Investment opportunities available on the MicroVentures platform are typically private placements in startup companies at various points in their lifecycle. The startup lifecycle spans idea generation to an eventual exit through an acquisition or initial public offering with several inflection points throughout. Companies featured on the MicroVentures platform can be categorized in the seed, early, and late stages of the startup lifecycle.
Seed and early stage companies featured on the MicroVentures platform are seeking capital to invest in product development, building a team of employees, and formalizing customer acquisition strategies. While seed stage companies are focused on product development, early stage companies typically have a handful of users testing a beta product while fine-tuning their go-to-market strategy and building out sales channels.
• Focused on product development and preparing for a broader market launch.
• Product is usually in use by early beta customers for testing and feedback.
• Typically cash-constrained and seeking its first outside investors through family, friends, and angel investors.
When offered on the MicroVentures platform, seed and early stage investment opportunities are primary offerings meaning capital raised by MicroVentures is received by the company to invest in business development activities, additional employees, and user expansion. Investments within this stage typically take two forms: convertible notes and preferred equity. The form of investment is dependent on the company’s relative maturity with seed stage investments typically structured as convertible notes while early stage companies issue preferred equity in exchange for investor funds. In institutional venture capital terms these are known as Series Seed, Series A, and at times Series B.
• Officially launched and focused on customer acquisition.
• Implementing its sales channel strategy and attempting to reach breakeven cash flow.
• Generating revenue but pursing additional capital from institutional investors to invest in customer acquisition and business development.
Late stage companies have demonstrated viability as a going concern and generally have a well-known product with a strong market presence. Late stage companies have generally reached a point of positive cash flow generation and profitability and begin to experiment with expanding into tangential markets. Early investors in late stage companies start to search for sources of liquidity thus leading late stage companies to position for a liquidity event, usually in the form of an acquisition or initial public offering.
• Well-known product which has successfully penetrated its initial market and learned where and how to move next.
• Cash flow positive and introducing its product into tangential markets.
• Investors are seeking liquidity as the company begins to position itself for an acquisition or an initial public offering.
Late stage investment opportunities on the MicroVentures platform are typically secondary investments. MicroVentures sources secondary investments from existing investors in a late stage company, providing liquidity to early investors or former employees. MicroVentures purchases preferred or common shares from early outside investors or former employees, respectively. In some instances, MicroVentures will participate in a tender offer, a process enabling current employees to sell shares in the secondary market to institutional investors.
Investments made early in a company’s lifecycle typically require a long holding period and can be riskier relative to a late stage company with a well-known product on its way to market dominance. Understanding the lifecycle stage at which an investment will be made is paramount in accurately capturing the risks and return characteristics associated with that investment.
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