media industry recorded the strongest valuation results in Q1 2018 compared to the other industries, with an average price increase of 101% and a median price increase of 59%.

However, the valuation results for the internet/digital media industry were moderately weaker compared to the prior quarter. In contrast, the software, hardware and life sciences industries all recorded stronger valuation results in Q1 compared to the prior quarter.

This quarter we are giving you, our readers, a “First Look” report that allows us to provide you the top-line trends for venture capital financings of Silicon Valley companies in Q1 more quickly. This “First Look” will be followed in several weeks with a more in-depth “Full Analysis” that will provide a broader perspective and include coverage of venture capital financings in other geographies drawing on data from a variety of industry reports.

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Advantages of ‘Date-Certain M&A Process over Standard M&A’

Every venture capital investor hopes that all his investment will succeed. The reality is, however, that a large percentage of venture investments eventually are shut down.

In the extreme they end in bankruptcy or assignment to creditors. The majority falls into the category of the “living dead.” Such companies are not complete failures, but their prospects do not justify continued investment, yet they are rarely shut down quickly.

Once reality has been recognized, most investors engage investment bankers to sell their investment off through prevailing M&A processes. Unfortunately, seldom with good results.

REASON #1

The main reason for that sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only by force of competitive pressure.

Potential buyers of the highest probability are those already familiar with the company for sale, such as competitors, existing investors customers and vendors. Once a sales process starts the seller is very much a diminishing asset. Both financially and organizationally.  Unless compelled to act, potential buyers simply start to draw out the process, submit a low-ball offer when the seller runs out of cash, or try to pick up key employees and customers at no cost.

REASON #2

The second reason is usually a misunderstanding of the psychology and methods of investment bankers.

Most investment bankers do best at selling “hot” companies. Companies whose value is perceived by buyers to be increasing quickly over time, and where there are multiple bidders.

They tend to be more motivated and work harder on such cases because transaction sizes –and resulting commissions– are larger and surrounding publicity can bring in new assignments, among others. They also tend to be more effective in maximizing value in such situations by using time to their advantage, pitting buyers against each other and setting very high expectations.

In a situation where time is not your friend, the actions of standard investment banking practices often make a bad situation much worse. Such actions include assigning less experience B-Teams to smaller transaction size cases, “playing out the process” which works against the seller, and pitting multiple players against each other which can drive away potential buyers who often know far more about the seller than does the banker.

 

THE GERBSMAN PARTNERS ‘DATE-CERTAIN’ M&A PROCESS

The most effective solution in situations where time is not on your side is a Date-Certain Merger and Acquisition Process.

Under this proprietary process, the company’s board of directors hires a crisis management/private investment banking firm (‘advisor’) to wind down business operations in an orderly fashion and to maximize the value of their intellectual properties and tangible assets. The Advisor works closely with board and corporate management to:

  • Focus on Control, Preservation and Forecasting of CASH
  • Develop a Strategy/Action Plan and Presentation to Maximize Value of Assets.
  • Plans to include Sales Materials, Due Diligence access. a list of all possible Interested Buyers for Intellectual Properties and Assets and Identify and Retain Key Employees on a go-forward basis.
  • Stabilize and provide Leadership, Motivation and Moral to all Employees.
  • Communicate with the Board of Directors, Senior Management, Senior Lender, Creditors, Vendors and all other Stakeholders in Interest.

THE PROCESS:

The company attorney prepares a simple “As-Is/Where –Is” asset sale documents. This document is very important and includes a “No-Reps or Warrantee” Agreement, as the board, officers and invertors typically do not want any additional exposure on a deal.

The advisor then follows up systematically with ALL potentially interested parties and coordinates their interactions with company personnel, including on-site visits.

Typical terms for a Date-Certain M&A asset sale exclude representations and warranties and include a sales date –typically four to six weeks – from the point of readying sales materials for distribution, a refundable CASH deposit in the range of $200,000, a strong preference for cash consideration and with the ability to close a deal in seven business days.

Date-Certain M&A terms can be varied to suit needs unique to given situations. For instance, the board may choose not to accept any bids, or to allow re-bids if there are multiple competitive bids, and/or allow early bids.

The typical workflow timeline from advisor hiring to transaction close and receipt of consideration is four to six weeks. Such timelines may be extended as circumstances warrant. Upon receipt of considerations, the restructuring/insolvency attorney then distributes funds to creditors and shareholders (if there is sufficient consideration to satisfy creditors), and takes all needed steps to wind down the remaining corporate shell. Typically in coordination with the CFO.

PROCESS ADVANTAGES:

Speed:   – The entire Date-Certain M&A Process can typically be concluded in 4 to 6 Weeks. Creditors and investors receive their money quickly. A negative PR impact on investors and board members related to a drawn out process is eliminated. Where required, such timelines can be reduced to as little as two to three weeks, however severely compressing the process often impacts the final value received during asset auction.

Reduced Cash Requirements:  – Owing to the Date-Certain M&A process’ compressed turn-around time, there is a significantly reduced need for any additional investor cash to support the company during the process.

