Bill Gross talks about analyzing his 100 startups and others from the marketplace around him.

In conclusion he says:

• Timing is 42% difference between the winners and losers
• Team and Execution is 32% of the difference
• The Idea 28%
• The Business Model is 24%, and
• Funding is 14%

Timing for us is product market-fit and demand.

1. Founding Team (size and experience of founding team, experience in great companies, experience with previous startups, diverse team)
   (5 is best)
2. Financial Backing and Buzz (strength of the investor and their past track record, size of the investment, and investment buzz)
   (8 is best)
3. Market Size and Product Category (estimate of their Canadian and World Wide market size, category analysis, competitive or channel forces)
   (5 is best)

The top 10 most interesting start-up financings this year, and the companies to watch for in 2019:

DarwinAI, Skywatch, Acerta, and Avro are from K-W, while the rest are from Toronto.

The Profiles:

We are not economists.  We do follow a few market indicators that help us decide relative states of health of the investment market and relative states of health of the economy.

One indicator that tells us that there may be less long-term money in the investment markets is the 2-10 US Treasury spread.  This is signaling lean times ahead.  You can find more about this online.  When there is a spread inversion there is a strong market to a near-term recession.

The indicators we follow show that there are either fewer ideas in the marketplace now or less money.  Here’s the information that is forming our opinion:

Canadian companies publishing getting seed rounds.

You can see for the same period in the past three years there is a steady decline in companies publishing their seed rounds.  This may be that we’ve decided this is not important, or it may also suggest fewer ideas, or it may suggest less money available.

Canadian companies being acquired:

There is a drop from last year in this time period and we are also less than 2016, which isn’t a clear trend but it does show a drop in the activity of the marketplace.

Finally,

Global IPOs:

This seems great.  Companies are going public at an astounding rate.

But if we look at the IPO activity before the last recession we see

Almost as if the financiers taking companies public really wanted to get to the markets before the recession.

If we look at recession years that followed we see:

So basically there isn’t enough money in the market to finance all the companies, or perhaps a company is hit by the recession and it’s decided to wait for a better balance sheet.

Regardless, recessions are bad for the investment environment and we feel one is coming.   The goal at TheMIN is to discuss what we can do to stay winners.

The averages look like this:

One conclusion is that the longer a company takes to reach an IPO the lower its valuation at IPO time.   If we split the cohort into two pieces and group the fastest to IPO with the slowest to IPO we see a few other interesting things.

and

There is no real correlation for the fastest to IPO group.  The slowest to IPO group is highly negatively correlated to time to IPO.  So the longer they take the lower the IPO value becomes.  Based on this fastest to the market group, and if things continue, there would be 2 companies every month being founded that will eventually IPO in about 4 years.  Let’s explore how these companies got to the IPO:

• majority received seed round from a parent and spun out
• majority received a Series A from one or two well-known VCs
• 12% of 4-year-old biotechnology companies receive a Series A
• 27% of 4-year-old biotechnology companies receiving a Series A are acquired or IPO
• “clinical stage” and “cancer/oncology” where the most common company descriptions
• from seed valuation to IPO these companies grew in value by 13.4 x on average (based on only the complete company histories we had access to) that’s a CAGR of about 90%.

The full list is below: