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Back 2 BusinessB2B is Back…StarVest never left!
Larry Bettino January 15, 2013
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STARVEST PARTNERS OVERVIEW• Established 1998; Two funds – $400 million
• Technology - enabled business services (B2B)
• Software-as-a-Service (SaaS)
• Internet Marketing
• Data/Information-based businesses
• eCommerce (technology and infrastructure)
• Security and Compliance
• Expansion stage ($2m - $20 million revenue)
• Workflow, transaction - based revenue, network effects
• Invest nationwide (30% NY, 30% Silicon Valley)
• “Where can we add value” – Service Provider
VENTURE B2C INVESTMENTS
2005 Q1
2005 Q2
2005 Q3
2005 Q4
2006 Q1
2006 Q2
2006 Q3
2006 Q4
2007 Q1
2007 Q2
2007 Q3
2007 Q4
2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
2009 Q2
2009 Q3
2009 Q4
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0
50
100
150
200
250
300
Source: PitchBook Data, Inc.Total Capital Invested Deal Count
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ATTRACTIONS OF B2C• Small upfront development investment• Consumers willing to try new things• Can generate many users quickly (viral)• Generate initial revenue quickly (Google Ad
Exchange)• Rapid valuation increases possible!
B2C VALUATIONS: PRE IPO PERFORMANCE
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00$38.00
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
$17.20
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$20.00
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
$17.20
COMMENTS ON B2B INVESTMENTS
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• “Let’s face it, business to business is DEAD.” BusinessWeek, August 2011
• “The Death of B2B Venture Capital” Prominent VC, October 2009
• “VC’s have given up on [B2B].” Andy Bechtolsheim, Founder, Sun Microsystems
WSJ May 2011
BUT…
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Attracting Consumers is Unpredictable (Read: Expensive)
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BUT…
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Monetization is Hard
$ GENERATED PER USER$190.00 $190.00
Amazon eBay Google Facebook Other $-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00 $190.00 $190.00
$24.00
$4.00 $0.25
BUT…
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Consumers are Fickle
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• AOL• eBay• 4Square• Path• OMG POP
- 66 months- 24 months- 13 months- 15 days- ? days
TIME TO 1 MILLION USERS
B2C VALUATIONS: POST IPO PERFORMANCE
0
5
10
15
20
25
$20.00
0
2
4
6
8
10
12
14
16
18
20
$17.20
0
5
10
15
20
25
30
35
40$38.00
0
2
4
6
8
10
12
14
16
18
20
$17.20
$19.64
$2.48
$4.80
$9.11
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• “Enterprise software is the hottest thing!” Business Insider, April 2012
• “Businesses are increasingly turning to startups and small companies for new technology for competitive advantage.” WSJ, August 23, 2012
• YCombinator this round – 50% is B2B
• “Recent survey of CIO’s: 73% say they must embrace new technology, or risk losing market share.” Harvey Nash Group
Flavor of the Month – B2B!
B2B ATTRACTIONS
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• B2B Building is Formulaic• Buyers are economically driven (ROI)• Happy customers are sticky (low churn)• Economic model (SaaS) getting greater traction• Consumerization of B2B (big trend)• Valuations/Outcomes can be excellent, too!
B2B SHARE PRICE PERFORMANCE$62.70
$52.12$34.31
$32.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
IPO= $17.00Price as of Jan 2012 = $41.88
IPO=$18.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
IPO=$28.00 $28.0000
- Public Value $4 Billion+- $400m to Hearst- $212 to Madison Dearborn- $180m to DELL- $117m to IronMountain- Private; Revenue >$200m
• NetSuite• iCrossing• FieldGlass• MessengerOne• Connected• Newgistics
STARVEST - EXPERIENCED B2B INVESTORS
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• NewComLink• IRON Solutions• Transactis• PrecisionDemand• The Receivables Exchange
• Veracode• Switchfly• Xignite• RAMP• Host Analytics
CURRENT STARVEST II B2B PORTFOLIO
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