Dodd-Frank’s Negative Impact on Start-Up/Emerging Company Capital Raising – by Ronald Woessner

Dodd-Frank crushed the valuations of start-up/emerging companies, as illuminated in the chart below:

Large Cap vs Microcap Spread
Raising Money in a Post Dodd-Frank World

Typical Sources of investment capital for start-up/emerging companies are:

  • Personal Loans/Credit of Founders – fund 57% of start-ups
  • Friends & Family – fund 38%
  • Venture Capital Funds – fund .05%
  • Angel Investors – fund .91%
  • “JOBS Act Crowd Funding – too new for reliable metrics, although expected to increase

The metrics above reveal that “Personal Loans/Credit” of Founders and “Friends & Family” provide the preponderance of capital for start-up/emerging companies. As these capital sources become “tapped” out, these companies need to attract “investment firm” capital to survive. Subsequent posts will illuminate the reasons why the Dodd-Frank crushed stock valuations have made it virtually impossible for start-up/emerging companies to obtain investment firm capital.

Alternatives to the S&P 500? – by Ronald Woessner

Noted financial analyst Michael Markowski, who predicted the demise of Lehman Brothers, Bear Stearns, and Merrill Lynch, is predicting that the current S&P 500 stock market bubble is poised to crash in 2018.

Overvalued Stocks

You can watch his predictions in the videos here.

One of the factors cited by Mr. Markowski is the significant divergence between large cap stock valuations and small cap stock valuations.

If such a crash occurs, it could be a good opportunity for investing in microcap companies since investors will be seeking investment opportunities other than the S&P 500.

Raising Money in a Post Dodd-Frank World – by Ronald Woessner

Dodd-Frank made it extraordinarily difficult for micro-cap companies to raise money.

The chart below, excerpted from an article by noted financial analyst Michael Markowski, who predicted the demise of Lehman Brothers, Bear Stearns, and Merrill Lynch, illustrates that the Dodd-Frank legislation crushed the values of micro-cap companies. The crushing of their valuations has made it extraordinarily difficult for micro-cap companies to obtain funding from sources other than Friends & Family investors.

Large Cap vs Microcap Spread
Raising Money in a Post Dodd-Frank World

You can read the full text of Mr. Markowski’s article here.

For most micro-cap companies, the expertise of firms like Microcap Strategies is needed to help raise funding from sources other than Friends & Family investors in a post Dodd-Frank world.