Ahh, the end-of-the-year lists. VentureBeat has today published its "Top 15 Venture Capital Deals of 2012." According to the article, the largest venture deal of the year was the $277.3 million financing of Fisker Automotive. Fisker is reportedly in financial trouble, and it reminds me of one of my opinions about venture capital: I believe that venture capital works best in cash-efficient business models.
When I was an investment banker, I worked on several financings for telecom and media businesses that had massive capital needs. What I found was that companies with capital-intensive business models calling for build-outs requiring hundreds of millions of dollars had additional elements of risk due to the size of the capital needs and nature of the projects. Projections are by their nature optimistic, and capital-intensive projects can cost more and be delayed (or fail) for a variety of factors, including execution issues, supply chain issues, cost overruns, and delays in obtaining governmental financing, approvals, permits, reviews, etc. These issues make future funding risk higher. All in all, I prefer to see venture capitalists focus on capital efficient business models.
Link to VentureBeat article:
http://venturebeat.com/2012/12/28/top-venture-capital-deals-2012/view-all/
Links to articles on Fisker Automotive's financial problems:
http://www.digitaltrends.com/cars/fisker-automotive-rules-out-bankruptcy-looks-to-wall-street-for-investor-aid/
http://www.latimes.com/business/autos/la-fi-hy-fisker-karma-cash-crunch-20121207,0,753069.story
http://www.foxnews.com/leisure/2012/11/30/electric-car-company-fisker-stalls-looks-to-future/
When I was an investment banker, I worked on several financings for telecom and media businesses that had massive capital needs. What I found was that companies with capital-intensive business models calling for build-outs requiring hundreds of millions of dollars had additional elements of risk due to the size of the capital needs and nature of the projects. Projections are by their nature optimistic, and capital-intensive projects can cost more and be delayed (or fail) for a variety of factors, including execution issues, supply chain issues, cost overruns, and delays in obtaining governmental financing, approvals, permits, reviews, etc. These issues make future funding risk higher. All in all, I prefer to see venture capitalists focus on capital efficient business models.
Link to VentureBeat article:
http://venturebeat.com/2012/12/28/top-venture-capital-deals-2012/view-all/
Links to articles on Fisker Automotive's financial problems:
http://www.digitaltrends.com/cars/fisker-automotive-rules-out-bankruptcy-looks-to-wall-street-for-investor-aid/
http://www.latimes.com/business/autos/la-fi-hy-fisker-karma-cash-crunch-20121207,0,753069.story
http://www.foxnews.com/leisure/2012/11/30/electric-car-company-fisker-stalls-looks-to-future/
