In the late 1990s, the white-hot IPO market for young technology companies meant that the global investment banks were very active in work with startups. These large firms were not always fully in tune, however, with the needs of early stage companies, and they suffered criticism for over-hyping companies, as well as for questionable relationships between bankers and analysts within their firms. With the advent of Sarbanes-Oxley, and other regulatory changes affecting Wall Street, some of the excesses were curbed, and many of these larger firms started to shift their attention elsewhere. In the last several years, a new generation of smaller investment banks emerged to join those larger investment banks still active in startup work.
One of those new players is CIC client Progress Partners. In addition to their office at CIC, Progress Partners has offices in New York City. They focus on technology and new media companies, helping with raising capital, from seed stage through mezzanine funding. In addition to raising capital, they would include in a list of things they do building strategic partnerships, particularly in the media world, and helping startups find buyers for their firms.
In today’s market, you might think that capital raising and M&A work would be equally difficult and unrewarding. Nick MacShane, Senior Managing Director of Progress Partners,
Nick MacShane, Senior Managing Director, Progress Partners
acknowledged to me recently that indeed “The current market for M&A is still lopsided in favor of the buyers, so investors are barely getting their stake back.” He went on to say, however that “At least they are finding a home for the business. On the capital-raising side, we see an uptick in investment interest in high quality, early stage deals.” Not everything is rosy for later-stage firms, however: “When it comes to later stage businesses, we see that even very high quality companies seeking B and C round funding are generally getting punished for having any kind of burn rate.” Of course there are exceptions, such as the recent success of E-Ink in finding an attractive offer, and the recent IPO of A123.
An uptick in investment interest in early stage deals sounds like good news. The data do show that many early stage investors are still writing checks, and particularly to companies they have not invested in before. To put together financings, Progress Partners acts as a connector between members of the venture community with whom they have built long-term relationships, and new firms that, while they may know some VCs, don’t know many of them, and aren’t necessarily versed in which partners are best to approach for a particular type of business, or how to present their companies’ stories in the best light.
As many of you know, I have a part-time role with a venture capital firm based at CIC, New Atlantic Ventures (NAV). To get some insight into how Progress is viewed by senior people in the venture industry, I asked my colleague Scott Johnson, Managing Partner at NAV, how Progress Partners is viewed. His take? Progress Partners can be helpful. “We look seriously at anything Nick shows us. He screens carefully, and never wastes our time.”