SpaceX Plans Tender Offer At $250 Billion Valuation | ZeroHedge

From: zerohedge

SpaceX Plans Tender Offer At $250 Billion Valuation | ZeroHedge

Elon Musk could be on his way to becoming the first trillionaire by the end of the decade, as two of his private companies soar in value, while his public company, Tesla, recently surpassed a trillion dollars in market capitalization. 

A new report from the cites people familiar with the discussions, stating that Musk’s SpaceX–the world leader in rocket launches and high-speed space internet (via Starlink)–is preparing to launch a tender offer in December to sell existing shares at $135 each. This indicates that the rocket company’s valuation has surged by another $40 billion, reaching $250 billion, up from $210 billion earlier this year.

Starship rocket booster caught by tower pic.twitter.com/aOQmSkt6YE

— Elon Musk (@elonmusk) October 13, 2024

The people said Musk’s artificial intelligence startup xAI recently raised $5 billion at a valuation of $45 billion, doubling in just a few short months. Soaring values in Musk’s private companies have added to his overall net worth. 

Musk’s cozy relationship with the Trump administration will likely result in Tesla winning the multi-year EV price war. A Reuters report from Thursday detailed how Donald Trump was planning to eliminate the $7,500 consumer tax credit for EVs. In return, this would destroy Musk’s competition, such as Rivian, Luicid, and legacy automakers.

As we previously noted, “Musk’s strategy to win the EV price war: Build the largest EV business with taxpayer dollars, popularize EVs, allow other startups and OEMs to enter the market, and then support politicians who want to end EV subsidies, crushing the competition and leaving Tesla reigning supreme.”

Meanwhile, ‘the Trump bump’ in equity markets sent Tesla shares over the trillion-dollar market cap level this past week.

According to the Bloomberg Billionaires Index, Musk’s net worth has risen to $306.5 billion, up $77.5 billion on the year – primarily because of the latest Tesla price surge. 

In September, wealth-tracking website  published a report forecasting Musk could become the world’s first trillionaire by 2027. This news is likely disheartening for struggling WeWork co-founder Adam Neumann, who famously said in 2019 that he wanted to live forever and become the first trillionaire. 

Musk’s dominance in space, EVs, AI, and media–with no other billionaire even close to his level of success, and more importantly, to his contributions to the nation’s success in this global technology race–has only infuriated far-left, anti-American Democrats…

If you’re wondering how bitter the Left is at @elonmusk for trying to save America, Maddow is straight up demanding the Kamala administration (not gonna happen!) cancel all SpaceX govt contracts. Because “national security.” pic.twitter.com/kihdzhkAZS

— Buck Sexton (@BuckSexton) November 5, 2024

… who are now calling for the dismantling of Musk’s companies. 

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Elon Musk’s xAI raising up to $6 billion to purchase 100,000 Nvidia chips for Memphis data center

From CNBC:

Elon Musk’s artificial intelligence company xAI is raising up to $6 billion at a $50 billion valuation, according to CNBC’s David Faber.

Sources told Faber that the funding, which should close early next week, is a combination of $5 billion expected from sovereign funds in the Middle East and $1 billion from other investors, some of whom may want to re-up their investments.

The money will be used to acquire 100,000 Nvidia chips, per sources familiar with the situation. Tesla’s Full Self Driving is expected to rely on the new Memphis supercomputer.

Musk’s AI startup, which he announced in July 2023, seeks to “understand the true nature of the universe,” according to its website. Last November, xAI released a chatbot called Grok, which the company said was modeled after “The Hitchhiker’s Guide to the Galaxy.” The chatbot debuted with two months of training and had real-time knowledge of the internet, the company claimed at the time.

With Grok, xAI aims to directly compete with companies including ChatGPT creator OpenAI, which Musk helped start before a conflict with co-founder Sam Altman led him to depart the project in 2018. It will also be vying with Google’s Bard technology and Anthropic’s Claude chatbot.

Now that Donald Trump is president-elect, Musk is beginning to actively work with the new administration on its approach to AI and tech more broadly, as part of Trump’s inner circle in recent weeks.

Trump plans to repeal President Joe Biden’s executive order on AI, according to his campaign platform, stating that it “hinders AI Innovation, and imposes Radical Leftwing ideas on the development of this technology” and that “in its place, Republicans support AI Development rooted in Free Speech and Human Flourishing.”

