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Zombie Funds

 Apocalyptic Future or Salvation?

A few days ago Luisa Beltran of PE Hub asked whether and what we should call the now popular appellation “Zombie Funds”.  I responded to her with the following:

“Here at Semaphore we call them “clients”.  No need for a pejorative characterization. It’s rather matter of fact.   Often it’s because GPs and LPs become mutually misaligned (for instance, when a carry hurdle may never be met it just makes sense for everyone to move on – the GPs to other career interests and the LPs knowingly recognizing that a better more attuned option exists to manage out the fund).

Yes, in some high profile cases it’s because of fraud or malfeasance of a GP that we find ourselves stepping into General Partnerships at the request of the LP.  Certainly those are the notorious examples.  Funny in that the GPs we replace become our best references.  Notwithstanding, generally it’s just good business judgment to let an entity such as Semaphore step in to “refresh” the relationships and more easily get the fund portfolio to perform until appropriate liquidation of the fund. The former GP moves on to other more potentially lucrative experiences, the LPs gets a more profitable eventual liquidation and everyone’s reputation is salvaged.  So let’s commonly drive a stake into the heart of the Zombie mischaracterization and understand that end of fund life sometimes requires good and compassionate hospice care.“ 

Here is the link to some other responses - PEHub.  Take a look.  If you want to discuss this or have a challenging fund situation please write me at mdisalvo@sema4usa.com.

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Semaphore (www.sema4usa.com), is a leading global professional services provider of Private Equity and Venture Capital funds under management and diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: troubled funds, equity, private equity funds, Semaphore, funds under management, general partners, limited partners, turnaround, LP

Beach Blanket Bingo?

Semaphore Has a New Markets Tax Credits Summer Project

Spring has finally made an appearance to New England after a long winter.  Hot summer days spent languishing at the beach; margaritas by the pool or skimming on the lake in a new boat are moving their way to the front of everyone’s minds.  No one thinks of stifling days surrounded by paperwork with the sun shining through the office window…you know, the one with the broken air conditioner. While summer is a time for relaxing and rejuvenating, the Semaphore staff is going to be reviewing projects, diligently negotiating contracts, finalizing deals and closing multi-party agreements in order to fulfill our latest allocation of New Markets Tax Credits funding.  

Semaphore has been operating Pacesetter CDE since 2010 and last year entered into an agreement with its majority shareholders, Wells Fargo and Bank of America, to acquire 100% of the stock of the firm.  We are pleased to announce that a $30 Million New Markets Tax Credit Allocation has been awarded to us in the latest round from the U.S. Treasury Department's Community Development Financial Institution (CDFI) Fund.  Semaphore is one of just 85 Community Development Entities (CDEs) throughout the nation that has received an award this year.

The New Markets Tax Credit allocations have assisted hundreds of low-income communities with the help of private investment capital.  We are excited that our good fortune allows us to actively continue to participate in revitalizing communities and creating jobs to improve distressed areas around the nation. So…while you are enjoying your sun filled activities, keep us in mind if your beach towel discussions turn to equity investments in low income communities; we would love to hear about any projects in which you think we can assist. 

Have a safe and profitable summer!

Louise Martineau is the Director of Operations at Semaphore. Semaphore (www.sema4usa.com ) is a leading global professional services provider of Private Equity and Venture Capital funds-under-management and diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit provider and advises General and Limited Partners as well as corporations around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: private equity funds, Semaphore, investment, new markets tax credits, Announcements

Boston Lives

I had a lovely lunch at a great sushi place last week with a Limited Partner to whom I’d just become acquainted, nothing unusual there – except that the place is just a few runners strides from the finish line of the Boston Marathon. It was barely two days after the massacre in my city.  And just feet from us were a mob of live satellite trucks and a gang of media lined up cheek by jowl speaking into microphones with cameras trained on their faces, the background eerily quiet and barren. It was certainly strange seeing such a large and vibrant part of the city, some 15 blocks of Copley Square in the Back Bay cordoned off with an army of men and women wearing camo, carrying carbines and what felt like hundreds of others in white environmental suits clawing through every inch of the city’s streets and rooftop. The juxtaposition of my lunch and the sad events of hours earlier should have been alarming.  It felt rather normal, calming, and even necessary.

