Transcript Document

Technology Private Equity Funds
Jonathan H. Holley
Jasper Asset Management
The Challenge in Defining Technology in PE Funds
 Often associated with Information Technology and Web1.0
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Google and Yahoo!
Microsoft
Oracle
Sun Microsystems
 Recently focused on Alternative and Clean Energy Technology,
“Viral” Internet Communities and Digital Convergence
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Non-corn ethanol processing technologies
Bio-diesel
Hybrid engine technologies
Social networking business models
Voice over Internet Protocol (VoIP) networks and digital media transmission
(incl. High Definition)
 Starting to embrace Technology Solution Bundles
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Intelligent Building solutions
Wireless telecom and Radio Frequency Identification Devices (RFID). Mostly
for integrated supply chain tracking.
Unmanned security technologies
Web 2.0 Services
Differentiating Venture from Mezzanine/Late Stage Technology
 Technology Venture Capital Funds:
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Funds invest in the development of ideas and new applications, usually in a trend
sector with an uncertain commercial environment
Average portfolio company investment is US$1.0-2.0 million
Technology VC funds tend to average US$50 million in size - - not mega-funds
Average Internal Rate of Return is 12%. Top quartile funds average 22%.
Failure rate of portfolio investments average 35% of invested capital
 Mezzanine/Late Stage Technology Funds:
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Funds invest in developed products or services requiring enhanced working
capital, new management and commercialization funding
Usually has secured intellectual property rights protection
Average IRR is 14%. Top quartile funds average 27%. Failure rate is 15-20%.
 Technology Funds utilized in lieu of In-House Research & Development
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Venture arms of major enterprise software and telecommunication companies
Sponsorship of university “incubators” with equity participation
Range from Venture through Late-Stage with common goal of ensuring
commercial focus and speed to market
Worldwide Technology Investing 1996 - 2006
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Fund Sector Breakdown - 2006
Sector Focus among Funds with Closes in 2006
Sector
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No. of Funds
Fund Value (US$ million)
Generalist
80
18,230
Technology
30
2,552
Energy
11
2,302
Infrastructure Industries
5
1,870
Consumer
4
745
Agriculture/Agribusiness
3
213
Natural Resources
2
61
Industrials/Manufacturing
1
750
Not categorized
26
6,470
Total
162
33,193
Technology PE Funds are currently focused on Clean Technology
• Global venture capital investment in clean technology companies
surged to $1.1 billion in the first six months of 2007 alone
• Propelled by activity in the US, 2007 venture capital investment in
clean technology companies are now on track to increase by more
than 35% compared to 2006
• 71 clean tech deals were closed in the first six months of 2007 in the
US and Europe raising over $893 million - - about 5% more year-onyear from 2006
• Globally, the valuations of clean technology companies are
substantial. For example, in the US, median valuations reached $30
million in the first half of this year – up from $15.8 million in 2001.
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Recent Technology Investing in Europe
 Information technology had the most significant upturn of any
industry in the first quarter of 2007.
 In total, €550.2 million was invested in 133 technology deals,
representing €30.1 million more in capital and 11 more deals from
the first quarter of a year ago.
 The software and information services segments showed the most
activity for the sector. Software deals increased by 20% over the
same period a year ago to 73, and investment increased 11% to
€222.5 million.
 More dramatically, deal flow in the information services segment
increased 131% to 30 deals, and capital increased more than twofold to €114.7 million.
 In addition, the number of IPOs for information services companies
doubled over the past year and this is likely a factor in investors'
preference for the segment this quarter.
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Technology and the Gulf
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Gulf Cooperation Council to increase its spending on IT by over 14-15% a year
over the next three years
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Gulf countries expected to spend US$1.7 billion on PCs, IT systems and
services, and imaging technology in 2007.
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Software market is growing by 11% a year and is expected to reach US$726
million by 2011.
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Growth of telecommunications, energy and internet sectors are fuelling growth of
technology products and services.
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Sharia’a-Compliant Investment in Technology Funds
 Conservative view often is Tech Venture Capital Funds are
tantamount to gambling due to very high valuations and high
failure rates - - rarely invest
 Will support Sharia’a compliant Mezz/Late Stage Funds with a
focus on product commercialization, usually in the energy,
automation/controls, intelligent building and manufacturing
technology sectors - - although fund participation is very low due to
the prevalent use of leverage in funds to enhance returns
 Jasper opinion is Sharia’a compliant technology funds will emerge
once MENA financial exchanges develop more fully, and then will
dominate regional Gulf technology investing
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Observations of Technology Sector in the Gulf
 The GCC is considered to buy 95% of the technology it needs from
overseas - - effectively no domestic tech industry
 Country-sponsored technology initiatives are underway in most GCC
countries to reverse the investment trend from US/EU/Asia to GCC - limited success due to real estate and energy focus of investors
 Cooperative technology initiatives between the GCC and Asian
countries has rapidly expanded due to cooling of US IPO markets and
high cost of regulatory compliance. Recent Mubadala (UAE)
technology agreements with South Korea are noteworthy.
 The GCC technology sector will continue to struggle without a
coordinated education initiative in the region. Technology is fuelled by
younger, innovative generations.
 Will need to develop an acceptance of technology venturing and its
associated failure rates
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Jasper Capital group companies
Jasper Asset Management Limited
Jasper Capital Limited
Jasper Capital Turkey Limited
Jasper Consult DMCC
Jasper Consult Limited
Jasper Corporate Finance Limited
Jasper Private India Limited
London
Abu Dhabi
Dubai
Bury House
33 Bury Street
St James’s
SW1Y 6AX
London
United Kingdom
Tel: +44 (0) 20 7839 8766
Fax: +44 (0) 20 7839 1810
Jasper Consult Limited
2102, Level P1
Al LuLu Tower B
Khalifa Street
PO Box 45168, Abu Dhabi
United Arab Emirates
Tel: +971 (0) 2 627 1834
Fax: +971 (0) 2 627 1834
Jasper Consult DMCC
1007, Level 10
Grosvenor House Commercial
Tower
Sheikh Zayed Road
PO Box 58549, Dubai
United Arab Emirates
Tel: +971 (0) 4 329 8799
Fax: +971 (0) 4 329 8797
Istanbul
New Delhi
Jasper Capital Turkey Limited
Ebulullah Caddesí, Meydan Sokao
Mermerler Sítesí Blok D3, Akatlar
34335 Istanbul, Turkey
T +90 (0) 212 352 6010
F +90 (0) 212 352 1888
Jasper Private India Limited
101-C
Super Mart – II, DLF – IV
Gurgaon 122 022, Gurgaon
New Delhi, India
Tel: +91 124 404 0498/99
Fax: +91 124 404 4295
www.jaspercapital.co.uk
[email protected]
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