by Zach Miners, IDG News Service (picked up by PCWorld)

May 22, 2013 (Monterrey, CA) — Google is launching a new fund through which it will make later-stage investments in technology companies, a Google executive said Wednesday.

The fund, to be called Google Capital, will be announced this summer but has already made three investments to date, said Mike Pearson, a general partner at Google Capital, at the Red Herring 2013 conference in Monterey, California.

Google already operates a fund, called Google Ventures, through which it invests in startups working in areas like mobile computing, gaming, big data and life sciences. Google Ventures has funded more than 150 companies to date, including Nest and DocuSign.

While Google Ventures tends to make early-stage investments in companies, the new investment arm, Google Capital, will be aimed at the “growth equity side of the market,” Pearson said during a panel at the conference.

“There are a wealth of people out there doing amazing things and we should be able to leverage Google to empower them,” he said.

Pearson didn’t identify the companies Google Capital has invested in so far, but said the fund will invest in areas adjacent to Google’s business, including potentially Internet infrastructure and digital video.

The fund hasn’t been formally announced and a “coming out party” is planned for the summer, Pearson said. He didn’t disclose the initial size of the fund or provide any other details.

Google Ventures invested a total of $51.8 million last year, according to a recent regulatory filing. Venture funds tend to make smaller investments in companies, while capital funds can sometimes invest significantly larger amounts.

“Google Capital is a very smart move” for Google, according to Ivan Nikkhoo, managing director at Siemer & Associates, which provides capital raising and other financial advisory services to tech companies.

In some cases, other businesses have acquired the companies Google made early-stage investments in, he said. Google Capital could provide Google with a way to take more control over the companies Google Ventures invests in. “Google wants to make sure they’re there for the life cycle of the company,” Nikkhoo said. “They want to make sure they control the strategic assets along the way.”

The fund might focus on areas like mobile commerce, location-based services, or technologies for delivering more personalized content and search results, he said. Google is trying to provide more “contextualized” search results with services like Google Now.

One of Google Ventures’ current projects is the Glass Collective, for funding startups that are looking to build products for the Google Glass augmented reality system. Other investments have been made in RetailMeNot, TuneIn and Pocket.

The Top 100 North America forum celebrates private companies on the cutting edge of technology that are positioned to grow at an explosive rate. This is a rare opportunity to meet 250 C-level technology entrepreneurs, corporate strategists and venture financiers from across the continent. It will discuss the drivers for successful entrepreneurship and demonstrate how innovation is creating business opportunities for challengers and incumbents alike.

“The list of companies that made Red Herring’s 2013 Top 100 North America list is quite impressive,” said Mr. Siemer. “I am enthusiastic about the opportunity to connect with such a strong showing of tech innovators and engage in meaningful discussion surrounding the future of our industry.”

About Red Herring

Red Herring is a global media company which unites the world’s best high technology innovators, venture investors and business decision makers in a variety of forums: a leading innovation magazine, an online daily technology news service, technology newsletters and major events for technology leaders around the globe. Red Herring provides an insider’s access to the global innovation economy, featuring unparalleled insights on the emerging technologies driving the economy.

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both in and out of technology enterprises, S&A has successfully completed more than 50 transactions with an aggregate value of over $3 billion in sell-side mandates and over $1.5 billion in equity capital raised. Headquartered in Los Angeles with offices in Singapore and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

Committed to expanding the international technology ecosystem, Siemer & Associates promotes innovative entrepreneurs through its early-stage investment arm, Siemer Ventures, and its technology incubator, WaveMaker Labs. One of the most active investment funds in Southern California, Siemer Ventures has invested in more than 40 current portfolio companies and makes an average of 12 new investments each year in digital media, software and Internet startups. Based in Singapore and sponsored by Siemer Ventures, WaveMaker Labs receives significant co-investment from the Singaporean government as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF).

By Ivan Nikkhoo, Managing Director at Siemer & Associates and Advisor at Siemer Ventures, for SoCalTech.com

May 15, 2013 (Santa Monica, CA) — Many entrepreneurs are skilled at starting companies and building successful small ones. Not a simple thing to do, but they seem to have a knack for it.

Growing a company into a big, growing, successful one is very different, and in many ways, a more difficult task. And taking a company through a hyper-growth stage is the most difficult part of all. That’s where many younger entrepreneurs fail. There are too many moving parts, unpredictable variables, and mistakes that often go unnoticed until they have caused serious damage.

This is why raising growth capital is of one the most important and defining steps for any company. It is at this point that experience, track record, maturity, timing, and a bit of luck come together. As Calvin Coolidge said, “All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work.”

