Jenn Calabrese’s Post

Why Are Companies That Lose #Money Still So Successful?   In a well-functioning #capitalmarket, profits should be the sole criterion for firm survival; that is, firms reporting losses should disappear. Of late, however, loss-making firms are highly sought after by #investors — often more than some profitable firms. Unicorns, or startups with valuations exceeding a billion dollars, are examples of such loss-making firms. What has changed over time? When and why did losses lose their meaning? The authors’ series of new research papers provide some answers, guiding managers to make the right #investments: those that produce delayed but real profits — not just those that produce short-term accounting profits but decimate #shareholder wealth in long run.   https://lnkd.in/eMYEddsU   Calabrese Consulting LLC

🚀 Considering an investment in a startup? Here's what both investors and firms should keep top of mind: 💡 Pre-money Valuation: Understand the true value of the company before investing. Diligently assess factors like market potential, growth trajectory, and competitive landscape. 💼 Shareholder Structure: Examine the current and post-investment ownership structure. Clear delineation of shares and roles ensures alignment of interests and smooth decision-making. 💰 Use of Proceeds: Ensure transparency in how investment funds will be utilized. Clarity on corporate purposes and alignment with the business plan are key. 📈 Dividend and Exit Strategy: Evaluate the proposed dividend policy and exit strategy outlined in the term sheet. Understand the mechanism for dividend distribution and the conditions for realizing returns through exit events such as liquidation or sale of the company. 🔍 Information Rights: Access to timely and accurate financial information is crucial for informed decision-making. Ensure provisions for regular reporting and access to company records. 📝 Legal Documentation: Thoroughly review and negotiate all legal agreements. From investment agreements to shareholders' agreements, clarity and alignment on terms are essential for a successful partnership. 🕒 Timing: Establish clear timelines for due diligence, negotiations, and closing. A well-structured timeline fosters efficiency and avoids unnecessary delays. 🔒 Confidentiality: Maintain confidentiality throughout the process. Protecting sensitive information builds trust and preserves the integrity of the deal. 🌐 Governing Law: Understand the legal framework governing the investment. Clarity on jurisdiction and applicable laws ensures a solid foundation for the investment. Investing in a startup can be a rewarding journey, but thorough evaluation and diligence are paramount. By addressing these key considerations, both investors and firms can set the stage for a successful partnership and long-term growth. #StartupInvestment #InvestmentStrategies #BusinessGrowth

"To make your strategy fit, you need to trim down the areas of adaptation." There are three broad areas of fit, one area is the internal fit. So here, we want to understand how do the activities, how do the resources, how are the capabilities that a firm has put in place, and how they interact. And how are they consistent with the overarching strategy, with the positioning that the firm tries to achieve in the marketplace? We also need to worry about, is the organization's incentive system is aligned with the objectives of the firm. Now, second question is, do you actually have the right set of activities, the right set of capabilities, given the environment that you're in? So, the second broad issue that we need to tackle, is the question of external fit. There we have to understand the industry. We have to understand competitors. We have to understand customers. So, we need to evaluate, whether we have the right set of choices given the environment that we're in? And thirdly, of course, this environment is changing all the time. Competitors react to your moves. New technologies arise. Customer tastes might change. And so the question is, can we achieve a dynamic fit, the third big topic we need to think about? How does the firm evolve its internal set of activities, given this evolving external world? So those will be the three broad areas that we want to think about when we think about strategy. #businessstrategy #businessaccounting #restructuring #cases #investing #fintech #startupecosystem

Demystifying 409A Valuation: Essential Insights for Entrepreneurs In the dynamic realm of startup ventures, navigating the intricacies of financial valuation is paramount. Today, let's delve into a critical component of this landscape: 409A valuation. 1. Definition: At its core, 409A valuation serves as a vital process for privately held companies to ascertain the fair market value of their common stock. Named after section 409A of the Internal Revenue Code, this valuation methodology holds immense significance in the financial realm. 2. Used for: So, why does 409A valuation matter? Simply put, it plays a pivotal role in setting the exercise price for stock options distributed to employees and consultants. By determining a fair market value, companies ensure compliance with tax regulations while offering equitable compensation to stakeholders. 3. Coming up with a 409A valuation: Achieving an accurate 409A valuation entails meticulous analysis and expert insight. Typically, companies enlist the services of qualified independent appraisers who assess various factors. These may include financial performance metrics, market trends, comparable transactions, and future growth prospects, among others. In an era defined by innovation and entrepreneurship, understanding the nuances of 409A valuation is indispensable. By embracing this knowledge, startup founders can navigate regulatory complexities with confidence, fostering sustainable growth and financial viability. Join the conversation and empower your entrepreneurial journey with invaluable insights into 409A valuation. #StartupFinance #FinancialValuation #EntrepreneurInsights #409AValuation #TaxCompliance #MarketTrends #EntrepreneurialJourney

Private Equity can help turbo-charge firms. A recent news article stated there are many positive stories where PE has transformed undervalued companies, generating exceptional returns and supporting around 1,500 businesses in the UK in 2023. PE firms work with long-term goals, providing access to new markets and expert advice. They back skilled entrepreneurs, enabling management teams to improve customer service, create positive work cultures, and attract talent with incentives. Some successful PE investors prefer minority investments, offering support without micromanaging.

Investors recognize that while competence is crucial, character is the true differentiator when evaluating founders. Being trustworthy is a crucial part of this. During your investor pitch, be transparent; transparency fosters confidence and lays the foundation for a strong, trustworthy relationship with investors. Another way to build investor confidence is to work with a professional employer organization. It demonstrates that you've got expert help to get HR done right and taken steps to reduce your risks as an employer. #Investors #Pitching #VentureCapital #Trust #HumanResources https://lnkd.in/gHFRdkbd

Investors recognize that while competence is crucial, character is the true differentiator when evaluating founders. Being trustworthy is a crucial part of this. During your investor pitch, be transparent; transparency fosters confidence and lays the foundation for a strong, trustworthy relationship with investors. Another way to build investor confidence is to work with a professional employer organization. It demonstrates that you've got expert help to get HR done right and taken steps to reduce your risks as an employer. #Investors #Pitching #VentureCapital #Trust #HumanResources https://lnkd.in/eY-2VS9c

Investors recognize that while competence is crucial, character is the true differentiator when evaluating founders. Being trustworthy is a crucial part of this. During your investor pitch, be transparent; transparency fosters confidence and lays the foundation for a strong, trustworthy relationship with investors. Another way to build investor confidence is to work with a professional employer organization. It demonstrates that you've got expert help to get HR done right and taken steps to reduce your risks as an employer. #Investors #Pitching #VentureCapital #Trust #HumanResources https://lnkd.in/geux9MVN

"Profitable businesses and industries are bound to attract competitors. Companies with strong moats are better able to keep competitors at bay, or at least long enough to adapt their business models to a new economic or technological reality. Looking for those quality companies with strong, wide moats is a good place to start for investors seeking to build durable, all-weather portfolios and long-term wealth."

Investors recognize that while competence is crucial, character is the true differentiator when evaluating founders. Being trustworthy is a crucial part of this. During your investor pitch, be transparent; transparency fosters confidence and lays the foundation for a strong, trustworthy relationship with investors. Another way to build investor confidence is to work with a professional employer organization. It demonstrates that you've got expert help to get HR done right and taken steps to reduce your risks as an employer. #Investors #Pitching #VentureCapital #Trust #HumanResources https://lnkd.in/g77WG3Pi