David Barbour’s Post

Going Public: Dream of an IPO? A C Corp is your ticket. 🚀 Transitioning from LLC to C Corp for Startups Is your startup evolving? Considering a switch from LLC to C Corp? It’s a strategic move that could pave the way for significant growth and investment opportunities. Why Make the Switch? Attracting Investors: C Corps are investor favorites. They offer structured scalability and ease in transferring shares. Going Public: Dream of an IPO? A C Corp is your ticket. Employee Compensation: Stock options? C Corps makes it easier to reward your team with equity. Startup Accelerators: Many prefer C Corps for their equity and convertible note structures. #StartupGrowth #BusinessTransformation #Entrepreneurship #InvestmentStrategy #CorporateStructure #VentureCapital #BusinessLaw #Innovation #StartupLife How to Transition: Statutory Conversion: A direct switch, transferring assets and liabilities from LLC to C Corp. Statutory Merger: Create a new C Corp, then merge your LLC into it. Non-Statutory Conversion: A complex process, best used as a last resort. The Process: Develop a conversion plan. Gain unanimous LLC member consent. File with your Secretary of State. 📈 Embrace the Advantages: Investor Appeal: C Corps is a magnet for serious investors. Employee Incentives: Use stock options to attract top talent. 🎯 Be Mindful of the Challenges: Tax Implications: Understand the tax differences between LLC and C Corp. Complexity: Seek legal and financial advice to navigate the process smoothly. 🌟 Ready to Scale Up? If you're considering this transition, remember, timing is key. Start as a C Corp, or make the change early to avoid complexities. Are you planning this transition or have already done it? Share your insights below! Let’s learn together!

Ho ho ho... liquidity for all! 🤶 🎄 🎅 Great article out from Michaela Jefferson in Sifted on startup shares liquidity today with interview snippets from Yoko Spirig from Ledgy and international granting experts Easop. In essence, as a startup employee you will likely have one (or two) of three ways to cash out. Unfortunately, all three mostly out of your control unless you made it to the senior leadership team (wait for it, there is a BUT). 1. Initial Public Offering (the big bucks) 2. Mergers & Acquisitions (potentially big bucks) 3. The Secondary Market We recommend providing number three to our clients all the time. Why? Two main reasons. It is a great way to bring the reality of "equity=cash at some point" closer to all of your employees even to those that might not be allowed to cash out (e.g. those that have not yet vested, or have left). We usually recommend a 10-20% cap on what people (mostly current employees) are allowed to sell to keep them incentivised with the rest of their allocation for the future. Tabling it as a future option also helps retain the OGs for whom a topup grant might be meaningless in terms of comparative size to their initial grant. Why not offer the possibility of liquidity instead? The BUT? As Cyrille De Baerdemaeker puts it with regards to secondaries: "There is no harm in asking the company directly..." Couldn't agree more, bottom up pressure works especially if some of your friends join in. Thanks Triin Hertmann for going public with your personal story. We need more of these in the European tech space for employee options to gain more and more traction and interest. #startupequity #liquidity #startup

Profits or path to profits is the key to any startup success. When the eventual listed share price is driven by profits, everything else is a backward calculation. And eventually you have to list (if you have external investors) as they have to be given exit. All businesses need "permanent capital" which only the public markets can provide. #founders #venturecapital

Inspired by multiple events and chats with founders over the last 18 mths. I believe more such situations are going to play out in the mths ahead as startups run out of cash and need to explore distressed situations and closing. So here’s a short article on what to think about and look out for.

Ever invested in a company that was super hyped, like a bubble that suddenly bursts and vanishes? Lost in the dust of broken promises and inflated egos. Sound familiar? The truth is, many investors get caught up in the glitz and flashy names while investing, neglecting the most crucial factor: a company's fundamentals. The chart below reveals a shocking truth: startups built on hype and inflated valuations often crumble after the initial excitement fades. Meanwhile, a different story unfolds under the radar. Small and medium-sized enterprises (SMEs) with solid fundamentals are quietly thriving in the market, making real money. These are the companies that prioritize slow but sustainable growth, building with a strong system. They may not have the initial flash, but they offer something far more valuable: stability. At Purple Oak Advisors, we help companies go beyond the allure of glamour to build a rock-solid foundation by streamlining their businesses before going public with an IPO. Want to know how we achieve IPO readiness? Check out our previous post here → https://lnkd.in/gyMfE_pX #investmenttips #startupinvesting #angelinvesting #venturecapital #VC #IPO #businessadvisory #businessconsultant #purpleoakadvisors

