January 2015

From Idea to InvestmentVenture Capital workshop one-day program

Douglas Abrams

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About the facilitator

• Wharton MBA

• JP Morgan – Vice President - IB Technology, Global Markets Internet Marketing

• Parallax Capital Management – Co-founder and MD - Venture Capital

• Extream Ventures – Co-founder and MD - S$20 million VC fund

• Expara – Founder and MD - IDM Ventures Incubator, fund, advisory, training

• NUS – Adjunct Associate Professor, Business School, Entrepreneurship

• Sasin – Visiting Professor, Venture Capital

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VC mindset

Risk and return are highly correlated

You cannot increase return without taking more risk

Return

Risk

Potential outcomes

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Why do companies raise investment?

Lifestyle or scalable?

Paycheck or payout?

A big piece of a small pie?

A small piece of a big pie?

Founder

Investors

Investors

Founder

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Why invest in venture capital?

As of June 30, 2014. The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,508 U.S. venture capital funds (963 early stage, 165 late & expansion stage, 374 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. (1)Pooled end-to-end return, net of fees, expenses, and carried interest.(2) 2007-2015 Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc

Case Shiller Real Estate Index 4.1Expara IDM Ventures (2) 43.03

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SEA exit markets at an inflection point

Exit activity in SEA, especially in Singapore, exploded in 2013• Increased investment in startups since 2007 is beginning to yield results

• Number of exits increased from 6 in 2010 to 20 in 2013

• Singapore alone has had 30 exits since 2007, 13 in 2013

• Value of exits increased from 51 MM in 2010 to 400 MM in 2013

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Some recent exitsCompany Country Acquiror Price Year

ZopIM Singapore Zendesk US$29.8MM 2014Non-Stop Games Singapore King US$ 100MM 2014sgCarMart Singapore SPH S$60 MM 2013DS3 Singapore Gemalto S$50 MM est. 2013Asian Food Channel Singapore Scripps Networks Undisclosed 2013Reebonz Singapore MediaCorp and Existing investors S$250MM 2013Yfind Singapore Ruckus Wireless Undisclosed 2013Techsailor Singapore TO THE NEW Undisclosed 2013travelmob Singapore HomeAway Undisclosed 2013Catcha Digital Media Singapore Opt Inc Undisclosed 2013GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013Viki Singapore Rakuten US$200MM 2013SGE Singapore Tech In Asia Undisclosed 2013ThoughtBuzz India To The New Undisclosed 2013AyoPay Indonesia MOL AccessPortal Undisclosed 2013Tongue in Chic Malaysia PopDigital Undisclosed 2013Ocision Malaysia Star Publication US$ 4.36MM 2013Glamybox Vietnam VanityTrove Undisclosed 2013PaymentLink Singapore Wirecard US$41.2MM 2013Dealguru Singapore iBuy S$34.28 MM 2013Buy Together Hong Kong iBuy S$21 MM 2013Dealmates Malaysia iBuy S$10 MM 2013PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012HungryGoWhere Singapore Singtel S$12 MM 2012AdMax Network Singapore Komli Media Undisclosed 2012TheMobileGamer Singapore Singtel US$1.5 MM 2012

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Key elements for success

Solve a problem for customers – Value proposition

Develop an innovative product – Innovation

Identify your customers – Market identification and analysis

Reach your customers – Marketing strategy

Compete when others enter - Sustainable competitive advantage

Make money – Business model and financial plan

Team – A team or B team

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Key venture finance terms

Business model

Financial projections

Valuation

Funding required & equity offered

Use of Proceeds

Exit Strategy and ROI

Cap table

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Company valuation methods

Price to earnings (p/e)

Dividend yield

Multiple of book value

Comparables

Discounted Cash Flow (DCF)

VC method

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How much equity does the investor receive?

Pre-money valuation– Amount invested by VC ÷ (Agreed pre-money value of business

+ Amount invested by VC) – $3MM pre + 1 MM VC = 25% VC equity

Post-money valuation– Amount invested by VC ÷ post-money valuation– $4MM post = 25% VC equity

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How do VCs make money?

Trade sale – sell to another company

IPO – sell to the public through listing on an exchange

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Trade sale or IPO?

www.nvca.org

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How does a venture capital fund work?

Fund Investors VC

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$ 10 mm

2

$ 10 mm

$ 58 mm

25%

75%

Fund size 10,000,000$ Life of the fund 7Management fee 2.5%Investable 8,250,000$ Investment size 1,031,250$ Companies 8Fail 4 50%Break even 2 25%Exit 2 25%

Investor's required ROI 35%Fund multiple return 5.76Fund size at exit 57,600,000$ Carry @ 20% 9,520,000 Distribution 48,080,000$ Fund return multiple 4.81Fund ROI 35%Required return per exit 28 times

Equity per company F/D 15%Required value of equity at exit 28,800,000$ Required co value at exit 192,000,000$

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Stages and sources of funds

Founder’s Capital

Seed/Angel

Series A, B, C

Mezzanine Pre-Exit Exit

VC hurdle rates 60-100% 40-60% 20%

OM F,F&F

Incubators corporations government

Customers, suppliers, strategic partnersVCs, Banks for VC loans

R&D Establishment GTM/Rollout Accelerated Expansion MaturityEnablement growth

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Calculate investor’s ROI including dilution

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Cap table

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Key elements of a venture deal

Board of directors

Protective provisions

Drag-along agreement

Conversion

Control

Price-per-share

Valuation

Amount of financing

Liquidation preference

Vesting

Options pool

Anti-dilution

Pay-to-play

Economics

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VC-Start-up negotiation game

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Contact us

Douglas Abrams

Expara Pte. Ltd.

dka@expara.com

www.expara.com

65-6323-3084, 65-9780-5381 (hp)

Block 71 Ayer Rajah Crescent, #02-10/11 Singapore 139951