The Exit Strategy Podcast

In Episode 35 we speak with Andrew Heintzman, who is a managing partner of InvestEco. This venture capital fund focuses on high-growth North American companies that promote health and sustainability in the food & agricultural sector. InvestEco's mandate is to deliver strong financial returns to its investors while helping its portfolio companies build a better world. Andrew gives us his feedback on the current fundraising market, and its changes over the past couple of years versus today. He's bullish on the North American market due to its large size and its competitive landscape, as it is a market that is so large that U.S.-based VCs have the bandwidth to help accelerate their growth. This translates to Venture Capital firms being more open to providing higher valuations due to the market size which offers the potential to expand. Andrew also provides his feedback on what he would expect to see from a European company were InvestEco to consider an investment. InvestEco has had positive experiences in their portfolio company's exit strategies. Andrew confirms that there is no one way to exit an investment and focusing on only one could become a struggle; so, being flexible is essential given market conditions, timing, the ability to be patient, etc. You need a good operating business, a good process and to create optionality, and this will create the best outcome.

The debt ceiling, the subject of the current drama consuming the nation’s capital, is something else entirely. While legally separate from the budget process, it represents yet another check that has evolved into the system since a version of the debt ceiling was first adopted in the run-up to World War I. The Treasury Department has been given gradually more leeway by Congress over how to finance deficit spending, be it for wars, emergencies or the creation of the social safety net. As negotiations over addressing the US debt ceiling continue and the threat of default draws closer, President Joe Biden has resurfaced the controversial idea of using the 14th Amendment as a way to lift the borrowing cap without Congress. Biden has said he doesn’t consider the move an imminent solution, but several liberal lawmakers in both chambers are pushing him to invoke the amendment rather than give in to Republican demands to cut spending and tighten work requirements, among others. Sens. Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts are among 11 senators who are urging the president to take advantage of the amendment to avoid the US defaulting on its debt. China’s $23 Trillion Local Debt Mess Is About to Get Worse. Stanford University political science professor Jean Oi, who specializes in China’s fiscal reforms, said: “The local government debt problem is spread throughout the country. While rich coastal areas will have more opportunities to repay their debt and more resources to draw on, less-developed places in China are going to be much more limited in what they can do. Durham report shows it was Clinton, not Trump, who colluded with Russians. Durham’s 300-plus page report also states that the FBI used “raw, unanalyzed, and uncorroborated intelligence,” to launch the “Crossfire Hurricane” investigation into Trump and Russia but used a different standard when weighing concerns about alleged election interference regarding Hillary Clinton’s campaign. The report also concludes that “at least on the part of certain personnel intimately involved in the matter” there was “a predisposition to open an investigation into Trump.”

We welcome Glenn Argenbrigth, a start-up founder and the founder of the Venture Capital firm Quake a VC that invests at the Seed Stage. We discuss the topics of the venture capital and start-up world today and his views on the start-up scene. Quake is a global player with offices in the US and Europe. Glenn has over 25 years of experience operating and running various private, pre-IPO, and public technology companies. He has founded over a dozen startup ventures, resulting in three public offerings, nine exits, and billions in shareholder returns. His background includes expertise and projects in software, firmware, middleware, hardware, enterprise, SaaS, consumer goods, and Web and mobile applications. Early in his career, he co-founded Mediaplex, one of the original online ad-serving platforms. The Company went on to a successful IPO, with a valuation in excess of $4.5 Billion. It was later acquired and is now part of the ValueClick family of companies. Other notable exits include Intellicom - acquired by Softnet Systems; Jotter - acquired by Saflink; and SFLK - where he restructured the business and successfully relisted the Company on NASDAQ, where the valuation climbed from roughly $18M to over $425M.In addition to his work in the areas of finance and operations, Mr. Argenbright has extensive experience in business development, marketing, and distribution across many verticals. In commerce, he’s negotiated agreements with Walmart, K-Mart, Target, Price / Costco, Sam’s Club, Walgreens, Phar-Mor Drugs, Sav-On, Toys-R-Us, Kay-Bee Toys, and Shop at Home. In tech, he’s forged strategic partnerships with Apple, Microsoft, VISA, Unisys, and Accenture. In entertainment he’s worked with VIACOM, Sony / Tri-Star / Columbia Pictures, Walt Disney Company, and many others.Glenn has appeared as a guest lecturer at numerous universities and startup events throughout the U.S. In addition, he’s been interviewed for both print and television, including Barron’s, Bloomberg, Business Week, CNBC, CNN, Entrepreneur, Forbes, Fox Business, Fox News, Inc. Magazine, Wired, and many others.

