Venture Expert and History

VENTUREXPERT Part I TABLE OF CONTENTS WHAT IS PRIVATE EQUITY? VENTURE CAPITAL - An Overview FOUR MAIN PLAYERS PRIVATE EQUITY CYCLE CASE STUDY: BOO.COM WWW.VENTUREECONOMICS.COM - VENTURE ECONOMICS - VENTUREXPERT WEB - INTRODUCTORY PAGE 3 4 7 8 14 15 16 17 VENTUREXPERT - PROFILES SECTION - QUICK SEARCH - BROWSE A LIST - BEGIN SEARCH 20 21 30 31 2 WHAT IS PRIVATE EQUITY? Private equity - provides equity capital to enterprises not quoted on a stock market. Private equity can be used to develop new products and technologies, to expand working capital, to make acquisitions, or to strengthen a company’s balance sheet. It can also resolve ownership and management issues - a succession in family-owned companies, or the buy-out or buy-in of a business by experienced managers may be achieved using private equity funding. There are, strictly speaking 3 subsets of private equity funding… PRIVATE EQUITY = [VC / BUYOUTS / MEZZANINE] Venture capital - refers to equity investments made for the launch, early development, or expansion of a business. Among different countries, there are variations in what is meant by venture capital and private equity. In Europe, these terms are generally used interchangeably. Buyouts - refers to equity investments in under performing companies or underperforming divisions of a larger company. Example: Gillette (Razors)– In general makers of plastics. In conjunction with the razor products they also make pens. Say, for example they didn’t want to remain in the pen business due to the increase in computer technology, then it is very likely that a buyout fund would be used to purchase that division. Buyout funding would be used to buy the management group etc and make it into its own company. A Buyout can be, either: · Management Buyout: Financing provided to enable current operating management and investors to acquire an existing product line or business. Management Buy-in: Financing provided to enable a manager or group of managers from outside the company to buy-in to the company with the support of private equity investors. · Mezzanine – Invest alongside one of the above - generally at a later stage of the investment e.g. just before a company goes public (last round of financing). Invested money may well help towards the costs of marketing the company. For example, Lastminute.com spent a lot on marketing prior to going public. 3 VENTURE CAPITAL – An Overview Process 1) Many ENTREPRENEURS require substantial capital. A founder may not have sufficient funds to finance a project alone, and therefore must seek outside financing. 2) Projects that are characterised by significant intangible assets expect years of negative earnings and have uncertain prospects. It is therefore very unlikely a bank will provide the sufficient funds. Similarly, troubled firms that need to undergo restructuring may find external financing difficult to raise. 3) VENTURE CAPITAL FIRMS finance these:· · · HIGH RISK HIGH GROWTH & POTENTIALLY HIGH-REWARD PROJECTS. 4) When considering an investment into an idea/concept, venture capitalists carefully screen the technical and business merits of the proposed project (Due Diligence, see p.11). · · They mitigate the risk of venture investing by developing a portfolio of companies in a single venture fund. Often they will co-invest with other professional venture capital firms. 5) Typically, they do not primarily invest their own capital, but rather raise the bulk of their FUNDS from private and public pension funds, endowment funds, foundations, corporations, foreign investors and wealthy individuals. 6) The committed capital is not long term. The idea is to invest in a company’s balance sheet and infrastructure until it reaches a sufficient size and credibility so that it can be sold to a corporation (M & A) or to the institutional public-equity markets (IPO). Investment Focus Venture capitalists may be generalist or specialist investors depending on their investment strategy. Generalists, investing in various industry sectors, or various geographic locations, or various stages of a company’s life. Alternatively, they may be specialists in one or two industry sectors, or may seek to invest in only a localised geographic area. 4 Not all venture capitalists invest in "start-ups." While venture firms will invest in companies that are in their initial start-up modes, venture capitalists will also invest in companies at various stages of the business life cycle. A venture capitalist may invest before there is a real product or company organised (so called seed investing), or may provide capital to start up a company in its first or second stages of development known as early stage investing. Also, the venture capitalist may provide needed financing to help a company grow beyond a critical mass to become more successful (expansion stage investing). The venture capitalist may invest in a company throughout the company’s life cycle and therefore some funds focus on later stage investing by providing financing to help the company grow to a critical mass to attract public financing through a stock offering. Alternatively, the venture capitalist may help the company attract a merger or acquisition with another company by providing liquidity and exit for the company’s founders. Length of Investment Venture capitalists will help companies grow, but they eventually seek to exit the investment in 3 to 7 years. An early stage investment make take 7 to 10 years to mature, while a later stage investment many only take a few years, so the desire for the investment life cycle must be congruent with the limited partnerships’ appetite for liquidity. The venture investment is neither a short term nor a liquid investment, but an investment that must be made with careful diligence and expertise. Types of Firms There are several types of venture capital firms, but most mainstream firms invest their capital through funds organized as limited partnerships in which the venture capital firm serves as the general partner. The most common type of venture firm is an independent venture firm that has no affiliations with any other financial institution. These are called "private independent firms" (APAX PARTNERS). Venture firms may also be affiliates or subsidiaries of a commercial bank (CREDIT LYONNAIS), investment bank (CAZENOVE PRIVATE EQUITY) or insurance company (SCOTTISH LIFE ASSURANCE) and make investments on behalf of outside investors or the parent firm’s clients. Still other firms may be subsidiaries of non-financial, industrial corporations (BRITISH TELECOM) making investments on behalf of the parent itself. These latter firms are typically called "direct investors" or "corporate venture investors." Other organisations may include government affiliated investment programs that help start up companies either through state, local or federal programs 5 (WELSH DEVELOPMENT AGENCY). One common vehicle is the SBIC or Small Business Investment Company program administered by the Small Business Administration (BANK OF AMERICA SBIC), in which a venture capital firm may augment its own funds with federal funds and leverage its investment in qualified investee companies. While the predominant form of organisation is the limited partnership, in recent years the tax code has allowed the formation of Limited Liability Partnerships, ("LLPs"), or Limited Liability Companies ("LLCs"), as alternative forms of organisation. However, the limited partnership is still the predominant organizational form. The advantages and disadvantages of each has to do with liability, taxation issues and management responsibility. The venture capital firm will organise its partnership as a pooled fund; that is, a fund made up of the general partner and the investors or limited partners. These funds are typically organised as fixed life partnerships, usually having a life of ten years. Each fund is capitalised by commitments of capital from the limited partners. Once the partnership has reached its target size, the partnership is closed to further investment from new investors or even existing investors so the fund has a fixed capital pool from which to make its investments. Like a mutual fund company, a venture capital firm may have more than one fund in existence. A venture firm may raise another fund a few years after closing the first fund in order to continue to invest in companies and to provide more opportunities for existing and new investors. It is not uncommon to see successful firm raise 6 or 7 funds consecutively over the span of 10 to 15 years. Each fund is managed separately and has its own investors or limited partners and its own general partner. These funds’ investment strategy may be similar to other funds in the firm. However, the firm may have one fund with a specific focus and another with a different focus and yet another with a broadly diversified portfolio. This depends on the strategy/focus of the venture firm itself. OVERVIEW Venture capital firms are pools of capital, typically organized as a limited partnership (eg with a pension fund), that invest in companies that represent the opportunity for a high rate of return within 3 to 7 years. The VC may look at several hundred investment opportunities before investing in only a few selected companies with favorable investment opportunities. Far from being simply passive financiers, VC s foster growth in companies through their involvement in the management, strategic marketing and planning of their investee companies and then exit with the help of an investment banker. They are entrepreneurs first and financiers second. 6 FOUR MAIN PLAYERS From the aforementioned we have… · ENTREPRENEURS who need funding; INVESTORS who want high returns; VENTURE CAPITALISTS who make money for · · themselves by making a market for the Entrepreneurs, Institutional investors and the Investment Bankers……. · INVESTMENT BANKERS who need companies to sell. Investment bankers are continually looking for ‘New High Growth Issues’ to bring to market. That is why Venture Capitalists invest in high-growth industries because they are likely to have EXIT opportunities. These issues will be easier to sell and likely to support high relative valuations – and therefore, high commissions for the investment bankers. PRIVATE EQUITY CYCLE LP FUND PERFORMANCE 7 5) DISTRIBUTION: 1) COMMITMENTS GP 2) DISBURSEMENTS 4) DISTRIBUTION OF £ and or STOCK RAISED FROM EXIT PC Cont. 3) EXIT PE LP = Limited Partner These are the ‘FUNDS’ Institutional Investors such as; · Pensions (e.g. Prudential) · Endowments (e.g. Scottish Widows) · Wealthy families They invest large sums of money (Funds) – they don’t’ have active management hence ‘Limited Partner.’ GP = General Partner These are the ‘FIRMS’ Venture Capitalists such as; · 3I (Europe’s leading venture capital company) · Schroder Ventures · APAX Partners 8 They manage the funds PC = Portfolio Companies These are the original ‘ENTREPRENEURS’ ‘the ideas.’ Companies such as; · Microsoft · Boo.com · Thomas Pink · Lastminute.com etc, etc. They require funding Cont. 1) COMMITMENTS ‘A limited partner's obligation to provide a certain amount of capital to a fund.’ LPs - GPs This is where the LPs & the GPs negotiate the amount of capital available for investment. Say, the fund is $100 million, this doesn’t have to be ‘taken down’ all at once. The GP will be allocated funds as and when investments are to be made. ‘Vintage Year’- The year of fund formation and first takedown of capital. OVERVIEW The process that venture firms go through in seeking investment commitments from investors is typically called "fund raising." This should not be confused with the actual investment in investee or "portfolio" companies by the venture capital firms, which is also sometimes called "fund raising" in some circles. The commitments of capital are raised from the investors during the formation of the fund. A venture firm will set out prospecting for investors with a target fund size. It will distribute a prospectus to potential investors and may take from several weeks to several months to raise the requisite capital. Currently (Sept 2000), over 50% of investments in venture capital/private equity comes from institutional public and private pension funds. The balance comes from endowments, foundations, insurance companies, banks, individuals and other entities who seek to invest part of their portfolio in opportunities with a higher risk factor & commensurate opportunity for higher returns. 9 Because of the risk, length of investment and illiquidity involved in venture investing, and because the minimum commitment requirements are so high, venture capital fund investing is generally out of reach for the average individual. The venture fund will have from a few to almost 100 limited partners depending on the target size of the fund. Once the firm has raised enough commitments, it will start making investments in portfolio companies. 2) DISBURSEMENTS ’Investments by funds into portfolio companies.’ GPs - PCs The GPs having kept in touch with the market and carried out Due Diligence choose any number of PCs to invest in. Making investments in portfolio companies requires the venture firm to start "calling" its limited partners commitments. The firm will collect or "call" the needed investment capital from the limited partner in a series of tranches commonly known as "capital calls". These capital calls from the limited partners to the venture fund are sometimes called "takedowns" or "paid-in capital." Some years ago, the venture firm would "call" this capital down in three equal installments over a three-year period. More recently, venture firms have synchronized their funding cycles and call their capital on an asneeded basis for investment. Having disbursed the capital, the GPs then nurture the growth – Very important, due to the vast sums involved (see p.14 Case Study: Boo.com the affects of not monitoring a company’s development). ‘Due Diligence’- The investigation and evaluation of a management team's characteristics, investment philosophy, and terms and conditions prior to committing capital to the fund. OVERVIEW The investment by venture funds into investee portfolio companies is called "disbursements". A company will receive capital in one or more rounds of financing. A venture firm may make these disbursements by itself or in many cases will co-invest in a company with other venture firms ("co-investment" or "syndication"). The syndication provides more capital resources for the investee company. Firms co-invest because the company investment is congruent with the investment strategies of various venture firms and each firm will bring some competitive advantage to the investment. The venture firm will provide capital and management expertise and will usually also take a seat on the board of the company to ensure that the investment has the best chance of being successful. A portfolio company may receive one round, or in many cases, several rounds of venture financing in its life as needed. A venture firm may not invest all of its committed 10 capital, but will reserve some capital for later investment in some of its successful companies with additional capital needs. 3) EXIT PRIVATE EQUITY Having developed the company to the best of their ability, GPs hope that the PC will be sold. Depending on the investment focus and strategy of the venture firm, it will seek to exit the investment in the Portfolio Company within 3 to 7 years. There are 4 ways (+/-) ; · IPO (Initial Public Offering) e.g. Lastminute.com At public offering, the venture firm is considered an insider and will receive stock in the company, but the firm is regulated and restricted in how that stock can be sold or liquidated for several years. Once this stock is freely tradable, usually after about two years, the venture fund will distribute this stock or cash to its limited partner investor who may then manage the public stock as a regular stock holding or may liquidate it upon receipt. Over the last twenty-five years, almost 3000 companies financed by venture funds have gone public. Technology IPOs have been in the limelight during the IPO boom of the last six years. · M & A (Merger or Acquisition) e.g. Barefoot Grass Lawn Service Mergers and acquisitions represent the most common type of successful exit for venture investments. In the case of a merger or acquisition, the venture firm will receive stock or cash from the acquiring company and the venture investor will distribute the proceeds from the sale to its limited partners. · Bankruptcy (Resources exhausted) e.g. Boo.com And very rarely… · Breakeven (Mutual decision between GPs & PC is close the investment, maybe due to downturn in the market/ can no longer attract investment etc). OVERVIEW While the IPO may be the most glamourous and heralded type of exit for the venture capitalist and owners of the company, most successful exits of venture investments occur through a merger or acquisition of the company by either the original founders or another 11 company. Again, the expertise of the venture firm in successfully exiting its investment will dictate the success of the exit for themselves and the owner of the company. 4/5) DISTRIBUTION ’Cash or the value of stock disbursed to the limited partners of a venture fund.’ PC - GP - LP If all goes well and there is an IPO or M & A, then the GPs and LPs reap the benefits. FUND PERFORMANCE This is included in this section of the diagram because it is important to measure the performance of the original ‘Fund Commitment’ to the amount ‘Distributed’ back in. 12 CASE STUDY An example of Venture Capitalist’s not carrying out their perceived role at BOO.COM BOO.COM Business partners Kajsa Leander & Ernst Malmsten founders of Boo.com (online sports retailer) – Britain’s first major dot.com crash. They both put £1 million into Boo.com and traveled the world with the bankers JP Morgan to get another £80 million backing from investors that included the Benetton family (from whom Kajsa once appeared as a model) and Bernard Arnault, who has stakes in Arc, Jacobs Louis Vuitton and Givenchy, among others. Investors were intrigued by the idea of an on-line shopping site, operating in 18 countries, selling full-price top brands at local currencies, with a system so sophisticated it would also deal with local taxes at the click of a mouse. What they did not reckon on was overspending on staff, marketing and equipment on an unprecedented scale. To make matters worse, the launch of the web site was delayed for five months and its state-of-the art graphics animation was beyond the access capabilities of many home computers. Eventually, bold talk wasn’t enough. Kajsa’s backers refused to stump up another £20 million for a company that had already spent £80 million and had debts – with claims that much of it had evaporated on the economic principle of the 3C’s: CONCORDE, CHAMPAGNE & CAVIAR!! May 28, 2000 The Mail on Sunday 34-35 13 WWW.VENTUREECONOMICS.COM VENTURE ECONOMICS In the last thirty years the private equity industry has developed from a collegial group of investment firms raising small amounts of capital principally from individuals to an institutional investment discipline that has taken a place in the asset allocation process of major US/ROW institutional investors. These new investors have varying levels of commitment to this industry and of expertise about how it works. What they all have in common, however, is a requirement for data and analysis on the performance of the private equity industry on an individual fund basis and as an industry. They view private equity as they do any other investment vehicle and therefore look for similar data which to base their investment decisions and measure their results…… · · Venture Economics, a Thomson Financial company (acq. in 1991), is the foremost information provider for private equity professionals worldwide. For over 39 years, VEc’s has been tracking the venture capital and buyouts industry. Since 1961, it has been a recognised source for comprehensive analysis of investment activity and performance of the private equity industry. Institutional investors, Venture Capital firms, investment banks, consulting firms, and notable media circles have identified VEc’s as the industry standard - An indispensable source for accurate, complete, and timely coverage of investment, exit and performance activity in the private equity industry. · Venture Economics has offered critical information and analytics through an unparalleled range of products from the industry’s foremost newsletters and Journals, including Venture Capital Journal, European Venture Capital Journal and Buyouts; to Conferences, such as the European Venture Forum and most recently ………. VentureXpert Web database set up in June 1999. · 14 VENTUREXPERT WEB VentureXpert Web Database (VX Web) provides information on the Venture Capital and Private Equity industries. In addition to comprehensive hyperlinked information on firms, funds, companies and key executives, the VX web includes information on investments into companies, commitments by limited partners, fund performance and Exits by IPO or M & A. VentureXpert Web allows clients to: · · · · · · · Analyse Company Valuations Conduct Due Diligence Uncover Industry Trends Benchmark Fund Performance Identify New Business Track Breaking News & Deals Monitor Private Equity Portfolios Log on to www.ventureeconomics.com 15 INTRODUCTORY PAGE This page introduces clients to… · · · · TFSD VENTURE ECONOMICS and AFFILIATES FORTHCOMING EVENTS PRESS RELEASES Hyperlink into documentation issued to the press by Venture Economics. Example: Pan-European Private Equity Performance in 1999-Final Results · PRATT’S GUIDE Directory that lists data on private equity firms. Containing:- Contact Details - Management Details - Investment preference data on firms Available once the client has subscribed to VentureXpert. Cost if sold separately - $975. · PRIVATE EQUITY WEEK 16 on to Private Equity Week is a publication of Venture Economics, launched the Web in September 2000. This timely and authoritative new Web site offers subscribers advanced online access to the print version of Private Equity Week, plus several new features which include: • Constantly updated breaking news reports on the private equity industry • Searchable archive of the Private Equity Week database going back to January 1999 • Daily news on private equity happenings in a particular industry sector of the new economy, sourced from Venture Economics’ VentureXpert™ Please go to www. Privateequityweek.com for more details. · HOME On the left hand side of the screen under ‘HOME’ are the following hyperlinks available throughout the session…. What’s new: companies VE News: What’s been updated in the last week e.g. No. of Press releases we put on re: venture capt and buyout industries – this shows the type of information that we track. Information that we mail out to news journals VE offers a wide range of Publications, Databases, Analytics Services and Customized Research Services Products: 17 NVCA Members: Briefing of our partnership with the National Venture Capital Association. Please note: this is the US equivalent of the EVCA (European) and BVCA (British) to which we are currently negotiating with (24th June) Sample reports: Insight into various reports that can be compiled FAQ: Sample Q & A’s. E.g. How do I find companies that received financing over $3m in California? Focused on industry and the VX Web. For