Transcript add future global leaders investing in University of Exeter Lecture

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investing in
future global leaders
University of Exeter Lecture
28 November 2002
Agenda
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What does it take to start a company ?
What is Venture Capital ?
What do VCs do ?
A peek into Add Partners
– Strategy
– Portfolio
 VC returns
 Q&A
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Components of a Startup
Founders
Financing
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Product /
Service that
addresses a
market need
Staff /
Management
team
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future global leaders
Financing Options
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Personal funds of founder(s)
Friends & Family
Angel investors
Bank loans
Private equity / venture capital
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Venture Capital is …
 money provided by professionals who invest
alongside management in young rapidly
growing companies that have the potential to
develop into significant economic contributors
 an important source of equity for startups
 Examples of venture-backed companies:
Intel, Compaq, Sun Microsystems, Ariba
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Venture capitalists generally …
 Finance new and rapidly growing companies;
 Purchase equity securities;
 Assist in the development of new products
and services;
 Add value to the company through active
participation;
 Take higher risks with the expectation of
higher rewards;
 Have a long-term orientation
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Example Capitalisation Table
Acme Inc
Capitalisation Table
1st Round
Current
Number
of Shares
Founder
Founder 11
Founder
Founder 22
Allocated
Allocated ESOP
ESOP
Unallocated
Unallocated ESOP
ESOP
%
Ownership
Pre-Money
Pre-Money Valuation
Valuation
Post-Money
Post-Money Valuation
Valuation
Share
Share Price
Price
New Shares
Fully Diluted
Number of
Shares
Fully Diluted
% Ownership
7,200,000
1,200,000
78.3%
13.0%
91.3%
7,200,000
1,200,000
24.2%
4.0%
28.2%
800,000
8.7%
8.7%
2,170,000
800,000
2,170,000
2.7%
7.3%
10.0%
9,200,000
9,200,000
9,200,000
9,200,000
30.9%
30.9%
61.8%
Add
Add Partners
Partners
Investor
Investor B
B
Investor
C
Investor C
Investor
Investor D
D
TOTAL
TOTAL
Investment
In $
0.0%
9,200,000
00
100.0%
29,770,
000
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2,000,000
2,000,000
4,000,000
29,770,000
100.0%
2,000,000
6,000,000
0.22
investing in
future global leaders
Why use Venture Capital ?
Make a company grow bigger, faster than
it otherwise would.
 Combination of funding and added
value
 Price is reflective of both financial
investment and added value
investment
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Types of VCs
 Investment Focus – generalists or specialists
 Stage of Investments:
–
–
–
–
Seed
Early stage
Expansion stage
Late stage / pre-IPO
 Others:
– Acquisition, turnaround or recapitalisation
– MBO / MBI / BIMBO
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Add Partners’ Strategy
Early Stage
• 1st or 2nd round
• Revenue
visibility
Pan European
• Focus on UK,
Germany,
France &
Scandinavia
Technology
• Infrastructure
enablers
• Technology
validated
Hands On
• Development
capital of €3-5
million
• Active investor
• Global potential
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Adding Value to Future Global Leaders
Financing
Exposure
• Media
• Analysts
• Conferences
Partners
• Technology leaders
• Keiretsu
• Universities
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• Syndication partners
• IPO
• M&A
Recruiting
• Specialized headhunters
• Pool of contacts
Portfolio Company
Customers
• Technology leaders
• Telcos, banks, insurance co’s
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Anatomy of a Deal
 What do we look for in a company ?
– Size of market
– Product / Technology
– Strength of management team
 Term sheet
– Valuation
– Investor rights
 Exit Considerations
– Trade sale
– IPO
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Valuation Metric ?
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From start-up to IPO
Nov 2001
Nov 2002
Nov 2004
May 2006
May 2008
Company
Incorporated
Incomplete team.
Management
Team
strengthened.
Product working.
2-4 reference
customers
Turnover of €500k
to €1m
Business model
well proven.
Turnover of at
least €20m in
2007.
Product not yet
proven (pre-beta)
Raise €4m VC at
€2m pre-money
valuation
Loss-making
Turnover of €4m
to €6m in 2005.
Loss making still.
Raise €15m at
€35m premoney.
Profitable.
IPO – e.g. raise
€20m to €50m at
€150m premoney
Raise €6m at
€12m pre-money
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Current Portfolio
Terahertz Photonics
www.terahertz-photonics.com
• Optical component and backplane materials
• Lead 1st Round, Aug 2000
• Co-investors: Scottish Equity Partners
Freever
Livingston, Scotland
www.freever.com
• Messaging platform technology & services
Paris, France
• Lead 2nd Round, Sep 2000
• Co-investors: Net Partners, CDC Innovation, Apollo Invest
XIAM
www.xiam.com
• Information routing technology
• Lead 2nd Round, Nov 2000
• Co-investors: Vertex, Delta Partners
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Dublin, Ireland
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Current Portfolio
SurfKitchen
www.surfkitchen.com
• Portal infrastructure and applications software
• Lead 1st Round, Jan 2001
• Co-investors: n/a
Scientific Systems
www.scisys.com
• Plasma measurement and control solutions
• 2nd Round, Sep 2001
• Co-investors: Vertex, ACT Partners
TempoSoft
Dublin, Ireland
www.temposoft.com
• Human Capital Management software
• Lead 3rd Round, Sep 2001
• Co-investors: Atlas Venture, CDC Innovation
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Zurich, Switzerland
Paris, France
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Current Portfolio
Proximion
www.proximion.com
• Optical components and subsystems
• 2nd Round, Sep 2001
• Co-investors: Celtic House, Innovations Kapital
Phyworks
Kista, Sweden
www.phyworks-ic.com
• Communications ICs
• Lead 1st Round, Feb 2002
• Co-investors: Atlas Venture, Prelude
PolarLake
www.polarlake.com
• Transactional XML Processing Software
• Lead 1st Round, November 2002
• Co-investors: Delta Partners
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Bristol, UK
Dublin, Ireland
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future global leaders
Venture Capital Returns (1)
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Venture Capital Returns (2)
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A Convergence of Favorable Factors Reshapes the European Technology Landscape
Entrepreneurship on the rise
Real Deals, Tornado Insider, serial
entrepreneurs
Success of technology clusters
Cambridge, Thames Valley,
Munich, Flanders, Kista
Development of venture capital
US VCs in Europe, European VCs
more focused
Local growth exchanges
Restructuring of technology giants
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Easdaq, Euro NM, Techmark &
European NASDAQ
Nokia, Ericsson, Alcatel, Siemens,
Philips, ST Micro
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Contact Details
Maisy Ng
Add Partners Limited
34 Dover Street
London, W1S 4NG
UK
Tel: +44 (0) 20 7399 2280
Fax: +44 (0) 20 7629 8398
www.addpartners.com
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