Money money money

For the first 40 years of the technology industry, high-growth, breakout companies would go public (IPO) much earlier in their lifecycle. Intel went public two years after incorporation, Amazon when it was three years old, Apple at four, and Cisco at the ripe old age of five. Microsoft was an outlier and long in the tooth when it went public after ~10 years in 1986 (largely on the back of its 1980 deal with IBM for MS-DOS.)

In the 2000s, the timeline to IPO lengthened significantly with some companies taking up to a decade or more to go public. With this shift in time horizons has come a shift in financing strategies and capital sources to fund them. Investors who used to invest in young public technology companies have been forced to invest in private companies instead. Long time horizons to liquidity has created large secondary markets for common stock. And finally, the shrinking number of public breakout companies (and public company founder role models) has created a founder generation skeptical of going public.

In this section we cover new sources of capital for late stage financings, secondary stock sales and tenders, and initial public offerings. I am not a lawyer and this is not intended to be legal advice so talk with your attorney about these topics.

Late-stage financing: Who should you be talking to?

As your company grows, the range of investors who can fund your next round shifts. While some venture firms (such as Benchmark, True Ventures, and Upfront) focus largely on series A financings, many traditional venture firms have either expanded their scope to include later stages or raised stand-alone growth funds to fuel laterstage high-growth companies. This includes funds such as 8vc, Accel, Andreessen Horowitz, Bessemer, CRV, DFJ, Felicis, Foresite, Founders Fund, General Catalyst, Greylock, Google Ventures, Index Ventures, Khosla Ventures, KPCB, Lightspeed, Matrix, Maverick, Menlo, Mayfield, NEA, Norwest, Redpoint, Scale, Sequoia, Shasta, SignalFire, Social+Capital, Spark, Sutter Hill Ventures, Thrive Capital, Trinity, USV, Venrock, and others. ¹ In general, the larger the fund the more likely they are to do late-stage investments.

In parallel, there is a whole class of later-stage funds that have traditionally focused on the growth stage such as Capital G (Google Capital), GGV, GCVC, IVP, Insight, Meritech, Summit, and the like. Newer funds, like DST, Tiger, VY have also emerged to take an entrepreneur-friendly approach to late-stage investing.

A more recent development over the last few years is the emergence of public market investors, or family offices, as direct investors in later-stage companies. This includes firms like BlackRock, T. Rowe Price, Fidelity, and Wellington, as well as hedge funds like Point72 and TriplePoint Capital. Some hedge funds, like Viking and Matrix, have focused on life sciences and digital health investments at the later stages. Sovereign wealth funds like ADIA, EDBI, GIC, Mubadala, Temasek, and others have also done direct investments in companies, while Softbank has emerged as an investing giant fueled with capital from Saudi Arabia and other sources. Private equity or crossover funds like KKR, TPG, Warburg Pincus, Blackstone, Goldman Sachs, JP Morgan, Morgan Stanley, and others have set up private tech-specific funds or efforts. A number of billionaires have also started to write large checks from their family offices to invest directly in exciting technology companies.

Finally, you have additional options later in the company’s life such as strategic investors and angel-led special-purpose vehicles, which are one-off funds raised specifically to invest in your company. The proliferation of late-stage capital sources suggests now is one of the best times for an entrepreneur to raise late-stage rounds.

1. Note: I’ve made an effort to include usefully representative lists of investment firms in this section, but I must warn readers that these lists are not comprehensive—and they may soon be out of date in any event. Do your research and don’t rely solely on lists of investors that you find in books. Also, I offer my apologies to any firms I overlooked.