Ronan Kennedy

How to value a seed stage company? Who knows...(Well, Jack McQuire does but I had to fill in for him at the last minute for last week's Valuation Masterclass.) Here's a slide I prepared highlighting some of the recent seed rounds we have led and supported. Two surefire valuation methods: comparables (i.e. numerous rational references to companies similar to you) and the market (i.e. pitch as many investors as you can and see where they land). I have seen valuations double simply as a result of well-managed competitive processes. Governance, Terms, and War Stories sessions coming up. Register here: https://lnkd.in/ghJJpdR4

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Boards of Directors – How Relevant To The Business Is The Board? In 2014, activist investor Starboard Value successfully replaced all 12 directors on the board of Darden Restaurants. The following shows the Darden incumbent board at the time of Starboard's proxy fight, Starboard’s value creation plan initiatives, the Starboard director nominees and the before and after performance (revenue, EBITDA, EBITDA margin and stock price). Note especially the direct relevance of each Starboard nominee to the industry or some aspect of the value creation plan. How often do you see this level of relevance on public company boards?

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https://lnkd.in/e-Cc-PhA Just wrapped up a case study highlighting some successful value creation work for a vertical software company. After a funding event, it can be tough for management teams to align on which initiatives to tackle first. Here are a few tips from my experience: 📈 Prioritize Compounding Benefits Start with initiatives that enable or build capabilities. These early projects are not the most glamorous. The long term value is the momentum they create and tone they set. They pave the way for bigger wins down the line. 🚧 Address Bottlenecks We identified and fixed a major technical bottleneck in the sales funnel. This gave us an immediate boost to revenue and win rates. The less obvious win was a finding that our marketing efforts were more effective than we thought. Many opportunities fitting the ideal customer profiles were getting stuck at the bottleneck! ✴ Find the Triple Word Score Initiatives Focus on initiatives that add value across multiple valuation categories like revenue, margins, and multiple expansion. My favorites are those that improve operating leverage and scalable unit economics. Operating leverage improves as each dollar of increased revenue earns a little more Operating Margin (EBITDA) over time. In the case study, I renegotiated two of the largest variable cost supplier contracts, leading to immediate improvements in unit contribution margins and setting the stage for increasing margins as revenue grew. This is a valuable function of a durable business model. Most teams agree on what needs to be done, but not always on the order. Choose initiatives that start building a solid foundation for future investments or the Quick Wins with high impact. A few good articles that touch on the technical concepts.. Healthtech: Show Your Magic | Andreessen Horowitz  https://lnkd.in/eGkDnkiG The Gross Margin Problem - Bottom Up by David Sacks https://lnkd.in/e9J2Eqaa

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According to government estimates, the U.S. Manufacturing sector loses well over $100B annually because so many companies remain over-dependent on outdated manual processes. For such companies, creating a more “eCommerce-like” buying experience for their suppliers is imperative.    That’s why today Cleo launched CIC ORCA (Order to Cash Automation), a new capability in our Cleo Integration Cloud platform that dramatically improves #B2B buying experiences by delivering seamless “eCommerce to EDI” workflows for businesses that don’t happen to have EDI capabilities.    CIC ORCA is intended for #manufacturers, #wholesalers, and #distributors who must cater to the modern B2B buyer’s preferences for ease-of-use, self-service, and efficiency when procuring goods, getting delivery updates, and receiving invoices from their suppliers.     In an era shaped by the “Amazon Effect,” suppliers are increasingly expected to emulate the B2C buying experience. Cleo's CIC ORCA gets everyone singing from the same song sheet. For the full story see today's Cleo Press Release or visit the CIC ORCA web page -- https://lnkd.in/gqFn4hCj

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Very similar and a complement to Independent Sponsor led transactions targeting $15 million to $100 million plus EV, search fund deals target acquiring companies for around $15 million EV, priced at approximately seven (7x) times EBITDA or less. Over the years, companies tracked by Stanford have shown annualized equity returns exceeding 30%! The target universe for search funds and Independent Sponsors is substantial, with nearly 200,000 businesses valued between $10 million and $100 million, according to NAICS Association data. Search funds often seek out companies with retiring family founders looking for liquidity. Middle and lower-middle market financial sponsors generally avoid targeting companies worth $15 million due to high overhead costs and the need to deploy significant amounts of capital. However, for individual entrepreneurs, these micro-sized deals are not only accessible but also offer attractive bargains. This has led to the emergence of specialized search PE funds alongside Independent Sponsor transactions. Great article by the FT. #privatecapital #privatemarkets #privateequity #buyouts #growthequity #independentsponsor #searchfund #middlemarket #smallbuyout #sme #institutionalinvestor #alpha #moic #irr #privatecredit #privatedebt #familybusiness #founderowned #fT

