A Quote by Clayton M. Christensen
People in private equity complain that they have so much capital and so few places to invest. But you have lots of entrepreneurs trying to raise money at the low end and find that they can't get funding because of this mismatch. I think that there is an opportunity there.
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There are lots of ways to make money in venture capital, and there are even more ways to be mediocre. The industry has too much money and too many smart people chasing too few great entrepreneurs.
Raise as little as you can to get you to something that you can show - plus maybe a quarter or two so you have a little bit of cushion - and then raise some more money. Raise as little - not as much - as you can because that's the most expensive equity you're going to sell.
Obviously, consideration of costs is key, including opportunity costs. Of course capital isn't free. It's easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you're generating a 100% return on capital, then you shouldn't invest in something that generates an 80% return on capital. It's crazy.
The JOBS Act will allow entrepreneurs to utilize 'crowdfunding,' which permits them to raise equity capital from a large pool of small investors.
We really wake up every day trying to build businesses. That is the goal of private equity. It's a misnomer out there that private equity profits by shrinking companies. In fact, it's just the opposite. Private equity creates value by growing great companies.
While I wouldn't say that most entrepreneurs find it easy to get funding, there are certainly more people out there funding technology and healthcare companies than in other areas.
Capital is always available for good companies, but the only question is value at which you raise capital. In bad times, you raise capital at low valuation, and in good times, you get a fair price. It separates winners from the rest.
If companies are able to raise equity from the market, then their problems for financing incomplete projects will come to end. Investment cycle in the capital market can kick-start with the money of savers and investors.
Venture capital has peaked in terms of its appetite, in terms of how much money it wants to put in. So now private equity funds are piling in. Primarily because interest rates are virtually zero so there's no fixed income play and they're not moving around.
Nobody in my generation ever started out in private equity. We got there by accident. There was no private equity business - actually, the word didn't even exist - when I started. I got there out of the purest of happenstance and so I think many people find what they really enjoy doing just in that way. So another piece of advice for you is: don't worry too much about what you're going to be doing when you get out of business school - life will come your way.
State funds, private equity, venture capital, and institutional lending all have their role in the lifecycle of a high tech startup, but angel capital is crucial for first-time entrepreneurs. Angel investors provide more than just cash; they bring years of expertise as both founders of businesses and as seasoned investors.
I think if you're out there trying to raise capital, and you're a woman, and you're in tech, I think what you need to do is find people to work with who know you and believe in you.
I've always treated money with respect, but I don't really think about money - I try to avoid it, because I don't like what money does to people. I find if you get too much money involved, people get corrupted.
I've probably done more venture capital deals and expansion financings than I have done private equity deals. But both are the same. Private equity companies have also built jobs.
I should say, the one thing you run into is, if you're trying to raise a round you have to decide, well, how much money are you trying to raise? And then you have to justify that to your investors, because they want to know why you [are] raising that much? Why aren't you raising either twice as much or half as much?
I would much rather invest in stocks, bonds, private equity and hedge funds than watches.
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