Michael Moe, CFAFounder, GSV Asset Management
@michaelmoe
Finding the Next Facebook
Every day in America 1,100
new businesses are formed.
Source: Gallup, U.S. Census Bureau
Every day in America 1,300 businesses fail.
Source: Gallup, U.S. Census Bureau
In 2014, Venture Capitalists invested in
4,356 companies.
Source: NVCA, PwC
In 2014, just 115 venture-backed companies went
public.
Source: Thomson Reuters, NVCA
and that was the best year since 2000.
Source: Dow Jones Venture Source, Fenwick & West
20% Chance Company Survives First 3 Years
What kind of nut would start a
business?
Name that Nut
Lost job in 32
Defeated in race for State Legislature in 32
Failed in business 33
He had a nervous breakdown in 41
Defeated in races for:
Congress in 43 Senate in 55
Vice President in 56 Senate in 58
And the answer is
Teachers told him he was too stupid to learn anything
Fired from his first two jobs for lack of productivity
Thomas Edison
$272 Billion Market Cap
He was fired by a newspaper editor because he "lacked imagination
and had no good ideas"
Launched film studios in 1920 and 1921 both went bankrupt
$195 Billion Market Cap
$233 BillionMarket Cap
In order to earn better than a C, the idea must be feasible.
-Yale professor response to a paper he submitted in 1965
Whatever it Takes
Wilson turned FedExs last $5,000 into $27,000 at the Black Jack table
$49 Billion Market Cap
Howard SchultzCEO, Starbucks
$82 Billion Market Cap
Dyslexic
Turned down by 53 banks for a business loan
Founded 8 Billion Dollar Businesses
The Power of Growth
Top 25 Stocks2005 - 2015
1 2 3 4
5 6 7 8
9 10 11 12
13 14 15 16
17 18 19 20
21 22 23 24
25
Median Stock CAGR31%
Source: Capital IQ, Yahoo Finance
Median EPS CAGR39%
Source: Capital IQ, Yahoo Finance
Median P/E, 200536x
Source: Capital IQ, Yahoo Finance
Median Market Cap, 2005$361 million
Source: Capital IQ, Yahoo Finance
Conclusion 1) Focus on Companies
with the Highest Growth, not the Bargain Basement
Conclusion 2 2) Focus on Small
Companies SIZE FORGES AN ANCHOR
People may bet on hourly wiggles of the market but its the earnings that waggle the
wiggle long term.
-Peter Lynch
$0.00$
$1.00$
$2.00$
$3.00$
$4.00$
$5.00$
$6.00$
$7.00$
$8.00$
$0$
$20$
$40$
$60$
$80$
$100$
$120$
$140$
Feb00
102005$
Aug00102005$
Feb00
102006$
Aug00102006$
Feb00
102007$
Aug00102007$
Feb00
102008$
Aug00102008$
Feb00
102009$
Aug00102009$
Feb00
102010$
Aug00102010$
Feb00
102011$
Aug00102011$
Feb00
102012$
Aug00102012$
Feb00
102013$
Aug00102013$
Feb00
102014$
Aug00102014$
Feb00
102015$
Apple
2005-2015
Source: Capital IQ, Yahoo Finance
Stock Price CAGR: 36% EPS CAGR: 55%
Stoc
k Pr
ice
EPS
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$0
$20
$40
$60
$80
$100
$120
Dec-3
1-2004
Jun-30
-2005
Dec-3
1-2005
Jun-30
-2006
Dec-3
1-2006
Jun-30
-2007
Dec-3
1-2007
Jun-30
-2008
Dec-3
1-2008
Jun-30
-2009
Dec-3
1-2009
Jun-30
-2010
Dec-3
1-2010
Jun-30