AI Sucks Up A Growing Chunk Of VC Funding In The US | ZeroHedge

From: zerohedge

AI Sucks Up A Growing Chunk Of VC Funding In The US | ZeroHedge

Even more so than usual, San Francisco will be the epicenter of the world’s startup scene this week, as founders, investors and other industry insiders come together at TechCrunch Disrupt, one of the leading events of the startup scene.

Unsurprisingly, AI will take center stage at this year’s conference, as investors are looking for opportunities to invest in the booming, yet still nascent field and founders of AI-related companies will do everything to profit from the AI boom and secure fresh capital for their ventures.

As Statista’s Felix Richter shows in the chart below, AI has sucked up an increasingly large chunk of VC funding in the United States in recent years.

Infographic: AI Sucks Up a Growing Chunk of VC Funding in the U.S. | Statista

In the first nine months of 2024, AI-related investments accounted for 33 percent of total investments into VC-backed companies headquartered in the U.S. That’s up from 14 percent in 2020 and could go even higher in the years ahead.

According to Crunchbase data analyzed by EY, AI deals accounted for 37 percent of the $38 billion raised by VC-backed companies in Q3 2024, with four of the 10 largest deals involving AI-related companies.

The latest increase in AI-related investments is still expected to be just the beginning of a longer-term trend.

As EY notes in its latest report on VC investments, most of the funds funneled into the field are currently focused on building the foundation for the technology, e.g. developing and training AI models.

Once this wave of investment ebbs, entrepreneurs will need to figure out ways to actually utilize the potential of AI, which will likely kick off a second wave of AI investments.

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Challenges of selling your shares in private companies

The process of finding a buyer for a private company can be a daunting task, particularly when there are no obvious buyers or a defined market for the specific company in question. Unlike public companies with accessible valuations and liquidity through stock exchanges, private companies have unique characteristics that often make them challenging to sell. The absence of interested buyers complicates the process, demanding extensive planning, strategic marketing, and a deep understanding of the company’s industry and potential buyer landscape. This article explores the reasons behind these challenges, the inherent complexities of private company sales, and the strategies that can improve the chances of finding the right buyer.

Checkout this short video on the topic:

Why Selling a Private Company is Challenging

Private companies, by nature, lack the liquidity and visibility that publicly traded companies enjoy. A few core challenges make finding a buyer especially difficult:

1. Limited Market Visibility

Private companies are often small to medium-sized businesses that do not have the market visibility of their larger, public counterparts. The absence of regular public disclosures, financial reporting, and the lack of a stock exchange listing makes it hard for potential buyers to gauge the company’s value and growth potential.

2. Financial Transparency

Financial transparency is another significant issue. Public companies are required to report their financials regularly, making them more attractive and comprehensible to buyers. Private companies, however, do not have to disclose financial statements publicly, and potential buyers may find it challenging to assess the company’s health without an inside look. The process of providing this transparency can involve significant effort, including preparing audited financial statements, which some smaller private companies may not routinely maintain.

3. Valuation Complexity

Valuing a private company can be a complex and subjective process. Without a widely accepted stock price or even regular transaction prices, private companies rely on valuation techniques such as discounted cash flow (DCF) analysis, comparable company analysis, or precedent transactions. However, these valuations can vary widely, especially when a potential buyer does not have complete information on the company’s financial and operational metrics. This uncertainty makes it difficult to set an agreeable price, further complicating the search for buyers.

4. Buyer Qualification

In cases where a potential buyer is identified, the buyer’s ability to pay a reasonable price or their interest in the company’s growth and operations may become a problem. Private companies may require substantial additional investments in infrastructure, technology, or workforce, which some buyers may not be willing to undertake. Even if buyers have the resources, their alignment with the business’s vision and operations could pose challenges. Qualifying and identifying genuinely interested buyers who can meet the seller’s requirements can thus become a prolonged, tedious process.

5. Inaccessibility of a Broader Market

Public companies attract buyers globally through stock exchanges. However, a private company’s market is often limited to local, industry-specific, or niche sectors. For many private companies, their appeal is confined to a narrow group of potential acquirers with specific motivations, which limits the likelihood of finding a buyer without significant marketing and outreach efforts.

6. Owner Dependence

Private companies, especially smaller ones, are often deeply dependent on their owners, who may serve multiple roles in the company, from operational oversight to customer relationships. This dependence can deter potential buyers, who may fear the company’s performance will decline once the owner exits. Additionally, a potential buyer may seek assurances of continuity or demand the owner’s involvement during a transition period, which the seller might not be willing or able to provide.

