Building the Business of Building businesses Experience of a private B.A

MX5 Charles MALKA, Forum Binary Venture Capital Bucharest, September 26 1

FIVE YEARS AFTER

MX5 •MX5 is in the B.A business from end of 1998, as private investor with limited funds (750 000 euros).

•Investment in 10 companies/start-up •Today • One is dead •Two have been sold to large corporations •Two are freeze •Five are still running • Around 200 jobs have been created.

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B.A MISSION

MX5     BA has to be convinced and convince others that helping the creation of micro and small companies is mandatory for the future of a country.

BA role is “key” for early stage, not only as investor but more as a pusher to build a real company with a real business. He must be involved in the company life BA must help to fulfill the “structure holes of the start up”, that can be technical,

marketing and sales,

production, services, finances..... And push to organize the company, to define a positioning on the market and a strategy.

Participate and help for next rounds of financing.

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FIRST STEP FOR START-UP

MX5 Start-up need to have in the environment • A Business Angel network with involved BA • Seed Money funds with available consultants to help in building the company • A mix of B.A, Funds and consultants 4

SECOND AND MANDATORY STEP

MX5 The most important reason for failure is the inability to attract and

maintain

financing Attracting financing is an ongoing effort. Success in the initial round is no guarantee that later rounds will be an easy matter.

One of the most critical mistakes is under estimating the capital requirement.... In term of the ongoing costs (X2) and the length of time it will take for revenues (X3). 5

MANDATORY FINANCIAL ENVIRONMENT MX5  All the start-up are not a future Oracle or Microsoft, many of them can become medium/ reasonable size company ( 3 to 10 Meuros) if helped at the right moment.

 IT is very important to find “structures” private or governmental able to provide the 1.5 or second round of financing which accept to finance, help and support such profile of companies, and not only future “stars”/, or companies yet successful.

 Today due to the consequences of the 92 “Internet bubble”, it’s hard to find post-development financing, at least in France 6

A Project for financing in Grenoble Area

MX5 Private Investors BA group Institutional Investors Individual BA invest his own money and follow the start-up Start-up Development round of financing Investment fund Accepts 7 years partnership and niche markets, 7

B.A selection to help a start-up today

MX5   Based on my 5 years and 10 companies experience the technology company that have a chance to start must have: – –

A real Technology and/or an application Know-how A mix of management, development and marketing and sales capabilities

–

A team very sensible to the market demand, very flexible to modify/adapt products and functions in front of market reaction. ( up to now I haven’t see a market study and sales previsions of a Business Plan corresponding to the reality).

–

Being sure to have, before to start, enough cash to reach first version of the product and first sales, it’s now a minimum of 2M euros.

So it’s easier to start service companies.....sorry

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MX5 A PANORAMA OF MX5 INVESTMENTS.

•

ASTRIA

ERP for Biological laboratory 1.5 Me revenues, Start 4 years ago with 150Ke no 2nd round, •

JAAGO

Software providing complete personalization engine for mobile Internet Applications Start 3 years ago with 2 M$ ...sold to NOKIA •

ARTURIA

Music Software company providing Virtual Studio (

STORM

) and Synthesizer (

MOOG

) •Start 4 years ago with 150 Ke second round 150 Ke, • Commercial success, needs funds to make money 9

A PANORAMA OF MX5 INVESTMENTS MX5 •

MAILOMANIA

Corporate email service Freeze.....error on the market acceptability, and not enough money to finish the solution and market it •

ATHYS

Software for real time automation simulation •Start 3 years ago with 1.5 Me sold to DASSAULT •

RAISE PARTNER

Solutions for Robust Risk management in Finance. Very successful • Start 2 years ago with 1.2 Me, running for second round 10

A PANORAMA OF MX5 INVESTMENTS MX5

ROBOBAT

Structural analysis and Design software for Civil Engineering and Building 6 M e revenues, 100 persons French company with software development in Poland.Leader in France. Second round of financing 2Me

GREENLIGHT

a funny consumer product Start 4 years ago Incredible acceptance by consumers Freeze

Marketing Fiasco

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MX5 CONCLUSION A country needs a permanent flow of new companies All the actors must participate , government, corporations, Universities, financial community etc. and citizens also by acquiring entrepreneurial spirit.

Environment has to be tailored for ease the start-up process, and there is 4 key factors (between zillions) for having some success with a start-up • Technology environment (University, Research center....) • Financial environment ( Government support like ANVAR in France, VCs, Banks,...

• Marketing and Sales spirit through training and experience • LUCK 12

MX5

THE END SOME QUESTIONS?

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