My new LP friend suggested we meet and support a neighborhood place that surely was bereft of business with such a wide swath of the city shut down and pall cast among patrons in the city.  We bantered with the server, asking “how is business” despite it being abundantly clear by the near empty place that should have been bustling at noon on a work day.  Our server answered that business was “dead”.  Odd word usage considering the circumstances of the day.  I know… I used to work in the restaurant biz and the phrase is always used to quite accurately describe the state of business at that moment in time.  Nonetheless, it was a bit jarring.

On the day after our lunch the President would be arriving nearby to speak at an interfaith service, thank volunteers, medical staff, and first responders.  He would comfort survivors in the hospitals scattered across Boston.  Boston is a living city.  That word, “living” should sound as strange as our server’s description of business. It did not. The city quite literally founded America.  It is North America’s most European city – in architecture and attitude.  Now it has taken on even more of a kinship as it suffers the senseless horrors of mad bombings similar to Madrid and London. I have personally experienced the atrocity of a terrorist bombing that leveled my hotel in Northern Ireland and have seen cars exploding in Tel Aviv and Jerusalem.  I never imagined such events would visit home.  One world indeed.

Our working lunch was full of business challenge, intellectual questioning, a bit of fun, a comparative of cities we’d lived and worked in, and discussions of family history.  Other than the initial interaction with our server we didn’t discuss or even intimate the existence of the horrid events displayed on every headline around the globe or the ongoing investigation just a few steps away.  It was unnecessary. Neither of us forgot it. We just needed to march on – for our own sake and the city’s.

Barely a day and half after that lunch the entire city and three neighboring cities were in lockdown  – not just a dozen+ blocks – through a long evening and into the next  watching a manhunt for the final suspect brother who had perpetrated the cowardly acts of blowing up the Boston Marathon. Within minutes of the brother being found there was another explosion – of relief, of thankfulness, of appreciation for the work of police and the remembered acts of heroism by the nurses, doctors and EMT’s, firefighters and police, volunteers and  spectators  who made things better because they were acting entirely normal at the time of the greatest need.  They were simply doing their jobs. 

On the very next day my family journeyed back to the site of the Marathon finishing line to pay personal honor at the roadside memorials littered with notes of condolence, of awe and appreciation. Now it is time for all us to honor them and go about doing our own unglamorous and comparatively unimportant jobs.  We are, in our own small way, responsible for a return to a new normalcy.  Boston is a living city – made more strongly vibrant by ever remembering but somehow still casting aside the terror that visited her this third Monday of April.

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After the horrific events of this past week, our prayers go out to all of the victims, volunteers, medical staff and those who responded and stayed diligent to the end in finding those responsible. I would like to take this opportunity to suggest sending a donation to the One Fund Boston. Information can be found by visiting the One Fund website at http://onefundboston.org/ .

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity and Venture Capital funds under management and diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

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Topics: limited partners, LP

Results of Annual Semaphore PE Industry Confidence Survey

 Self-Confident PE v Congressional Follies

By Mark S. DiSalvo

 

The Semaphore Confidence Survey respondents are truly prescient.  If America had only listened to our results last year it would have saved the American people over a Billion dollars in advertisements and political machinations in the just concluded presidential campaign.  Exactly twelve months ago some 47% of our respondents had confidence in Mitt Romney (funny, that number).  Game over.  Then again, only 39% were confident in President Obama.   Let’s see what Nate Silver can do with this year’s results!

While Romney is off the political grid and despite the big re-election, only 33% of respondents expressed confidence in the President with 37% stating a lack of confidence in him. That is decidedly better than his principal newest political foe, Speaker John Boehner, who “enjoys” a 3% favorable v 64% unfavorable rating. Those abysmal ratings are only superseded by Congress as a whole with nearly 80% expressing no or little confidence in our elected officials laboring under the Capitol Dome with not a single expression of confidence by any respondent.