Strategies to Increase the Likelihood of Finding a Buyer

Despite these challenges, several strategies can enhance the odds of finding a buyer for a private company, even when no interested party exists at the outset.

1. Create a Comprehensive Exit Strategy

A well-planned exit strategy is essential for making the company more attractive to buyers. The exit strategy should include a business valuation, a roadmap for improving the company’s financial performance, and a timeline that allows for a smooth transition. Sellers should begin preparing at least two to three years in advance to address operational inefficiencies, strengthen financial records, and make other adjustments that could increase the company’s market value.

2. Engage in Strategic Marketing and Outreach

Marketing a private company sale requires more than just a listing on business-for-sale platforms. Instead, it demands targeted outreach to individuals, companies, and investment firms that might find strategic value in the acquisition. Sellers can work with specialized brokers, investment bankers, or mergers and acquisitions (M&A) advisors who can facilitate connections and market the business directly to likely buyers. Identifying and engaging with industry players, including competitors, suppliers, or large players interested in vertical integration, can expand the pool of potential acquirers.

3. Develop a Clear, Transparent Financial Picture

Since financial transparency is a significant barrier, preparing detailed and audited financial statements that go back several years can help build buyer confidence. The company should ensure its financial statements are organized, well-presented, and comply with generally accepted accounting principles (GAAP). This provides potential buyers with the data needed to make informed decisions and mitigates some of the perceived risks associated with private company acquisitions.

4. Focus on Growth Opportunities and Future Projections

Buyers are often attracted to companies with strong growth potential. By highlighting future revenue opportunities, market expansions, new product lines, or underutilized assets, sellers can demonstrate that their company has upside potential. Developing realistic, data-supported growth projections can make the company more appealing and help to justify the valuation.

5. Address Owner Dependency Issues

To minimize concerns about owner dependence, private company owners should work to gradually delegate responsibilities to a management team. Having experienced managers or executives who can run the business independently shows potential buyers that the company is resilient and will continue to function well without the original owner. Additionally, agreeing to a temporary consulting role during the transition period may provide buyers with the reassurance they need to proceed with the purchase.

6. Consider Different Buyer Types

Expanding the potential buyer pool requires flexibility and an understanding of different buyer types:

  • Strategic Buyers may acquire companies to improve their existing operations or expand into new markets. Identifying competitors, suppliers, or companies in related sectors can increase buyer possibilities.
  • Financial Buyers, such as private equity firms, seek businesses with solid cash flows that can be optimized for profitability. Positioning the company as a steady cash flow generator or as having restructuring potential can make it attractive to this buyer type.
  • Individual Investors or Entrepreneurs may be interested in running a small business. This buyer type often looks for businesses that offer a manageable level of risk and provide a steady income.

7. Implement a Competitive Bidding Process

If there are multiple potential buyers, implementing a competitive bidding process can encourage better offers. By setting a deadline and establishing a transparent process, sellers can create a sense of urgency, potentially raising the price and improving the terms of the deal.

Legal and Logistical Considerations

Once a buyer has been identified, several critical legal and logistical steps remain:

1. Due Diligence

The due diligence process involves the buyer verifying all aspects of the business, including financial statements, contracts, employee agreements, intellectual property, and customer data. A seller who is prepared for this process with well-organized documents and clear records will facilitate smoother negotiations and help instill buyer confidence.

2. Negotiation of Sale Terms

Negotiating sale terms is crucial, covering aspects such as the purchase price, payment structure, warranties, liabilities, and potential earn-outs. Earn-outs, where the seller receives additional payments based on the company’s future performance, can help bridge valuation gaps between buyer and seller expectations. The negotiation phase is where having an experienced M&A advisor or attorney can be invaluable, ensuring that the seller’s interests are protected and that the sale terms are beneficial.

3. Transition Planning

Successful transition planning ensures continuity and stability post-sale. This could involve training new management, transferring key relationships, or documenting essential processes. Transition plans can vary in duration, but having a clear roadmap can make the acquisition more attractive to buyers concerned about operational continuity.

4. Tax Considerations

The tax implications of selling a private company are often complex and can impact both the seller and buyer. Sellers should consult with tax professionals early in the process to optimize the sale’s tax structure, which could include installment sales, capital gains considerations, or tax deferral strategies.

