JP Morgan Collects Data on Borrowers' Race in Push Against Wealth Gap

JP Morgan Collects Data on Borrowers' Race in Push Against Wealth Gap

May 20, 2022, TechCrunch

Denny Kwon and Scott Anthony were featured in a TechCrunch Q&A about the current startup landscape, answering a range of questions startups might be wondering about right now. They suggest that founders should be prioritizing building relationships with bankers and the larger companies that might conceivably be interested in acquiring their startup.

"There is certainly a feeling of more pressure on sellers to get deals done as quickly as possible in light of the fact that there’s a lot of market volatility right now and they don’t know how buyers may be reacting to a significant decline in their stock price," Denny said. "Smaller companies are also facing the prospect of a slightly more challenging fundraising market, so alternatives for them are narrowing."

When asked whether acquirers are more or less inclined to offer equity as a component of a deal due to the current volatility of, Denny responded, "It’s much more challenging to price deals with a significant stock component in this market. With any volatility, you don’t get a clear sense of the inherent value of a share, so all-cash deals are much more favorable to targets."

"There’s valuation pressure, but it’s hard to gauge [the degree]," Scott explained. "Certainly, we have companies that were racing to close valuations [before Russia invaded Ukraine] and [that period since] has changed everyone’s expectations. I think there’s concern on the company side that investors are sitting out and that’s driving valuations down."

He continued, "Companies with revenues and good prospects will weather any downturn better — they always have. Sector wise, it will depend, but the whole stablecoin [debacle] hasn’t helped the crypto stuff."

When asked whether startups that are open to selling should be reaching out to anyone, or should they wait to see who approaches them, Denny said, "I'd be advising startups to talk to bankers and keep relationships up with people at the larger companies they know simply because we may be in for a longer-term correction, where funding becomes even more challenging than it has been over the last couple of months."

Scott offered an additional approach. "Having relationships with the bankers is prudent so if you have to check the market, you have those relationships already," he added. "Also, keeping in contact with customers and bigger strategic partners that would be natural buyers for the company could short-circuit any kind of sale process later."

Click here to read the full article.