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When it comes to business acquisitions, assessing the risk is crucial. Here's a breakdown from my recent analysis of a quilt store purchase: SDE: $257k  Total Deal Cost: $1.27 million SBA Loan: $1.14 million at 90% LTV Equity Needed: $127,000 Annual Loan Payments: $189,000 at 11% interest After loan payments, the business would net only $70,000 annually. Additionally, the asset base leaves a negative airball of $700,000, indicating substantial risk. Why would you take on such a deal for relatively low returns? The answer - most people wouldn’t. And this is why deals like this should be priced closer to 2x or 3x SDE and include a healthy dose of seller financing. No one is going to take on the gargantuan risk of a deal like this at the seller's asking price. Once you understand the math, it's like having x-ray vision to quickly evaluate whether deals actually make sense or not. In this case, this one does not pass the sniff test to me. What do you think? Let me know in the comments. #SMB #ETA #finance #Cashflow #investing

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I’m about possibility and opportunity. During the time between my last exit and starting Cascade Seed Fund I ran multiple companies through strategy building and execution. People love to plan because it’s about possibility but its just as important to know what you don’t want to happen as it is to know what you do want to happen. Lots of companies fail because of too much offense and not enough defense. What are small actions you can do today to strengthen the safety and well-being of your company. More on offense soon.

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This founder's $40 million dilemma ... Sell or scale? Last week, I spoke with a founder whose manufacturing business is worth a cool $40M. (his projected growth has him at $70 million in enterprise value) He now faces a tough decision: Should he continue growing independently or sell 60% to private equity (PE)? Here's the catch: If he sells, he'll bring on other companies and build a multi-billion dollar platform ... ... while answering to a boss. But the question remains: Is he a one-hit wonder? It's a tough one to answer. The stakes are high: - Exiting now means pocketing an 8-figure windfall. - Continuing solo could mean massive growth but also massive risk. - Acquiring other companies often involves raising debt, further increasing risk. - Selling to PE could make him the founder of a platform with huge potential. There is no perfect answer. But here's my take: - Selling to and EXPERIENCED private equity allows you to take money off the table while still having the opportunity to grow. - Even with a boss, you get a second bite of the apple when the platform eventually sells. (another substantial payout) The key is understanding your options and making the best decision for yourself and your team. Do you agree? Share your thoughts below. P.S. - Get some value? Please reshare this.

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It's important to be aware of the friction that could be created when key hires are made in a fast-growing business. I spoke with Jeremy Stein about this in our recent conversation about the role fractional executives are increasingly playing in high-growth businesses. Hear Jeremy's thoughts on this in the following short clip - and you can access the full interview and transcript over on our website: https://lnkd.in/dxX34bdN #COO #FractionalHires #Entrepreneurship

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The consolidation play by Private Equity has both pros and cons, and it cannot be denied that sometimes the consumer may suffer, but the quality of the provision may become higher. It's a trade-off that needs to be managed well in order for it not to become "vampire economics" #PrivateEquity #VentureCapital #ImpactInvesting #Economy #USEconomy #Investing https://lnkd.in/gtdk6d5v

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A series for those interested in listening to transformational healthcare

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This week Mikal Ventures brings you a 4-week breakdown of the non-US capital market with an emphasis on the Mikal verticals. Over the 4-week period ending June 24, just over 1,160 new companies were added, with 102,850 companies included in the non-US Health Tech, Med Tech, Fin Tech, AI Tech, and Ed Tech verticals. The non-US AI Tech saw the greatest percentage growth in new companies for the period at 16%, vs. the vertical average of 11% for the period. The non-US Health Tech vertical led the group in transactions. The non-US Med Tech vertical lead in both SEC Filings and news articles. Mikal Ventures publishes these stats on a rolling 4-week basis to provide a perspective on how the verticals and new startups move through time. We hope you find them informative and thought-provoking. VC Investors are always adjusting their "Play Book" with a variety of options for investing. Mikal Ventures is one of those alternatives, offering curated solutions to real world problems. Reach out if you have questions on how we can be of assistance and bookmark https://mikalventures.com/ for additional insights and information.

