Posted by Leah Stashko on Thu, May 10, 2012 @ 03:45 PM
Are you hoping to one day sell your company for millions of dollars – maybe even someday soon? So you whip out your cap table to look at your shares and percent ownership. But wait! The numbers aren’t adding up. So you start looking for old documents to see where the discrepancy started, but where are they?! All of a sudden, a quick look turned into a timely process and you’re doomed to the headache of digging up all the old data and searching cap tables for discrepancies.
Don’t wait until it’s too late! SmartCap offers a quick and easy way for you to organize your documents for each round of financing. By adding “details” to each round you can quickly and easily access underlying agreements and term sheets.
When adding or editing Classes and Securities simply add the necessary attachments and your details will be available to view and review whenever you want.
If you need to add option grant documents for individuals, you can do this at the Equity Holder level virtually eliminating the issue of the option grant not matching the shares in the cap table.
You are able to view all documents associated with a deal by clicking on the details for that class, or you can expand your view and see individual’s documents.
Not only is this a great organizational tool, but it also allows you to reconcile documents and information at each round of financing, removing any question of whether or not you’re building on an accurate foundation.
Need help reconciling your documents and cap tables? DocDep will do it for you with our Cap Table Audit service!
Posted by Leah Stashko on Wed, Apr 25, 2012 @ 12:39 PM
We wanted to share with everyone a few changes that DocDep is working on to enhance our cap table functionality. Most of these enhancements have come from requests that we received from the 150+ firms using our cap table software.
Soon to come, a new view! You will be able to view by event; a view that mimics what we often see in the spreadsheets that our sent to us for Cap Table Audits service. We have also been asked to improve option vesting and our tracking as well. This functionality should be out in early May.
Our CPA and Auditor, Brandon, spent this past weekend working with a firm on their cap table, which featured four preferred rounds of financing, including conversions of previous rounds into new rounds. As a result of this, he has asked us to add some functionality allowing you to buy shares of a round at different prices.
The most complex update we are working on is our waterfall functionality. This is a complex function, with all sorts of hurdle rates, preferences issues, option strikes and other things to consider. Luckily, our CEO Farid Naib, has an extensive background and a few papers published in derivative math, but even he seems to be looking for more aspirin. We’re developing to take those headaches away!
Cap table Horror Story of the Week: One firm transposed the number of shares and dollars, and then incorrectly reported percent ownership. Don’t let this happen to you.
For our VC and PE firms, we have been hard at work helping our clients get out over 15,000 K1s. We are very glad that tax season is over!
Posted by Rebecca Holloway on Fri, Apr 13, 2012 @ 01:06 PM
As you may have heard, DocDep is now providing a free online cap table, SmartCap. Your cap table is an extremely important part of your company. Even more important is that the cap table is set up correctly. SmartCap presents you with an easy-to-use application for organizing your cap table.
What information should you start with when you set up your SmartCap cap table? First begin with the Classes and Securities. This allows you to differentiate the specific types of equity that your company has issued, whether options, common stock or preferred stock.
Next enter the company’s Equity Holders. Holders may be any individual or entity that has ownership in the company or has the right to purchase ownership.
Last record Equity Events and Allocations. A new event is any instance of new equity issued into the company, for example a new round of investment or increasing the option pool. After your event is created, then you can issue equity to the holders. Here you can input the class name, number of shares, and share price. Now your SmartCap cap table has been started!
SmartCap provides you with additional easy-to-use functions, such as the “What If” tool, which allows you to enter hypothetical rounds of financing. This will show you how your company’s ownership would change were you to take on additional funding with specific terms. You can enter your What If scenario in Pre-Money Valuation or Percent Ownership.
SmartCap is flexible, allowing you to look at your cap table any way you want. You can view by holder or by class, by all shares or by voting shares. You can view your table with pre and post equity events and with or without accrued interest. SmartCap also supports export to Excel.
If you haven’t already signed up for the free cap table you can do so by clicking here. For more information you can also view our SmartCap video.
Posted by Andrew Martel on Thu, Feb 16, 2012 @ 07:00 AM
The cap table is the most critical element in an investment deal between a VC company and potential portfolio company. It defines equity ownership and investment stakes for a company and sets forth how holders are compensated. And yet, it might also be the most misunderstood – and frequently wrong – piece of the deal as well.