Maximized Value:  – A quick and effective process during wind-down mode minimizes strain and rapid asset depreciation and thereby preserves enterprise value. The fact that an auction will occur on a certain date typically brings truly interested and qualified parties to the table. In our considerable experience, this process strongly aids in maximizing the final value received.

Cost:  – Advisory fees consist of a retainer and a performance fee, which is a percentage of the sales proceeds.

Control:  – At all time during the process, the board of directors retains complete control. For instance, it can modify the auction terms, or discontinue the auction at any point, thereby preserving all options for as long as possible.

Public Relations:  – As the entire sales process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all terms kept confidential. Accordingly investors can list the company in their portfolios as sold vs. having gone out of business.

A Clean Exit:  – Upon closing of the auction, considerations received are distributed and the advisor, under the leadership of the insolvency counsel, then takes all remaining steps to effect an orderly shut-down of the remaining corporate entity.

 

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, ranging from technology, life science, medical device, digital marketing, consumer to cyber security, to name only a few.

Since inception in 1980, Gerbsman Partners has successfully restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations, and has been involved in over $2.3 billion of financings, restructuring and M&A transactions.

 

Gerbsman Partners has offices and strategic alliances  in San Francisco, Orange County CA, Boston, New York, Washington  DC, Mc Lean VA,  Europe and Israel.

 

IT’S OFFICIAL: T-Mobile and Sprint are coming together to form a $146 billion new company to take on Verizon and AT&T

john legere t-mobile
T-Mobile CEO John Legere.
Steve Marcus/Reuters
  • It’s official: T-Mobile and Sprint have announced plans to merge, with a combined company valued at $146 billion.
  • John Legere, T-Mobile’s CEO, is expected to serve in that role for the merged entity, which would retain the T-Mobile name.
  • The agreement marks the culmination of four years of on-again, off-again discussions.
  • The deal is likely to draw scrutiny from antitrust regulators, considering the Trump administration’s treatment of AT&T and Time Warner’s attempted merger.
  • Sprint dropped by 13% in premarket trading on Monday, while T-Mobile slid 2.4%. Follow live trading on Markets Insider.

The boards of T-Mobile and Sprint have put the finishing touches on a massive merger agreement that values a combined company at $146 billion.

T-Mobile’s CEO, John Legere, made the announcement on Sunday by tweeting a seven-minute video breaking down the merger and linking to a website that further explains the combination.

Deutsche Telekom, which owns two-thirds of T-Mobile, would control the newly formed company.

—John Legere (@JohnLegere) April 29, 2018 //platform.twitter.com/widgets.js ” data-e2e-name=”embed-container” data-media-container=”embed”>

Legere is expected to be the CEO of the combined entity, which would keep the T-Mobile name and have headquarters in Bellevue, Washington, and Overland Park, Kansas.

The deal, which would combine the third- and fourth-largest US wireless carriers, is expected to come under serious scrutiny from antitrust regulators, as the Trump administration has fervently opposed AT&T’s proposed mega-acquisition of Time Warner.

The agreement marks the culmination of four years of on-again, off-again discussions between T-Mobile and Sprint; this is the third time the two rivals have tried to merge.

With a combined 127 million customers, the two firms are expected to compete directly with Verizon, the US’s largest carrier, and AT&T.

“This isn’t a case of going from four to three wireless companies — there are now at least seven or eight big competitors in this converging market,” Legere said on Sunday.

The agreement involves T-Mobile exchanging 9.75 Sprint shares per unit of T-Mobile. Deutsche Telekom would own 42% of the combined company, while SoftBank, which controls 85% of Sprint, would own 27%. The public would hold the remaining 31%.

Sprint and T-Mobile discussed a deal in November, but talks broke down amid disagreement over who would control the new company. A Wall Street Journal report suggests that SoftBank’s founder, Masayoshi Son, may have since become more willing to give up control amid mounting pressure on Sprint to roll out 5G technology.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could on its own,” Legere said in an official statement.

Sprint’s CEO, Marcelo Claure, added: “We intend to bring this same competitive disruption as we look to build the world’s best 5G network that will make the US a hotbed for innovation and will redefine the way consumers live and work across the US, including in rural America.”

The all-stock transaction values Sprint at 0.10256 per T-Mobile share, or $6.62 a share, based on T-Mobile’s latest closing price, for a total of about $26 billion.

T-Mobile had a market value of $55 billion as of Friday’s close, and the two companies have roughly $60 billion of combined debt.

 The Bronx Wanderers – outstanding – 50’s, 60’s, 70’s rock n roll
You want to smile, you want to dance, you “remember when”
Highly recommend from a “Bronx Boy”
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5stars2 (1).png

With superlative vocals and musicianship, dynamic enthusiasm and a genuine love of the music they perform, The Bronx Wanderers recreate the magic of the era and build an energetic bond with their audience, guaranteeing an evening of toe-tapping, hand-clapping and dancing in the aisles all night long. Their show tells the stories and plays the music that will take you as close as you can get to having lived the actual experience. The Wanderers arrive at every show with new material all the time but never leave out the favorites that their fans and audiences have come to love. Not to be forgotten, are the popular Frankie Valli medleys that this group “nails” say the critics. “It never gets old, says lead singer Yo’ Vinny. It just doesn’t get better than this. We don’t rest on our laurels. We never will.”

JerseyBoys-Quote (1).png

“Take it from me, Danny Aiello, spend an evening with the Bronx Wanderers, you’re going to have a ball.”

— Danny Aiello

“I honestly feel a part of their family and you will too. It’s honestly one of my favorite shows of all time.

— Tony Orlando

“Whenever I’m in New York I stop at two places. Gino’s Pastry Shop for Cannoli’s and then find out where the Bronx Wanderers are playing.

— Chazz Palminteri

“They’re the hardest working band in show business today. I guarantee that you’ll come back for more.

— Paul Shlisky, Caesars Entertainment

 

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.

 

Steven R. Gerbsman
Principal
Gerbsman Partners

steve@gerbsmanpartners.com
http://www.gerbsmanpartners.com

BLOG of Intellectual Capital

http://blog.gerbsmanpartners.com

Skype: thegerbs

People using their phones while driving is a huge problem, but a new iPhone feature is helping

Phone while driving Getty
  • 37% of trips include at least some significant phone usage while the car is moving, according to a new study.
  • But features like Apple’s “Do Not Disturb While Driving” can reduce phone use by as much as 8%.
  • The results show that small software changes on big platforms like Apple’s can nudge people to make safer decisions.

It shouldn’t be surprising that people love to use their phones while driving — if you commute in a car, you see it every day, either in your car or other people’s.

But it’s somewhat surprising how many people drive while distracted: there’s significant phone use during as many as 37% of trips logged by Everdrive, an app developed by car insurance company Everquote.

During those trips, people were using their phones for as much as 11% of the time, or about 3 minutes during a 29 minute drive on average, according to the Everdrive study released on Wednesday, which examined 781 million miles of driving data from sensors like your phone’s GPS and accelerometer.

But there is one silver lining to the study: Apple’s new “Do Not Disturb While Driving” feature designed to reduce distracted driving is working. Basically, if your iPhone detects you’re in a moving car, it will turn off all notifications and you can set an automatic text response to tell your friends and family you can’t respond because you’re behind the wheel.

Everquote found that 70% of people in its study kept the DND While Driving feature turned on after Apple released it last September. And between September 19 and October 25 last year, people with DND on used their phones 8% less, according to the study.

So it’s not a silver bullet, but it turns out a software update can reduce distracted driving.

Other interesting stats from the study:

  • States with laws prohibiting phone use while driving showed the least phone use while driving.
  • Drivers tend to make a hard brake on 25% of trips.
  • The states with the worst driving scores are Maryland, Delaware, Pennsylvania, Rhode Island, and Connecticut.
  • The states with the best driving scores are Montana, Wyoming, South Dakota, Alaska, and Idaho.

 

 

HOW DO YOU DECIDE WHO TO MARRY?

(written  by kids)

1. You  got to find somebody who likes the same stuff. Like, if you like sports, she should like it that you like sports, and she should keep the chips and dip coming. —  Alan, age 10

-No  person really decides before they grow up who they’re going to  marry. God decides it all the way before, and you get to find out later  who you’re stuck with. —  Kristen, age 10

2. WHAT IS THE RIGHT AGE TO GET MARRIED?
Twenty-three is the best age because you know the person FOREVER by then..  —  Camille, age 10

3. HOW CAN A STRANGER TELL IF TWO PEOPLE ARE MARRIED?

You might have to guess, based on whether they seem to be yelling at the same kids. —  Derrick, age 8

4. WHAT DO YOU THINK YOUR MOM AND DAD HAVE IN COMMON?

Both don’t want any more kids. —  Lori, age 8

5. WHAT DO MOST PEOPLE DO ON A DATE?

-Dates are for having fun, and people should use them to get to know each other. Even boys have something to say if you listen long enough.  —  Lynnette, age 8

– On the first date, they just tell each other lies and that usually gets them interested enough to go for a second date.  —  Martin, age 10

6. WHEN IS IT OKAY TO KISS SOMEONE?
-When they’re rich. —  Pam, age 7

-The law says you have to be eighteen, so I wouldn’t want to mess with that. – – Curt, age 7

-The rule goes like this: If you kiss someone, then you should marry them and have kids with them. It’s the right thing to do. Howard, age 8

7. IS IT BETTER TO BE SINGLE OR MARRIED
It’s better for girls to be single but not for boys. Boys need someone to clean up after them. —  Anita, age 9

8. HOW WOULD THE WORLD BE DIFFERENT IF PEOPLE DIDN’T GET MARRIED?

There sure would be a lot of kids to explain, wouldn’t there?  —  Kelvin, age 8

And the #1 Favorite is…….
9. HOW WOULD YOU MAKE A MARRIAGE WORK?
Tell your wife that she looks pretty, even if she looks like a dump truck. —  Ricky, age 9