The Role of M&A Advisors and Brokers

M&A advisors and brokers play a critical role in facilitating private company sales. They bring industry expertise, access to potential buyers, and experience in structuring complex transactions. The right advisor can add significant value by ensuring that the business is marketed effectively, that the seller’s interests are protected during negotiations, and that the transaction remains compliant with legal and regulatory requirements. In cases where there are no existing buyers, these professionals may be instrumental in conducting outreach and identifying potential buyers who otherwise would not have been considered.

Conclusion

Finding a buyer for a private company without existing buyers is undeniably challenging but far from impossible. It requires careful planning, financial transparency, and a strategic approach to identifying and engaging with potential acquirers. By addressing valuation complexities, owner dependency, and limited market reach, private company owners can make their businesses more attractive to a broader pool of buyers. Moreover, engaging professional advisors, preparing a comprehensive exit strategy, and maintaining flexibility in the negotiation process are critical steps to closing a successful sale.

In the end, selling a private company is a complex, multifaceted process that involves not only finding a buyer but also meeting the buyer’s expectations for growth potential, financial transparency, and operational resilience. By acknowledging and addressing these challenges, private company owners can improve their odds of securing a buyer and achieving a favorable outcome. This methodical, structured approach to the sale process can help pave the way to a successful exit, even in a difficult and uncertain market.

If you have shares in a private company you want to sell, see this page:

https://vccross.com/secondaries2/shareholders

VCC Launches Free learning area for LPs, Investors, and VC Pros

Venture Capital Cross — 9/4/2024 — Private markets are growing in popularity and we’re getting lots of questions about what is what, why and how are private markets different than public markets, etc.  So we’ve launched a free learning area on our portal @ vccross.com/learn – Also, we have launched user Forums where we can discuss secondary market opportunities or other market events, we invite you to check it out (for the Forum, registration is required.)

Content for pros and novice alike, checkout this short on the value of being quiet:

Here is a short explanation what is the Cap Table:

These and more are free on our YouTube channel as well as our site.  Enjoy!

First Look Inside SpaceX’s Starfactory w/ Elon Musk

From the Venture Capital Cross Blog –  Checkout this inside look at SpaceX with a casual interview with founder Elon Musk.  Say what you will about Elon, SpaceX is an amazing company that’s shooting up like a rocket.  Let’s listen to what he has to say directly:

More about SpaceX

SpaceX has established itself as a revolutionary force in the aerospace industry since its founding in 2002 by Elon Musk. The company has achieved numerous milestones that have transformed the landscape of commercial spaceflight and satellite communications.

Launch Services

SpaceX has become the world’s leading provider of launch services, offering cost-effective and reliable access to space. The company’s Falcon 9 rocket, known for its reusable first stage, has dramatically reduced launch costs and increased launch frequency. This reusability breakthrough came in 2015 when SpaceX successfully landed a Falcon 9 first stage, and by 2017, they were regularly reusing these stages for multiple missions.

Crewed Spaceflight

In 2020, SpaceX made history by becoming the first private company to send astronauts to the International Space Station (ISS). This achievement marked the beginning of a new era in commercial crewed spaceflight, with SpaceX now regularly transporting astronauts to and from the ISS for NASA.

Starlink

SpaceX has also ventured into the satellite internet market with its Starlink megaconstellation. As of 2023, Starlink had 3,660 active satellites in orbit, comprising half of all active satellites. This ambitious project aims to provide global broadband coverage, especially to underserved areas.

Future Endeavors

Looking ahead, SpaceX is focusing on its next-generation Starship spacecraft and Super Heavy rocket. This fully reusable system is designed for missions to the Moon, Mars, and beyond. SpaceX is investing heavily in Starship development, with reports suggesting an annual budget exceeding $1 billion for the project.SpaceX’s success has not only revolutionized the space industry but has also inspired a new wave of commercial space companies and investments. As the company continues to push the boundaries of space technology, it remains at the forefront of the ongoing transformation in space exploration and utilization.to push the boundaries of space technology, it remains at the forefront of the ongoing transformation in space exploration and utilization.

The complete list of tier-1 and notable VCs and angel investors

From Republic: 

Tier-1 VC

Tier-1 VC are world’s leading and most reputable VC firms — they typically lead the round and their investment is a strong quality signal for other investors.

List of Tier-1 venture firms:

  • Andreesen Horowitz
  • Khosla Ventures
  • SV Angel
  • Accel Partners
  • NEA
  • Sequoia
  • Venrock
  • First Round Capital
  • Spark Capital
  • Slow Ventures
  • Y Combinator
  • Kleiner Perkins
  • GV
  • Founders Fund
  • Union Square Ventures
  • Lightspeed
  • Thrive Capital
  • General Catalyst
  • Benchmark
  • Greylock
  • Bain Capital Ventures
  • Lerer Hippeau
  • Bessemer
  • Insight Venture Partners
  • Greycroft

Notable VCs

Not as high-signal as Tier-1 VCs, Notable VCs are still very professional, long-standing reputable firms that bring a quality signal to the deal. Please note that the list skews towards US-based firms.

  • Tiger Global
  • Menlo Ventures
  • Charles River Ventures
  • Redpoint
  • FirstMark
  • Triangle Peak Partners
  • Comcast Ventures
  • ff VC
  • DCM
  • 500 Startups
  • RRE Ventures
  • DCVC
  • BoxGroup
  • Revolution
  • Intel Capital
  • ARCH Venture Partners
  • Franklin Square Capital Partners
  • Founder Collective
  • Madrona Venture Group
  • Anthemis Group
  • Initial Capital
  • UpHonest Capital
  • Homebrew
  • Matrix Partners
  • Susa Ventures
  • Upfront Ventures
  • Bond VC
  • Compound
  • Harrison Metal
  • Samsung NEXT
  • Zetta Venture Partners
  • Social Leverage
  • Kapor Capital
  • Felicis Ventures
  • Techammer
  • Silverton Partners
  • Fuel Capital
  • Bowery Capital
  • e.ventures
  • Rethink Education
  • Ulu Ventures
  • Science
  • Forerunner Ventures
  • Flybridge Capital Partners
  • Storm Ventures
  • Primary Venture Partners
  • Wonder Ventures
  • Fenway Summer Ventures
  • Nexus Venture Partners
  • Baseline Ventures
  • Amplify Partners
  • Frontline Ventures
  • True Ventures
  • IA Ventures
  • Norwest Venture Partners
  • Cowboy Ventures
  • Birchmere Ventures
  • XG Ventures
  • Entrée Capital
  • M13
  • Comet Labs
  • Hyde Park Venture Partners
  • Silicon Badia
  • Two Sigma Ventures
  • Great Oaks VC
  • Tekton Ventures
  • Golden Ventures
  • Battery Ventures
  • FJ Labs
  • Magma Venture Partners
  • Mangrove Capital Partners
  • Caffeinated Capital
  • Signia Venture Partners
  • AME Cloud Ventures
  • BAM Ventures
  • Peterson Ventures
  • Brainchild Holdings
  • Tribe Capital
  • Red Swan Ventures
  • Neu Venture Capital
  • XSeed Capital
  • Eight Roads Ventures
  • Lux Capital
  • Innovation Endeavors
  • Foundry Group
  • Canaan Partners
  • Resolute Ventures
  • DHVC
  • Haystack
  • Trinity Ventures
  • Boldstart Ventures
  • Nextview Ventures
  • Pelion Venture Partners
  • Bloomberg Beta
  • BBG Ventures
  • SparkLabs Global Ventures
  • Service Provider Capital
  • Initialized Capital
  • Coinbase Ventures
  • Winklevoss Capital
  • Pantera Capital
  • Goldman Sachs
  • Comcast Ventures
  • Intel Capital
  • Qualcomm Ventures
  • Salesforce Ventures
  • Novartis Venture Fund
  • Johnson & Johnson Innovation
  • Samsung Venture Investment
  • Cisco Investments
  • SR One
  • Time Warner Investments
  • Microsoft Ventures
  • GE Ventures
  • Roche Venture Fund
  • Alexandria Venture Investments
  • Pfizer Venture Investments
  • Novo Ventures

Notable Angel Investors

Notable angel investors are those individual investors who have a known public track record and bring value to the company along with their capital.

  • Mark Cuban
  • Naval Ravikant
  • Jason Calacanis
  • Ron Conway
  • Fred Wilson
  • Cyan Bannister
  • Tim Ferriss
  • Chris Sacca
  • Paul Graham
  • Kevin Rose
  • Keith Rabois
  • Dave Morin
  • Jack Dorsey
  • Alexis Ohanian
  • Scott Banister
  • Marc Benioff
  • Tim Draper
  • Max Levchin
  • Garry Tan
  • Reid Hoffman
  • Gary Vaynerchuk
  • Mitchell Kapor
  • David Sacks
  • Ashton Kutcher
  • Dave McClure
  • Chris Dixon
  • Jeff Bezos
  • Marc Andreessen
  • Fabrice Grinda
  • Paige Craig
  • Brad Feld