Viewgraph No. 1An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesAn Opinionated Introduction To Venture Capital in EuropeAndrea CapitanioAlice VenturesE:mail andrea@aliceventures.itViewgraph No. 2An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesPrivate Equity & Venture Capital<> <>Viewgraph No. 3An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesEarly Investments LifecycleconceptM&S Plan V0.1P&O Plan V0.1Eng. SpecsPrototypePlan V1AlfaBetaV1Plan V1Res. & Develop.Marketing& SalesProd.& OpsPlan V2Plan V2CUSTOMERSV1.1Seed (< €1 mil)Early Stages (€1 -10 mil)Expansion/(€10+ mil)developmentAngelsIncubatorsAcceleratorsVenture CapitalPrivate Equity &Merchant BanksStart-upViewgraph No. 4An Introduction To Venture CapitalAndrea Capitanio -Alice Ventures•Advisor to MB Venture Capital•MB Venture Capital Fund I–€150 mil under management–Focus on •Early stages investments (start-up to first round) in the EU and Israel•Bio-tech, Media and Info-tech•Financing from €1 to 10 mil (€3 -5 mil operations on average)–12 investments in SE, BE, UK, IT, …•The Team–Edoardo Lecaldano (Media and Infotech), John Gonzales (Biotech), Sergio Saibene (Infotech and Telecom), Andrea Capitanio (Infotech and Telecom)–the Polytechnic of Milan and the Bocconi Business School of Milan•MB VC Fund I investors: FIAT, Pirelli, Mediobanca, Generali, Montedison, Informatica, ...Viewgraph No. 5An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesWhat Venture Capitalists do ...•Sift through thousands of (good and bad) investment propositions•Identify a few valid initiatives and finance them –in exchange for private equity (usually a minority stake)–structure the deal•Support the entrepreneurs in succeeding. E.g.: –providing financial advice–in headhunting and setting up advisory boards–in contacting customers, channels, … –in steering and positioning the company–in managing PRs activities–in managing IP and legal issues •Look after value creation–further round of financing–merger and acquisition, IPO, … Viewgraph No. 6An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesVenture Capital in the EU (FY2000)•Funds raised in the EU: €48 bil–UK 37%, Fr 16%, DE 13%, ...–High Tech early-stage: €8.6 bil–High Tech expansion/development: €6.6 bilSource: “Annual Survey of Pan EuropeanPrivate Equity & Venture Capital Activity”,European Private Equity & VC AssociationViewgraph No. 7An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesVenture Capital in the EU (FY2000)•Investments made: €34.9 bil (over 13000)–UK 38%, FR 15%, DE 14%, …–€11bil (31.5%) in 5448 High Tech dealsAmount InvestedRatioSeed€ 0.8bil2.3%Start-up€ 5.8bil16.7%Expansion€ 12.9bil37.1%Replacement€ 0.9bil2.7%Buy-Out€ 14.3bil41.2%Source: “Annual Survey of Pan EuropeanPrivate Equity & Venture Capital Activity”,European Private Equity & VC AssociationViewgraph No. 8An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesVenture Capital in the EU (FY2000)•Average deal size €2.7m (€2.2m in 1999)–€3.4 mil per financing (€18.5 in the US*)* Source: Financial Times, July 16th200120001999Seed€ 731K€ 775KStart-up€ 1.2mil€ 770KExpansion€ 2.4mil€ 1.6milReplacement€ 2.1milBuy-Out€ 13.5milSource: “Annual Survey of Pan EuropeanPrivate Equity & Venture Capital Activity”,European Private Equity & VC AssociationViewgraph No. 9An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesVenture Capital in the EU (FY2000)•Divestments made: €9.1 bil –€3bil in 1308 trade sale operations –€1.3bil in 1001 public offerings •249 IPO & 682 sales of quoted equity–€689mil in 896 write-offs–€1.4bil in 316 sales to other VCs or financial institutions•37 Tech. IPOs up to June 1st., 2001–Raised €1253 mil + €6255 mil of Orange IPOSource: “Annual Survey of Pan EuropeanPrivate Equity & Venture Capital Activity”,European Private Equity & VC AssociationViewgraph No. 10An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesVenture Capital in the EU (FY2000)•What does a VC asks for –VC investors’ stake •2% have 1 -9%•38% have 10 -33%•21% have 34 -49%•39% have 50+ %Source: “The Economic Impact of Venture Capital in Europe” (EVCA and Coopers & Lybrand)Viewgraph No. 11An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesMost Appreciated VCs Contributions•Financial Advice 44%•Corporate Strategy & Direction 43%•Sounding board for ideas 41%•Challenging status quo 32%•Contacts or market information 26% •Management recruitment 10% •Marketing strategy 7%•Money only 12%Source: “The Economic Impact of Venture Capital in Europe” (EVCA and Coopers & Lybrand)Viewgraph No. 12An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesThe Financing Lifecycle•Approach–Elevator’s Pitch and Info Memo•Presentation–Placement Memo•Business plan–Meetings•Negotiation –Term Sheet (or Letter of Intent)•Verification and Validation–Due diligence•Closing & Financing•Value Creation•ExitViewgraph No. 13An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesHow to approach a venture capitalist•The Business Plan•A Team•A Presentation and an “Elevator’s Pitch”–be ready !!