How Vibrant is Atlanta’s VC Ecosystem? $1 gets you $7.48

We often hear that Atlanta does not have the vibrant venture capital ecosystem that the Bay Area or Boston or even Austin have.  So how vibrant is Atlanta’s VC ecosystem?

PitchBook just released research[i] that reveals exactly where the major VC regions in the U.S. measure up.  There are only 12 cities/regions that had more than 30 VC deals that experienced successful exits in the last 10 years, a successful exit being defined as 1x or greater return of invested capital at exit.  Atlanta had 35 deals which ranks Atlanta #8 nationally, ahead of Chicago, Raleigh/Durham and Austin.

The most vibrant market is the Bay Area where the 613 successful exits exceed the rest of the markets combined.

The most impressive data from this study was that that the average multiple of invested capital at exit is 8x.  In dollar terms, $1,000,000 of VC cash invested returned $8,000,000 at exit.  The figure for Atlanta is 7.48x.  What was most impressive about Atlanta’s VC exits is that 97% yielded a return greater than 2x, the highest of all 12 regions.
multiple-on-invested-capital

We have honestly been a little bashful about projecting exit multiples in the double digits.  We walk that fine line between being credible and incredible.  Even VC firms frequently look askance at projections that show 10x or 20x multiples at exit.  We have a pharma opportunity that should generate 25x to over 50x in three to five years.  So guess what?  Vertical Capital Advisors is going to set the curve going forward.  We are going to work with the VC community to move the needle.  We are located in a wonderfully creative, talented and resource-rich region and VCA will be an agent for transformative growth in our region.

 

 

ABOUT VERTICAL

Vertical Capital Advisors is an Atlanta-area business advisory firm built on creating tangible value for our clients, serving clients in just about every industry.  Our clients are both capital growers and capital allocators.  How can Vertical help your firm maximize value?

 

Joe Briner
Managing Director
Vertical Capital Advisors LLC
briner@verticalcapitaladvisors.com
866-912-9543 ext 108

 

[i] http://pitchbook.com/news/articles/which-us-cites-generate-the-best-vc-returns

The Trump Factors (there are 3)

 

trump

A close business associate asked me if my view on the U.S. economy changed in light of the actions taken by President-elect Trump since the election.  The question caused three points to crystallize in the answer I gave.  It went something like this:

There are three Trump factors that combined do have the potential to change the trajectory of the U.S. economy: his focus on growing businesses, his plan to reduce corporate taxes and his plan to reduce regulation.

#1 – Trump’s focus on growing business.  It has been eight years since we had a President who understands and encourages business, small business in particular.  There is enormous pent-up energy that is about to be released by businesses of every size.  We could see a wave of business innovation and transformation akin to the revitalization and creativity of the Renaissance.  Massive business investment could be unleashed by changes in the tax code.

#2 – Trump’s plans to reduce corporate and other taxes.  There is no question that the Kennedy and Reagan tax reductions opened eras of incredible business growth and investment.  Did you know that Apple, by itself, has over $230 billion of cash on its balance sheet OUTSIDE OF THE U.S.?  To put that in perspective, the FDIC[i] reports that there are 5,980 insured banks in the U.S. and Apple’s cash held outside of the U.S. is greater than the combined capital of over 2,000 banks.   That’s just one company!  CNBC[ii] reports that there is $2.5 TRILLION held by U.S. corporations overseas!  That is more capital than all but the top 50 banks.  Imagine nearly 6,000 new banks eager to make loans.  It would be transformative.  (You can tell I am a recovering banker, yes?)  If the corporate tax rate is reduced and Trump’s 10% repatriation tax is implemented, the U.S. economy could see a wave of investment unlike anything in history.

#3 – Trump’s plan to reduce regulation lifts a huge psychological weight off the shoulders of business owners.  The current administration has issued over 560,000 pages of regulations[iii] and this year isn’t over yet; “we’ll add 11,190 pages over the next 44 days, to end 2016 at around 92,830 pages” notes Clyde Wayne Crews of the Competitive Enterprise Institute.

federal-register-page-counts

Source: Townhall.com

You and I must comply with every one of those half-million pages of regulations, lest we face fines and imprisonment.  It’s a staggering concept, a sobering reality.  A wet blanket that dampens the entrepreneurial spirit.

Businesses power our economy.  Relieved of the crushing regulatory overburden and freed of confiscatory taxes, entrepreneurs will flourish under an administration that values American ingenuity.

The question is whether the renewed fires fueling a new wave of growth can escape the gravity of massive debt and spending and a population that is no longer growing but is stable to shrinking and rapidly aging.  It’s a coin flip from where we are today.  We have to catch a series of breaks and President Trump’s plans all have to come to full fruition quickly to avoid a meltdown that will reveal the 2008-2010 crisis to be just the opening act.

At Vertical Capital Advisors, we are seeing a renewed spirit in many of the new clients we are working with.  In the last month we have seen a very strong interest in securing growth capital.  Business owners feel more confident about the future.  They are willing to take calculated risks.  They are willing to invest in people, plant and equipment.  This is a marked change from the previous eight years of cautious, tentative growth where only the most certain of business investments were funded.

 

 

ABOUT VERTICAL

Vertical Capital Advisors is an Atlanta-area business advisory firm built on creating tangible value for our clients, serving clients in just about every industry.  Our clients are both capital growers and capital allocators.  How can Vertical help your firm maximize value?

 

Joe Briner
Managing Director
Vertical Capital Advisors LLC
briner@verticalcapitaladvisors.com
866-912-9543 ext 108

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[i] https://www.fdic.gov/bank/statistical/stats/2016sep/industry.pdf

[ii] http://www.cnbc.com/2016/09/20/us-companies-are-hoarding-2-and-a-half-trillion-dollars-in-cash-overseas.html

[iii] http://townhall.com/tipsheet/leahbarkoukis/2016/11/17/obamas-new-regulations-n2247287