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This week Mikal Ventures brings you a 4-week breakdown of the non-US capital market with an emphasis on the Mikal verticals. Over the 4-week period ending May 29, a total of 1,545 new companies were added, with 101,688 companies included in the non-US Health Tech, Med Tech, Fin Tech, AI Tech, and Ed Tech verticals. The non-US AI Tech saw the greatest percentage growth in new companies for the period, weighing in at a notable 27%, nearly two times the overall vertical average of 15%. The non-US Heath Tech vertical led the group in transactions. Non-US Med Tech vertical lead in both SEC Filings and news articles. Mikal Ventures publishes these stats on a rolling 4-week basis to provide a perspective on how the verticals and new startups move through time. We hope you find them informative and thought-provoking. VC Investors are always adjusting their "Play Book" with a variety of options for investing. Mikal Ventures is one of those alternatives, offering curated solutions to real world problems. Reach out if you have questions on how we can be of assistance and bookmark https://mikalventures.com/ for additional insights and information.

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Any business worth acquiring is like a puzzle with pieces that fit just right. Picture this: a 40-year-old electrical services business with $2.8 million in revenue, $600k in SDE, and a purchase price of only $1.75 million. Add in FF&E assets worth over $900k and a modest down payment of $175k, and you’ve got a compelling investment. With 14 employees and a solid asset base, this business checks all the boxes for a strategic acquisition. As always, thorough due diligence is a must, but don’t let skepticism hold you back from a transformative opportunity. This could be your ticket to exponential growth. But how do you source deals like these? If you’re ready to dive in deeper, go to: https://lnkd.in/gZxZeaR6 to join my recently launched community: The Acquisitions Accelerator. See you there. #BusinessAcquisition #InvestmentStrategy #EntrepreneurLife #BusinessGrowth #MergersAndAcquisitions

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May is when many private companies finalize mid-year comp plans 💵 Need a reliable 409A valuation? Or has it been over a year since your last? We've got you covered! Scalar's 409A valuations keep you compliant, protect employees from tax penalties, and come with a team that supports you all the way through an audit. https://lnkd.in/gs_CtPNS

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Should I use only equity for my search fund acquisition? 👇 If you can convince enough shareholders to part with their cash in order to purchase a company, this is the simplest way to go. A few thoughts: 1. Equity carries no covenants or external limits on how you and your team run the company. 2. Since there’s no debt, you have a higher risk tolerance. 3. Equity investors are patient. Debt holders are not. 4. Investors get well rewarded for shared success. If you do well, they do very well. This can make it easier to raise capital. 5. Some companies are not a good fit for debt. Lenders like predictable cash flow, hard assets and a history of profitability. 6. Equity is easy to raise compared to debt, which involves due diligence, counterparty risk, and tight terms. On the other hand, equity is expensive. You will have to give away the value of the money up front, and more.

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Public and private SaaS company revenue multiples remained steady in Q1 2024 at 8.5x and 7.2x, respectively. The trend towards stabilization started in Q4 2022 after the go-go days of 2021 and early 2022—and we believe steadiness is here to stay. Read more in our latest #SaaSMeter report: https://okt.to/A7jaXC

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📈🏢 Aby Rosen's RFR Holding is facing a staggering $2.5B debt bill as defaults pile up! 💥 🔎 According to a recent Bisnow article, RFR Holding, a prominent NYC real estate firm, is grappling with mounting debt and defaults. The company, led by billionaire Aby Rosen, has a portfolio of high-profile properties, including the iconic Seagram Building and Lever House. 🏢🏦 📊 The firm's debt load has surged to a whopping $2.5B, with $1.1B in loans maturing this year alone. 💸 The pandemic has hit the commercial real estate market hard, causing defaults to skyrocket. RFR Holding is no exception, with defaults on several properties, including the $200M mortgage on the Seagram Building. 📉 🗣️ "The pandemic has created a perfect storm for commercial real estate," said one industry expert. "Companies like RFR Holding are facing unprecedented challenges as they navigate this difficult time." 🌪️ 🔜 So, what's next for RFR Holding? The company is reportedly exploring options to refinance its debt and avoid further defaults. 💡 With the commercial real estate market showing signs of recovery, there's hope that RFR Holding can weather this storm. 🌞 Stay tuned for more updates on this developing story! 📰🔔 #RFRHolding #CommercialRealEstate #Debt #Defaults #NYCRealEstate

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