In contrast some 78% of our respondents are confident in themselves and 43% remain confident in the PE/VC Industry with only 18% expressing some lack of confidence in how they earn a living. Personal confidence slipped a bit from last year’s results of 81%. Confidence in the US economy has slipped from last year, 37% to 46% and degraded even more with the International economy as the preponderance of those with little or no confidence grew from 47% last year to 57% today.  This seems a bit counterintuitive in that the number and size of expected deals appear significantly up by those self-reporting their expected investment objectives.  Further proofed by the fact that 65% earned more income last year than in 2011 and fully 57% expect to earn yet again more income than in 2012 - they’re going to need it to pay higher taxes.

Continuing the reversal of a trend prior to last year, my industry colleagues continue to see the prospect of more income, more deal flow and high confidence in themselves, their peers, and industry. This clear read comparing the raw highlight data from the 5th annual Semaphore Confidence Survey with last year’s results affords some fascinating insight across business and politics.

And in what is the group investing?  Enterprise Software replaced Social/Community Technology for the top spot with the latter moving down to third and Financial Services moving from eighth to 2nd this year.  Health Care Services moved from third to 4th with Digital Media rounding out the top five.  For the second year in a row, Sustainable Energy/Cleantech (for the first three years of our survey in the top five) failed to make the top ten.  On-line Consumer Retail and Gaming went from 4th and 5th to 9th and 10th.

The distribution of respondents in the US stayed remarkably the same from past years - the top six were CA, MA, NJ, NY, CT, TX, with only NY and NJ swapping places. Our US respondents had reasonable confidence in their state governments with 28% expressing confidence - that must look like heaven to the US Congress even though it is down from 37% last year.   

International responses were quite different.  We had our widest ever distribution of respondents with only the UK remaining on top with 27% of all international survey-takers with  Canada, China and France rounding-out the top four.  Russia, Japan, Switzerland and Germany were knocked out of last year’s top five. International respondents had crushingly poor opinions of their governments with the same 74% having no or little confidence in their countries leaders, up 3% from the 2011 survey and more than double the 31% of three years ago. 

The over 470 who did reply this year, up slightly from last year, were weighted a bit differently than  prior years’ mix of VC (39%  this year v 28% last year), Buy-out pros (24% v 33%), Limited Partners (13% v 11%) operating executives (6% v 19%) and third party professional 18% v 12%).

Comments this year were generally policy oriented and in a serious vein.  Some can be viewed on the raw data highlight link below.  There was one comment I’ll share in full from either a jokester or savant – or both:

“I met a fairy who said she would grant me one wish.  Immediately I said, "I want to live forever." "Sorry," said the fairy, "I'm not allowed to grant eternal life." "OK," I said, "Then, I want to die after Congress gets its head out of its ass!" The fairy replied, "You crafty bastard."  12/26/2012 2:14 PM

Maybe this individual should run for Congress.

See you next year.

To see the highlights of the results of the 2013 Semaphore Confidence Survey please click here.  If you want to do your own comparison, the 2012 Semaphore Confidence Survey results are here.

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Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity and Venture Capital funds under management and diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: entrepreneurs, equity, private equity funds, Semaphore, funds under management, general partners, limited partners, VC, investment, Business Operations

An Office Lunch Table Thanksgiving Tale

 Leftovers and gratitude - a new Semaphore tradition.

By Mark S. DiSalvo

At my Thanksgiving Day table we go around the room and ask each family member (31 this year) to relate just what it is for which they are most grateful.  Responses are variously funny (“my big nose so I can better enjoy the smell of that wonderful pecan and pumpkin pie” or “I’m especially pleased to be taller than my runt older cousin who always tortured me when I was a kid”); poignant (“that Mother’s dementia has allowed her to forget the pain of the past year and simply enjoy our family get together”) and variously serious (getting into a favorite university, the blessing of a new child, etc.).  I’m sure it’s a tradition or experience that many other families enjoy.