example: What an IRR? How does Venture Economics value funds? Glossary: Product demos: Contact us: Links: Industry and Product related definitions Not up and running yet (June 24th) Provides access to all TFSD products With Thomson Financial and the NVCA for example Methodology: is And finally enter into VENTUREXPERT DATABASE VENTUREXPERT is the largest Private Equity Database available with.. · 90% coverage in the USA 18 · 50% coverage in Europe and the ROW (some industries have more coverage than others, due to investing trends in the market e.g. Investment into the Internet has more focus than the likes of investment into advertising –Sept 2000). % coverage relates to overall investments made in Private Eq. Mrkt These records are updated on a daily basis. If it’s in the public domain we will have it on the database Having logged on, you will arrive at the main options page, which is split into two main sections: · and · PROFILES ANALYTICS PROFILES SECTION This is the most comprehensive part of VX and will be the part that clients will initially gravitate towards. The PROFILES section of VentureXpert Web is used for querying on Portfolio Company(ies), Fund(s), Firm(s) and Executive(s). (As of Sept 2000) 30,000 portfolio companies 9,900 funds 6,500 firms 66,000 executives There are three ways to query on the above items. · · · QUICK SEARCH BROWSE A LIST BEGIN SEARCH QUICK SEARCH Use this method when you know the name of the: 19 · · · · · Portfolio Company Fund Firm or Executive PROCESS - Type in the full or partial name (MINIMUM 3 CHARACTERS) and click the ‘search’ button - A list of possible Portfolio Company(ies), fund(s), Firm(s) or Executive(s) will appear. - Hyperlink into your choice, to view the report. - The end result will provide you with a ‘Profile’ Example: Chorum Technologies (PORTFOLIO COMPANY) 20 1) COMPANY OVERVIEW Company Founding Date: When Chorum Technologies were established Status: Private or Public. IPO Date: If there were an Initial Public Off’g, we would highlight the date. Industry: We have our own set of industry codes (e.g. VEIC 1520). The SIC codes (standard industry codes) are too vague and due to new industries being established, we have to be proactive in keeping up with the new classes out there. In the last 5 years, we have updated the codes 3 times. We are constantly reviewing our service to the client. Date Last Updated: - Records are updated daily. Analysts in Newark/ Tunbridge Wells. Business Description: - Brief overview of what Chorum specialize in. Product Names: - Any names associated with their business. On the right-hand side you have the address and ‘Hyperlink’ to their Website. 2) FIRMS & FUNDS INVESTING IN THE NAMED COMPANY (eg. Chorum) 21 Firm: Name of the firm investing Fund: Name of the fund being managed by the firm to invest Focus: The indicated area of specialization of a Fund usually expressed as B (Balanced), S/E (Seed and Early Stage), LS (Later Stage) or LBO (Leveraged Buyout) which is a BUYOUT fund. VC Seed Stage - An investment strategy involving portfolio companies, which have not yet fully established commercial operations, and may also involve continued research and product development. Early Stage - A fund investment strategy involving investment in companies for product development and initial marketing, manufacturing and sales activities. Later Stage - A fund investment strategy involving financing for the expansion of a company which is producing, shipping and increasing its sales volume. Balanced - A venture fund investment strategy which includes investment in portfolio companies at a variety of stages of development (Seed, Early Stage, Later Stage). BUYOUT Leveraged Buyout - A fund investment strategy involving the acquisition of a product or business, from either a public or private company, utilizing a significant amount of debt and little or no equity (usually a ratio of 90% debt 22 to 10% equity). NOTE: this is EXACTLY the same as a buyout – US terminology! Rounds of Participation: Round(s) that they have participated in Individuals: High net worth individuals. Undisclosed Non Venture Firm: This identifies a venture firm, which invests directly into a portfolio company, but doesn’t want us to use their name in the data. Undisclosed Non Venture Investor: This identifies a fund, which invests directly into a portfolio company, but doesn’t want us to use their name in the data. You will find examples, similar to these last two throughout the database. The reason for this, is that the market is PRIVATE and not every detail is disclosed. Ten years ago it was very confidential. However, as the asset class has become more prominent, more and more information is being disclosed. It is also a way for firms/ funds/ portfolio companies to market themselves. 23 3) EXECUTIVES This is actually a combination of those who work for the company and those who are making the investments into the company. For Example –You will see that Scott Grout is the CEO, Mark Keitlinger is the CFO and so on……, BUT you will also see that Edward Olkkola is a Board Member, actually from Austin Ventures (where he is a General Partner) and Robert Paluck is the Chairman of the Board, actually from CentrePoint Venture Partners (where he is a General Partner). If we relate this to one of the main roles of a General Partner – Nurturing the Portfolio Company’s growth, if someone sits on the board of a portfolio co. – he advises the management of that company. This is important for people to know, because if he’s on 25 boards and 20 of the companies do well he obviously knows how to develop a company. Interesting………… www.thestandard.com/article/display/0,1151,15403,00. Industry Standard:- A study of individual venture capitalists reveals that the ones with the greatest returns aren't always the ones to watch. Mutual fund investors learn to watch the fund manager rather than the fund company to pick the right fund. Similarly, investors should look at the track record of the individual venture capitalists, not necessarily those of the venture firms. Identifying good venture capitalists based on past performance can help investors piggyback on the knowledge and experience of those VCs. This is especially true for VCs who pick a winning investment in a company’s earliest stages. 24 4) INVESTMENT ROUNDS Investment Rounds: By taking the information from section 2, (firms and funds…) this section provides details of whom, How much and when there was an investment. Deal ID = Round Details (you can hyperlink into this section, where it will give you the name of the fund and the estimated investment made by them. Date: Of the round. Stage: Investment Stage Number of participating investors: From section 2 (Funds & Firms) Round Amount $Thous: Combined total invested (12600.0 actually stands for $12.6 million). Company Valuation: The valuations are all Post-Round valuations. We get the data from surveying the Venture Firms who value their portfolio companies. BKA: Negotiation point (between the GPs and the PCs- They take a look at the market in general, e.g. is the company in a market where there is a great need for its services.. etc). This is a private market valuation, not a 25 public. E.g. In the public market, valuations have dropped off dramatically recently e.g. Boo.com, Lastminute.com This information is not often disclosed. The firms that we survey have the option of:· · · Disclosing Company Valuations Not Disclosing Company Valuations Allowing Venture Economics to show Company Valuations in the aggregated section (See p.?? VentureXpert PartII) Note: We only obtain valuations from the Firms investing. Round Details: When you hyperlink into here you see each individual amount invested by the firms. The amounts are recorded as an ‘Estimated Investment Amount’. We actually obtain this figure from the press/ websites/ or the firms themselves. However, to cover ourselves of any misleading amounts, we report them as estimated. 5) EXITS Exits: If there were an exit of any sort, we would give a summary here. Note: we don’t actually cover the market once it leaves the Private sector. If you were interested in looking at a Fund, Firm or Executive report, then the process would be exactly the same. However, where we had 5 sections in the Portfolio Company Report (using the example of Chorum Technologies), you will find that the sections change somewhat in the Fund, Firm and Executive Reports. PORTFOLIO COMPANY REPORT (As already shown) 26 · · · · · Company Details Firms and Funds Investing in this Company Executives Investment Rounds Exits FUND REPORT · Fund Details: (much the same as the Portfolio Company. However: - Management Firm: name of the firm who manage the fund - Fund Type: i.e. Venture Capital, Buyout - Focus: focus of the Fund e.g. Early Stage. REMEMBER that funds tend to have a stage focus, rather than industry focus. · · · Vintage Year: The year of fund formation and first takedown of capital Fund Size: Amount available to invest e.g. $10 million Investments Made: a list of Portfolio Companies that they invest in Funds Managed: a list of all the Funds they manage to invest with Investment Profile: this ranges from… State Breakdown Nation Breakdown Industry Breakdown (i.e. Construction, Internet Specific, Transportation etc) Stage Breakdown (Stages of Investments i.e. Seed Stage, Early Stage etc) · Executives: a list of those who work with the fund. FIRM REPORT · · Firm Details: (much the same as Portfolio Company & Fund. However: Capital Under Management: Amount that the firm has to invest Membership Affiliations: NVCA/ EVCA etc (see p.33) Firm Type: Venture Capital, Buyout Investments Made: a list of Portfolio Companies that they invest in 27 · · · Funds Managed: a list of the Funds they manage Investment Profile: this ranges from… State Breakdown Nation Breakdown Industry Breakdown (i.e. Construction, Internet Specific, Transportation etc) Stage Breakdown (Stages of Investments i.e. Seed Stage, Early Stage etc) Executives: a list of those who work for the firm EXECUTIVE REPORT · Current Executive Positions: details of the role they play in the Firm and the Boards (if any) they sit on or details of the role they play in the Portfolio Company. Historical Executive Positions: previous roles (if any). · BROWSE A LIST Use this method when you want to see an alphabetical listing of: · · · · Portfolio Company(ies) Funds Firms Executives 28 Or if you just wanted to choose specific sections of the previous report (e.g. Firms & Funds investing in Chorum Technologies) you can use the Custom Reports. PROCESS - Put the bullet in the hole to the left of Portfolio Companies, Funds, Firms or Executives and click browse a list. Hyperlink into the profile that is listed under a particular letter to view an individual report. Please see below.... BEGIN SEARCH Use this method when you have specific criteria This is the main template page in the profiles section. Here you have 5 sections, which enable you to search for either: · · Management Firm data: details of the firms managing and investing the funds Company data: details of the companies being invested in 29 · · · NOTE: · Executive data: details of the actual employees/ board members Fund data: details of the fund itself Investment details: optional details to accompany the above It is important to understand that there are a number of fields to enter data into. However, this does not mean that you have to enter data in every field. We give the client a range of options so as to greater define the search. If you are searching for one of the aforementioned, then in order to compile a report relating to either Firm/Company/Executive/Fund, then on the main platform, prior to coming into this section you have to put the radio button in the desired choice. · This is a way to take the entire universe and slim it down into a smaller group Contd. 30 MANAGEMENT FIRM DATA Name: Here you can search for the name of the firm Location: Of the firm Firm Type: E.g. Corporate partnership, consulting firm, private firm investing own capital, individual etc. Affiliation: E.g. the firm could be affiliated to the National Venture Capital Association (NVCA) or European Venture Capital Association (EVCA) etc. Note: Venture Capital Associations are dedicated to defining, serving and representing the interests of the Venture Capital and private equity industries. In general, VCA’s work with all branches of government and the media promoting the public policy interests of the venture capital and entrepreneurial communities. COMPANY DATA Name: Here you can search for the name of the company 31 Location: Of the company Industry: What industry class the company belongs to (there are 3 main industry classes: 1) 2) 3) Information Technology (e.g. Internet specific) Medical/ Health and Sciences (e.g. Biotechnology) Non-High Technology (e.g. Transportation) Then you have sub-sections of these. Internet Group: So pervasive now that it has such a broad structure. E.g. Internet software, Internet hardware, e-commerce etc. Again, from this we have made the searching more specific for the client. Pub Status: Status of the company. The options include: 1) 2) 3) 4) All Public – has left the private sector Private – remains in the private sector Registration – when a company has told the world it is soon to be going public i.e. within the next two months. The reason for this is that they often look for an extra round of investment for marketing themselves to attract greater public interest in their concept, prior to actually going public. IPO Date: Say, for example you wanted a list of all Venture Capital backed companies that have gone public – this is where you would identify your date range. However, although we know they have gone through an IPO, VentureXpert doesn’t track exits – we only indicate them (we don’t have as much detail like SDC on the IPO itself). Business Desc: Much like a Keyword search Company Valuation: This maybe used if there is a need to find companies valued between e.g. $10 million and $20 million. NOTE: this would be entered as 10000 and 20000 respectively. Exclude undisclosed valuations: In the database, as mentioned earlier, there are some details that firms do not wish to be disclosed. This option is allowing the client to show ALL valuations in the database or just those with names. 32 EXECUTIVE DATA Name: Of specific person, enter Surname first Title: Choose from over 300 different titles, from ‘Analyst’ through to ‘VicePresident Peripheral/ Cardiovascular Sales & Marketing’. FUND DATA Name: Of specific fund Location: Of the fund Investment Type: What the Fund is e.g. Venture capital fund/ Buyout fund/ Mezzanine fund etc. Fund Type: Where the fund comes from e.g. Individual investor/ Endowment/ Pension etc. Fund Size ($000s): Just to put you in the picture, as mentioned earlier: 10000 = $10 million, 20000 = $20 million. Stage Focus: What is the focus of the fund e.g. seed stage, early stage etc. Fund Year: Year the fund was formed (‘vintage year’) Fundraise Status: Is a particular fund raising money - etc. Sequence: Say the client wanted to look at the investment patterns of first time funds e.g. Summit I/II/III/IV. Then Summit I is the new fund and all the others are follow-on funds. NOTE: some people like to do analysis to see if there’s some type of shift in the investment trends of first time funds, versus follow-on funds. Queries may include, ‘Are they more or less risky?’ ‘Do they have better or worse track records?’ INVESTMENT DETAILS 33 Stage: Focus of the investment stage e.g. seed stage, early stage etc. Date: Of investment Round: Identify a specific round of investment e.g. the 3rd round would be entered as 3 to 3. Round Total: Total investment in the specified round Examples for using ‘begin search.’ Q: How can you query for a list of Portfolio Companies that: - are located in Europe - and are in the Computers Hardware & Computers Graphics/ Digital Imaging Industry. - and received there first round of financing between 01/01/1999 & 12/31/1999? A: 1) By default, the bullet hole should be filled into the left of Portfolio Companies. Click begin search. 2) At the Company Data section, click on Select Criteria to the right of Location. In the Select state section scroll down and highlight Europe. Scroll down to the bottom right hand corner and click on the Accept Criteria button. 3) Stay in the Company Data section, click on Select Criteria to the right of Industry. Next click on the Computer Hardware link under the Information Technology section; highlight the industry codes from 2100 Computer and Hardware through 2200 Computer Graphics and Digital Imaging and click Accept Criteria on the right. 4) At the Investment Details section enter in the Date 01/01/1999 to 12/31/1999. Also, enter 1 to 1 in the Round# (1-99) boxes below to insure that your list will only contain Portfolio Companies that have received their first round of financing. 5) Scroll up to the top and click Execute search. Hyperlink into the Company profile(s) you choose. 34 Q: How can you query for a list of all the private Portfolio Companies that have valuations between $5 million and $10 million? A: 1) By default, the bullet hole should be filled in to the left of Portfolio Companies. Click begin search. 2) At the Company Data section click on the Pub Status drop down arrow and choose Private. 3) Stay in the Company Data section, enter in the Company Valuation ($000s) 5000 to 10000. 4) Scroll up to the top and click Execute search. Hyperlink into the Company profile(s) you choose. Q: How can you query for a list of Funds located only in Germany, Israel or Japan that have invested in Portfolio Companies from 01/01/1999 through 12/31/1999? A: 1) Put the bullet in the hole on the left of Funds and click begin search. 2) At the Fund Data section click on Select Criteria to the right of Location. Scroll down to the Select Nation and highlight Germany. Hold down the ‘Ctrl’ key on your keyboard and scroll down and highlight Israel. Continue to hold the ‘Ctrl’ key and highlight Japan. Click the Accept criteria button in the middle of the page. 3) At the Investment Details section enter in the Date 01/01/1999 to 12/31/1999. 35 Scroll up to the top and click Execute search. Hyperlink into the Fund profile(s) you choose. 36 TABLE OF CONTENTS ANALYTIC REPORTS 3 COMPANY VALUATIONS 4 FUND COMMITMENTS 11 FUND PERFORMANCE 14 FUND STATISTICS 37 DISBURSEMENTS 40 OTHER REPORTS 37 45 VX WEB DATA SOURCES 46 CLIENTS 47 ANALYTICS REPORTS The client can use the data from the ‘Profiles’ section to compile reports that include Company valuations, Commitments by limited partners, Investments (aka ‘Disbursements’) in companies, and the performance of funds from 1969 (investing in the US) and 1983 (investing in EUROPE) Split into Six sections:- · COMPANY VALUATIONS: Valuations by category/ Ranked valuations · FUND COMMITMENTS: Amount of money raised by funds from Ltd Partners · FUND PERFORMANCE: Return on Ltd Partner investment in private equity funds and investment benchmark updates · FUND STATISTICS: Complete fund and firm capitalization statistics · DISBURSEMENTS: Investments by funds into portfolio companies 38 · OTHER REPORTS: State or Nation Profiles COMPANY VALUATIONS Valuation information is used when Venture Capitalists are trying to put a value on one of their companies. They want to make sure it falls within certain standards or norms of what is going on within the industry. For example, say a VC is doing another round of financing for a company in the Consumer Products industry (Internet). Prior to the investing, they want to find a breakdown of all the valuations of other companies in the same industry that have been financed in the past year or so. Using VX, the first place a client would go to find out each individual detail, would be to the profiles section. However, valuation information is very hard to come by. VX obtains company valuation information from the fund reports that Private Equity firms issue to their investors (out of 30,000 portfolio companies, we currently have valuations for 2,552 companies that we can disclose and 11,000 that we cannot (Sept 2000). From this the majority of firms that supply us with this information prefer that we only present it on our database in an aggregated format (please see appendix 1 – Survey form). · · More than not, we receive valuations on the guides of confidentiality No valuations have company names next to them in this section So, taking the above into account, the Company Valuations database has been developed for the client to find aggregated valuations, reporting by valuation round, company stage, company industry etc. Split into two sections:- · VALUATIONS BY CATERGORY 39 · RANKED VALUATIONS VALUATIONS BY CATEGORY If we went to the quick search (in the profiles section) and looked for a portfolio company, e.g. ‘Webvan’ (Consumer Products industry, within Internet specific) we can see that after their 3rd round of financing they were valued at $612 Million (this is a post round valuation). If on the other hand there were no valuation, ‘Not disclosed’ would be shown. From this, whether your chosen company has a valuation or not, there may well be a need to find out what other companies, within the same industry are being valued at. Using the example of Webvan and the ‘Consumer Products’ industry (VEIC 2812) we can run a search. As a pointer, when choosing how you want your final report to look, the most meaningful reports are the Valuations by ‘Round’ and ‘Stage’ of investment into a company. You can then build your search up in the optional search criteria, e.g. the industry you are focusing on etc. In this example, the focus of the search will be to find out what the valuations of all those companies who received their 3rd round of funding between 01/01/1999 and 08/08/2000. Having set the following search criteria…. 1) Select Report Type Valuation Round 2) Select Report Criteria Date: 01/01/1999, Round: 3 to 3 3) Select Optional Search Criteria - Company Industry, Internet Specific, 2812 (Consumer Products) - Accept Criteria and Generate Report 40 ……… Cont. …. the compiled report is telling us is that for Consumer Products companies that received their 3rd round of funding between 1/1/1999 and 8/8/2000, we actually have 6 companies where we have valuations. Round: In this case it was the 3rd round of investment Sample: No. of companies who have provided Venture Economics with their valuations, whether they are disclosed or undisclosed. Sum of val: Summary of total valuations of all comps. Avg val: Average value of comps in sample ($194 Million) Max: One of these comps. Received a $612 Million valuation (Webvan) Upper Quartile: Top quarter of comps (in this example the top 25% of these 6 companies fall between the Max and the Upper Quartile. Median: The mid-point of any sample, with half of the sample less than or equal to the median, and half of the sample greater than or equal to the median. 41 Lower Quartile: Lowest quarter of comps. Min: One of these companies has a minimum valuation of $43.8 Million. Note: If there are only 3 companies we won’t be able to cover the Max, Upper quartile, Median, Lower Quartile and Min. We only report on 4 and over. Therefore, 12+ months is a respectable time frame to get a good report. Although there are no names we can see that Webvans’ 3rd round valuation is actually the highest in our sample set. From this a client can see the key valuations and have a clearer idea of the range of valuations within the specific industry. To further manipulate the data, the next query would probably relate to, ‘Having found the Max and the Min Valuations - How do I find out the precise valuations of the other 4 companies in the sample?’ RANKED VALUATIONS As we had 6 comps in our sample above. This section provides further characteristics relating to the ranking of the valuations. Using exactly the same search criteria, we can find out the precise valuations of those other than the Max and Min. 42 Rank: Of the Sample Industry: Internet Specific (we know that consumer products is the industry within ‘Internet Specific’) Stage: Focus of investment Valuation: Post-money valuation of a company ($/Million) If you view the ‘Stage’ column, you will see that there can of course be variants (in this example either expansion or later). From this our clients can actually work there way through those companies with the same criteria as used within a search to try and match up these characteristics. As mentioned previously, we cannot provide any names within this section, but we still provide as much detail as possible so that the client can get as close to matching valuations to names (with of course the data that we do have). Note: We don’t condone it, but the system allows for it A client would use the ‘Valuations by category and Ranked Valuations’ hand in hand to get as close to matching valuations of companies within their set query. 43 USEFUL FOR: Analysts who are doing comparable transactions, analysts who are trying to price deals. They can look at these reports and say companies that are receiving their 3rd round of financing, that are Consumer Products companies, the average valuation is $194million – · Your asking for $300million etc.. Your way out on your valuation! Etc, etc. Or · ‘Your valuation is nowhere close to going IPO, nowhere close to providing interest!’ Etc, etc. So, rather than just simply looking at what valuations have been disclosed in the profiles section, here our clients can, from a statistical point of view, have a broader understanding. · Gives investors facts to their views on valuations and it also · Gives entrepreneurs ammunition to go to their investors and say we deserve this valuation because this is what the market has shown, as illustrated by Venture Economics. Note: The higher the valuation, the greater interest from investors Sample Questions Q: How can you compare the valuations of Internet content related companies by round? A: 1) Under Analytics Reports, click on Company Valuations. 2) At step 1 put the bullet in the hole to the left of Valuation Round. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999. 44 4) Scroll back up to the top and in step 3, go to the company section and click on Select Criteria to the right of Internet Group. Put a check in the box to the left of Internet Content. Then click the accept criteria button. 5) Scroll to step 4 at the bottom left hand corner and click generate report. Q: How can you compare the valuations of e-commerce related companies by stage? A: 1) Under Analytics Reports, click on Company Valuations – valuations by category. 2) At step 1 put the bullet in the hole to the left of Company Stage. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999. 4) Scroll back up to the top and in step 3, go to the company section and click on Select Criteria to the right of Internet Group. Put a check in the box to the left of Internet e-commerce. Then click the Accept criteria button. 5) Scroll to step 4 at the bottom left hand corner and click generate report. Q: How can you compare 1999 valuations of Internet related companies by industry? A: 1) Under Analytics Reports, click on Company Valuations – valuations by category 2) At step 1, put the bullet in the hole to the left of Company Industry and click the drop down arrow so that Sub Group 3 shows. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999. 4) In section 3, go to the Company section and click on Select Criteria to the right of Company Industry. Click on Internet Specific under the Information Technology sub heading in the Select Industry Type screen. 45 Click the select all button to select all Internet specific companies, and then click the Accept criteria button. Click the Accept criteria button when you have returned to the Select industry type screen. 5) Scroll to step 4 at the bottom left hand corner and click generate report. FUND COMMITMENTS This database tracks the limited partner’s obligation to provide a certain amount of capital to a venture capital or buyout fund. One of the more important data items is fund raising status, which will tell you whether or not the limited partner is raising money for investment. This does not tell you how much is currently invested in the industry, only how much LPs have committed to invest over a period of time. IMPORTANT BECAUSE: This represents the ultimate funding source for future investments made into investee companies. Industry has been raising more and more record amounts of capital for investment year after year. 46 ANSWERS QUESTIONS LIKE: · · · How much venture capital was raised in 1998? Has more private equity capital been raised in the USA or Europe? Which funds raised the most money last year? MOST IMPORTANT TO: · · · Venture Capitalists and Buyouts general partners who are raising money and want to see the competition in the market place. Limited Partners (Institutions, Endowments, Insurance companies and other Investors in Private Equity partnerships) who want to see where the industry is heading in terms of new money raised. Consultants, Investment Banks, Specialised Private Equity advisors etc – as many help or are raising funds themselves – to view fund raising cycle. UPDATED: Updated daily but quarterly surveys further increase coverage. SAMPLE QUESTIONS Q: How much money was raised by corporate venturing groups in 1997, 1998 & 1999 by venture capital funds? A: 1) Under Analytics Reports, click on Fund Commitments. 2) At step 1, put the bullet in the hole to the left of Fund Raising (by year). 3) By default step 2 should have a bullet in the hole to the left of Venture Capital. Under Report Date Range, enter in the date’s 01/01/1997 to 12/31/1999. 47 4) Scroll to step 4 at the bottom left hand corner and click generate report. Fund Raising (by year): 1997, 1998, 1999 No. of Funds: Raised in that year Total Target ($mil): Combined target for all funds Period Amount Raised ($mil): Actual combined total of funds raised Amount Raised to Date ($mil): Cumulative build up since 1969 (US) 1983 (Eur). Q: How much money was raised in 1999 by fund stage focus? A: 1) Under Analytics Reports, click on Fund Commitments. 2) At step 1, put the bullet in the hole to the left of Fund Stage Focus. 3) By default step 2 should have a bullet in the hole to the left of Venture Capital. Under Report Date Range, enter in the dates 01/01/1999 to 12/31/1999. 4) Scroll to step 4 at bottom left hand corner and click generate report. 48 FUND PERFORMANCE This database is designed to allow the industry to compare for the first time the results of venture capital and buyouts investing to returns of other asset classes. Due to the sensitive nature of individual fund returns, the performance database may only be viewed at an aggregate level (again, as we are in a private market, Confidentiality comes into play. You cannot get an Individual Funds Performance). What we mean by aggregate level is briefly speaking: an aggregate of the cashflows ‘Committed’ by the Limited Partners to the cashflows ‘Distributed’ back to the Limited Partners – an IRR. What is an IRR? 49 The most widely accepted measure by which benchmarks can be consistently compared is an internal rate of return (IRR) to the investors. This calculation is based on the cashflows to and from the fund from the fund’s investors. The cash flows are based on cash-in/cash-out returns over time, modified to include the residual value of the private equity fund’s portfolio holdings. A separate cashflow treatment is made for captive funds with no investor cashflows and is described in a separate section. The analysis focuses on this IRR calculation. The rates of return analyzed throughout this report are implied, annualized returns. This section describes the methodology of the calculations, the uses and limitations of the various measures, and discusses issues affecting the measurement of performance of investing in private equity funds. The Association of Investment Management Research (AIMR), the governing body for Chartered Financial Analysts in the United States, has also deemed the IRR as the most appropriate measure of returns presentation for venture and other private equity investor investments. The EVCA and BVCA have also adopted the IRR as the best measure of performance. No individual returns information is available for a single fund. Queries returning less than 3 funds will notify the user that the sample size was too small to proceed. This database represents an on-line version of the Investment Benchmark Reports (IBRs) also produced by Venture Economics. IMPORTANT BECAUSE: The only and best-known online performance database available. The performance database is several different databases, which provide analysis on a variety of levels (explained later). However, we pioneered many of the techniques here and the web product closely mirrors the investment benchmark reports we publish in terms of coverage. ANSWERS QUESTIONS LIKE: · · · · What was What was 9/30/97? How does What was the pooled IRR as of 12/31/98 for funds started in 1994? the upper quartile IRR for funds started in 1993 as of the IRR for European funds compare to US funds? the return to buyout funds for the last 1, 3, and 5 years? CAN CALCULATE PERFORMANCE FOR A GROUP OF FUNDS USING: · · · IRRs TIME WEIGHTED RETURNS CASHFLOW STATISTICS 50 Because of the nature of the investment, industry does not have an “index” but you can use time-weighted returns as an index as many clients do. MOST IMPORTANT TO: · · · General partners at Venture Capital and Buyout firms to compare their performance with peer groups. Limited Partners to compare the performance of their portfolios with peer groups. This includes pension funds, endowments, foundations Consultants, Advisors to keep track of performance trends in private equity. BE CAREFUL OF AND THINGS TO KNOW: · Remember that we only provide aggregate performance of funds – we do not provide individual performance statistics on any fund through our benchmarks or databases. You may have clients say, “Why can’t we look at FUNDS that focus on Transportation?” There are so many industries, that the sample groups are too small. Again, down to small sample sizes we nor our competitors for that matter cover funds focusing on a specific industry (not even in the USA). The problem is that most Funds are broadly defined. Most of them say "I“m going to be an I.T. investor”……. Well I.T. can be Hardware, Software, Communications, the Internet – Very, very broad. From this, probably only 5-10% of funds are focused on a single industry. So, we’re talking about 100-150 funds out of the VX database. This is the same as most Mutual funds invest in a variety of industries. The Venture Capital and Buyout groups tend to do the same thing. There are sector funds out there, but not a whole lot of them, comparatively. Note: We can do this behind the scenes, on a project basis, but it takes time. The Research Team in Newark compile this sort of specific information for clients, maybe up to 10 times a year (e.g. if a client just wanted to look at Medical Health and Biotech Fund performance. The research group at Venture Economics can do that sort of project). So, you could always tell the client this. However, in the meantime, ……. , ….., IT’S ALWAYS IMPORTANT TO EXPLAIN WHY WE DO WHAT WE DO, RATHER THAN HAVE OUR CLIENTS GO INTO THE DATABASE AND PERCEIVE DATA TO BE LIMITED – IN THIS CASE, ITS BECAUSE THE SAMPLE SIZES ARE TOO SMALL. THAT’S WHY IT IS NOT AVAILABLE TO THE CLIENT. 51 Personally, I would be a little weary if a client went into the database and chose, for example: Internet Funds, and then only came out with say, 10 even though there’s Millions $$ being invested in internet companies. Plus, the big question with those 10 funds, is.. Are they getting a truly representative sample of how good Internet funds or Internet deals are doing? That’s why we should add some caution in there and we can do that verbally. · You cannot obtain a single fund’s performance at all. This information is confidential. For example, there is no place in the Industry (VentureXpert, VentureOne, Initiative Europe) where you can go & say “I want to find Apax Germany’s fund performance.” It will not say Apax Germany has a 25% return. You can go in (VentureXpert) and actually get the numbers for all 1248 funds, you can get the actual IRRs, but no name is next to it. This is because of confidentiality. What we are trying to do, is give our clients as much detail as we can without stepping over the boundaries that we have, with regards to confidentiality. The Venture Capital and Buyout Groups want us to have the information, because they like to use the database. They would go into, say our ‘Vintage Year’ report and for example, benchmark their own fund. They will pitch it against other funds formed in that year, and work out what quartile, what segment of the sample it lies in. They’ll use this to benchmark. What they don’t want, is for VENTUREXPERT to provide the world with information on their individual funds. If they contribute their data, then other groups will eventually follow suit. Therefore, further substantiating VENTUREXPERT’s ‘Fund Performance’ section. The Fund Performance section is split into the different categories, such as Size of Fund, Stage of Fund, Location of Fund etc, to give those who want to juggle around with the numbers, the opportunity to go in and slice & dice and make a comparison against whoever they want to. …….We give the Venture Capitalists and Buyout Groups the opportunity to search across the board, without releasing confidential information. We don’t actually condone it, but we give them the ability to do it. To round off.. 52 You cannot search for:· Individual Fund Performance (Confidentiality) · Industry Specific Funds a] Only small % focus on Industry specific b] Sample too small Can search for:· Region Fund performance (USA & Europe. Europe becoming more comprehensive by the day) DATA SOURCES: · Audited Financial statements of General Partners (VC and buyout firms). Basically, once a quarter GP’s compile a report, which is presented to the actual investors. This explains where they have invested their capital, investment trends in general and how the funds are performing Quarterly surveys of General Partners · Fund Performance is split into two sections: Express Reports and Custom Reports. Please note: US Funds originate from 1969, whereas EURO Funds start in 1983. EXPRESS REPORTS As of Sept 2000 this section only shows funds located in the primary market of the US CUMULATIVE FUND TYPE PERFORMANCE Choose a qr. end/yr. end. Reports the performance of all Private Equity funds from inception by Fund Investment Stage Focus (i.e. later stage VC funds, LBO funds, Mezzanine funds, etc.) to a selected qr. end/yr. end. 53 Split into four calculation types:1) Cumulative Internal Rate of Return since Inception (IRR) IRR (Internal Rate of Return) - The discount rate that equates the net present value (NPV) of an investment's cash inflows with its cash outflows (mentioned previously). 2) Cumulative Distribution to Paid-in Ratio since Inception (DPI) DPI (Distributions to Paid-in Capital) - The amount a partnership has distributed to its investors relative to the total capital contribution to the fund. Say, for example a Ltd Partner has committed $100 million into a fund. He may have received Distributions back of $10 million. So, of the initial investment of $100 million, he knows that he’s got $10 million back. This can’t be taken away from him. Even if the valuations of his current investments Increase/ decrease, he knows he’s got $10 million in the bank! So, in addition to an IRR a good way to display your performance is to say, we as a fund have distributed $10 million back to our initial investment. It’s a money game and early money is good money. 3) Cumulative Residual Value to Paid-in Ratio since Inception (RVPI) Residual Value - The remaining equity, which a LP has in a fund. That says of all the amount paid in for the entire fund… say $100 million, How much are those company’s worth, what value have we put on those company’s? So, this says of each portfolio, what’s the worth of the remaining portfolio? 4) Cumulative Total Value to Paid-in Ratio since Inception (TVPI) TVPI - A combination. You add the Distributive amount to the Residual Value (RV) amount and divide by the Paid in amount – and you come up with, what’s the Total value. 54 If, theoretically I was able to cash out all my companies at the value I have given those companies. How much money would I have returned to the Limited partner? So, it’s just an additional way to benchmark. Most people use an IRR; some people use the cash on cash method as well. These sections are different ways to Benchmark Fund Performance. IRR is the key in the industry Example Of Report: 55 Fund Type: · Focus of the fund · These have different characteristics and returns · Funds tend to focus on Stage rather than industry:Seed/ Early/ Balanced/ Later = Venture Capital focus Small/ Medium/ Large/ Mega = Buyout focus Mezzanine = Mezzanine focus Number: · This basically states the number of those specific funds in the database, where we have fund information (Note: there are more funds - we have over 9000, but only 1248 in our sample, again down to these being the only ones available with information) · Note: If you add up each of the Fund Type Sections, you should, theoretically come up with the quoted figure. However, an interesting point here, is that you do get some funds that are both ‘Venture Capital & Buyout Funds’ (e.g. Warburg Pincus: they raise large amounts of money and they can do any kind of deal, from a Seed stage to Mega buyout - So, they get ‘double counted.’ Average IRR: · The arithmetic mean of the internal rates of return. 56 The most common measure of central tendency is the average or mean. It is measured by the simple arithmetic mean of the sample IRRs. Calculates averages by: 1. Calculating rates of return for each fund and then 2. Calculating an average across the sample for each year of the grouped fund’s existence. · · This is an average of the IRR. For Example, 13.3 = Annual % return We collect ‘cashflow’ information from each of these funds. This is Quarterly information that basically talks about the financial relationship between the Limited Partner (LP), i.e. the Pension Fund, Endowment, Insurance Company etc. and the General Partner (GP) i.e. Venture Capital Firm or Buyout Firm. So, we’re looking at the money that goes back and forth, between those two groups. Capital Weighted Average IRR: · The average IRR weighted by fund size with funds contributing to the average in proportion to their size. Because rates of returns are percentages and percentages can be affected by scale differences, another method of calculating an average consists of weighting the rates of return by some measure. One common weight is the fund size. The capital weighted return has one drawback; it weights returns by fund-size rather than by invested capital. While the capital weighted return does take investment scale into consideration that a pure average would not capture, it is not a true "investment-weighted" return as it does not capture the actual investment scale and timing as the fund size is static. If a fund invested all its capital during the first takedown, the pooled return and capital weighted return would be very close measures, however, by itself the capital weighted return only gives weight to larger funds regardless of the size or timing of their cashflows. For this reason, the Pooled Return is a superior method. When a LP and the GP negotiate a fund, that is when the ‘Commitment’ evolves. However, say a $200 million fund is allocated by the LP, it doesn’t mean that the $200 million is drawn down for the GP to invest, all at once. Money from a fund is drawn down when there is a need for the GP to invest. So, by putting this into perspective, if the GP asked for $50 million, there would still be $150 million in the fund. However, even if only $50 million was drawn down; · The Cap weighted Avg weights it on the TOTAL Committed capital. 57 · This can be a ‘mis-weighting because it weighs the return on money that is not really invested (the $150 million is still in the hands of the LPs and only $50 million in the hands of the GP’s who invest into PC’s). Pooled IRR: · A method of calculating an aggregate IRR by summing cash flows together to create a portfolio cashflow and calculate IRR on portfolio cashflow The pooled method is a measure that attempts to capture investment timing and scale. The pooled return is calculated by treating all funds as a single "fund" by summing their monthly cashflows together. This cashflow series is then used to calculate a rate of return. This method implicitly would create an investment-weighted return and most closely matches the method that many investors used in measuring the return on their portfolio. Rather than averaging all the returns for their funds, they would lump all the cashflows together and calculate a return on the underlying "pooled" portfolio. In a likewise manner, rather than calculating individual returns for each fund and aggregating those returns by an average, the pooled return aggregates the cashflows for a group of funds into a portfolio and then calculates the rate of return on that portfolio of cashflows, thus treating the cashflows as if they were one fund. The advantage is that it does take the scale and timing of cashflows of large and small scale into consideration. The disadvantage is of course that larger cashflows will be given more weight so in a composite portfolio of small early stage funds and large later stage or buyouts funds the larger funds will have more influence on the performance than the smaller funds. However, many investors would say that this mimics the performance characteristics of their own portfolio. We find that this measure is the most appropriate measure for aggregate performance at either the vintage year or composite portfolio level. · · · This average is only weighted on the actual money drawn down from the ‘COMMITMENT’ and invested ‘DISBURSEMENT’ into a company (LP to GP to PC: refer back to ‘Private Equity’ diagram). Most people use this because it is a return on ‘Money at work.’ This is the truest representation on ‘How is my invested capital performing.’ The first 3 Columns: Average/ Capital Weighted Avg./ Pooled Avg. are calculated numbers. 