-2011
Dec-3
1-2011
Jun-30
-2012
Dec-3
1-2012
Jun-30
-2013
Dec-3
1-2013
Jun-30
-2014
Dec-3
1-2014
Monster
2005-2015
Source: Capital IQ, Yahoo Finance
Stock Price CAGR: 47% EPS CAGR: 37%
Stoc
k Pr
ice
EPS
$0.00$
$0.50$
$1.00$
$1.50$
$2.00$
$2.50$
$3.00$
$3.50$
$4.00$
$4.50$
$5.00$
$0$
$100$
$200$
$300$
$400$
$500$
$600$
Dec-3
1-2004
Jun-30
-2005
Dec-3
1-2005
Jun-30
-2006
Dec-3
1-2006
Jun-30
-2007
Dec-3
1-2007
Jun-30
-2008
Dec-3
1-2008
Jun-30
-2009
Dec-3
1-2009
Jun-30
-2010
Dec-3
1-2010
Jun-30
-2011
Dec-3
1-2011
Jun-30
-2012
Dec-3
1-2012
Jun-30
-2013
Dec-3
1-2013
Jun-30
-2014
Dec-3
1-2014
Netflix
2005-2015
Source: Capital IQ, Yahoo Finance
Stock Price CAGR: 39% EPS CAGR: 35%
Stoc
k Pr
ice
EPS
$0.00$
$5.00$
$10.00$
$15.00$
$20.00$
$25.00$
$30.00$
$35.00$
$40.00$
$0$
$200$
$400$
$600$
$800$
$1,000$
$1,200$
$1,400$
$1,600$
Dec03102
004$
Jun030
02005$
Dec03102
005$
Jun030
02006$
Dec03102
006$
Jun030
02007$
Dec03102
007$
Jun030
02008$
Dec03102
008$
Jun030
02009$
Dec03102
009$
Jun030
02010$
Dec03102
010$
Jun030
02011$
Dec03102
011$
Jun030
02012$
Dec03102
012$
Jun030
02013$
Dec03102
013$
Jun030
02014$
Dec03102
014$
Priceline
2005-2015
Source: Capital IQ, Yahoo Finance
Stock Price CAGR: 47% EPS CAGR: 54%
Stoc
k Pr
ice
EPS
Growth
Double-Edged Sword
Where would you rather invest $100K?
High Octane Fund
Year 1 Up 100%
Year 2 Down 30%
Steady Eddy Fund
Year 1 Up 20%
Year 2 Up 20%
YEAR 1 YEAR 2
Return Value Return Value
HighOctane 100%
SteadyEddy 20%
Start $100K
YEAR 1 YEAR 2
Return Value Return Value
HighOctane 100% $200K
SteadyEddy 20% $120K
Start $100K
YEAR 1 YEAR 2
Return Value Return Value
HighOctane 100% $200K (30%)
SteadyEddy 20% $120K 20%
Start $100K
YEAR 1 YEAR 2
Return Value Return Value
HighOctane 100% $200K (30%) $140K
SteadyEddy 20% $120K 20%
Start $100K
YEAR 1 YEAR 2
Return Value Return Value
HighOctane 100% $200K (30%) $140K
SteadyEddy 20% $120K 20% $144K
Start $100K
Down To Break Even-10% 11%-30% 43%-50% 100%-70% 333%-90% 1000%
Breaking Even
0
1,000
2,000
3,000
4,000
5,000
6,000
1/2/90
1/2/91
1/2/92
1/2/93
1/2/94
1/2/95
1/2/96
1/2/97
1/2/98
1/2/99
1/2/00
1/2/01
1/2/02
1/2/03
1/2/04
1/2/05
1/2/06
1/2/07
1/2/08
1/2/09
1/2/10
1/2/11
1/2/12
1/2/13
1/2/14
1/2/15
NASDAQ 2000: 5,000
Source: Capital IQ, Yahoo Finance
1
0
1,000
2,000
3,000
4,000
5,000
6,000
1/2/90
1/2/91
1/2/92
1/2/93
1/2/94
1/2/95
1/2/96
1/2/97
1/2/98
1/2/99
1/2/00
1/2/01
1/2/02
1/2/03
1/2/04
1/2/05
1/2/06
1/2/07
1/2/08
1/2/09
1/2/10
1/2/11
1/2/12
1/2/13
1/2/14
1/2/15
NASDAQ 2000: 1,200
Source: Capital IQ, Yahoo Finance
2
1
-76%
0
1,000
2,000
3,000
4,000
5,000
6,000
1/2/90
1/2/91
1/2/92
1/2/93
1/2/94
1/2/95
1/2/96
1/2/97
1/2/98
1/2/99
1/2/00
1/2/01
1/2/02
1/2/03
1/2/04
1/2/05
1/2/06
1/2/07
1/2/08
1/2/09
1/2/10
1/2/11
1/2/12
1/2/13
1/2/14
1/2/15
NASDAQ Today: 5,000
Source: Capital IQ, Yahoo Finance
3
2
+417%1
If you were a consultant for a month, how would you prefer to be paid?
$10,000 per week
or 1 PENNY on day 1, doubling every day?
$0
$10,000
$20,000
$30,000
$40,000
Day 1 Day 5 Day 10 Day 15 Day 21 Day 31
$10,000
$0
$10K
1
Day 1
$0
$10,000
$20,000
$30,000
$40,000
Day 1 Day 5 Day 10 Day 15 Day 21 Day 31
$10,000$10,000
$0$0 31
$10K
Day 5
$0
$10,000
$20,000
$30,000
$40,000
Day 1 Day 5 Day 10 Day 15 Day 21 Day 31
$20,000
$10,000$10,000
$10$0$0 $10
$20K
Day 10
$0
$10,000
$20,000
$30,000
$40,000
Day 1 Day 5 Day 10 Day 15 Day 21 Day 31
$20,000$20,000
$10,000$10,000
$328$10$0$0 $328
$20K
Day 15
$0
$10,000
$20,000
$30,000
$40,000
Day 1 Day 5 Day 10 Day 15 Day 21 Day 31
$30,000
$20,000$20,000
$10,000$10,000 $21,000
$328$10$0$0
$21K
$30K
Day 21
$0
$5,250,000
$10,500,000
$15,750,000
$21,000,000
Day 1 Day 5 Day 10 Day 15 Day 21 Day 31
$40,000$30,000$20,000$20,000$10,000$10,000
$21,474,836
$21,000$328$10$0$0 $40K
$21 millionDay 31
Compound interest is the eighth wonder of the world.
He who understands it, earns it
he who doesnt, pays it.
Rule of 72
Interest Rate Years to Double $1 in 30 Years
3% 24 $2.436% 12 $5.749% 8 $13.2712% 6 $29.9615% 5 $66.2125% 3 $807.79
Rule of 72
Island of Manhattan, 1626
Island of Manhattan, 1626
Bought for $24
Good deal?
Island of Manhattan, 1626Value Today at
5% Annual Return
$4 billion
Island of Manhattan, 1626Value Today at 7.5% Annual
Return
$36.9 trillion
Island of Manhattan, 1626Value Today at 10% Annual
Return
$275
quadrillion
2000 2015$0.04
$7.03
Cost of Computing (per MM transistors)
Source: Deloitte
2000 2015$0.02
$4.77
Cost of Storage (per GB)
Source: Deloitte
1990: $20KToday: $1
Source: Deloitte
Moores Law
Source: Intel
Global Internet Users (billions)
1996 1999 2002 2005 2008 2011 2014
3.02.2
1.51.0
0.70.30.1
21% CAGR
Source: Internet Live Stats
2.1B Smart Phone Users
Source: Strategy Analytics
2012 2013 2014 (P) 2015 (P) 2016 (P) 2017 (P)
270225
180140
10070
Android and iOS App Downloads (billions)
Source: Gartner
31% CAGR
Human Genome Project 1990
Cost to Map Genome in 2003: $100M
Source: NIH
Cost to Map Genome in 2015: $100
Source: NIH, 23andMe, GSV Asset Management
$0
$20
$40
$60
$80
1977 1983 1989 1995 2001 2007 2013
Moores Law in Solar - Swansons LawCosts decline has enabled solar to reach grid parity
Source: Bloomberg New Energy Finance
Source: Facebook, World Bank
Population Size
1.4B 1.24B1.35B
Market Cap: $245 Billion
Tweets per Day
500M
Source: Statistic Brain, GSV Asset Management
Source: Google
1 Billion Viewers Watching
6 Billion Hours Per Month
586 Million Minutes Talking
Per Day
Source: Wall Street Journal
Total Number of Twitter Accounts
[INSERT]Source: Facebook
64 Billion WhatsApp Messages per Day
Total Number of Twitter Accounts
[INSERT]
700 Million Snaps per Day
Source: SnapChat
None of These Companies
Existed Before 9/11
Total Unicorns, 2000: 1
Source: Fortune
Total Unicorns, Today: 97
Source: Wall Street Journal
UBERcorns $10B+
Source: Wall Street Journal
Bubble vs. Boom
NASDAQ Top 10: 2000Company P/EMicrosoft 57x
Cisco 127xIntel 43x
Oracle 103xSun Microsystems 85x
Dell 57xMCI Worldcom 22x
Chartered Semiconductor 53xQualcomm 123x
Yahoo! 418xSource: Barrons
NASDAQ 100 P/E 2000: 105x
Source: CNN Money
NASDAQ Top 10: 2015Company P/E
Apple 15xGoogle 19x
Microsoft 16xFacebook 30xAmazon NM
Intel 14xGilead Sciences 11x
Cisco 13xComcast 17xAmgen 17x
Source: Barrons
