Capital Raising
Posted on Mar 1, 2022 4:00am PST
The capital raising landscape is improving for new and growing ventures.
Venture capital is plentiful for startups, though much of it is focused
on these industries/assets: medical devices, software, internet media,
biotech, and energy. At the same time, the criterion for these infusions
is much more stringent than in prior years.
What about the other sources of funds? Financial institutions are slowly
dipping a foot into the water; specialty lenders (non-banks) are increasingly
providing funding to the vast middle market. Even the large and community
banks are starting to seriously analyze new transactions, providing senior
debt for both growth and M&A. More deals are getting funded and the
covenants are somewhat less onerous (e.g. waiving the personal guarantee).
The competitive environment for mezzanine lenders has heightened, with
more entrants to the field. In addition, the rates now hover between 10
to 14%, with reduced requirements for warrants. Private equity (PE) funds
are still cautious, as evidenced by the expanded length of time from letter
of intent to a transaction close. The firms with high value-add products
and services are in high demand. Although PE funds are flush with cash
(termed dry powder), the diligence performed since 2008 has more than
doubled in scope and intensity.
Mentor Securities is primarily engaged in capital raises and sellside engagements.
We are now working with some doctors that have patented medical devices
or products they want to exploit. These projects will likely result in
an outright sale or a royalty/licensing agreement with pharma.