Growth capital is commonly defined as between $10mm to $75mm, and in absence of capital markets for smaller IPOs, raising institutional money has become the most common way to gain access to capital for growth companies. Common questions around this subject include:

• Why would smart institutional money invest in such companies at what seems to be unreasonably high valuations?
• When is a company ready for growth capital?
• How available is growth capital?
• When do you raise growth capital?
• How do you find the right partner?

As always, I believe that no good decision is made in isolation. Let’s address these questions:

Smart Money

Institutional money is often referred to as smart money. The thinking here is that they have the expertise and experience to have been able to raise the funds to play the game, conduct appropriate due diligence, and implement necessary changes at their portfolio companies. This is also why so many commercial banks like to lend to companies backed by institutional money.

Smart money always backs the team. They prefer to back teams they have experience with, or that have a relevant track record, or industry expertise that is a clear differentiation. If you have the right team, they will make the necessary changes if plans are not on track, remove weaker players, and will manage the board’s expectations properly. For that kind of risk mitigation, any smart investor will pay a premium.

Growth Capital Readiness

As Bill Gates famously said, “Intellectual property has the shelf life of a banana.” So when it comes to growth capital, institutional investors look to invest in companies that have a clear differentiation, scalability, execution capabilities, and a great team. There are numerous funds actively looking to invest, so there is usually no scarcity of capital for good opportunities. To get access to capital, key drivers include:

• Team: Does the team have the track record, experience, execution capabilities, and maturity to get the company to the next level? How well does the team work together? Are there any holes in the senior management team? Do they have M&A capabilities and expertise? Are their objectives aligned? Do they still own enough of the company to be properly motivated, or are they too diluted?

• Traction: Has the company refined and proven its model? Is the capital going to be used for further proving the model, or will it be used to enhance the existing working one? What kind of clients, partnerships, and business development relationships does the company have? How referenceable are those relationships? How big is the customer base? How fast is it growing?

• Addressable target market: How big can this idea/company become? Will the potential outcome meet the investor’s IRR requirements? What are the growth potentials, geographical expansion opportunities, and adjacent or complementary verticals? Is there a rollup opportunity?

• Monetization Mechanism: Not every dollar is worth the same. Are the revenues transaction-based, subscription, or revenue share? When do they collect the revenues? Is the business very cash flow negative? What kind of information does the company have on its customers? How much of the revenues are repeatable?

• Defendability of the IP: How difficult would it be to replicate this company with another team and some capital in a short period of time? Are there any barriers to entry? Any patents? How hard of an execution play is this?

• Business Model: Is this a new business model, an improvement on an existing business model, or does it create a dislocation in an existing industry? What are the gross margins, customer acquisition costs, churn, LTV, etc? When will it reach break even or profitability? How strong and detailed are its financial models?

• Company Health: What are the valuation expectations? What does the cap table look like? How many preferences are there? Are there any existing debt and liabilities? Where is the company in its life cycle? Has it shopped the deal? Are there any skeletons in the closet?

This is but a snapshot of how every investor would begin discussions.

Timing Is Everything

I often advise entrepreneurs that they should raise growth capital when they can, not when they need it. As Ellen Glasgow said, “All change is not growth, as all movement is not forward.” The best time to raise growth capital, assuming you are ready for it, is when the market conditions are ripe, the market views your sector favorably, key competitors are being funded, or there is inbound interest.

If the sector is out of favor, key institutional players have already made their investments, or you really need the capital, then you will be playing with a weak hand.

Finding the Right Institutional Partner

Raising institutional money is like marriage. Find the right partner, and life can be fantastic. End up with the wrong partner, and there can be misery!!! The right partner helps you grow with more than just capital, and grows with you.

Most smart institutional investors are always looking for good companies and teams to invest in. They often have tight relationships with the leading incubators, early stage funds, and investment bankers to ensure good healthy deal flow. However, they have specific criteria around sectors, geography, stage, revenues, EBITDA, and check size. There is, of course, the question of the vintage of the fund, and how much dry powder they have for new investments versus capital for existing portfolio companies. One last thing they look at is whether or not they have a portfolio company that they deem competitive or in conflict.

The best institutional investors act as partners in that they bring in other investors, open doors for business development opportunities, help in recruiting, are objective in their advice as the company grows, act like coaches, and guide the company through its inevitable difficult times. That’s why with the right partner, valuation is less important because in the long run, everyone will do better.

