Фондове за Рисков капитал

Източници на финансиране

Бизнес План

Какво ? Защо ? Как ? Колко?

Venture Capital Venture Capital FundFund

Business Business AngelAngel

БанкаБанкаДруги източници:Други източници:Донорски Донорски фондовефондове

Предприемаческата компания 4 етапа на развитие

Time

CashFlow

I II III IV

Time

“Pure entrepreneurship”

CashFlow

Предприемаческата компания 4 етапа на развитие

Предприемаческата компания ЕТАП I: “Чисто предприемачество”Defining the concept of the businessGathering financial resourcesAssembling the startup team Identifying customersAnalyzing the competitionBuilding the prototypeGetting your first ‘customer’

Time

“Strategic focus”

CashFlow

The Entrepreneurial Venture FOUR PERIODS of DEVELOPMENT

The Entrepreneurial Venture PERIOD II: “Strategic Focus”

What business aren’t we in? IMPLEMENTING the business are we in! Knowing better than ANYONE else:

What will people pay How many will they buy How to distribute How to service the customer

Identifying strategic partners Developing relations with suppliers Going beyond the prototype to a truly scaleable

product Recruiting a complete team Raising ‘institutional’ money

Time

“Systems building”

CashFlow

The Entrepreneurial Venture FOUR PERIODS of DEVELOPMENT

The Entrepreneurial Venture PERIOD III: “Systems Building”

Financial controls Stable division of labor Reporting relationships and authorities Developing systems of internal control Formalizing the terms of a sale Operational systems

Production, outsoucing Distribution, sales Service, warraties

CashFlow

Time

“Corporate management”

The Entrepreneurial Venture FOUR PERIODS of DEVELOPMENT

The Entrepreneurial Venture PERIOD IV: “Corporate Management”

Hiring “outsiders”Going publicAdding the follow-on product[s]Shedding those who can’t keep upFormalizing the cultureRationalizing the strategy

The Professional Entrepreneur

Time

CashFlow

I II III IV

Visioning the Future into the Present

New Venture Funding StreamSales$

Time

Cash Flow

$1 $8

Venture Capital Rounds

$20

$40

$80IPO

Acquisition

Investment

Corp Growth

Corporate “Window” and Spin-outs

What is Venture Capital?

Private or institutional investment (capital)in relatively early-stage companies (ventures)

Types of VCs:Angel investorsFinancial VCsStrategic VCs

• Застрахователни компании, Пенсионни фондове, образователни фондове, и заможни инвеститори.

• Тези организации имат инвестиционно портфолио, което разпределят между различни финансови активи – акции, облигации, недвижими имоти и др.

• В портфолиото има клас “Алтернативни инвестиции” и venture capital е такава инвестиция. Около 5% до 10% от портфолиото може да е отделено за такива инвестиции.

• Висока възвръщаемост от тези високо рискови активи.

Как се формира капиталът на VС?

• Повечето Venture Capital Funds са на принципа ограничено партньорство:

Venture Capital Fund

Limited Partners

Pension Funds, Educational Endowments, Foundations, Insurance Companies, Wealthy

Individuals

General Partners“Venture Capitalists” you will deal with. They may have been Entrepreneurs in a prior life or

they might be financial types.

The General Partners use an Offering Memorandum to raise a fund of a given size from the Limited Partners by convincing them that the

GPs have a unique strategy or expertise in a particular sector or sectors of the market. Fund

raising can take a year or more.

If the GPs are successful they will convince enough Limited Partners to invest enough money to achieve the size fund offered.

When this happens there is a first “close” of the fund.

Как са организирани

Venture Capital Funds?

• Жизнен цикъл • Повечето фондове се образуват за 10 години. След това обикновено се

ликвидират• Максимална доходност между 5 - 7 години или по-малко.

• Първоначални инвестиции• For Early Stage Funds it is typical for the Fund to reserve $2-$3 for every $1

invested. For example if the Fund invests $2m in Round 1 they will reserve another $4m -$6m for follow-on rounds. So a $400M Fund might invest $100M in the first rounds of portfolio companies and $300M in follow on rounds.

• Време на първите инвестиции• A Fund usually makes its initial investments in the first 3 years of the Fund life

cycle. During the remaining life of the Fund follow-on investments are made and the portfolio companies are positioned for “harvest”

Какъв е жизнения цикъл на VC?

