The following FAQ was designed to answer the most frequently asked questions about Acorn Ventures in general, as well as those on venture capital, investment banking and business services. This FAQ has been compiled over the course of many years. We welcome your feedback via e-mail regarding adding any other relevant information to this FAQ.
Why doesn't Acorn Ventures sign Nondisclosure Agreements?
We do not sign NDA's because it would open us up to potential litigation and would seriously limit the amount and type of deals we may want to evaluate for our portfolio. The following are links to articles that illustrate (in serious and comical ways) why most VC's do not sign NDA's:
http://news.com.com/ http://www.thevc.com/ http://www.billsnow.com/
What is Acorn Ventures' criteria for investment in my company?
Our investment criteria is outlined in detail in the venture capital section of this website. Please review it thoroughly before submitting a proposal to us.
What is the process after I submit my executive summary for review?
After we receive your executive summary, one of our associates and/or partners will review and evaluate your opportunity for investment. If we determine your opportunity is not a good fit, we will inform you that we are not pursuing an investment. If we determine that your opportunity may be a good fit, we will contact you to request more information (often a full business plan, management resumes and any other relevant information). If we are interested in learning more after reviewing this information, we will setup a conference call or face-to-face meeting to get to know you, your team and your opportunity in more detail.
What type of exit strategy is Acorn Ventures looking for?
Our preferred exit strategy depends on what is most suitable for your company and includes an initial public offering (IPO), merger or acquisition.
What do you consider an attractive time period for a company's exit strategy?
A venture fund's lifespan is typically 10 years. Therefore, we are looking for companies that can reach an exit event in 3 to 5 years, 7 years at maximum.
Can I raise venture capital if all I have is an idea?
Raising venture capital with just an idea has become very difficult. After the burst of the .com bubble, most venture capital firms ceased making pure seed investments. A typical VC firm will focus on companies that have established initial operations, initial management and have started development or achieved completion of its product or service. Raising capital for an idea will most likely require one or more Angel investors to get a company prepared for venture capital. Entrepreneurs with companies at seed-stage should evaluate whether our investment banking division may be a suitable funding partner.
Do you invest in public companies?
No, we are true to our nature as venture capitalists and only participate in investments before a company's initial public offering.
Where does the capital come from that Acorn Ventures would invest?
Our capital comes from our venture fund, which is a limited partnership managed by our firm. If funding is provided by our investment bank, the capital will come from trusted third-party investors.
How much equity do I have to give up for an investment?
That depends entirely on the amount of the investment, the valuation of the company, the stage of the company, the future potential for growth and the proposed exit strategy.
Does Acorn Ventures participate on my Board of Directors?
We typically take a board seat in our portfolio companies.
What is Acorn Ventures' Management Involvement?
We're not bankers, lawyers or financial sharks interested in taking over your company. We're entrepreneurs turned venture capitalists with extensive operating experience. We think like you, work with you and support you by taking an active role in management and the board without limiting your overall control.
What type of return is Acorn Ventures looking for?
At liquidation (merger, acquisition, IPO or buy-back), most early-stage venture capital firms look to receive roughly 10 times the amount originally invested. This is not a required return, and we often achieve much higher returns, but if your business can only return a few times the invested capital to a VC, venture capital may not be for you.
Are investments by Acorn Ventures debt or equity based?
We primarily make equity-based investments or debt/equity investments that convert to equity at a later stage. We are not lenders and do not participate in debt-only investments. If you are looking for a debt-only investment, our investment bank may be able to find you a suitable debt-partner.
Do you invest in young, but more developed companies?
Yes. Most of our venture capital investments are made in young and growing companies that are already operating and generating revenue. However, if your company has been in business for a long time and you are looking for expansion capital or mezzanine financing, our investment bank may be a more suitable financing partner.
Once you have raised money for my company, will you consider a direct investment in the future?
Yes. However, your company must fall into the criteria of our venture fund or any other venture funds we will have under management at that time.
What is a Private Placement Memorandum?
A Private Placement Memorandum (Prospectus or PPM) is most commonly used when raising seed or early-stage capital from private investors (Angel Investors), according to rules put in place by the Securities and Exchange Commission (SEC). A PPM is usually accompanied by a subscription agreement which is used by the investor to purchase (or subscribe for) the shares of the offering Company. Companies that don't qualify for venture capital have the highest chance of funding success if a PPM is used to raise funds. Can your Investment Banking division raise money for my company at any stage? Yes. Our investment banking division has been involved in fund raising activities for pure seed companies, early-stage companies, established companies and pre-IPO companies. We carefully analyze each company to establish the appropriate fund raising strategy.
How involved is Acorn Ventures after I receive funding through its Investment Banking division?
We are not involved in your company's management and don't take a board seat for funding your company through our Investment Banking division. However, once we have established a relationship with a company, we often continue to do business over the years, raise future rounds of financing and sometimes invest directly through our fund.
Does Acorn Ventures require a retainer or any upfront fees?
No. We believe that charging retainers or upfront fees of any sort shows an investment bank's lack of confidence in raising funds. Instead, we only work with a select number of companies that we are confident will achieve success.
How is Acorn Ventures compensated for raising money?
Our typical compensation for raising money through our Investment Banking division consists of a combination of success fees and warrants.
What other costs are involved in raising money for my company?
At the end of the day, raising money without spending money is only possible in theory, not in real life. Several expenses may apply during the preparation, fund raising and closing process, such as the creation of documents (business plans, memoranda, due diligence), travel, investor meetings, legal fees etc.