The current deal market is experiencing likely the hardest capital raising period that Rob Grimaldi has seen since 2008, and in many ways the COO of Viscogliosi Brothers says it’s harder than that year, which was devastating.
“Things are totally different than they've always been, and also totally the same,” Grimaldi said at the 2024 Detroit Smart Business Dealmakers Conference. “There's always a challenge. There's always something that's out there that makes things difficult. Quality deals will tend to get done. Bad deals in times like this just don't get done. And so, the question becomes, how far do you push?”
With nine portfolio companies, he says sometimes they push harder on the quality deals to get them going, but some deals are just harder to push forward.
“It's been a real difficult period for us,” he says. “We've been successful. We've raised capital. But we've had to be creative. We've had to do things that two years ago you might not have thought about doing. But it's when the market is really good and everybody's happy and you're making great progress and you're having big exits that you need to take care of your partners because now we need to leverage those relationships and go back to people and say, ‘All right, here's where we're going with this.’”
He says building those relationships over time and finding the right people is critical.
“Twenty-three years ago, we just found money and get deals done,” he says. “Now we're finding the right kind of people, the right kind of strategic partners to help.”
As the market has become more challenging, he says they’ve had to look at some deals that had great conviction and were solid companies doing important business, but then had to reevaluate. In one deal it became clear that financing was going to be very difficult for the target company, so they had to make a tough decision to shed off a piece of the business. That move, however, allowed them to clean up the balance sheet, focus on the core piece of business and ultimately innovate a product. From that, the revenue grew, even though there were doubts it would.
“It allowed us to be a little bit creative, clear up some of the balance sheet, which then allowed us to raise from more traditional sources, which is not how we normally do it in our world,” he says. “We're normally out looking for equity checks. So, creativity needs to be important at this point.”
In 2008, he says they didn't have all the same relationships that they have now. So, today, he says, it's easier to navigate a challenging market than it was then. Part of the reason was that some of their traditional partners had gone out of business. That forced his firm to get even more focused on capital raising, on who they were talking to — talking to hundreds of people rather than just those in their network.
“It was expanding that out and making more phone calls, having deeper discussions with current partners, talking through how we're going to look at a deal and how you're going to come in for a little more than you'd maybe plan to come in for, because we just need it,” he says.
It also means getting creative. He says in once instance they invested in a company that failed its phase-one trials. With a great deal of money invested, they gambled that the company would ultimately succeed. A recent valuation showed their gamble paid off.
“But that's us going out on flyer, taking a risk, getting creative, and then really getting people behind us to see the vision, to see the story on what could be a binary decision,” Grimaldi says. “In theory, all med tech, specifically biotech, is binary. It works or it doesn't. And if it doesn't work, you're screwed. You just lost a ton of money. There's some nuance to that, but convincing people that two years ago, 2019, that this company would be successful, wasn't the easiest story. We had a long road ahead of us.”