Angel Investors Typically a wealthy individual Often with a tech-industry background, in

position to judge high-risk investments Usually a small investment (< $1M) in a very

early-stage company (demo, 2-3 employees) Motivation:

Dramatic return on investment via exit or liquidity event:

Initial Public Offering (IPO) of company Subsequent financing rounds

Interest in technology and industry

Financial VCs

Most common type of VC An investment firm, capital raised from

institutions and individuals Often organized as formal VC funds, with

limits on size, lifetime and exits Sometimes organized as a holding

company Fund compensation: carried interest Holding company compensation: IPO Fund sizes: ~$25M to 10’s of billions Motivation:

Purely financial: maximize return on investment

IPOs, Mergers and Acquisitions (M&A)

Strategic VCs

Typically a (small) division of a large technology company

Examples: Intel, Cisco, Siemens, AT&T Corporate funding for strategic investment Help companies whose success may spur

revenue growth of VC corporation Not exclusively or primarily concerned with

return on investment May provide investees with valuable

connections and partnerships Typically take a “back seat” role in funding

The Funding Process: Single Round Company and interested VCs find each other Company makes its pitch to multiple VCs:

Business plan, executive summary, financial projections with assumptions, competitive analysis

Interested VCs engage in due diligence: Technological, market, competitive, business development Legal and accounting

A lead investor is identified, rest are follow-on The following are negotiated:

Company valuation Size of round Lead-investor share of round Terms of investment

Process repeats several times, builds on previous rounds

Terms of Investment Initially laid out in a term sheet (not binding!) Typically comes after a fair amount of DD Valuation + investment VC equity (share) Other important elements:

Board seats and reserved matters Drag-along and tag-along rights Liquidation and dividend preferences Non-competition Full and weighted ratchet

Moral: These days, VCs extract a huge amount of control over their portfolio companies.

Basics of Valuation Pre-money valuation V: agreed value of company prior to this round’s

investment (I) Post-money valuation V’ = V + I VC equity in company: I/V’ = I/(V+I), not I/V Example: $5M invested on $10M pre-money gives VC 1/3 of the

shares, not ½ Partners in a venture vs. outright purchase I and V are items of negotiation Generally company wants large V, VC small V, but there are many

subtleties… This round’s V will have an impact on future rounds Possible elements of valuation:

Multiple of revenue or earnings Projected percentage of market share

Board Seats and Reserved Matters Corporate boards:

Not involved in day-to-day operations Hold extreme control in major corporate

events (sale, mergers, acquisitions, IPOs, bankruptcy)

Lead VC in each round takes seat(s) Reserved matters (veto or approval):

Any sale, acquisition, merger, liquidation Budget approval Executive removal/appointment Strategic or business plan changes

During difficult times, companies are often controlled by their VCs

Other Typical VC Rights

Right of first refusal on sale of shares Tag-along rights: follow founder sale on pro rata

basis Drag-along rights: force sale of company Liquidation preference: multiple of investment No-compete conditions on founders Right to participate in subsequent rounds

(usually follow-on) Later VC rights often supercede earlier Anti-Dilution Protection

Why Multiple Rounds and VCs?

Multiple rounds: Many points of valuation Company: money gets cheaper if successful VCs: allows specialization in stage/risk Single round wasteful of capital

Multiple VCs: Company: Amortization of control! VCs:

Share risk Share DD

Both: different VC strengths (financial vs. strategic)

So What Do VCs Look For? Committed, experienced management Defensible technology Growth market Significant revenues Realistic sales and marketing plan

The Process?Write business planRaise venture capitalSell productGo public or sell companyRetire

200 Deals

1,000 Deals

6 -7 Deals Selected

The Process?

How To Get Through The FunnelBusiness model that satisfies marketUnderstanding of what it takes to build

team, product lines and businessWell thought out business planExperience helps – crusty sales person

vs. 5 PhDs

INTEGRITY

CREATIVITY

DRIVE

FOCUSPASSION

LEADERSHIP

TEAM WORK

VISION

EXPERIENCE

Management Teams Make Or Break A Company

Keys To Success

Management teamProducts and markets

Markets that are not there – yet!Financing

OwnershipOpportunistic exits

Problems Along The WaySuddenly out of moneyKey non-performing member of teamManagement team member leavesProduct/Technology doesn’t workMarket/Competitive landscape

changes Investor group falls apart on

vision/execution

Biopharm & Software Lead 2005 InvestingEquity Investment in European Venture-Backed Companies by Industry, 2005

Source: Dow Jones VentureOne/Ernst &Young

Retail0.5%

Products1%

Services3%

Software18%

Medical IS0.4%

Communications7%

Electronics3%

Information Services5%

Semiconductors14%

Medical Devices5%

Biopharmaceuticals44%

Info. Tech.49%

Prod. & Serv.6%

Healthcare45%

UK Leads European InvestmentInvestment in Europe by Country, 2005

Source: Dow Jones VentureOne/Ernst &Young

Other13%

Ireland5%

Sweden7%

Switzerland8%

Denmark9%

France12%

Germany16%

United Kingdom 30%

Въпроси?