This week, we are offering a remedy for the confusing and error-prone capitalization table: A free application that will build tables for investment-backed companies. It will allow equity holders to see their ownership in common and preferred stocks and other securities, calculate how ownership changes under different scenarios, and analyze convertible interest rates. All of these features are available under the free model – a few more bells and whistles come with premium accounts. Click here for the full list of features.
The cap table, which details equity ownership and debt obligations at a company, spells out who owns what in a company, how they are compensated, and what happens to those ownership stakes under different events. A good cap table can provide more information than any marketing material or website. Many people first realized that the music sharing site Spotify had huge potential when TechCrunch found its cap table.
The new cap table is a logical extension and development of the applications we have worked on over the years. When DocDep started two years ago, our only offering was online software that would organize documents and make them easy to share. But as we’ve grown, we’ve learned that the true value of what we provide is not in the virtual file cabinet, but in the giving people the ability to make their information clear and accessible. In short: to make it useful. The cap table might not seem like the most pressing issue when you have fires to put out, but a good cap table utility that can prevent some of those fires from flaring up in the first place.
Posted by Andrew Martel on Sat, Dec 31, 2011 @ 09:20 PM
Happy Holidays and Happy New Year from DocDep! 2011 was an exciting year for us, with a shift in strategy, new products and exciting growth. And 2012 promises much more, especially with the arrival of Dodd-Frank. You could be forgiven for thinking that 2011 was Dodd-Frank’s big debut. Between the Republican presidential candidates lambasting and promising to repeal the law and Congressman Barney Frank’s retirement announcement, the 2010 Wall Street Reform and Consumer Protection Act has received a lot of attention this year. But 2012 is the year that Dodd-Frank compliance will really come to the fore. Next year, we’ll be done talking and financial agencies will have start acting.
Many Provisions Still Coming
Many major provisions of the Act have not yet taken effect, including the requirement that firms with more than $150 million in assets under management register with the SEC. Under this requirement, the SEC can require a firm to produce many key documents – everything from corporate governance policies to financial records to proxy voting policies.
This might seem like a daunting list of requirements, making the SEC as intimidating as the IRS. Steve Randolph of the consulting firm Oakbrook Solutions notes that this will even ensnare some family-owned firms. But investors and fund managers should not fret. All that's required to meet this provision of Dodd-Frank is some strong, clear corporate governance and document management. DocDep has developed an application that will help firms develop this organization and reporting system. The application offers a storage and maintenance platform to keep track of corporate and financial records, secure locations for marketing materials and portfolio management tools.
We know that Dodd-Frank is very controversial and sure to cause a lot of headaches as it rolls out. But for alternative investment firms, SEC registration does not have to be very onerous. Leave the real worrying for the rest of the bill, which, according to Bill Sheridan of CPA Success, is only one-fourth enacted. Including that darn Volcker Rule!
Nevertheless, all of us at DocDep hope you and your firm have a happy and prosperous new year!
(Image: Wordle of the entire text of the Dodd-Frank Wall Street Reform and Consumer Protection Act) 
Posted by Andrew Martel on Thu, Dec 15, 2011 @ 11:45 AM
At the recent AlwaysOn Impact conference here in Philadelphia, we had the privilege of listening to a distinguished panel of venture capitalists talk about how they evaluate investments. They were asked what their greatest pet peeve was when evaluating potential companies. This might have been a light throw-away question meant to give the entrepreneurs in the room some practical advice about keeping presentations short or how to properly network. But what the investors talked about instead were the serious shortfalls they see in business plans, ones that often lead to rejection. This got us thinking: how might venture capital software help entrepreneurs avoid these missteps and help funders see past them?
We’ll address three of the pet peeves that members of this distinguished panel shared and a prescription for venture capital software to prevent or mitigate the damage.
Pet Peeve #1: Over-Optimism
Venture capitalists probably expect that entrepreneurs are going to be giving some rosy forecasts when they talk about their revenues or number of potential clients. But Andrew Garman of New Venture Partners said that about a third of the financial pro-forma his firm sees has never been achieved in the history of business. Over-optimism suggests that a CEO will be reluctant to acknowledge challenges to their business models and could possibly ignore them until it's too late. No software platform can necessarily cure someone who is optimistic to a fault. But a venture capital software program that facilitates information exchange can help funders and company executives share ideas and anticipate challenges coming down the line.
