“Investing in tomorrow’s business”
Videesha Kunkulagunta, Principal @justvideesha
o Investor at Berlin based Redstone Digital GmbH (www.redstone.vc) o Digital Policy Fellow at the German Marshall Fund of the United States o Previously: PROfounders Capital (London), EIR @Telco, ex-generalist banker, internal operations o Third culture kid lived in Singapore, London and now Berlin o Design fan & travel junkie o Mentor: Seedcamp, Techstars, Axel Springer Plug&Play, Startup Bootcamp
Brief Intro
From the 1960s: A “traditional” model of Venture Capital
Partners Non-Partners
Analyst Associate Principal
Venture Partner
The “traditional” Venture Capital firm
General Partner
General Partner
Examples:
§ Private Investors § Fund of Funds § Endowments § Family Offices § Foundations § Pension Funds
“Partners” pitch to Limited Partners (LPs)
#1 Return on investment to LPs
§ Taking risk § Brand signal: marketing § Partner experience § Partner network
Promise “Value Add”
Fee Structure: § 2% - management fee § 20% - carry (net value
created)
Earn fees - The “2 plus 20”
Example: § Fund Size: EUR 100m § Term: 10 years § Investable capital: EUR
80m § Fees: EUR 20m
Get to work – Venture Capital a “relationship-driven” business
Source: Harvard Business Review, 1998
70% involves “hands on” Portfolio management
Fund Returns
Typical Returns Profile: § 30% to 40% fail § 30% - 40% return the
investment § 10%-20% produce returns
“The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined. “ – Peter Thiel
“Traditional” Venture Capital Examples
What it means though…
“Venture Capital is un-scalable. Production equals the time each partner has” – Bill Gurley, Benchmark Capital
So what’s changed?
Drivers of change – It’s easier to start a company
Hardware
Internet
Tools/Services
Resources/Experience
Price
Number of companies
Low
High
A re-invention of pre-seed/seed stage investment
Main growing trends: (i) Micro-VCs (ii) Accelerators (iii) Crowd-funding
(i) Rise of Micro-VCs – Will there be a “correction”?
Source: CBInsights, 2015
“Micro-VC” Definition: Raised or raising less than USD/EUR/GBP 100m
(ii) Accelerators – Room for growth?
Not all
about
tech
Only 0.2%
accelerated
A “platform” for first time entrepreneurs
Source: CBInsights, Alchemist accelerator
(iii) Crowdfunding Platforms – Filling a debt/social capital gap?
73%
On the rise
Source: Crowdfunder, Massolution Report, 2015
What’s next?
Venture Capital ripe for re-invention
New VC models at every stage
Strong Corporate Participation
Increased Diversity
Increased LPs Direct/Co- Investing
Internationalisation of VCs
Further Technical Enablement
Experimentation with traditional fund structures e.g. no fee.
Traditional corporation has tech embedded and looks at non strategic areas.
Different skill sets, race, gender etc.
LPs are getting more sophisticated.
Great companies are being built everywhere
Role of the VC changes.
Increased Specialisation Funding more non-traditional categories e.g. food, hardware, robotics.
(i) Independent Start-Up Studios – “company builders” plus fund
20
Core Elements: § Create companies from an idea § Create several companies at once § Shared resources for companies
Examples:
E-commerce (Germany)
Fin-Tech (Germany)
Sector - agnostic (UK)
(ii) Our model: Assist LPs “Venture Capital as a Service”
Professional and easy investing
Control over Investments
Corporate VC
Corporate Accelerator
Corporate Incubator
Investment in VC Funds
Investment in Incubators
Investment in Accelerator
(iii) Other emergent trends
§ Increasing Venture Capital fund IPOs – as portfolio companies stay private longer § More private equity funds launch dedicated venture funds § Private equity funds invest earlier - the growth stage EUR 10m – EUR 50m investments
§ Corporate labs and funds will continue to launch
Thank You
Any Questions?
@justvideesha
Appendix
Source: Kmuehmel
Venture Capital Only one source of financing
Drink champagne What my parents think I do What my friends think I do What society thinks I do
What entrepreneurs think I do What I think I do What I really do
Appendix