Transcript Diapositivo 0

Key learnings of managing COMPETEsupported Venture Capital funds
FIN-EN Meeting in Lisbon
Lisbon 26th September 2013
Lisbon 26th September 2013
Espírito Santo Ventures in brief
1• Solidity and experience
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Venture Capital funds management company, with 13 years industry experience
Integrated in BES Group, with full autonomy in investment and divestment decisions
Over EUR 250 million in assets under management, in 5 active funds
A seasoned team of experienced professionals
2• Clear investment focus and strong expertise
• Focus on areas of great challenge and growth: CleanTech, Information Technology and Healthcare &
Well-being
• Clear investment criteria and strong investment selection capabilities
3• Global reach
• Global deal flow, with no geographic restrictions
• Strong global VC partnership, reinforcing the flow of attractive investment opportunities, attracting foreign
investment to Portuguese companies and opening doors for all portfolio companies
4• Commitment to value delivery
• Investments in 53 companies, 8 trade sales, 2 IPOs
• Strong engagement in the management of the portfolio companies
• Active investor relationships
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13 years experience in Venture Capital investment
Over €250m under management
Solidity and Experience 1
2000 … 2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
ESTV
ESV II
ESV III
Inovação e Internacionalização
ISTART I
New fund
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The inception: Espírito Santo Tech Ventures – ESTV
• Organized as a VC holding company in 2000
• €70m invested in 12 companies, between 2000 and 2004
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Our core global VC funds, ESV II and ESV III
• ESV II – €88.5m, 18 investments, working on divestment phase (3 exits to date)
• ESV III – €75.3m, 17 investments, closing in on the end of its investment period (2 exits to date)
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Funds for early stage investment in Portugal attracting investments with strong potential
• “Inovação e Internacionalização” – €10m for growth companies, 5 investments to date
• “ISTART I” – €3m for seed financing, 7 investments to date
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Planning for new international funds and initiatives
• Structuring new international VC fund, with initial closing in 2014
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Clear investment criteria for
Espírito Santo Ventures’ Funds
Clear investment focus and strong expertise 2
The company must:
• Be the best in its field, with a unique
business model or technology
Companies that can only deliver
incremental change can not create a
significant value
• Have a global addressable market of
at least USD $ 1 billion
Companies addressing a local or a small
niche market will remain local or small in
their impact
• Have knowledgeable, honest and
resilient managers
An outstanding technology is not
sufficient to drive a company’s success if
it isn’t led by the right people
• Offer a valuation potential of at least
5x, in the medium term
A very significant return to our investors
is key to the success of our venture
investment activity
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A clear focus on three areas
of great challenge and potential growth
Clear investment focus and strong expertise 2
Our funds invest in areas that are closely related with what we believe to be the
XXIst century global challenges
Environment, demography and global development
Information
technology
CleanTech
Global warming is raising
awareness about the need to
preserve and recover air, water and
soil quality
We invest in technologies that can
support a sustainable and
environment-friendly development
• New / renewable energy sources
• New efficient and non polluting
industrial / agricultural processes
• Energy efficiency
• Desalination and water efficiency
• Natural resource efficiency
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Technologies to facilitate the
communication and optimize the
business relations and processes will
play an important role in global
development
We invest in technologies and
processes that can create significant
value in bridging individuals and
organizations
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Information technologies
Communication technologies
New payment solutions
Semiconductors
Electronics
Healthcare and
Well-being
The increase in lifespan and the aging
of the population are creating new
healthcare needs
We invest in technologies to solve
these problems and increase the wellbeing and quality of this extended life
• Diagnosis and therapeutic
procedures and devices to increase
the quality of the modern extended
life expectancy
• Healthy food and beverages
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Extensive experience in investing worldwide –
portfolio companies
Global reach 3
Long standing experience
in investing and coinvesting with some of the
best VCs in different
markets provides a rare
knowledge of best-in-class
venture practices
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A consistent growth in national investment
opportunities, with no loss of quality
Number of Investment Opportunities
directed to ESV by geography
670
532
488
233
70
52
2006
2007
110
Source: Espírito Santo Ventures’ deal flow database
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316
2008
Portugal
377
2009
Europe
2010
North America
2011
427
2012
Other
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A unique knowledge of
the Portuguese startup community
By Region – predominance of
tech centers in Lisbon and the
Northern regions
Deal flow by region 2010/2013
By Stage – Even distribution
with preponderance of
seed/early stage
Classified deal flow from Portugal –
2010/2013 (simplified)
Minho Trás-os-Montes
E
Porto Alto Douro
Late
stage
15%
Aveiro
Beira
Viseu
Interior
Seed
30%
Coimbra
Leiria
Ribatejo
Madeira
Setúbal
Early
stage
24%
Alentejo
Açores
Algarve
Classified deal flow from Portugal –
2010/2013 (simplified)
Biotech &
Drugs
4%
Therapeutic Lifestyle
3%
4%
Diagnostic
5%
Food &
HC &
Nutrition
5%
Well-being
Environment
21%
IT
and waste
51%
6%
CleanTech
Software
28%
28%
Growth
31%
Lisboa
By Area – More than half of
the deal flow is IT-related
Materials &
Construction
Hardware/Co
8%
mms/Semico
Energy
n
efficiency
13%
6% Renewable Services
energy
9%
8%
<3,0%
3,0% << 10,0%
10,0% << 15,0%
15,0% << 33,0%
>33,0%
Source: ESV deal flow database
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Venture Capital investment plays
an important role in society
Successful Venture-backed companies show evidence of superior
economic importance and greater resilience through the downturn
Through the downturn: 2008-10
21%
Employment growth –
VC-backed companies vs.
US private employment
-2.0%
11%
-3.1%
Revenue growth –
VC-backed vs US Sales
0.20%
1.6%
US VC investment as % Jobs in US VC-backed
of GDP
companies as % of
Private Sector
employment
Revenue at US VCbacked companies
compared to GDP
-1.5%
Other benefits, at a domestic level, include aspects like catalyzing knowledge
and IP, creating qualified jobs, capturing wealth (through exports),
or attracting foreign investment
Source: National Venture Capital Association – Venture Impact - The Economic Importance of Venture Capital-Backed Companies to the U.S. Economy
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Our portfolio is proof of that role
Growing business of our portfolio
companies...
...impacting their respective employment
numbers
Sales volume of ESV portfolio companies (M€)
All companies
Portuguese companies
632
Number of employees in ESV portfolio
companies
All companies
8.741
Portuguese companies
200
3,556
445
5.396
56
118
94
4.528
865
1,719
217
90
2,391
135
32
35
315
38
89
At the time of
investment
295
2012
At the time of
investment
2.418
3,466
817
1,320
69
2012
At the time of
investment
1,165
515
583
3,366
1,320
Dec 2012
At the time of
investment
Dec 2012
ESV III - investments between 2008 and 2012
ESV II - investments between 2006 and 2008
"Fundo I" - investments between 2000 and 2002
Source: Espírito Santo Ventures, portfolio companies
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ESV is managing two funds
participated by COMPETE
ISTART I proving the concept of seed
financing in Portugal
In 2009 ESV was approached by IST’s Management
Board to establish a financial instrument to
promote entrepreneurship in the University
• Coincided with the launch of the COMPETE
process and matched the objectives of its Seed
investment component
Innovation and Internationalization (“I+I”)
Fund supporting early stage companies
The application to a COMPETE-supported fund was
born of a joint will between ESV and BES in late 2009
The €10m fund was established in early 2012 to
support early stage companies with a strong focus
on internationalization
• Up to €1,5m per company, per year
The €3m fund was established in early 2012, aiming
to support technology-based projects by
researchers from any Portuguese university or
research institute
• Up to €300k investment per company
50%
35%
45%
50%
Private
investors
20%
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Seven ISTART I investments, to date,
from several sources of deal flow
ISTART I
Main deal flow source institutions for ISTART I
Institutions with an ISTART I portfolio company
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I+I Fund supporting early-stage companies with
ambitious internationalization plans
Innovation + Internationalization
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investment from other investors, including
foreign
Co-investors in ISTART I and I+I portfolio companies
Corporates
Foreign
investors
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VCs
Business Angels/
Institutional investors
ISTART I / I+I assumed a lead/co-lead role in almost all deals
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Improving the effectiveness of the capital to be
deployed means maximizing…
...the attractiveness to
private investors,
including international
Ensure that investors'
best interests are
protected by minimizing
any limitations that in
any way limit the ability
of the funds to provide
financial returns
Lisbon 26th September 2013
...the attractiveness to
the best fund managers
...the economic impact
of selected companies
Ensure that fund
managers are rewarded
in line with the market,
so as to attract the best
fund managers, those
who offer the capacity to
adequately deploy the
funds
Ensure that only (and
most of) the companies
who offer a large
potential of impact are
supported, and they are
supported to the fullest
extent possible
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A few practical suggestions to
improve current practices
1 Review strictness of the geographic limitation
• Supporting “Portuguese companies”, is about supporting companies created in
Portugal that create and retain value in our country
• Often, as part of their development process and for the best reasons, the best
companies will be motivated to move HQ abroad
• Preventing investment or imposing exits in those cases is not in the company’s or
the investors’ best interests
2 Recognize the need and gain the ability to support the best companies through
their development
• Inability to provide support past a certain stage or amount (including across
funds) is not in the company’s or the investors’ best interests
3 Strive to incentivize good deployment, not necessarily fast deployment
• Current fee structure creates the incentive to quickly call and deploy the capital
4 Ensure competitiveness of the offer to funds managers
• A competitive fixed and variable fee structure
• Trust and verify, rather than imposing disproportionate reporting requirements
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In short, experience in investment supported by
COMPETE has been positive and should be amplified
It has enabled the creation of Venture Capital funds, vital to the development of
the economy
It has succeeded in attracting private investors into those funds
It has been deployed in a number of high potential companies
• Successfully making the transition between academia and the business world
• Helping highly innovative companies grow internationally
It has succeeded in attracting foreign investment into these companies
A positive experience that should be amplified
Which is in line with the rise in demand and in investor interests
Still, there are opportunities to improve the effectiveness
of the capital to be deployed
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