Should Your Startup Go Public? Weighing the Pros & Cons of an IPO The IPO dream: it beckons many startups, but is it the right move for yours? Let's explore both sides of the coin. Going Public: The Allure Capital Infusion: IPO unlocks a treasure trove of investor cash to fuel growth, R&D, and strategic acquisitions. Credibility & Visibility: Public listing screams "established player" - attracting customers, partners, and top talent. Employee Motivation: Stock options incentivize your team by letting them share the company's success. Liquidity & Acquisitions: Investors get an exit path, and your company becomes a more attractive target for potential acquirers. Challenges to Consider Cost & Scrutiny: The IPO process is expensive and involves stricter regulations and reporting requirements. Short-Term Focus: Public markets often prioritize short-term gains, potentially hindering long-term vision. Loss of Control: Founders may relinquish some control as shareholders gain voting rights on key decisions. Market Fluctuations: Prepare for a rollercoaster! Stock prices can be heavily impacted by external factors. Not for Everyone: Companies with unproven models or high debt may struggle to attract investors. The Takeaway Going public is a strategic decision, not a one-size-fits-all answer. Consider your growth stage, financials, team experience, market conditions, and long-term goals. Explore alternative funding options and the impact on your company culture too! Ultimately, a successful IPO can be a powerful growth tool, but it's just one piece of the puzzle. Building a sustainable company requires a strong foundation, a clear vision, and a talented team. #startup #IPO #investment

Michael Brown and Ran Ben-Tzur are giving tech entrepreneurs, investors, and leading executives a map of the current IPO and growth company landscapes at next week's The Montgomery Summit. Growth company exit volumes have experienced glacial movement for the last two years, hitting a 10-year low of $62 billion in 2023 as IPO markets remained virtually shut. With cautious optimism, the market is warming up. More private companies are beginning to explore growth opportunities or restart IPO processes after a prolonged period of market uncertainty. 🧭 Michael will speak on the panel "Paths to Liquidity in 2024" to help investors, startups, and industry advisors navigate and anticipate trends in the current liquidity ecosystem. 💼 Ran will share his experiences working for, and advising, companies going public on a panel titled, "Taking a Company Public: Insights into IPO Readiness in 2024." Get in on the conversation by registering here: https://bit.ly/3Tj4fZe #IPO #venturecapital #montgomerysummit

Major #PrivateEquity firms are expected to begin numerous company #exits soon. From Bloomberg, Jan 24, 2024 report: "Buyout houses from Thoma Bravo to Permira are putting portfolio company sales high on the agenda for early 2024, as the industry seeks to return money to investors after a challenging period for exiting holdings." Two things to note from PitchBook Q4 2023 Enterprise #SaaS valuation stats: 1. SaaS Company Valuations: The median EV/trailing 12-month (TTM) revenue multiple at the end of Q4 was 5.6x, down 67% from 2021’s median of 16.8x. 2. SaaS Revenue Growth Rates: Pre-pandemic, the median revenue growth rate in 2018 was 34%. That figure fell to 16% in 2023. Four things for #Seed and #EarlyStage #Startups to note from Channel Angels: 1. Capitalize on Distracted Rivals: You've got the opportunity to disrupt later-stage startups that could be running out of financial runway, or distracted by exit negotiations. 2. Avoid M&A Celebrations: You'll see lots of headlines about accelerated M&A activity over the next six to 12 months. Don't freak out about "missing the boat." Many of the deals will involve undisclosed and/or depressed valuations. Focus instead on your own #EBITDA and #ARR growth rates, and #CustomerRetention. 3. Growth Still Matters: Yes, focus on profitability. But to attract a serious strategic buyer or investor at a strong valuation, you need to be growing at least 2X to 4X faster than the public Enterprise SaaS market -- where growth rates slowed to 11% in 2023 (source: Pitchbook). 4. Preach to the Converted: Tired of pitching your startup business to #AngelInvestors & #VentureCapilists who don't understand your #ChannelSales, #PartnerProgram or #MSP #GoToMarket strategy? Then reach out to the angel team at Channel Angels -- including yours truly, Gerwai Todd and/or Kevin Blake. Wishing you all the best for 2024. -jp

According to this post valuations are starting to come down. I am not sure if this is indicative of reduced valuations for MSP companies but it could drag multiples down. Good food thought if you are thinking of exiting.

When fundraising, founders leave millions of $$$ on the table. Reason: Lack of term sheet knowledge Here’s a quick snapshot of clauses that cover critical investor rights: - Liquidation Preference: In case of a startup sale, how will the sale proceeds be distributed. - Participation rights: Investors' right to liquidation proceeds over and above their pro-rata. Whether investors can claim the surplus. - Anti-dilution rights: Protection for investors from dilution in case of lower valuation in the next rounds. - Protective provisions: Right to approve or veto certain decisions. - Board seats: No. of board seats and board observers that investors can appoint. - Right of first refusal / tag-along rights: Helps investors stack more equity or offload in the event of a sale. - Information rights: Right to access internal information like financial statements and MIS. It is not just the money, but what comes with it, that defines the success of the transaction. #startups #deals