On the Monday after the holiday, with my colleagues at our office lunch table, it was noted how I had not written a biz blog post for a couple of months. We agreed I should highlight the recent transaction where we acquired a New Markets Tax Credit platform and trumpet the recent investments. Somehow we got off on the tangent of family Thanksgiving expressions of gratitude.  It struck us that we don’t do the same at work as we do in our homes.  When the gang started discussing that very fact, we went from voicing gratitude for our good fortune to have interesting careers to bemoaning those, some of our relatives and friends that are up against it and pressed economically, in unproductive careers or who don’t have the privilege of a job at all. We discovered, in conversation, that our successes, in and of themselves are unimportant but that true satisfaction came in helping others get the same emotional fulfillment that we enjoy when we turnaround a fund or help a portfolio company earn a new customer. We were amazed to discover we’ve supported the creation of a few thousand jobs over the past decade and resolved, collectively, to see how we can ensure that the dignity of work is afforded to even more people as we continue to invest and nurture our current and future portfolio.  The discussion turned to taxes and universally, albeit some of  my colleagues begrudgingly,  we understood that the moaning about an increase in marginal tax rates and an expected upping of capital gain was a tiny price for the benefit of our  Semaphore Team working together and doing so in this engagingly challenging industry in a great country. Experiencing the ancillary profits of hard work as satisfaction, in and of itself, as well as the emotional stimulation of assisting entrepreneurs and stakeholders alike, we realized, was the true reason we labor. Sure, we like the monetary success but the sense of accomplishment when a business liquidates on its own terms and seeing the unadulterated joy of an entrepreneur actually accomplishing a dream is our most sustaining payoff.

Bottom line, we are privileged indeed.  I think we’ll start a new tradition.  Lunch table Thanksgiving. Nothing goes better with left-over turkey and stuffing sandwiches (with cranberry sauce, of course).  Try it – establishing the tradition of asking your colleagues about what makes them grateful at work.  You might find a new motivation and a reason to believe in yourself. The sandwich isn’t too bad either – lighter on the mayo next year.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity and Venture Capital funds under management and diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: turnaround, investment, new markets tax credits, portfolio company

No Sand Between Our Toes 2012

No Sand Between Our Toes (2012)

But our LPs are very happy that we don't have summer tans.

This is the fifth edition of our summer blast. OK, it should be titled "Some Sand Between Our Toes". We've actually had the fortune of enjoying both a busy period and a highly efficient back office, operations and professional mitigation staff that is running like a well-oiled and glowingly-tanned sunbather. After 11 years of taking over troubled fund assets and doing diligence on funds and deals, we have comfortably created an effective process that makes our clients more liquid and we, at Semaphore, smiling at both our good fortunes. In fact we've just spent this past month officially closing down a Venture Fund after intervening some five years ago.

It may not be a breezy beach read but here is the story. The North Shore Fund (name changed to protect the guilty) was a moderate sized venture fund with two General Partners investing from a syndicate that included many of America's most well-known banks and several larger state pension funds, each with approximately $40 million in committed capital. It was a second fund run by well-educated but under skilled managers. You'll have to wait for the movie but suffice it to say, returns were less than generous. More accurately, they were outright awful. While few get fired for poor performance alone, you will get fired for willful destruction of value, cutting governance corners along the way and playing just on the edge of fraud. The LPs had spent the better part of two years fighting with the GPs about their misbehavior while paying 2 full points in management fees. Litigation had been filed and discovery was ongoing. There was not a no-fault divorce clause in the Limited Partner Agreement and some several hundred thousand had already been spent on litigation. An LP who had previously worked with Semaphore introduced us to the syndicate. We promised three things: 1.) Get the GP out the door without litigation. 2.) Take control of the fund and let the partnership know what had gone wrong. 3.) Tell the truth about whether we could fix it.

We were not very welcome when we walked in the GPs door to introduce ourselves as the folks who were going to replace the very individuals who greeted us. Governance was a mess, portfolio companies had been wholly ignored during the protracted fight and fund values were, well, lower than the clams buried deep in the sand we hoped to be trodding this summer. In fact we ended up taking over Fund I as well, whose value had wholly eroded. We mercifully buried the fund and secured complete liability protection for the LPs.

Back to Fund II: Bottom line is, we fixed it. Semaphore walked the GPs out the door without further litigation; straightened out governance; righted portfolio businesses; sought and received third party reparation; and replaced a third of portfolio company management teams. Ultimately, Semaphore returned 3.1X of value – all without drawing down another nickel of the then available unfunded capital commitment when we intervened.