58 The last 5 Columns are the actual IRR’s of Funds. Split into five sections – Maximum internal rate of return (IRR) through to Minimum IRR, highlighting the annual % increase/ decrease of funds in a particular stage. BKA as the Range of IRRs - Presents the high and low internal rates of return for a given year. Max: The highest return level for a group of funds. Upper: - section Med: The mid-point of a distribution, with half of the sample less than or equal to the median, and half of the sample greater than or equal to the median. Lower: - section Min: The lowest return level for a group of funds. In between each of the five sections (although not visible in our example) you have Quartiles: Quartile = Segment of a sample representing a sequential quarter (25%) of the group. (First 10 out of 40 funds - first quartile, etc.) If a Venture Capital or Buyout Firm is reporting back to their investors, they can ‘Benchmark their own Fund performance by saying ‘We had a 70% IRR. Therefore, by benchmarking it against the fund information in VentureXpert they can say that their Seed fund is in the 1st Quartile (i.e. between 202.9 (Max) and 17.9 (Upper) in our example above). Likewise, a Limited Partner would want to look at their entire portfolio. Let’s say a Limited Partner has invested into 25 Venture Capital partnerships, they would want to see how each of those funds was performing. So, if an investment was made into a SEED Fund for example, the Limited Partner would say, ‘I know my SEED Fund is returning 50%, BUT how is that doing compared to other funds’. The whole idea is to pick funds that are going to get a high return. Note: At any given time in a funds life, some of the money has been returned and some is still in the portfolio company(ies). Say, for example after 3 years of a Fund being in operation, all of the money has been drawn down (all the negotiated ‘Commitment’ of capital, has been taken down to invest by the Venture Capital/ Buyout firm). During this time, if any of the Portfolio Companies being invested in have gone public (IPO) or merged/ acquired, then there has been money made. Which means that money has been ‘Distributed’ back to the Limited Partner. But, there’s still a number of Companies left in the Portfolio…. ….So, from an IRR calculation you have two pieces of information: How much £ has been distributed back to the LP How much are the remaining PC’s worth? 59 CUMULATIVE VINTAGE YEAR PERFORMANCE Choose a qr. end/yr. end. Choose the Fund Investment Stage Focus. Reports the performance of funds by vintage year to a selected qr. end/yr. end. This report would be used to Benchmark against funds formed in the same year. Example…. (Vintage Year Performance) “Our fund in particular, having started in 1988… so far, we have a 20% return and in relation to the total of 47 funds in the sample that would put us in the 1st Quartile of our 1988 Vintage Year.” 60 CUMULATIVE VINTAGE YEAR COMPOSITE PERFORMANCE Choose a qr. end/yr. end. Choose the Fund Investment Stage Focus. Reports the performance of funds by a composite group (i.e. all VC funds from vintage yr. 1969 to 1999, 1983 to 1999, etc.) to a selected qr. end/yr. end. This is very much like the Vintage Year Report. 61 INVESTMENT HORIZON PERFORMANCE Choose a qr. end/yr. end Reports the performance of funds by Fund Investment Stage Focus. The report will generate pooled averages for samples sizes that have had any cashflows during the time period (i.e. the pooled return for all funds in a sample with cashflows over the last 20 years, 10 years, 5 years, etc.). Referring to the above: What this report shows is, from 12/31/1999, ‘What happened in the previous quarter, year etc. What’s the change in value that the VC/ Buyouts/ Mezzanine industry had in that 1-year period, 3/5/10/20 year period etc. For example, if we look at Private Equity Funds, the value of Partnerships went up by 62.3% in the Private Equity Industry. 62 Cont. This figure takes into account two key areas: 1) Exits: How much money was generated by Trade Sales or by IPOs or M&A. Maybe company (a) went public or company (b) in our portfolio was merged or acquired. And a partnership made money doing that. 2) Valuations: Another way a partnership can increase its value is when a company is still private (still in the portfolio) and is doing well. The valuation of that company may well increase, e.g. from $1 million - $10 million. So, the Venture Capitalists will say, I think this company is worth $10 million today. This is part of an IRR calculation also. So, between the actual Trade Sales, M & A’s, IPO’s and the change in value of the company’s that are still in the portfolio – what we’re saying here is that the value of the Private Equity industry increased by 62.3% in the last year. Note: An individual fund probably wouldn’t compare themselves against this information because this information takes into account a lot of different funds. This takes into account funds formed yesterday and funds formed 20 years ago. They are all in that mix, that’s why the Vintage Year is so important because it allows a fund to say, “How am I doing against other funds that are like me?” But what this does, is that it takes the next level above individual fund comparison and says, ‘OK, how did the industry do?’ Although this maybe deemed as a piece of overview information, it is still very important. Because every ¼ these Funds usually have to submit a report to their investors and say exactly what has been going on in the industry and how the fund is performing (FUND REPORTS, which we receive for our research purposes). Example of the use of this report …… (Investment Horizon Performance) “We’ve seen a remarkable rise in the VC industry over the last 3, 6 & 9 month periods. We’ve seen an increase of X and Y%.” 63 CUSTOM REPORTS Unlike the Express Reports you can select your primary market as either US or Europe. CASHFLOW SUMMARY Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (qr. or yr.) and date range. Reports the cashflows of the sample group of funds over the selected time period. The output shows the period, the total takedowns ($’s invested), cash distributions ($’s distributed back to the limited partners), stock distributions (total $ amount of the stock distributed back to the limited partners), total distributions (total of cash dist. and stock dist.) and NAV (net asset value of the sample group). 64 BENCHMARK SUMMARY Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (qr. or yr.) and date range. Reports the performance of all funds in the sample size from inception to a selected qr. end/yr. end. The report includes IRR (internal rate of return), DPI (distribution to paid-in) ratio to measure the cumulative investment returned relative to invested capital, RVPI (residual vale to paid-in) ratio to measure how much of the investors invested capital is still tied up in the equity of the fund, and TVPI(total value to paid -in) the sum of the DPI and RVPI. From: Inception, either 1969 US or 1983 European 65 INVESTMENT HORIZON SUMMARY Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (qr. or yr.) and date range. Reports the performance of funds by the investment horizon. The report will generate pooled averages for samples sizes that have had any cashflows during the time period (i.e. the pooled return for all funds in a sample with cashflows over the last 20 years, 10 years, 5 years, etc.). 66 TIME WEIGHTED RETURNS (PERIODIC IRR’s) Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (qr. or yr.) and date range. Reports the IRR of the sample size using periodic irr’s. The report contains the various IRR’s of the sample size over a selected time period, the total return, geometric average, arithmetic mean, standard deviation, annualized geometric average and the annualized standard deviation. For example, if the frequency is by qr. and the date range is 12/31/98 to 12/31/99, the report will show returns from 3/31/99 to 6/30/99 and 06/30/99 to 9/30/99, etc. 67 INVESTED VS UNINVESTED Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (qr. or yr.) and date range. Reports the invested vs. uninvested capital of the sample size. Num Take: Number of takedowns to date Num Fund: Number of different funds used to date Cml Take: Cumulative takedown – amount of commited capital invested Cml Commit: Cumulative commitment negotiated to invest Pct Inv: Percentage invested Cml Uninv: Cumulative uninvested – amount of commited capital uninvested Pct Uninv: Percentage uninvested 68 PERCENTILE ANALYSIS Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (qr. or yr.) and date range. Reports much the same as the previous reports, however, rather than showing results within the ‘Quartiles’ the client can further search by 10ths, 5ths, 1/4s or 1/2 of the compiled result. Percentile Group: In this case it is split into 10ths Percentile Value: Range of actual IRR’s. 69 RANKED STATISTICS Select Primary market type (USA/EURO), select Private Equity type, choose report frequency (cumulative or periodic) select date range and Calculation Type (Cumulative since Inception). Ranks funds by size, stage, and year etc. Vintage Year: The year of fund formation and first takedown of capital. Stage: Focus of the fund.. e.g. Balance (B), Early stage (E/S) etc. Size: Of an actual fund IRR: Of an actual fund Example referring to the above: Q: List all European VC Funds formed in 1995. This shows the top funds, what stage, size and the IRR as of 03/31/2000. This is each fund in the Vintage Year of 1995. Say, that you wanted to find out if you were the No.1 fund or the worst fund, you could take your own IRR 70 and place it wherever you want & say…. Instead of I’m in the “Top Quartile” you may want to say, “I’m 2nd out of however many funds in the sample. A: The generated report shows the top funds, what stage, size and the IRR as of 03/31/2000. Formed in 1995, is a balanced stage VC fund between $250.1 - $500 MILLION and has a return of 97.78% per year - this is an annual IRR. One problem we’ll run into is small sample sizes, just because there’s not as many funds in one country (outside of the USA yet). Just like, if we did a ‘State’ run in the USA, if you looked at California and Massachusetts there’s enough funds, but after that you start to get down to really small samples. ONE ISSUE WE ALWAYS RUN INTO IS PURE SAMPLE SIZE When doing a demonstration of the VX web, the VINTAGE YEAR PERFORMANCE along with the INVESTMENT HORIZON are the two reports that are shown 71 Sample Questions Q: What is the pooled IRR for early stage venture capital funds for vintage years 1993 and 1995 as of 12/31/1999? A: 1) Under Analytics Reports, click on Fund Performance. 2) Under Custom Reports, click on Benchmark Summary. 3) At step 1, put the bullet in the hole to the left of U.S. Venture Capital and click the drop down arrow so that the date range reads; From Date: 06/30/1999 To Date: 09/30/1999. In addition, make sure the Frequency bullet hole is filled in to the left of Quarterly. 4) At step 2, click on Select Criteria to the right of Stage focus. Check-off the box to the left of Early Stage Funds. Click the Accept Criteria button on the right. 5) Stay in Step 2 and click on Select Criteria to the right of Fund Year (yyyy). Scroll down, highlight 1993. While holding the ‘Ctrl’ key, scroll down and also highlight 1995. Click on the Accept Criteria button to the right. 6) Go to step 3 at the bottom left hand corner and click generate report. Q: As of 12/31/1999, what was the 10-year investment horizon return to venture capital funds by fund type? A: 1) Under Analytics Reports, click on Fund Performance. 2) Under Express Reports, click on Investment Horizon Performance. 72 3) At step 1, click the drop down arrow so that Report End Date shows 12/31/1999. 4) At step 2, click generate report. FUND STATISTICS This section contains analysis of fund demographics for the universe of funds in our database. Since a Fund can raise money over a period of years, fund statistics allow you to do analysis that is impossible to do in fund commitments by aggregating the fund raising into a queryable database allowing the user to compute statistics on funds by various data items. Data items include name, address, investment stage focus, fund raising status, fund size, fund vintage year, fund sequence number and type. Some of the information can be found in profiles and in commitments but some analysis is very difficult to do in those databases making this a more analytically valuable way of examining the universe of funds in the database. ANSWERS QUESTIONS LIKE: · · How many private equity funds are located in Europe? Which funds are the largest? MOST IMPORTANT TO: · · · Venture Capitalists and Buyouts general partners who are raising money and want to see the competition in the market place Limited Partners (Institutions, Endowments, Insurance Companies and Other Investors in private equity partnerships) who want to see where the industry is heading in terms of new money raised. Consultants, Investment Banks, Specialised private equity advisors etc - as many help or are raising funds themselves. BE CAREFUL OF: Biggest difference between commitments database and fund statistics is that commitments generally analyses funds by calendar year and fund statistics analyses funds by vintage year. E.g. if a fund raises money in three separate years, raising 3 mill in 1996, 2 mill in 97 and 1 mill in 1998, commitments will treat it as 3 funds with different amounts in each year which double counts or triple counts funds when doing some statistical analysis. Money committed will be spread across the 3 years making some analysis misleading. Fund statistics would treat the above-mentioned fund as a fund formed in 1996 with a total fund size of 6 mill greatly simplifying the analysis you can do. DATA SOURCES: 73 General press releases sent to us, quarterly survey, and industry press. UPDATED: Updated daily but quarterly survey process will increase coverage significantly Sample Questions Q: Rank 1999 VC funds by fund size where they have closed on more than $200 million. A: 1) Under Analytics Reports, click on Fund Statistics. 2) At step 1 put the bullet in the hole to the left of Ranked Funds (committed capital) and Rank from 1 to 99999. 3) By default step 2 should have a bullet in the hole to the left Venture Capital. 4) Scroll back up to step 3 and enter 200 to 99999 in the boxes to the right of Fund Size ($Mil). 5) Stay in step 3 and click on select criteria to the right of Fund Year (yyyy). Scroll down, highlight 1999 and click the Accept Criteria button on the right. 6) Stay in step 3 and click on Select criteria to the right of Fundraise Status. Check-off the box to the left of Had Final Close and click the Accept Criteria button on the right. 7) Scroll to step 4 at the bottom left hand corner and click generate report. Hyperlink into the Fund profile(s) you choose. 74 Rank: Fund Name: Fund Year: Year fund was formed Investment Stage Focus: Focus of the fund Fund Size $Mil: - 75 DISBURSEMENTS This database essentially tracks the venture capital and buyout financing that companies receive from the initial commitment(s). Details include company characteristics (name, public status, founding date, address information), fund characteristics (name, investor type, size, vintage year, address information), firm characteristics (name, firm type, founding date, address information) and financing round characteristics (date, number, amount, investment stage). IMPORTANT BECAUSE: This is the statistic that is most cited in the press and the one that we have the most competition for. It is the “deals” database in the private equity industry. ANSWERS QUESTIONS LIKE: · · · How much capital was invested in semiconductor companies in France? To what extent have disbursements increased during the 1990’s in the Europe? What is the percentage of UK’s disbursements amount compared to the rest of Europe? MOST IMPORTANT TO: · · · Venture Capitalists and Buyouts general partners who are making investments Limited Partners (institutions, endowments, insurance companies and other investors in private equity partnerships) who want to see where the industry is headed in terms of new money invested. Consultants, investment banks, specialised private equity advisors etc – view deal flow – see industry trends. BE CAREFUL OF: We have substantial information on venture investments, which is comprehensive enough to be called “total” investment for the US. The activity for the rest of the world is “best available only”. We do not have comprehensive coverage of the buyouts industry in the US either but will be augmenting this over the winter in collaboration with the M & A group. 76 DATA SOURCES: · Audited Financial statements of General Partners (buyouts and venture capital firms) – no other competitor does this – makes our data the most accurate but relying on this alone makes us suffer from timeliness so we augment financial documents with….. Comprehensive quarterly survey done under the auspices of the NVCA (US. Our European arm is currently in talks with the EVCA & BVCA – European and British Venture Capital Associations) Comprehensive review of press and over 600 information websites quarterly plus over 700 company websites to verify investment information. · · UPDATED: Updated daily but quarterly survey process will increase coverage significantly toward end of quarter. Sample Questions Q: How can you query for a list of corporate venturing funds that invested into Internet E-commerce related Portfolio Companies that are located in the Europe in 1999? A: 1) Under Analytics Reports, click on Disbursements 2) At step 1 put the bullet in the hole to the left of Fund Name. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999 3) Scroll back up to the top and in step 3 put the bullet hole in Include All (which is to the right of Standard Venture Capital). 4) Stay in 3, just go to the company section and click on Select Criteria to the right of Location. Scroll down to the Select Region section and highlight Europe. Click on the accept Criteria button to the right. 5) Stay in the company section, just click on Select Criteria to the right of Internet Group. Next, checking off each of the Internet focused boxes and click the accept criteria button to the right. 77 6) Scroll to step 4 at the bottom left hand corner and click generate report. Hyperlink into the Fund profile(s) you choose. Q: How can you query for Venture Capitalists that invested in Biotechnology companies in 1999? A: 1) Under Analytics Reports, click on Disbursements 2) At step 1 put the bullet in the hole to the left of Firm Name. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999 4) Scroll back up to the top and in step 3 click on Company Industry. Next, click on Biotech and Select all, Accept criteria. Accept criteria again. 5) Stay in step 3, go to Excl. undisclosed valuations and put the bullet in yes. 6) Scroll to step 4 at the bottom left hand corner and click generate report. Hyperlink into the Firm profile(s) you choose. Firm Name: No. of Companies: e.g. Granite Ventures LLC invested into 3 companies. No. of Firms: This is always going to be 1. Ave per comp: This shows the average the firm invests into each company 78 Ave per firm and Sum Inv ($mill): Both these fields relate to the total amount invested by the firm. Pct of Inv: This shows the % that firm has invested out of the whole sample. From the previous question, the next query may well relate to……. Q: How can you query for a list of companies that one of the above firms has Invested in? A: 1) Under Analytics Reports, click on Disbursements 2) At step 1 put the bullet in the hole to the left of Company Name. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999 4) Scroll back up to the top and in step 3 click on Company Industry. Next, click on Biotech and Select all, Accept criteria. Accept criteria again. 5) Still in section 3, go to Firm Name and Select Criteria. Type in the name Of the company (e.g. Granite Ventures LLC), put a tick next to the selection, click Add to Selection. Finally click on Return to main search. 6) Scroll to step 4 at the bottom left hand corner and click generate report. Hyperlink into the Firm profile(s) you choose. 79 This now shows the 3 companies that Granite Ventures LLC invested in. Q: How much money was invested in the venture capital industry in 1998 & 1999 by quarter? A: 1) Under Analytics Reports, click on Disbursements 2) At step 1 put the bullet in the hole to the left of Disbursements by Year and drop the arrow from Year to Quarter. 3) Scroll down to step 2 and enter in the Date 01/01/1998 to 12/31/1999. 4) Scroll back up to the top and in step 3 put the bullet hole in Include All (which is to the right of Standard Venture Capital). 5) Scroll to step 4 at bottom left hand corner and click generate report. Q: What is the distribution of Private Equity dollars invested in 1999 by company industry class? A: 1) Under Analytics Reports, click on Disbursements. 2) By default step 1 should have a bullet in the hole to the left of Company Industry Class. Just drop the arrow from Class to Minor Group. 3) Scroll down to step 2 and enter in the Date 01/01/1999 to 12/31/1999. 4) Scroll to step 4 at the bottom left hand corner and click generate report. 80 OTHER REPORTS USA specific only. Unless focussing on the USA this section is not relevant (Sept 2000). At present, you can only get IPO data and not M&A. Use the Other Reports section and select Nation profile. Select the Venture Capital Backed IPO by State and then set your time frame and change the ranking to 1 to 55 to get all data. Execute report and the aggregate totals will be at the bottom of the report. There will be no return data included as it is not available. Q: How can I find Venture Capital Backed IPOs by State for 1999? A: 1) Under Analytics Reports, to the right of Other Reports, click on the drop down arrow and select Nation Profiles. 2) At Select Report Elements, check-off the box to the left of Venture Capital Backed IPOs by State. 3) At Select Date Range, enter the dates 01/01/1999 to 12/31/1999. 4) At Select Ranking, enter 1 to 99999. 5) At the bottom left hand corner, click generate report. Q: How can I find the top Internet company investments in California during 1999? A: 1) Under Analytics Reports, to right of Other Reports, click on the drop down arrow and select state profiles. 2) At Select Report Elements, check-off the box to the left of Top Internet company investments. 3) At Select State, click on the drop down arrow and select California. 4) At Select Date Range, enter the dates 01/01/1999 to 12/31/1999. 81 5) At Select Ranking, enter 1 to 99999. 6) At the bottom left hand corner, click generate report. VX WEB DATA SOURCES 1) Websites (company and firm websites) also Internet news sites like Yahoo, Businesswires, Red Herring, Dbusiness/ Daily Press/ Newswires Used for General updates on existing and new records 2) Survey Firms on a Quarterly basis Used for Disbursement/ Commitment/ Valuation/ Cashflow and Fund Performance activity. 3) Obtain Firm and fund annual and interim reports (Audit Financials) - Used for all data - company, fund, firm, disbursements, commitments, IPO, M&A, Limited Partnerships, Fund Performance Also…. · · Industry related periodicals (PEW, Red herring)-used for all data company, fund, firm, disbursements, commitments, ipo, M&A. SEC filings - used for rounds of financings, company, firm, fund,commitment data 82 CLIENTS Investment banking community: Interested in seeing company’s that are just receiving funding – Investment Banks can then go and get in “on the deal” before the IPO Venture Cap and Buyout Groups: To see who’s investing and where. More general industry info for their presentations Buy Out: Looking for deals they can get into Lawyers/Accounting Firms: Marketing info; they need to see the company’s to identify who else to sell their services too Investment Management Community: To understand what’s going on in their industry. 83