1. Late-Stage, High Growth, Private Companies
Raising Capital:
Late-Stage, High Growth, Private Companies
Sanjai Bhagat Provost Professor of Finance Independent Director, ProLink Solutions

2. Decreasing Number of Public Companies in the U.S.
In Any Given Industry: Winners Take All
Source: Doidge et al (2018)

3. Decreasing Number of Public Companies in the U.S.
In Any Given Industry: Winners Take All
Source: Doidge et al (2018)

4. Where have all the flowers gone

5. Where Have All The IPOs Gone?
Source: M. Lowry, R. Michaely, and E. Volkova (2017)

6. Number of Start-ups that raised at least $150 M, 7 years after first round
Source: Ewnes & Farre-Mensa (2018)

7. Round up the usual suspects…

8. Decline in number of IPOs, and number of public companies
Sabanes-Oxley Act 2002
Dodd-Frank Act 2010
Perhaps not …
Decline in number of IPOs,
and number of public companies
long before 2002!

9. NSMIA National Securities Market Improvement Act 1996
Federal pre-emption of states’ Blue Sky Laws
Allows investors to raise unlimited amounts of capital from “accredited investors”
Used extensively by Venture Capital and Private Equity firms
Changes to Investment Company Act of 1940
Exempts from registration/disclosure private funds
with 100 or fewer investors

10. VC and non-VC capital to late-stage startups
Source: Ewnes & Farre-Mensa (2018)

11. New sheriffs in town…

12. Diversified Private Equity Funds Historically in LBOs;
Now in “growth-equity” investments
Mutual Funds, Hedge Funds
Historically, active IPO investors
Now, investing in private VC-backed startups

13. Non-VC investors in late-stage startups
Source: Ewnes & Farre-Mensa (2018)

14. Source: Chernenko et al (2017)

15. Source: Chernenko et al (2017)

16. Source: Chernenko et al (2017)

17. Source: Chernenko et al (2017)

18. Founders equity after first-round of VC financing
Source: Ewnes & Farre-Mensa (2018)

19. New kid on the block?

20. Regulation A+ offerings, or, Mini-IPOs 2016-2017 290 companies
$400 million total raised
Most companies have no revenue
Industry: Finance, insurance, manufacturing
AuditAnalytics (2018)

21. Positively related to post-IPO ownership of
IPO Valuation
Positively related to post-IPO ownership of
CEO VC
Officers and Directors
Other Blockholders
Negatively related to stock-sales during the IPO of
AuditAnalytics (2018)

22. Founders will continue to own significant equity after the
Given, IPO Valuation is
Positively related to post-IPO ownership
Negatively related to stock-sales during the IPO
Founders looking for equity capital should assure hedge-fund/mutual fund/private equity group:
Founders will continue to
own significant equity after the
equity capital has been raised