The other side of the coin is that by having a partner whose interests are not aligned with yours, you wind up with someone who is not a value-add investor, who does not understand your business, and who has completely different ideas about what the direction of the company should be. Just remember that horrible relationship you had difficulty getting out of …

So when you are raising growth capital, remember that not all money is created equally. Talk to the CEOs of the existing portfolio companies. Talk to the bankers who have dealt with them in the past. Check the reputation. Look for the RIGHT partner.

Considering the fact that in most markets, growth is the biggest driver of enterprise value, focus on building a good team, a strong business model, a healthy company, and growth. So remember, as Albert Einstein famously said, “Intellectual growth should commence at birth and cease only at death.”

Ivan Nikkhoo is an experienced entrepreneur, investment banker and VC focused on the life cycle of tech companies. He is a Managing Director at Siemer & Associates, and an advisor to Siemer Ventures.

Apple ● Auctionomics ● Crowdstar ● EasilyDo ● Facebook ● Felicis Ventures
Flipboard ● Foodspotting ● Good Technology ● Halfbrick ● Kabbage
Legacy Venture ● Longevity Fund ● Netflix ● Path ● PayPal ● RewardsPay, Inc.
Rock Health ● Samasource ● SAP Ventures ● Saveup ● Softech VC ● Speck Design
StitchFix ● Twitter ● Veritey ● Women 2.0 ● XG Ventures ● YouTube / Google TV

To view more photos from the event, please click here to see our Facebook album.

The panel will take place from 12:30 pm – 1:45 pm on the third day of the four-day conference, organized by Digital Hollywood. Panelists will discuss the top digital trends affecting the music industry, highlighting building successful brands and monetizing content in the digital era. The conference will attract hundreds of attendees and speakers from all walks of the digital music, entertainment and tech industries, including developers, C-level executives and investors.

“The music industry has had a turbulent relationship with digital media ever since the late 90’s,” said Rudolph. “After a decade of repositioning, we’re finally reaching the point where digital media is beginning to contribute a financial benefit to music brands rather than offer an obstacle to success, and it’s exciting to speak on this panel highlighting the current successes and the future possibilities.”

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both in and out of technology enterprises, S&A has successfully completed more than 50 transactions with an aggregate value of over $3 billion in sell-side mandates and over $1.5 billion in equity capital raised. Headquartered in Los Angeles with offices in Singapore and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

Committed to expanding the international technology ecosystem, Siemer & Associates promotes innovative entrepreneurs through its early-stage investment arm, Siemer Ventures, and its technology incubator, WaveMaker Labs. One of the most active investment funds in Southern California, Siemer Ventures has invested in more than 40 current portfolio companies and makes an average of 12 new investments each year in digital media, software and Internet startups. Based in Singapore and sponsored by Siemer Ventures, WaveMaker Labs receives significant co-investment from the Singaporean government as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF).

The panel will take place from 2:30 pm – 3:30 pm on the second day of the two-day conference, organized by Digital Media Wire (DMW). Panelists will discuss the top digital financing trends for the gaming industry, highlighting the key components that determine whether they choose to invest in — or acquire — a gaming company or not. The conference will attract hundreds of attendees and speakers from all walks of the gaming industry, including developers, C-level executives and investors.

“The gaming industry has been experiencing increased consolidation and drawing considerable investment focus over the past year, making it a hot topic among members of the digital media investment community,” said Mr. Siemer. “I am delighted to share the insights I’ve gleaned from the conversations I’ve had and deals I’ve worked on with other members of the industry.”

About Digital Media Wire, Inc.

Digital Media Wire, Inc. launched in 2000 with a simple yet compelling proposition to provide busy executives with a daily briefing of the most important news stories about the business of digital media. On July 20, 2000, DMW published the first issue of Digital Media Wire Daily — a daily email newsletter dedicated to objective coverage of news stories about the convergence of media, entertainment and technology. Today, DMW is a media company that consults and manages marketing campaigns for digital media brands, owns and produces industry conferences, publishes daily newsletters and operates the popular www.dmwmedia.com news and community portal.

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both in and out of technology enterprises, S&A has successfully completed more than 50 transactions with an aggregate value of over $3 billion in sell-side mandates and over $1.5 billion in equity capital raised. Headquartered in Los Angeles with offices in Singapore and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

Committed to expanding the international technology ecosystem, Siemer & Associates promotes innovative entrepreneurs through its early-stage investment arm, Siemer Ventures, and its technology incubator, WaveMaker Labs. One of the most active investment funds in Southern California, Siemer Ventures has invested in more than 40 current portfolio companies and makes an average of 12 new investments each year in digital media, software and Internet startups. Based in Singapore and sponsored by Siemer Ventures, WaveMaker Labs receives significant co-investment from the Singaporean government as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF).