www.rsgf.co.uk infolab mark wyatt wednesday 5 th december 2007
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www.rsgf.co.uk
InfoLab
Mark WyattWednesday 5th December 2007
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EV – fund management organisation
Institutional funds – investing for return
Technology three funds - £34 million investing in technology
RisingStars Growth Fund I RisingStars Growth Fund II SYIF Pilot Seedcorn Fund
Private Equity Coalfields Enterprise Fund - £10m
MBOs, expansion capital former English coalfield regions but focus on Yorkshire, North East and East Midlands
3rd most active VC investor in the UK *
* Source: Ernst & Young Venture Capital Insights Report 2004-2005 and 2005-2006
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Venture Capital – Early Stage Technology Approach
What do we do? provide start up and early stage seed capital to high growth technology businesses – sector agnostic predominantly in the North of England investment range £50k to £1.5m taking proof of concept investments to AIM listings, Series A rounds and trade sales
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Technology team
Julian Viggars (39) Head of Technology Investment
Previously Investment Director, latterly NXD BioProjects Plc and Barclays Ventures
At BioProjects – responsible for 2 largest investments, both start-ups. 1 sold recently for up to $100m. 1 listed on AIM – current value c.£40m
BioProjects investors at IPO 1.5x cash
4 years at EV
Edward French (39) Investment Director
Previously MD of Bradford University commercialisation company – 7 spin outs formed
Previously Chairman of UNICO – UK University spin-out association
13 early stage pre-revenue technology deals for RSGF
5 years at EV
Dr Mark Rahn (36) Investment Manager
PhD and MBA from Manchester Business School
Freelance consultant to the early stage tech and seed VC industries – NESTA, NStar and University of Manchester
Joined EV in 2006
Dr Mark Wyatt (35) Investment Director
Formerly at Merlin BioSciences
9 RSGF deals, IPO of Plant Impact plc
Sectors: medtech (pharma) and environmental
4 years at EV
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Why use venture capital?
Advantages
– Money to grow the business more quickly
– New contacts and management help
– New networks
– New business insight
Disadvantages
– Investors look for a high rate of return
– Requires giving up a stake in the business
– High levels of information required
– Control and rewards shared
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Networks – key to achieving competitive advantage
Investment banks
FinancialAdvisors
ResearchInstitutes
European& US links
AccountantsGrant funders
SMEs
MajorCompanies
Conferences
ANGEL INVESTORSANGEL INVESTORS
TECH. TRANSFERTECH. TRANSFEROFFICERSOFFICERS
PORTFOLIO COMPANIESPORTFOLIO COMPANIES
ENTREPRENEURSENTREPRENEURS
INDUSTRYINDUSTRYORGANISATIONSORGANISATIONS
LPsLPs
NXDsNXDs
VCsVCs
RSGF / INVESTMENTSRSGF / INVESTMENTS
IDEASIDEAS
CEOsCEOs
CONSULTANTSCONSULTANTS
REGIONALREGIONALVC’sVC’s
COMPETITORSCOMPETITORS
COLLABORATORSCOLLABORATORS
LAWYERSLAWYERS
TECHNICALTECHNICALADVISORSADVISORS
PATENT PATENT AGENTSAGENTS
FinancialInvestors
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What is a fundable project?
• It is not as simple as “I’ve invented a super technology”
• It is not a business plan with 200 pages of technical detail
• It is about the creation of a business opportunity that will give a
fair return to all existing and future stakeholders
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Typical early stage technology VC operating model
Investment Criteria
• Differential value
• IPR - protectable position
• Clear exit potential
• Large market / unmet need
• Milestones
• People
• Prior knowledge and network
• Valuation & funding strategy
Investment Principles
• Tranched Investments
• Lead Investor / Syndication
• Clean Starts / early stage
• Business building
• Right to Appoint NXDs
• Exit and Cash Focus
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Sectors of Interest
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Regional investors - invest locally, but think globally
Next Device Acquired by USA business Experience of bus. dev. in Korea
Peckforton Indian partners
Acal CEO based in Japan USA based NXDs
Plant Impact USA / European / Middle East
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Wadaro – starting point
Strong founders, been involved in one successful VC backed business before – Magic4
Founder investing alongside VCs, demonstrating belief in the business, sharing risk and upside
Extremely well organised for a start up – clear milestones
Required funds to develop technology
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Wadaro – now
RSGF II and NWBIS (YFM) invested
Sector NXD on Board
Partnering discussion ongoing
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Chromatide – starting point
Creative technical founder with industrial background and credible technical reference points
Low level service turnover, and one royalty bearing development contract
Interesting technology that required investment Scaleable IP protection
Numerous market opportunities, but no clear commercial strategy
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Chromatide – now
Recruited non-executive chairman and SAB Refined strategy with expert consultants First investment: brought in knowledgeable co-investor
(Malcolm Stewart at Liverpool Ventures) Identified potential CEO Entered into commercial agreement with Eka Chemicals,
part of Akzo Expanded technical resource and secured GRAND award
to further explore platform technology Development work underway, commercial interest
already identified
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Not all VCs are the same
• Do your homework
• Look them up in the BVCA directory
• Check out what they have been investing in on
their website
• Call them to pre-qualify interest
• Focus your efforts on those that look like they
invest in opportunities that resemble yours
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Pitching to VCs
• Not all VCs require a plan, but they do require thought out and
well present propositions
• Keep it simple and clear
• Remember, VCs need an exit, so how will you provide one
• Demonstrate you know how to reduce the risks in the venture
• Demonstrate openness, and think about how you answer
questions
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RSGF II – outlook
Significant experience to date with RSGF I
Commitment to tranched investment model
Plans to achieve earlier syndication Chromatide with MSIF, Wadaro with NWBIS (YFM) two more syndicated deals in legals
Focus on investee team building and evolution
Build balanced portfolio
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Questions?
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