VIDEO: New class of startup aims for quick revenues
peHub‘s Dan Primack spoke with Reuters about a new kind of startup that’s designed to develop an idea and then be snapped up by a larger company.
As Primack explains, these startups differ from the traditional sort in that they tend to be interested in creating targeted web services or applications rather than conventional companies with longer-term growth ambitions.
“The hope for these companies isn’t to create the next Google or the next Cisco, the goal is to create a little application that Google or Cisco or Facebook or Twitter wants and then will purchase,” he explains.
Primack says startups of this new variety are often cheaper to start and run, and tend to realize revenues very quickly because they are designed to create a one-off service.
Many have been reared by Y Combinator, a Silicon Valley-based venture outfit that invests in young startups and helps them fine tune their applications or services.
Watch the interview with Primack below.
peHUB: If CIT goes down, these companies may be hurting
peHUB’s Erin Griffith reports:
Buyouts Senior Editor Ari Nathanson and I compiled a list of buyout-backed companies which have used CIT as a lead arranger on its credit facility over the last three years, courtesy of Thomson Reuters data.
We came up with 38 companies.* Of those 38, CIT provided a revolver loan to all but two. For companies that haven’t drawn down their revolver (including this week’s run, which has only added to the company’s demise), the sudden disappearance of CIT could mean the sudden disappearance of all liquidity.
The interesting part is the amount of repeat business on the list. It brings new meaning to the “strong lender relationships” often touted by buyout pros. The one thing they don’t brag about is how a “strong relationship” with a failing lender could wind up being worse than no relationships!
For example, Wind Point Partners used CIT for four of its portfolio companies. Thoma Cressey Equity Partners (before Carl Thoma and Brian Cressy split up) also has four CIT-led credit facilities in its portfolio. Sentinel Capital Partners and Baird Capital Partners each have two companies with CIT facilities.
View the entire list below.
*We eliminated a few that have since been sold, but haven’t checked that each of the 38 are still owned by their listed PE backer.
from DealZone:
E Ink sale not much of a VC payday
E Ink's "electronic paper" is the special sauce that makes e-book readers like the Amazon Kindle possible, but it hasn't proven to be much of a meal for its venture capital backers.
The privately held company was purchased by Taiwanese display maker Prime View International on Monday for $215 million, 12 years after it emerged from a Massachusetts Institute of Technology laboratory.
peHUB notes that the decade-plus span is far from ideal for VCs (the ideal horizon is five to seven years). Even worse, VCs including Intel Capital, Motorola Ventures, Solstice Capital, the McClatchy Company, Lucent Technologies, FA Technology Ventures, and the Hearst Corporation sunk some $148.8 million into E Ink over the years, for an underwhelming 1.4 multiple.
E Ink holds more than 100 patents on its "electrophoretic" ink technology, in which electric charges are sent along a grid embedded in the paper. The charges cause tiny black and white particles to move up and down, creating text and images.
E-Ink and Prime View are already close business partners, with E-Ink providing the front part of flexible displays to Amazon and Sony. Prime View makes the back end and assembles the displays. The companies said said the deal would provide the financing and manpower needed to fuel development of color displays, slated for mass production at the end of 2010.
VC fundraising still in the doldrums
Forty U.S.-based venture capital firms raised just $4.3 billion in the first quarter of 2009, according to data released this morning by Thomson Reuters and the National Venture Capital Association. The downside is that this represents the lowest number of funds to raise capital since Q3 2003. The upside is that the actual amount of capital raised was higher than the $3.5 billion raised in Q4 2008 (slight solace, but solace nonetheless).
Just three of the funds were first-timers, while the largest raiser was August Capital ($650m for Fund V).
In a prepared statement, NVCA president Mark Heesen said: “First, the majority of venture firms are not actively fundraising at this time because they have either recently raised a fund and are investing those dollars or are waiting until market conditions improve. Second, despite the recession, venture firms with solid track records continue to be able to secure sizable commitments from limited partners as there remains a great deal of promise for future returns from the venture capital asset class.”
The full release is below.
VENTURE CAPITAL FUNDRAISING ACTIVITY SLOWS CONSIDERABLY IN THE FIRST QUARTER OF 2009
This is nothing new. Back in the 1990′s, they called this concept “built to flip”, and was quite common during the dot.com bubble. It’s probably even older than that.