•References•An NDA (if required)Quick Check: Do You Need a VC ?Viewgraph No. 14An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesThe Business Plan•A Product/Service description–Pros and cons of the solution–Market needs it satisfies–Barriers to Competition•Business Model–Market Analysis (strategic and tactical)•Competitors–Execution Plan •Marketing and Sales Plan•Research and Development Plan•Operations Plan•Team•Financials–Valuation Model & Placement Terms–Income Statement, Balance Sheet & Cash Flow•3 years minimum, quarterly breakdown•1st year in monthly breakdownViewgraph No. 15An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesThe Business Plan: Suggestions•Be sure you sell a “need to have” not a “nice to have” solution.•Be Focused.•Assess your competition (present and future)•Be concise and speak the truth•Be complete and clear in your analysis –state ALL your assumptions–do not hide cons•Have details ready if requested•Validate, validate, validate … Viewgraph No. 16An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesThe Term Sheet•The parties•Securities to be issued•Amount of financing & disbursement schedule•Pre-financing valuation•Option plan & earn-out•Use of proceeds•Liquidation Preference•Protective Provisions, Voting Rights and BoD participation•Anti-dilution•Lock-ups •Tag along and drag along•Exclusivity•Reporting•...Viewgraph No. 17An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesHow does a VC think•IRR (Internal Rate of Return)–Company’s Current and Future Valuation•Comparables (P/E,P/S,…), “Number of”, DCF, … –What’s The Best Strategy To Create Value•Which are the achievable milestones and what’s the financing needed ?•When is the break-even expected ? With which margins and revenues.–Exit Strategy•Trade sale, IPO, Nth+1 round of financing, .. •Minimizing Risks–Diluting the investment–Liquidation Preference rights Viewgraph No. 18An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesA possible valuation scenario•Company X. Quoted on Stock Exchange Z. Valuation €100mil, Sales €50 mil, Earnings €5 mil. P/E = 100/5 = 20, P/S = 100/50 = 2.•Company Y. Acquired for €20 mil with sales of €10 mil. P/S = 20/10 = 2.•Your “UnwiredCo” plan forecasts €30 mil in sales and €5 mil in earnings in 2006. Its buss. model is “similar” to X and Y. –Lower Valuation of UnwiredCo in 2006 using P/S of 2 is 30*2 = €60mil–Higher Valuation in 2006 using P/E of 20 is 5*20 = €100 mil •Present Post-Money1valuation (discount-rate2of 50%) is between 60/(150%)5years= €8mil and 100/(150%)5years= €13.3mil•The “UnwiredCo” requires a €4 mil financing round.•The Pre-Money valuation is between €8-4=4mil and €13.3-4= 9.3mil.•An agreement is reached at a pre-money valuation of €6mil.•hence the Investor will obtain a 4 /(6 + 4) = 40% stake in the company.1 Valuation of the company after the investment.2Target Annualized Return of InvestmentViewgraph No. 19An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesEuropean Private Equity Funds Formed 1980-1998Net IRRs to InvestorsInvestment Horizon Return as of 31-Dec-2000Stage1 YR3 YR5 YR10 YREarly Stage26,014,524,014,3Development31,521,419,411,8Balanced40,456,445,420,7All Venture35,636,333,617,2Buyouts10,930,626,218,0Generalist1,912,617,812,3All Private Equity15,629,225,816,3IRR: Internal Rate of Return. “Rate of discount which equates the present value of the cash outflows associated with an investment with the sum of the present value of the cash inflows accruing from it and the present value of the valuation of the unrealized portfolio”.Source: “Annual Survey of Pan EuropeanPrivate Equity & Venture Capital Activity”,European Private Equity & VC AssociationViewgraph No. 20An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesWhat to look for in a VC•People you LIKE !