Oh yeah, we got paid a piece of the action – real carry from a fund destined to be written down to zero. This, of course, meant that our LPs received significant newly-found liquidity. For the rest of the story give us a ring. I will promise to call you back from the beach. Then again, the phone just rang and it's a client with a recalcitrant GP who is acting badly. Maybe next summer...

Hope summer is affording you some respite. If you have any fund worries keeping you from enjoying the surf, lake, forest cabin, poolside, living room or wherever it is you should be happily vacationing - then kick the problem to us.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity funds-under-management and technology diligence services. Semaphore currently holds fiduciary obligations as General Partner for seven six Private Equity and Venture Capital funds, a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are inBoston with principal offices inNew York andLondon.

Topics: Venture Capital, troubled funds, private equity funds, general partners, limited partners, investment, venture funds, operations

Cash Trumps Politics

Cash Trumps Politics

Results of Annual Semaphore PE Industry Confidence Survey

 

By Mark S. DiSalvo

It’s all about the cash.  Reversing a trend, my industry colleagues seem to have the wind at their backs when it comes to their personal income and business expectations - this despite a decided lack of confidence in government, most especially Congress. This clear read comparing the raw data from the 4th annual Semaphore Confidence Survey with last year’s results affords some fascinating insight across business and politics.

Let’s start with pay.  At the start of last year 74% of the over 400 respondents to the 2010 Confidence Survey believed they would earn more money than the prior year. Fully 61% did. And this is over 5 times as many who earned more income in the then prior year. 18% earned the same as the prior year and only 21% earned less, halving the number whose compensation was less the prior year.   Not only are the respondents richer but they also expect to get more so.  57% believe they will earn yet more money than last year, 31% the same amount and only 12% less. We don’t know the sources of this increased comp but for the 61% of our respondents who were PE or VC professionals it’s a fair bet that, like Mitt Romney, they had a much smaller tax rate than our other respondents who presumably paid ordinary income tax rather than the 15% carried interest tax rate.  Perhaps we should ask that specific question next year.

Speaking of Mitt: 47% express they are somewhat confident or confident in Romney against the 11% who express somewhat confidence in Gingrich while, significantly, 0% are confident in Newt. Romney even beats the President by 8% in a head to head match on confidence.

On the negative side, in this particularly contentious Presidential election year,

72% are not confident or not very confident in Gingrich while the numbers are 27% for Romney. Romney again laps the President with 49% expressing a lack of confidence.

Clearly Romney is the favorite in this crowd as one might expect him to best Obama here.  Nonetheless, the small gap in confidence between them suggests that Obama may be in better shape than one could generally predict although he is significantly weighted down by the large non-confidence opinion expressed.  Surely, Gingrich would be the preferred opponent for the current resident of 1600 Pennsylvania Avenue. Surprising still is that Obama does not receive more credit for the growth in actual income and trend of continued growth expressed by respondents.  

There is no wondering or skillful analysis needed when you talk about Congress. Last years lowest ever number of 7% confidence was more than halved to 3%!  Even state legislatures grew in confidence from 27% to 32% (you should know that the top states replying were CA, MA, NY, NJ, CT, TX, WA, NC and then IL).   This does not bode well for any member of Congress running for reelection.  Their jobs may be more at risk than a GP who has made negative returns for, say, two straight funds (in and of itself an all too common experience).

International respondents had crushingly poor opinions of their governments with fully 74% having no or little confidence in their countries leaders, up 4% from last year and still more than double the 31% of two years ago.  The preponderance of our international respondents were from the UK with most replies coming, in order, from France, Switzerland, Japan, German and China. 

Our peers expect to be busy this year. In the beginning of 2011, fully 100% thought they would make up to six investments – and they did. 81% completed up to three deals and almost the same numbers intend to complete up to three deals. Further, those deals were as large as expected with 63% self reporting that their deals were in excess of $25 Million in each discrete investment. 

And in what is the group investing?  The industry stayed rather consistent. Social/Community Technology took the top spot for the first time, moving up from second, swapping places with Enterprise Technology and Health Care remaining third. Sustainable Energy/Cleantech dropped out of the top five (it dropped out of the top ten!) with On-line consumer retail claiming 4th and Gaming staying in 5th.

The over 400 who did reply this year, down slightly from last year, were similar to last year’s mix of VC, Buy-out pros, operating executives and third party professionals. One thing for sure is that this year’s mix of survey takers continued to be very high on themselves believing that 71% (78% last year) were confident in their business and 81% (84% last year) confident in themselves.  Confidence in their bosses dropped to 63%, from 75% expressing that view last year, but still – that is 13 points higher than two years ago and nearly triple the year before.

As always, there was insight and entertainment offered by our contributors.  Channeling Lady Macbeth, one offered “Out out damned Newt” balanced by “Obama's wealth redistribution agenda is destroying the economy of this country”.  An optimist suggested, “Even 9% unemployment still means 91% employment”. Another bemoaned that “I should have gone to law school” - hope that was not one of our attorney respondents.  

We had an infamous commentator from our inaugural survey who said “PE is dead and I wish my boss were too.”   I can’t tell you how many people still ask me about that guy. All have waited for him to resurface.  I can’t say definitively it was the same person but someone this year noted, “PE is not dead. Still wish my boss was.”  That, at least, was a confession that he was wrong a few years ago about the industry, and a comfort that he did not murder his boss.  Whew.

See you next year.

To see the highlights of the results of the 2012 Semaphore Confidence Survey please click here.  If you want to do your own comparison, the 2011 Semaphore Confidence Survey results are here.

 

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity funds-under-management and diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York and London.

Topics: Venture Capital, Semaphore, general partners, limited partners, VC, investment, venture funds

Semaphore’s 2012 Confidence Survey

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Hello,

Do you expect to make more personal compensation next year than this year?  Feeling more confident or less confident in the President’s Economic team?  Your thoughts on Newt or Mitt?  Annually we ask our readers to weigh in and share their level of confidence in themselves, the economy and their businesses.  Last year we heard significant confidence – was it warranted?

Semaphore is conducting its fourth annual survey of Private Equity and Venture Capital partners, principals and professionals supporting the industry. The purpose of this survey is to gather input from our industry friends and clients with the results reported to all current subscribers of the Semaphore PE Signals Blog and our monthly Semaphore Reporter, as well as the subscribers of Term Sheet.

By participating you’ll get to gauge your expectations with your peers, competitors and industry colleagues. The survey will take 2-3 minutes and respondent identity will not be reported to us.  Results will be published in the Semaphore Reporter and the Semaphore PE Signals Blog as well as in Term Sheet and on our website www.sema4usa.com .  Take the plunge.

 

Click here to take the survey.

Click here to see last year’s results.

 

Topics: Venture Capital, troubled funds, private equity funds, funds under management, general partners, limited partners, diligence, venture funds

Semaphore Forms Joint Venture with Topline Strategy

Semaphore Forms Joint Venture with Topline Strategy

to Provide Technology Due Diligence

 

As you may have read in our last S4 Reporter, Cris Miller, the founding director of our Technology Due Diligence Practice retired last Friday September 30th. With Cris’ departure, we decided to form a Joint Venture with Topline Strategy, a Boston-based provider of strategy consulting services to technology companies, in which Topline will take over day-to-day management of the practice.  It will operate under the name The Semaphore Technology Diligence Practice.

Over the last 5 years, we have formed a close partnership with Topline Strategy, working on dozens of engagements together. Together we’ve been able to provide our clients more complete answers to questions about their technologies and the markets for those technologies. 

With the retirement of Cris Miller, who was the driving force behind our Technology Due Diligence practice, we thought the best way to continue our commitment to clients as well as grow the practice was through a Joint Venture with Topline Strategy. Through our long partnership, the Topline team has demonstrated a true understanding of Technology Due Diligence as well as built strong relationships with our principal technologists and major clients. Having them take the business forward was a natural.  We have been working together on the creation of, and transition to this, Joint Venture for the last three months.

