cashing in - how to make money investing in startups
Post on 14-Sep-2014
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Join Zack Miller, Head of the Investor Community at OurCrowd, and David Stark, Investment Associate at OurCrowd, as they discuss the investment strategies necessary to build and maintain a successful startup portfolio. By nature, startup investments are a high risk/high reward asset class. Knowledge, therefore, is key in maximizing your profit potential when investing in startups. Join us to learn: The startup math that investors use to get rich Understand how companies' valuations change over time and what that means for your investments Learn how OurCrowd and other startup investors see an eventual return on their investment and how those returns are calculated This webinar is appropriate for both investors and entrepreneurs alike.TRANSCRIPT
Cashing InHow to make money investing in startups
Your hostsDavid Stark,
Investment Associate Zack Miller, Investor Community
OurCrowda better way to invest in Israeli startups
Startup Lifecycle
Startup success is predicated on being able to continuously
market to more mature customers
Investors participate at different stages
(“rounds”) along the way
Seed Round
A Round B RoundLater Rounds
The Startup Math
Early Stage Valuation Model: #1
Early Stage Valuation Model: #2
Early Stage Valuation Model: #3
Mid Stage Valuation Model
• Marketplaces: 1x gross transactions and 20x EBITDA
• SaaS: 4x this year’s revenue and 3x next year’s revenue
• Revenue multiples by sector
Late Stage Valuation Model
Buy low sell high ?
At each funding round, investors run the risk of
getting diluted
vs
More math: Effect of dilution
–Paul Graham
“If a company does really well, you eventually will get diluted,
because the valuations will get so high it’s not worth it for you.”
The importance of reserving capital
1. Some deals are pay to play
2. Doubling-down on your winners
Dave McClure’s Moneyball for Startups: Invest BEFORE product/market fit, double-down after
Exit, turn right for profits
The importance of portfoliosthe right way to hedge investor risk
Prof Robert Wiltbank’s Angel Investing Study• Diversified angel investors averaged 2.5X
ROI • BUT, 90% of returns to investors came from
only 10% of exits
How to identify a $billion unicorn
–Paul Graham
“The 2 most important things to understand about startup investing, as a business, are (1)
that effectively all the returns are concentrated in a few big winners, and (2) that the best ideas
look initially like bad ideas.”
Seemingly bad ideas Good ideas
Huge winners
Peter Thiel Model
Different types of exits• Mergers and Acquisitions • Going public (IPO, Reverse Merger) • Acquihires • Soft Landings
!
• Cash acquisition • Merger • IPO • Dividends
Taxes, Fees, Liquidity and Net Returns
Exit scenario
Investment case
Build a great business and the exit will sort itself out
Seed round Idea phase
Series C-D rounds POC, revenues
Series A-B rounds R&D, early sales
Diversification across early-stage phases
OurCrowda better way to invest in Israeli startups
Funding the next generation of successful
startupsSince February 2013, invested in 36 startups
!OurCrowd and our
community of investors have invested over $43 million in
these firms
