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Venture Capital Investing Success
Buck Jordan of Canyon Creek Capital, a venture fund manager at the marcus evans Private Wealth Management Summit Spring 2015, on succeeding in the venture capital space.
NEW YORK, N.Y., Jun 06, 2015 - (ACN Newswire) - "Family funds and high net worth individuals should not try venture capital on their own because they will likely be subject to a massive amount of adverse selection. It is not a space where amateurs or part time investors can easily succeed because institutional funds take all the best deals first. It takes a dedicated team of professionals to source, vet and manage venture investments and this is a capability that family funds should either build themselves or outsource," advises Buck Jordan, Managing Partner, Canyon Creek Capital.
"Public markets are highly efficient - everyone has the same information and can act on a level playing field. Late stage private equity has a fairly efficient market as well because investment bankers generally shop investments to a wide audience. But when you move down to the early stages of venture capital, the market is highly inefficient in terms of transparency and deal flow. To source high quality deals, an investor needs to have a strong network that is constantly keeping track of entrepreneurs for the correct time to invest and then be able to fight for that allocation," he explains.
Canyon Creek Capital is a venture fund manager attending the marcus evans Private Wealth Management Summit Spring 2015, in Palm Beach, Florida, June 7-9.
- What do you look for in companies?
We look for a highly qualified team of repeat entrepreneurs who are using disruptive technology to solve real, tangible pain points in large markets. We prefer Software as a Service (SaaS) companies, as their revenue valuation multiple tends to be between 10-12x. This means, if a SaaS company has USD 1 million in topline revenue, the enterprise value is between USD 10-12 million. At the same time, the downside is relatively manageable because upon investment, you can make a reasonable argument that if the company goes sideways in the future, there will still be a strong technology stack and sticky, recurring revenue which an investor can use to recoup some or all of their capital back.
We like marketplaces, as they can build and scale quickly. We avoid medtech and pharma companies because of their slow sales cycle, which means a slow payback for investors, and the FDA approval process can turn a company into a failure overnight. We also do not like cleantech companies because they are capital intensive and Canyon Creek is looking for companies that can get to scale with USD 2-5 million of capital invested.
- What difference can a strong entrepreneur make?
The importance of having a strong entrepreneur cannot be overstated. Early stage companies have to go through so many changes in their lifecycle that without a highly qualified entrepreneur who can change and adapt, the company probably will not amount to much. We believe that good entrepreneurs can make a bad plan work, but the reverse is not necessarily true.
- How do venture capital funds compare with some of the other assets that wealthy families might invest in?
Most families have a large mix of hedge funds and real estate in their portfolio. Hedge funds are fairly liquid stock, real estate highly illiquid but with good cash flows. Venture capital, along with later stage private equity, is much higher growth but also highly liquid. There are no dividends or cash flow, but an extremely large potential outcome. Many of the successful institutional funds have 10-20 percent allocated towards venture capital private equity.
- Why now?
Right now, we are in a real venture capital renaissance. The cost to start and scale a company has been dramatically reduced over the years and companies can be far more capital efficient. Many markets, such as LA, are booming with a tremendous amount of start-up activity, but the capital markets have not caught up yet. In our market, there is an oversupply of seed capital and an undersupply of Series A capital which is creating a "Series A Crunch" that we believe presents a huge opportunity for our fund. We can invest in companies at Series A risk levels but benefit from something closer to seed prices.
With the incredible amount of data that is available, the proliferation of smart phones, sensors, wearables and cloud technology, there is a veritable flood of innovation coming and there will continue to be numerous billion dollar companies emerging in the early stage space. Family funds should not miss out on the opportunity and should have at least a limited exposure to the asset class.
About the Private Wealth Management Summit Spring 2015
The 16th Private Wealth Management Summit is the premium forum bringing leaders from America's leading single and multi-family offices and service providers together. Taking place at the Eau Palm Beach Resort & Spa, Palm Beach, Florida, June 7-9, 2015, the Summit includes presentations on generational planning, trends in family office investing, conducting due diligence on alternative investments, strengthening client relationships and what to expect in the years ahead.
For more information please send an email to press@marcusevanscy.com or visit the event website at www.privatewealthsummit.com/BuckJordanInterview
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Please note that the Summit is a closed business event and the number of participants strictly limited.
About Canyon Creek Capital
Canyon Creek Capital is an opportunistic "Bridge to the A" and Series A venture fund, which invests in companies with large potential markets, capital efficient businesses and strong founding teams. We're focused on supporting founders who are tackling big, real world, problems with smart, scalable, technology enabled solutions. The Fund has a unique structure which has been tailored towards family offices by giving LPs a significant amount of control and influence over their investment by allowing them to create their own uniquely weighted portfolio. Investors get to "double down" on investments they are excited about while at the same time benefiting from a lower management structure.
Located in Santa Monica, CA, Canyon Creek Capital is located in the heart of what is commonly referred to as "Silicon Beach" which is a major growth area for media and technology startups. Fund I was extremely successful with several realized exits and a successful investments still running, no losses. Canyon Creek is currently raising fund II and has already deployed a meaningful amount of capital which affords investors the ability to benefit from several up rounds and pending exits while still investing at the original cost basis. www.canyoncreekcapital.com.
Contact:Sarin Kouyoumdjian-Gurunlian
Press Manager, marcus evans, Summits Division
Tel: +357 22 849 313
Email: press@marcusevanscy.com
Source: marcus evans Summits
Sectors: Daily Finance, Daily News
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