–Trustworthy & Collaborative•Can bring value, not money only !–Do not have to be experts in the sector but have to understand the business.–Good network of contacts.•Ask for referencesViewgraph No. 21An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesThe Wireless Market•UMTS –July 2000. WestLB Panmure UMTS Report estimates German UMTS users to pass the 2mils threshold (3% of total) in 2002 and reach 51.6mil (60%) in 2011.–Oct 2000. UMTS Forum Report 9 estimates 32 mils Mobile Multimedia Users in West Europe in 2005 and 90 mils in 2010–Recent (May 01 ?). Durlacher UMTS Report -0.3 mils in the EU in 2003 and 32 mils in 2005.•Layoffs –Ericsson announced 3300 layoffs and ceasing production in two EU plants.–Nokia has announced 3/400 layoffs.–Motorola has announced another 4K layoffs (adding to the 18K already announced)•Handsets–Projections for handset sales in 2001 in the EU have came down from 600 to 450 mil.Viewgraph No. 22An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesThe Wireless Market Sectors•Content–Producers and Providers•Services–(Virtual) Mobile Network Operators–Application providers (WASP) & Portals•Applications–End-user applications–Platforms and frameworks•Optimization Tools and Techniques•Enabling Technologies–Access, Core & Home Networks–Mobile TerminalsViewgraph No. 23An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesM-commerceSmart Messaging,m-advertising m-CRM, m-SFM, ...Streaming & MultiMediaMobileTerminalRadioNetworkCoreNetworkHomeNetworkEnablingTechnologiesOptimizationApplicationIncreasing Entry BarriersSmart Antennas & Radios, …xG Stacks, ICs, ..EnterpriseNetworkM-commerceIncreasing CompetitionHybrid Networks & Multi Access Network Data Compressionand OptimizationLocation Based ServicesMExEsViewgraph No. 24An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesConclusions•Always engage your brain before doing anything–your BP deserve more care than your best publication•Do your homework–assess your competition and the market •Push the envelope but …Be aware of your limits–partner with others to define the BP –do not be too greedy •Do frequent reality checks–talk to other experts, prospective buyers & channels, VCs–compare to other similar initiatives •Be committed –the start-up must be your only thought until the IPOViewgraph No. 25An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesGood Luck and … I hope to be hearing from you soon !Andrea Capitanio -Alice VenturesE-mail: andrea@aliceventures.itPhone: +39 02 4998 1730S-mail: Piazzale Baracca 1, Milano, 20123, ItalyViewgraph No. 26An Introduction To Venture CapitalAndrea Capitanio -Alice VenturesAbstractMobile communications are rapidly becoming the preferred mean of personal remote interaction in today's society and besides the hype surrounding the quantum leaps in the cellular networks genealogy -2G, 2.5G, 3G, 4G, .. -the continuously improving wireless infrastructure is likely to generate a ground fertile for significant business opportunities but also clouded with aggressive competitors.The “Private Equity” capitals market provides capital to enterprises not quoted on a stock market in exchange for an equity participation. Venture Capital (VC) is, strictly speaking, a sub-class of Private Equity and is characterized by investments made for the purpose of developing, launching, and expanding the commercialization of new products or services.Venture Capital has long been a necessary lubricant in the success stories of high-tech business initiatives and a key ally for technologists turned entrepreneurs. The presentation will provide an introduction to the world of Venture Capital, and will address issues related to how VC can positively impact the lifecycle of high-tech startups and support a business initiative in its early days.Markets statistics will be used to extrapolate what to expect from a VC and an opinionated speaker will provide some practical suggestions on how a technologist turned entrepreneur should prepare, present his/her plan, select the right VC and pursue his/her goals.Some specific considerations will be made addressing the peculiarities of the capital market for business initiatives insisting in the wireless mobile communications world.

Public Domain

views:1162

downloads:142

rating:not rated

reviews:0

posted:8/31/2007

language:english