Author Archive
The Royalty Model
August 9th, 2010 | 
Author: Is it time to expand the concept of structured angel investing beyond me too pre-VC equity investing in sub $2.0 million pre-money high impact opportunities? Should we instead think of any and all ways for high net worth individuals to use their resources and talents to grow concepts, products, and services whether they fit the 30-1 risk adjusted return profile?
Shouldn’t we support angels to maximize each part of their portfolio needs – current cash flow, liquidity, illiquid private equity, and high yield debt – even within their early stage pre-profitable segment? Since most made their fortune in the small business or professional practice fields, knowing from personal experience the need for cash flow each rugged step of the way toward success, they can judge the practicality and benefit –cost of leasing deals, growth equity deals, receivables financing, and on.
Thus, it behooves us to give best practices and techniques and tools for financial investments along the entire early stage continuum. Therefore, New Vantage is exploring current techniques to tried and true investment approaches - including royalty based vehicles for growing companies instead of layer upon layer of dilutive equity into companies that they know well because of prior relationship or sitting on the board of directors. The availability of better cash flow revenue sharing instruments seems to be meaningful for a portfolio company in growth mode and we will continue research and design of this instrument in the coming weeks and months. We welcome feedback and advice from others on the pros, and cons and context for use of this appropriate tool for high growth companies. These tough economic times demand revisiting all tools in our arsenal for equipping companies to stay afloat and survive today’s economic headwinds and this may well be a technique for structured angels and active angels to try. Stay tuned.
Posted in 
Goodbye American Dream
A sobering piece in the weekend edition (July 31-Aug. 1) of the Financial Times by Edward Luce, “Goodbye American Dream” reinforced my thinking about the future of entrepreneurial endeavors here and the historic role of entrepreneurial finance for innovation. I have recently been speaking around the globe about the apparent decline of venture capital for high growth start ups outside of Silicon Valley and Boston and that article about our stagnant economy only drove a stake in anyone’s idyllic fantasy that a cyclical rebound would soon take hold in the land of Ozzie and Harriet’s economic dreams. The article starkly laid out the flattening of our American growth curve for our life style and economic well being especially for the American middle class and the skewing of wealth to the upper 1% over the last generation.
Unless we find more personal energy and resources to drive a renewed sense of economic resurgence and enthusiasm, we are destined to follow our predecessors in the British Empire and the Roman Empire before them in decline and diminishing of our children’s legacy. The need to focus on savings and optimism and to govern with clarity toward an upsurge for our economy, to reverse our fortunes to a renewed upswing, and not to rely on reliving our past glory and deeds and to end our internal bickering and in-fighting, should be a clarion call for us in leadership positions. We must shed dependence on decade’s old economic models and fictions that the middle class is guaranteed to grow generation by generation as of the old days.
The statistics are sobering – the 70% middle of the economic ladder has been stuck in neutral for over a decade while we have allowed the non-producing financial elite – the 1% of the top earners (wealthy) in the US – to triple their net wealth far beyond their productivity gains. We will have to honestly face our debts, our entitlements and out political mis-alignment or be devoured by our emerging economy partners who only have drive and energy toward progress, not looking back. For our part, the growing non—institutional entrepreneurial financing segment of the economy must pull together and provide time and resource to fledgling high impact opportunities in a once in a generation rekindling of energy. We must regain our momentum or we will face a slippery downward slope toward second rate economic status. Some news articles light a fire under us and are powerful beacons of light on our stark options – let’s see how the angel community and American entrepreneurs can respond to this challenge.