Problem #2 Lack of Transparency
How can “green” companies prove they are green? How do funders committed to sustainability define clean technolgoy and ensure that a potential company will meet that standard? This lack of transparency was a pet peeve of Joyce Ferris, the founder and managing partner of Blue Hill Partners, an investor in green technology. More broadly, this can be a lack of corporate governance, and it is not just a concern among for all investors. Loh Peck Kuan, a broker and private equity partner in Asia, cited a lack of transparency as one of the most common reasons entrepreneurs do not receive funding decade ago. Venture capital software can provide greater detail about business practices and give funders a window into the day-to-day processes so they can see just how environmentally friendly they are.
Problem #3 Better Use of Funds
Another panelist said that his pet peeve was not in the business model itself, but what the company planned to do with its funding. Many that were already profitable thought it was a good idea to invest in marketing – which he did not think was always necessary. Here, venture capital software could offer entrepreneurs and venture-backed CFOs a clearer picture of their company’s financial performance. With this information, they can have a better discussion about how to make use of their funds. This is also where strong communication tools can come into play. When a funder likes a company’s business plan and potential, but finds their funding plans a little misguided, they can have a conversation about different priorities. This could lead to stronger returns.
This discussion was one of many great exchanges that took place at the IMPACT conference back in November. We’ll be sharing more thoughts from the event on the blog soon. But we know that these three pet peeves are not the only ones out there. What are some other pet peeves that funders or entrepreneurs might have? Can technology cure them? Or are they human traits that will be a problem no matter what?
Posted by Andrew Martel on Sun, Nov 20, 2011 @ 01:00 PM
As we build DocDep’s brand and promote Sonar Investment Document Manager and its related applications, we have visited quite a few VC firms and researched many more to understand their needs. Many firms make a remarkably similar pitch to their portfolio companies. They all promise to be more than just a check. The words “mentor,” “tight-knit,” and “expertise” are peppered on nearly every VC homepage. At DocDep, our mission is providing venture capital software applications that will allow venture capitalists to bring great ideas to market and generate huge returns doing so. We thought of three elements of a good Venture Capital – Portfolio Company relationship – and how venture capital software might help nurture it.
Evaluating the Potential
Of course, for every company in a venture capital firm’s portfolio, there are dozens more being carefully considered. Mark Suster of GRP Partners advises portfolio company managers to establish an early relationship with funders. If they wait until they need money, it will probably be too late. The same goes for venture capital investors – they should put in the time to get to know the people running potential investments that interest them. A document or data management software program could offer an organized channel for sharing information and communicating.
Prepare for Crises
The pitches that many VC firms make to portfolio companies promise funding, growth, mentorship and a predictably lucrative and fulfilling future for their company. But things often go wrong in startup land. The credit agency Dun & Bradstreet advised portfolio companies to note how well a venture capital firms react in a crisis. Market conditions change, regulatory roadblocks pop up, suppliers get bottle-necked. Any one of these episodes can kill a startup, which is why they will need a funder who knows how to handle crises just as well as day-to-day mentorship and strategic planning. Software can help venture capital firms rise to these occasions by ensuring that all of the information they need is well-organized and easily accessible.
Encourage “Good News” Updates
The best VC-portfolio company relationships are not rigid. They encourage informal check-ins and “good news” updates, where portfolio companies can give informal progress reports. These assure funders that the investment is performing well and deepens the relationship between investor and entrepreneur. Here, software can provide an easy channel of communication. If nothing else, it helps investors store and retrieve updates, so if a fund manager is harried during this time of a portfolio company’s “good news,” the newsletter, press release, or other item can be securely and conveniently filed for a time when the manager is ready to catch up.
Truly effective venture capital software would have to be both structured to provide organization and make workflow easier, but also allow for flexible and easy exchange of information with portfolio companies. What do you think? Is venture capital software necessary for a good relationship with portfolio companies? Or can that relationship be handled in a looser way?
Posted by Andrew Martel on Wed, Oct 26, 2011 @ 11:55 AM
Earlier this month, we gathered with hundreds of private equity investors and other service providers for ACG Philadelphia’s M&A East conference in our hometown of Philadelphia. We had a great time telling folks about our shift to DocDep and some of our new applications. Overall, the conference was a great experience and taught us how smart portfolio management can guide decision making.
One of the unexpected highlights of the event was the keynote address by former CIA director Gen. Michael Hayden. Event speakers are sometimes bores, recruited more for their name recognition than an engaging delivery or resonant message. But the ballroom full of investors paid rapt attention as Hayden recounted a White House meeting on Syrian nuclear ambitions late in George W. Bush’s presidency.
Hayden recounted telling then-President Bush that CIA sources had tracked visits to Syria from international nuclear scientists known to be involved in weapon manufacturing. The agency also confirmed that the Syrians had recently built a lab capable of producing nuclear weaponry. But they could not definitively determine that Syria had a nuclear weapon or that it posed an immediate threat. In the wake of intelligence failures leading up to the Iraq War a few years earlier, Bush announced that the United States would not take action against Syria because they could not be sure what Syria had. Sure, there was some troubling data, but it was useless as information.
Portfolio management might not have the high drama and suspense of the CIA, but the message was clear to the investors in the audience: All their data is useless unless they can translate it into actionable information.
Above image is a satellite photo of a suspected Syrian nuclear facility (later destroyed by an Israeli airstrike.)
This is where smart portfolio management can help investors. This approach takes the usual metrics that investors use to evaluate prospects, such as a company’s revenue, industry growth and debt, and connects the dots to create a useful narrative about the company’s past and projection for the future. Smart portfolio management has several principles, but three of the most prominent are confirmation, context and creativity.
Confirmation
This is the most fundamental element of good decision-making and portfolio management. Neither covert operatives nor alternative investment managers can stake their decisions on a single data point or source. If one intelligence source says a nation has nuclear weapons, the CIA better check it out. Likewise, if one industry analyst says that a certain sector is bound to grow, managers know to test that prediction with other experts. But investors also must guard themselves against confirmation bias, which occurs when we notice or look for information that reinforces our first notion, instead of testing against equally valid and potentially conflicting information.
Context
Another key piece of portfolio management involves learning about the broader market and economic conditions surrounding an investment. Yale lecturer and global equity investor Vikram Mansharamani reminds us here that investing by the smartest conventional standards in Indonesia in 1997 would not have saved one from losing it all in the Asian Financial Crisis. Investors should be sure to look at the bigger picture before moving forward. Similarly, Hayden reminded us that any decision regarding Syria’s nuclear program would be made in the context of the intelligence failures and ongoing war in Iraq.
Creativity
No, this last principle does not refer to the creative accounting scandals that fell Enron, WorldCom and other companies in the early 2000s. It instead refers to smart portfolio management that helps investors see new opportunities outside of their current wheelhouse. Creative portfolio managers anticipate the new changes in technology and consumer demand – much as Steve Jobs did as he built Apple into one of the world’s biggest companies. As for creativity in Gen. Hayden’s line of work, well, that could be seen as the Arab Spring. Protester from within Syria and other Middle East nations are addressing the security threats and repressive regimes on their own, with limited or no U.S. military intervention.
Posted by Andrew Martel on Sun, Oct 02, 2011 @ 12:00 PM
If you have visited our site before, you have probably noticed a few touch ups to our homepage and other spots in recent weeks. Our name, DDC, has been retired in favor of DocDep. This change isn’t just because we wanted to get out of the pile of acronym company names. Rather, it is part of a larger strategic shift – one that was motivated by good corporate governance.
Corporate governance is a favorite theme on this blog. We have often pointed out the rewards of having a good organization and communication practices in place, and the consequences of not having one. But our rebranding and new strategy is not the result of having a good corporate governance plan in place, but what happens when it is put into practice.
Share Customer Feedback
Like most sound business strategies, the premise around DocDep came from our customers. Customer feedback is always at the heart of developing business practices, but is growing more influential as social media leverages their power. In our case, our corporate governance practices allowed our salesforce and analysts to communicate with our CEO, Farid Naib, and share client feedback on our products and pricing. For example, at DDC, we sold software packages, in which many applications came bundled. Several customers told us they liked some elements of our software, but had no need for others. Under DocDep, applications are broken out and sold separately.
