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x.Million Capital Ventures1
Maria Dramalioti-Taylorx.Million Capital, Managing Partner
Angellab#1, Founder
19.03.2013
Startup Capital in Europe
10 non-textbook lessons for entrepreneurs &
angels
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Agenda
• Venture/Angel Capital: – How to decide if you need it– How to navigate Angels & VCs
• On raising Capital in UK/EU
UK Entrepreneur: “Why bother? I am off to the US”
UK Investor: ”Go, but not before you see this…”
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x.Million Capital Ventures3
Large potentialmarket
Originalidea
Best-in-market founding team
ENTREPRENEUR HAS……money to move
*FASTER* than OWN capital allows
HiringFaster product developmentInfrastructureCommercialisationGeographical expansion
#1 - Sell shares only when you need
SPEED
1
2
3
…intensifying competition
THEREFORE FACES…
…AND NEEDS…
…SO SELLS shares to to pay for..
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x.Million Capital Ventures4
#2- Know your place in the FUNDING SPECTRUM
+
NET CASH
POSITION
Closed
ALPHA
Public
BETA
SCALE- STAGE
1st Revenue
Venture Debt
GrantsBootstrappingFamily
Angel CapitalVenture CapitalSeries A (€2m-€20m)
Venture CapitalSeries B,C,D (€5m-€20m)
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DO IT LIKE A JACANA
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#3 – Decode the Business Angels
• Angels invests own money
• Small amounts, early, at low valuation– €10k-€250k at valuation €0.5-€2m
• Exit:– sell at €5-10m valuation & make 1.5-3x
– bring VCs, get diluted (may) make 5-10x
• AIM: 2x capital (but mostly get capital back)
Angels are like women: temperamental & (mostly)
irreplaceable
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#4 – Decode the Venture Capital business
• VCs raise a fund every 2-4 years– Invest other people’s
money
• Invest the funds over 5 years• Exit (sell) via M&A or IPO• They take:
– 2.5% pa management fee on funds managed
– Carry = 20% x [Total Return at Exit] – [Total Amount Invested]
• AIM: ONE 10x home run
VCs run a business. They make it sound like
Black Magic.
IT IS NOT.
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#5 – γνῶθι…τω επινδυτή
SOURCE: www. http://www.instigatorblog.com
Angels may not let you fail, VCs may give you a big success
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VCANGEL CAPITAL AN
GEL /
VC
DIS
CO
NN
EC
T
€ 500k € 2m
+
Closed
ALPHAPublic
BETA
SCALE- STAGE
1st Revenue
NET C
AS
H P
OS
ITIO
N
#6 - Series “A” Crunch: MIND THE GAP
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Germany & UK are more affected by the VC/AC disconnect
US , 4,705 US , 5,585
US , 14,339
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
< $ 0.5M $0.5M - $2M >$2M
Dea
l V
olu
mje
( n
on
US
)
-
100
200
300
400
500
600
700
800
900
Dea
l V
olu
me
(US
)
UK
Germany
Russia
Source: Data from ThomsonOne, Period: 10 years
ICT Deal volume per deal size bracket
#6 - Series “A” Crunch in NUMBERS
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NOTE: The blurring of AC/VC in the US is coming to Europe (maybe)
www.dramalioti-taylor.org
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#7 – A new taxonomy of investors
#Venture Accelerators Astia (for female geeks)SeedcampSpringboardAccelerator Academy500 stratupsY-Combinator….# Super Angelswww.AngeLLab.eu www.angel.co
# The NEW lean VC They treat every entrepreneur as an individual
Aim for the one that suits your needs best Interesting blog:http://disruptivegrowth.wordpress.com/2010/10/14/do-accelerators-help-raise-funds/
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#8- Connect the fundraising dots
Fight the information asymmetry
Sourceswww.thefunded.comwww.fredestin.comventurehacks.com earlystageadventures.comwww.adventurista.com
“what they offer” vs. “what you need”
– Initial capital per idea– Sector focus: do they
understand it? – Risk tolerance: can they
deal with uncertainty?– Compatibility: will their
pride suffer if you fail?– Terms (& strings attached)
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Agenda
• Venture/Angel Capital: – How to decide if you need it– How to navigate the VC scene
• On raising Capital in UK/EU…
UK Entrepreneur: “Why bother? I am off to the US”
UK Investor: ”Go, but not before you see this…”
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#9 - The US VC is prone to “bubbles”, when they burst startups become
orphaned
US
0.15%GDP
EU
5.8x 0.026%GDP
Investments per capital in US is 5.8x higher than EU
US VC is big &… … some say already in a “bubble”
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#9 – US VCs face an IPO crunch
IF Index >30 THEN IPOs drop dramatically
CBOE @ 06.11.12:
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#9 – Startups in the US need 2x avg. capital to build £100m business
EU = 1/2 x USA
Source: Early Bird Ventures, 2012
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#9 – US tech acquisition of EU companies is a well travelled road to
exit
#US tech companies hold record offshore cash
Source: Zephyr M&A, 2012
0%
20%
40%
60%
80%
100%
20122011201020092008200720062005200420032002
EU acquisitions by US companies non EU acqusitions by US companies
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Go. See. Come back.
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# 10 - EU Growth drivers to ride on
EU-5$292
EU-5$172
2010 2015
eCommerce ($bn)
The $172bn eCommerce market in Europe will grow 1.7x between 2010-15
EU5: 1.7x in 5 Yrs
$172 bn < 10% of EU-5 retail
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# 10 - EU Growth drivers to ride on
$1,299
$122
2011 2015
EU-5 Mobile Ad spending will grow 10x between 2011-2012 (2x as fast as in the US)
EU5 growth: 10x in 4 Yrs
Mobile Ad Spending (mn)
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# 10 - EU Growth drivers to ride on
0.62
6.52
1.73 0.1 0.88
11.8610.71
1
Fixed ( excl POTS) Mobile Short Range Other ( MAN, Satellite)
2011: 8.99bn connected devices1.8 connected devices per person
2020: 24bn connected devices6.6 connected devices per person
Internet of Things:The ratio of Devices /Humans is expected to grow 3x by 2020
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85% of worlds population covered by wireless signalsvs80% of world population connected to the electrical grid
Wireless connectivity flattened our world
Source: Mary Meeker, KPCB, 2012
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Your turn to talk
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European consumers are shifting online…
United States
East & West Europe
Internet Users
90M
150
M
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European consumers are going mobile fast …
United States
East & West Europe
Mobile Subscriptions
2004, Mobile subscriptions EU > US
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2x
…and are more social than most