NASDAQ 100 P/E 2015: 19x
Source: GSV Asset Management
Median Time to IPO
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 3 Years
Median Time to IPO
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 3 Years
Today: 7 Years
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: $18M
Median Annual Revenue at IPO
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: $18M
Median Annual Revenue at IPO
Today: $68M
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 370 million
(6%)
Internet Access
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 370 million
(6%)
Internet Access
Today: 3.1 billion
(43%)
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 60 million
(1%)
Broadband Access
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 60 million
(6%)
Today: 2.3 billion
(32%)
Broadband Access
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 180 million
(3%)
PC Penetration
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 180 million
(3%)
PC Penetration
Today: 1.4 billion
(20%)
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 740 million
(12%)
Mobile Phone Penetration
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 740 million
(12%)
Mobile Phone Penetration
Today: 5.2 billion
(73%)
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
Smart Phone Penetration
2000: 0
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
Today: 2.1 billion
(28%)
Smart Phone Penetration
2000: 0
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 0
App Downloads
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 0
Today: 140+ billion
App Downloads
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 6%
Digital Natives in Workforce
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 6%
Digital Natives in Workforce
Today: 35%
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 1.4 billion
Global Middle Class
Source: National Venture Capital Association, PwC, WilmerHale, Fortune
2000: 1.4 billion
Global Middle Class
Today: 2.5 billion
Old Global Innovation Map
London Risk isnt my cup
of tea.
New York City If its such a good idea, why hasnt it
been done already.
Minneapolis Looks promising
Lets test it.
San Francisco Can I write you a
check?
Shanghai Great idea. Now its
my idea.
New Global Innovation Map
Austin
Boston
Chicago
Sao Paulo
Mumbai
Shanghai
Dubai
Global Silicon Valley
ImagiNation
Blackberry Apple
$70$70
2007 Market Cap: Apple vs. Blackberry
Source: Capital IQ, GSV Asset Management
Blackberry Apple
$730
$5
2015 Market Cap: Apple vs. Blackberry
Source: Capital IQ, GSV Asset Management
Founded: 1921
Founded: 2009
Market Value: $41 Billion
S t . P e t e r s S q u a re : 2 0 0 5
S t . P e t e r s S q u a re : 2 0 1 3
Founded: 1888
Market Value: Bankrupt
Founded: 2011
Market Value: $16 Billion
Founded: 1957
Market Cap: $8 Billion
Founded: 2008
Market Value: $13 Billion++
Megatrends S
ocia
l - M
obile
Clo
ud +
Big
Dat
a
Mar
ketp
lace
s
Sust
aina
bilit
y
Educ
atio
n Te
chno
logy
Investment Themes
PEOPLE PRODUCT
POTENTIALPREDICTABILITY
Megatrends
Eval
uatio
nO
wn
ersh
ip
4Ps
DCF, P/S
Datapoints + Milestones
Growth Drives Enterprise Value
Themes
Ranking of Companies
Underwriting Investment
Confirmation, On Track
Megawinners
Industry
Ten Commandments
Company
Valuation
Short Term
Long Term
Identifying and Investing in the Stars of Tomorrow