Get Outside Opinions
Direction from customers planted the seed for our change, but Farid wanted to ensure we would get it right. A hallmark of good corporate governance is the ability to get frequent, reliable feedback from outsiders, including board members, business partners, and longtime clients. This kind of feedback is solicited casually, allowing our confidants to share their honest opinions. This informal interaction with partners and board members is as important, if not more, according to Australian business consulting firm The Negotiation Experts.
Evaluate Strategy and Tactics
Once we designed a plan for the new DocDep product line and strategy, we did not turn on autopilot and let it grow. The entire DocDep staff continues to meet regularly to monitor what applications are coming along, which ones will be most useful, and how we can best position them at roll out. This is probably the most important element of good corporate governance: allowing processes to be reviewed and strategies to be readjusted after launch.
So, what will the new DocDep strategy bring? As mentioned above, it will feature applications that clients can buy individually or in any combination they see as necessary. It also involves some new offerings, including apps for investment firms to better track and view their financial data, as well as a tool for private equity firms to meet requirements under the Dodd-Frank legislation. But we would not be practicing good corporate governance if we did not have clear lines of communication with clients and others outside our group. So, what do you think of our plans for DocDep? And what else do you do to maintain good corporate governance?
Posted by Andrew Martel on Thu, Sep 01, 2011 @ 08:24 AM
Here in DDC’s home of Philadelphia, one of the brightest spots within business community are our business incubators. Wharton, as well as Temple and Drexel universities, offer centers to help startups develop the business organization and skills to get off the ground. They are joined by DreamIt Ventures, which start its 2011 three-month incubator program in Philadelphia Sept. 12, as well as Good Company Ventures, which focuses on helping sustainable companies. In June, our CEO, Farid Naib, spoke at the at the University Science Center, for an event sponsored by Philly Startup Leaders and the Greater Philadelphia Alliance for Capital and Technologies on understanding funding term sheets to entrepreneurs.
Just like that motivational poster reminded us that everything we need to know we learned in kindergarten, the organizational tools and support incubators provide is something that all businesses – regardless of their stage – need to stay on top. Here are three resources that Philadelphia-area incubators provide their startups. Does your business have these capabilities as well?
Market Research
Temple University’s Small Business Development Office promises its startups resources ranging from computer databases to student externs to help them identify their market base and learn its needs. Market research is often overlooked, especially at the very beginning of a business’s life cycle. But it is essential to forming the early business strategy.
Presentation Skills
Many entrepreneurs have a brilliant idea, and probably a lot of technical know-how or familiarity with the market to bring it to fruition. But unless they can speak convincingly and passionately about this idea, it’s going to get a pass from funders. Many incubators, including Drexel’s Baiada Center for Entrepreneurship have many presentation workshops and competitions. In fact, most of the incubator’s work is to prepare business owners for the all-important pitch to angels or venture capitalists at the end of the program.
Professionalism
Incubator companies are just starting out, but even they are expected to run their business like a professional and competent enterprise. Many small businesses, whether they are just starting out or have been running for a years, overlook the importance of having professional space, office equipment, and other resources that says to clients, funders, and partners that they are responsible and reliable. Taking meetings at the local Starbucks or a cluttered home office does not reassure these people. The University Science Center prides itself on its professional work environment, with receptionists, fully equipped meeting rooms, and full IT support.
At Farid's talk at the University Science Center in June, we met many entrepreneurs with passion and some brilliant ideas on what people and businesses need. But they also recognized that they needed some business organization and some understanding of funding, communicating, and marketing to realize their dreams. Many of them had turned to incubators to make that happen.
A Recipe for a Successful Launch?
All business incubators operate under the premise that they can give a startup the right guidance and support to flourish. But their usefulness has long been debated. Back in 1999, at the height of the tech economy, BusinessWeek asked whether business incubators could "justify their existence." Work. Silicon Valley entreprentuer Sramana Mitra started a wide-ranging online discussion in 2010 on the various reasons a business incubator might fail to jump-start a new enterprise or industry.
So, what does it take for a great idea or a product to become a successful business? How do a collection of entrepreneurs working in the same field band togethter to create a small industry? Can outside advisors instill good business sense? Or must it come from the business founders themselves?
