PEI Staff

As a super angel fund, our primary objective is to identify companies poised for extraordinary growth in markets that have huge potential headroom to fuel that growth. The three core markets I see for 2011 are: mobile, e-commerce and enterprise. Mobile is the way to go The dizzying explosion of mobile usage reminds me of the heady days of the internet in the early ‘90s. In roughly 12 quarters since their launch, the combined unit shipments of the iPhone, iPod touch and iPad alone have approached 120 million, easily eclipsing the 27 million unit reach of the Netscape browser in the same time period.

A great deal has been written about Groupon’s rejection of a supposed $6 billion offer from Google. Most of the reports breathlessly describe the explosive revenue and customer growth the company has achieved in two short years and what a breakthrough the model represents. With over 40 million email subscribers, Groupon’s success is based on […]

For our final issue of 2010, while others are sifting tea leaves, reading tarot cards, or gazing into crystal balls for what’s in store for capital markets next year, we’ll tell you what our own proprietary super-sophisticated forecasting model is saying. And if everyone’s bets for 2011 are as accurate as they were for this […]

Carried interest, essentially performance fees, for private equity firms should be taxed as income rather than capital gains. But Blackstone boss Stephen Schwarzman and many of his friends unsurprisingly object, sometimes to hyperbolic extreme. And the additional revenue wouldn't make much of a dent in the U.S. deficit. So despite the symbolic value, the idea is losing out to politics. [The tentative Dec. 7 tax deal between President Barack Obama and congressional Republicans made no mention of raising taxes on private equity gains. Also, the U.S. Senate's Finance Committee last week dropped that idea from a bill to extend broader tax cuts enacted in 2001 and 2003.] The latest Senate plan to remove the carried interest loophole last week became a victim of the horse-trading around extension of Bush-era tax cuts that would otherwise expire at the end of the year - a negotiation that brought a tentative deal between President Barack Obama and congressional Republicans on Tuesday.

You know it’s a busy December when bank meetings are outnumbering holiday parties. By one calculation, thirty-one leveraged transactions launched last week, twelve on Wednesday alone. There were the de rigueur dividend recaps – Decision Resources, Earthbound Farm, Flexera Software, Harbor Freight, HDT Worldwide, Hyland Software, Novelis, and TARGUS. But there were also some genuine LBOs in the mix: Advantage Sales, FilmYard, Sunquest, Syniverse, Transtar, and UTEX. We run through the roll call for a subtle corporate finance point: That’s a lot of deals.

Yesterday, inspired by Bill Gurley’s piece looking at the IPO market in Silicon Valley, I took a closer look at the Massachusetts IPO scene. Now, let’s look at New York. Unlike MA’s robust public company ecosystem, where I counted 33 public companies with greater than $1 billion in market capitalization, I was shocked to discover how very few similarly situated public companies in the Innovation Economy that exist in NY. If you restrict the geography to 30-45 minutes driving distance and part of the New York City “scene” (which encourages mingling and productive talent and idea sharing), you have to eliminate CA, IBM and Priceline.

Bill Gurley’s excellent piece on Silicon Valley IPO Anxiety inspired me to take a companion look at the East Coast, particularly Massachusetts and New York, and evaluate the health of the local IPO economy and prospective pipeline. Today I’ll cover Massachusetts—tomorrow New York. I first came across Bill when he was a Wall Street analyst and covered my company Open Market (IPO 1996). I always admired his perspicacity, even if he didn’t like our stock all the time! For purposes of this blog post, I am only focused on companies involving technology, whether software, Internet, health care or energy – which I’ll define as members of the Innovation Economy. Note also that, for obvious reasons, I leave out any Flybridge Capital portfolio companies in my analysis.

We really wanted to like Basel III. Frankly, anything with a Roman numeral commands our immediate attention and respect: Super Bowl I, World War II, Rocky III. Ok, maybe not Rocky III. The name alone implies a certain tradition combined with a sense of progressive improvement. First there was Basel I (1988). Then came Basel II (2004). Now we have Basel III. Add the gravitas of a Swiss city and, well, we’re buyers. But it’s a rough world we live in. All things once sacred are under scrutiny. Even as governments worked frantically over the past three years on a succession of plans to plug systemic cash leaks and bolster weak balance sheets, the unprecedented velocity of change in the financial sector made the best and brightest regulators look clueless.

Rumors swept through trading floors last Friday that a “big deal” was launching of a kind rarely seen in this market. But by day’s end, those reports appeared unfounded. “We heard a loan was coming with no sponsor dividend,” one syndicator noted wistfully. “But we knew it was too weird to be true.” Ok, maybe we were hearing things, but you can’t blame us for being distracted. First, there was Ireland. Yes, the Emerald Isle (or the Land of Ire, as it’s now known in the eurozone) was back in the news as the poster child for sovereign budgetary woes. And in a flashback to this past spring, capital markets reacted by taking a brief powder. Seems investors aren’t quite as cozy as the rash of bank/bond issuance would indicate.

The world is divided between those who think that the leveraged debt market is overheated, and those who know it is. And for both camps, as surely as the arrival of pumpkin pie mix on supermarket end caps heralds turkey day, the appearance of ranks of dividend recaps on loan and high-yield shelves is a vivid sign of investor over-exuberance. PE sponsors recapitalizing portfolio companies just to take out cash they had put into the original LBO were once features of a late-stage market. But the velocity of market cycles is such today that recaps occur at the beginning. It took six years after the dot com crash for leveraged wackiness to return. This round it’s taken six months.