As part of the agreement Cris Miller will be joining Topline Strategy as an advisor and Topline Strategy will continue to work closely with our Private Equity Advisory group, providing both strategy consulting and technology due diligence services to Semaphore’s clients and portfolio companies.

As Topline Strategy will be the operating partner in our Joint Venture, going forward, please feel free to contact Jon Klein (jon@toplinestrategy.com) with any questions about Technology Diligence or visit its website www.toplinestrategy.com. Of course, you can also reach me (mdisalvo@sema4usa.com) if you have any questions.  I know you join us in wishing Cris well in his retirement as Topline and Semaphore  continue to fulfill our common promise and commitment to aiding investors and the M&A community with the right knowledge and correct solutions to ensure success.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity funds-under-management. Semaphore currently holds fiduciary obligations as General Partner for seven Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York and London.

Topics: Technology Assessment, due diligence, private equity funds, Semaphore, technology diligence, business advisory, technology, diligence

See Ya Cris

Cris Miller is getting ready to move on to the next chapter of his life - retirement.  Before he leaves behind Technology Diligence, difficult markets, anxious GPs and the usual headaches of deal making (and breaking) to discover new art galleries, photography locations and the calm Maine landscape with his wife Marcia, Cris agreed to share the more important things he discovered over the years.  Cris, you will truly be missed by each of your colleagues, clients and legion of friends.  We will always have memories - and now this wisdom.  Good luck, Godspeed and enjoy life!

Read on for Cris' "Things I have learned in business".

See Ya

Some people never know when to say goodbye.

At 66 my “bucket list” has out weighed my need/desire for full time employment. I have made the decision to retire.   Ten years ago Mark DiSalvo invited me to join Semaphore and we started the Semaphore Technology Diligence practice - to run side by side with the funds under management business.  Call us silly, naïve or just plain blind but September 1, 2001 was not the best of times to start a practice catering to VCs, Growth Equity, low and mid market Private Equity.  The “bubble” had busted but we figured we were at the bottom of the business cycle so there was only one way to go.  WRONG.  The tragedy of 9/11 put a halt to any belief there would be a quick start to this new business.  Nonetheless, we went all in anyway.  Thanks to much encouragement from the investment community we persevered and finally got our first engagement.  Literally hundreds of fascinating engagements later we have serviced billions of dollars of invested value and, I truly believe, fulfilled the promise and hopes of that hopeful September day a decade ago. Thank you.

The practice goes on without me (we’ll write about that in a very short bit).  Here is a list of a few things I learned not only in this endeavor but in 4 other start-ups and a number of different career positions.  So here they are – “Cris’ Commandments”:

Things I have learned in business in the past 50 years:

  1. Make friends and influence people – thanks Dale C (that’s Carnegie for all you folks under 66).
  2. Measure your impact and make adjustments immediately – even if they are the wrong ones!
  3. Learn from everyone. Remember, each person you meet has something of value…even if they can only be used as a bad example.
  4. Relationships are the most important thing in business, for that matter, in life.
  5. Collaboration is the key to success. Partnerships can take many forms and it’s OK to invent new types.
  6. Work the ecosystem.  Even if you cannot reciprocate keep up the effort.    
  7. Setting expectations is critical. 
  8. If you can’t do it – DON’T!
  9. Hoping for a good outcome does not work.  Smart planning and strong execution is all.
  10. Be kind to everyone.  Your Mother was right, you never know from where the next referral may come.
  11. Stay in touch – people and positions change. We’ve earned hundreds of thousands from calls made 5+ years ago.
  12. Ego and hubris is trumped by good judgment and logical thinking.
  13. Due Diligence is required in all aspects of life. Try, say, marrying without it.
  14. The expression “no good deed goes unpunished” is not true.   All good deeds are rewarded – eventually.
  15. Sometimes the best deal is the one you do not do.
  16. Loyalty is a rare commodity. Give it and treasure those who provide it.

 

It’s been a sometimes tiring but almost always fun adventure. I’ll be thinking of you all - whether on the lakefront in Maine, shooting photos in Madras or eating blowfish in Kyoto. Thanks again.

Retiringly,

Cris

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