France has a plethora of opportunities to make starting a business quite successful through its tax incentive programs and grants that many US companies may not be completely aware of. Thomas clearly helps us understand these programs and even walks us through a case study that helps clarify how it could be done. There are different types of public aid to finance your research and development projects: The Research Tax Credit (CIR): Up to 30% of the expenses incurred, in the form of a corporate tax credit (IS) that can be reimbursed. The Innovation Tax Credit (CII): The CII allows companies to obtain a tax credit of 20% of the number of certain innovation expenses. The Young Innovative Company Status (JEI): Exemption from employers' contributions from URSSAF and IS. Bpifrance Aid: Zero-interest loan or subsidies of 25 to 60% of the R&D budget, Innovative Company label.

As the Biden administration escalates its threats against TikTok, the company’s chief executive made his first appearance before Congress on Thursday. Given the U.S. government’s aggressive recent posture, TikTok CEO Shou Zi Chew was destined for a harsh turn under the glare of the government’s big, bright lights — and that’s very much what played out across the hearing’s sprawling five hours. ChatGPT, OpenAI’s text-generating AI system, has taken the world by storm. It’s able to write essays, code, and more given short text prompts, hyper-charging productivity. The tech is not going away — and indeed has expanded dramatically since its launch just a few months ago. Major brands are experimenting with it, using the AI to generate ads and marketing and it won't stop there. India has long harbored a strong entrepreneurial spirit, and it’s not uncommon to see people leaving their jobs to set up their own businesses. A hallmark of that spirit is quite visible these days in the country’s flourishing startup ecosystem, which has expanded rapidly in the past few years, to say the least.

Episode 30, The SVB Collapse is sending shockwaves throughout the market but let's review what really happened. Act 1 – We developed ANOTHER Technology Bubble, Interest rates cut to zero. The developed world received thousands of dollars in stimulus checks sent to people, and tech stocks rose significantly. In 2020-2021 you had a tremendous amount of cash being dumped into these tech start-ups. This caused SVB deposits to multiply from $62 billion > $198 billion USD in Deposits Act 2 – A tremendous amount of cash was deposited into the SVB balance sheet, and the bank had discretion to re-invest that money. The problem was the SVB was trying to provide loans to their clients in the technology scene, but they all had too much cash already. So, what SVB did was that they took a lot of long-term bonds, which is extremely interest rate sensitive. Now with interest rates rising, you have less demand to invest in start-ups, many of which were unprofitable and many with unrealistic business models. Deposits by this point dropped to $165 billion. Act 3 – March 8th, Moody’s calls SVB and notifies them that they will be downgrading the bank and on March 10ththey downgraded them to a C-rating following the collapse. WHY? Because of all the exposure to all these long-term bonds and notes, and with rising interest rates they were forced to increase the saving rate payout to keep the customers from moving their money to a competitor bank.  The Moody’s call pushed SVB to sell all their $21-billion USD in long-term assets at a $1.8-billion USD loss, and Act 4 – Once the SVB tried to sell $2.25 billion of its stock to investors to make up for the $1.8-billion USD loss and instead of helping it triggered panic, which further dropped deposits by another $42 billion USD to around $ 120 billion USD in deposits. 85% of all deposits were uninsured; so, it means that many of their customers didn’t diversify their banking, and every company should diversify their banking relationships. Act 5 – SVB UK Acquired by HSBC, shares in HSBC fell 3.5%, while Commerzbank slid around 12% and Credit Suisse was down 9.4%. Elsewhere Sunday, U.S. regulators shut down New York-based Signature Bank, a big lender in the crypto industry, in a bid to prevent the spreading banking crisis. First Republic Shares Fall 60% Despite Liquidity Reassurance 2-year on: March 08, 2023 -  5.05% March 13th, 2023 at 4:30 PM - 4.095% 0.97% drop, which is the largest drop in such a short period of time This means that the market expects the Fed to stop raising rates.

