Q&A with Mark Caccavo of Bombora Advisory
Bombora Advisory is an investment management and advisory firm focused on the VC-backed late-stage/pre-IPO market and is based in New York. We work with VC-backed companies, its employees, venture capital funds and its limited partners to provide liquidity solutions of private securities. We then leverage our network of family offices, multi-family offices, secondary funds and UHNW individuals to directly facilitate transactions.
Mark Caccavo founded Bombora Advisory in 2017 with a focus on investments and analysis for family offices and UNHW investors. He has a deep background across the capital markets at buy-side hedge funds and has held senior positions at Santander, Natixis, U.S. Trust.
Join us for a private Family Office Insights Webinar featuring an overview and update of the Pre-IPO Secondary market by Bombora Advisory.
Wednesday June 24th , 2020 • 2:15pm-3:15pm Eastern
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How and why do you see family offices and UHNW investors participate in the pre-IPO marketplace?
In its simplest terms, access. Family offices have been pushed out of the marquis venture funds in favor of larger institutional investors and mega funds. This has left them to allocate to newer funds (which have a significantly lower amount of unicorns ~ companies with a pre-IPO valuation $500mm or above). Additionally, the typical VC timeline to IPO or exit has increased from 6-8 years to 8-12 which leaves a tremendous amount of time until LPs are returned capital.
Through the pre-IPO market, they can access many high growth companies on the path to IPO. Granted they are participating at higher valuations, but they also typically shorten the timeline to 1-2 years and can choose the companies individually.
Most family office investors choose to carve out an allocation to pre-IPOs and invest across 10-20 different companies. Once public, they typically sell and recycle the proceeds into other pre-IPO companies.
What is the key consideration for family offices thinking about investing in the pre-IPO marketplace?
Can I get enough information to have a handle on the company's valuation?
Valuation has long been the key attribute investors had struggled with. Today, the marketplace has significantly more data points. VCs are funding companies longer. Ten years ago companies typically went public after the Series C or D rounds, now they deploying capital into E/F/G rounds giving more data point on valuation, new key investors and growth. The active pre-IPO market also provides a bid/ask in many cases. Lastly, COVID-19 has delayed companies going public which requires companies to update their S-1a quarterly. So to the extent they have already file a preliminary S-1, they need to update it quarterly. Lastly, all of the recent layoffs have flooded the pre-IPO market with new inventory as employees look to provide some cushion until the are re-employed. Companies will have current 409a valuations for purposes of ex-employee option exercises.
How are you different than an EquityZen, Sharepost or Forge?
RainMaker is a different kind of platform. Most of the people on it have their own family office advisory firms, M&A boutiques or are venture capitalists. So, through the network, we all work together to coordinate buyers and sellers - it is a much more discreet process. The average size of our trades is around $5mm. In many cases, we will have previously traded with a company and know the specific preferences from the company on the sale process. I will also note, in the current environment, most companies are not exercising ROFR (right of first refusal) and let transactions proceed unfettered so they can keep as much cash on the balance sheet as possible.
Mark Caccavo of Bombora Advisory
Mark Caccavo founded Bombora Advisory in 2017 with a focus on investments and analysis for family offices and UNHW investors. He has a deep background across the capital markets at buy-side hedge funds and has held senior positions at Santander, Natixis, U.S. Trust. Caontact Mark email@example.com