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Returns-On-Innovation
“Financing start-ups”
E.Factor, 25th of June 2008
Kissing the right frogs? or kissing the frogs right?
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Returns-On-Innovation
Venture Capital
Finance horizonFinance horizon
Private Capital markets
IPOs
Follow-Ons
Convertibles
Mergers & Acquisitions
Company Development
Finance need
SEED CAPITAL
EARLY STAGE
LATER STAGE
TURN-AROUND
BUY-OUT
BRIDGE
First € 500k - € 50 mln
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Returns-On-Innovation
Entrepreneurs’ Funding: Many Options
Your Personal Funds
“3F” – Friends, Family, and Fools
Personal Credit Cards and Other Borrowings
Business Angels
Corporate Direct Investment
Venture Leasing
Governmental loans
Mezzanine Financing
Merger and Acquisition
Initial Public Offering
Secondary/Follow-on Public Offering
Private Placements – Debt & Equity
Buyout/Acquisition Financing
Corporate Debt
Venture Capital/Private Equity
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Returns-On-Innovation
5 Questions before calling a Venture Capitalist
• Do you have enough growth ambitions? • Do you want to be a
co-investor/shareholder in the company you are working in?
• Do you know how much capital you need and what the use of proceeds will be?
• Are you willing to have “outsiders” in the board to discuss operations and strategy?
• Do you know what the goal/buss.model of the venture capitalist is?
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Returns-On-Innovation
What is private equity/venture capital?Characteristics
• Sharecapital/equity for non-public/listed companies– Combi of shares and (convertible) loans
• Active shareholder role /RvC
• Investment period 3-7 years
• Specialisations in investment stage and/or sector
• Capital at Risk -à Risk premium
Seed Start-up Replacement-capital BuyoutExpansion
Maturity of the company
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Returns-On-Innovation
Succesfull (ICT) Innovations: Predictable?
• “Well-informed people know that it is impossible to transmit the voice over wires and that were it possible to do so, the thing would be of no practical value”, - Boston Post, 1865.
• Alexander Graham Bell,1876: ”What is the use of communication over a distance? I don’t know anybody over there?”
• "I think there is a world market for maybe five computers." - Thomas Watson, Chairman of IBM, 1940/3/9
• “Television will never be a medium of entertainment” – David Sarnoff, RCA, 1955.,
• "640K ought to be enough for anybody."Bill Gates, 1981• End 80s:” Mobile Phones are only needed for Emergence
services”• Early 90s: The Internet: “no serious business use - ”• Consumer Need for Broadband in 2015 maximum 50Mbps -
Jet-Stream, 2005.
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Returns-On-Innovation
Capital Capital –– C Ventures (3): SelectionC Ventures (3): Selection
We select deals by combining the right business driversWe select deals by combining the right business drivers::
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Kissing the frog right? -The Art of kissing
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Returns-On-Innovation
Kissing the right frog:“Elevator Pitch”
• Now or Never feeling:• Focus on how and why prospective customers
will buy from you, and pay you money.
YOUR VALUE PROPOSITION MUST BE COMPELLING, QUANTIFIABLE, PROVEABLE, REFERENCEABLE, AND EASILY EXPLAINABLE…
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Returns-On-Innovation
Kissing the right frog:The real prince?
• Management Team(!)– Track-record– Commitment (co-investment / time)– Complementary team (technology/marketing)
• Business Activity– (potential) consumenten needs– Vision / Trends– Adressable market / First customers
• Product/Technology Advantage– USPs– Competition– Alliances and/or Patents
• Investment Rationale/Financials– Investment Need/ Use of Proceeds– Business Model (recurring revenues)– Perspective on ROI / Exit scenario– Key financials