Fed Chair Powell says interest rates are ‘likely to be higher’ than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. Powell said the current trend shows that the Fed’s inflation-fighting job is not over. In their December estimate, officials pegged the terminal rate at 5.1%. Current market pricing moved higher following Powell’s remarks, to a range of 5.5%-5.75%, according to CME Group data. BlackRock says European companies are showing ‘surprise resilience’ — and better value than the U.S. The Wall Street giant highlighted in a note Tuesday that European fourth-quarter earnings showed corporate health extended beyond the region’s bedrock sectors of banking and energy. Regional stock markets have been on a good run year-to-date but remain at a discount both on a historical basis and versus U.S. peers. The global human population reached 8.0 billion in mid-November 2022 from an estimated 2.5 billion people in 1950, adding 1 billion people since 2010 and 2 billion since 1998. Population in the world is, as of 2022, growing at a rate of around 0.84% per year (down from 1.05% in 2020, 1.08% in 2019, 1.10% in 2018, and 1.12% in 2017). The current population increase is estimated at 67 million people per year. By 2100 we can expect that population growths will cap at around 10+ Billion people living on the planet.

Swatick breaks it all down in this special episode about the country of India. Strong economic indicators India is the fourth largest economy in terms of purchasing power parity The nation’s GDP is expected to grow by over 8.5 percent in 2010-2011 Liberal and transparent foreign investment regime Well developed banking system and vibrant capital market Strong and independent judicial system Among the highest rates of returns on investment Incredible human capital skills A strong pool of scientific and technical manpower from such places as the  India Institute of Technology and the India Institute of Management Over 255 of Fortune 500 companies getting services from India Second largest English-speaking population in the world Abundant, high-quality, cost-effective, competitive manpower. Over 100,000 IT professionals added each year IT Industry over US$14 billion and growing at 50 percent per year Pervasive entrepreneurial spirit Prevalence of foreign technology licensing: Ranked 1st in the world Availability of scientists and engineers: Ranked 2nd Quality of management schools: Ranked 9th Firm-level innovation: Ranked 12th Firm-level technology absorption: Ranked 16th Easy industrial licensing policy Under the Industries (Development and Regulation) Act of 1951, an industrial license is only needed for items that fall under compulsory licensing, are reserved for the small-scale sector, or in a location that is restricted All industries exempt from industrial licensing are required to file an Industrial Entrepreneur Memorandum No approval is required, only notification needed Financial sector reform Stable tax regime; only three rates of indirect tax and trade facilitation measures have been introduced The Foreign Exchange Management Act, of 1999 provides a liberal regime; forex procedures are straightforward Stocks can be sold on without prior approval Profits, dividends, and capital investment can be repatriated Royalties can be paid by wholly owned subsidiaries to parent companies

In Episode 27 we discuss Fundraising by venture-capital firms hitting a nine-year low in the fourth quarter. Venture firms raised $20.6 billion in new funds in the fourth quarter. That was a 65% drop from the year-earlier quarter and the lowest fourth-quarter amount since 2013.  “Dry powder” would prove to be “wet powder ” as venture capital funds opt to support existing portfolio companies through rough times over making new investments. Recent data from the secondary marketplace shows that bridge rounds became more common during Q4 2022 at every stage, from Series A to Series D. Treasury yields hit new highs last week, with 10-year yields approaching 4% and two-year reaching 4.7%. Short-term US Treasury yields reached their highest peak since July 2007 last week, after new official data revealed the US economy is still coming in hot. The ten-year Treasury yield is an indicator many use as a benchmark for the economy. The Fed is more determined than ever that more interest rate increases are needed. Let’s take a look at what’s driving yields up and if inflation is here to stay.

Venture funding has started flooding back in at least one area: Secondaries! But what is a Secondary? Ralph DiFiore, discusses his experience raising money for one of the pioneering secondary funds in the market. What is the market for it and who is to benefit but more importantly why is it useful? Meta’s Reality Labs lost $13.7 billion on VR and AR last year. What is the Largest US Venture Funding Deals Of 2023, it’s clear that AI is the big winner but Biotech is not too far behind.