hec inside venture capital part 2 part 3
TRANSCRIPT
INSIDE VENTURE CAPITALFebruary 2016
Christophe Raynaud – Managing Partner & Cofounder
WHO AM I TO SPEAK ?
HEC graduate (last millenium)
Entrepreneur…- Chateauonline
- Netboussole
- Samaris
…Turned VC (dark side of the force)- Saeed Amidi (Amidzad partner / plug&play tech center)
- Paris Business Angels
- ISAI
CONTACT : r a y n a u d @ i s a i . Fr / @chraynaud
WHAT WILL I BE TALKING ABOUT ?
What is Venture Capital History ?
What is an investment thesis ? What’s ISAI’s ?
How do VC/ISAI source/screen opportunities ?
What makes a great founder ?
WARNING
NO BULLSHIT RULE
NOT THE TRUTH, JUST MY OWN EXPERIENCE
INVESTMENT THESIS
PEOPLE vs IDEA INVESTMENT CHOICE
ARTHUR ROCK « WHAT I AM INTERESTED IN IS INVESTING IN PEOPLE »> BET ON THE JOCKEY NOT THE HORSE
EUGENE KLEINER « MAKE SURE THE DOG EATS THE DOG FOOD »« IN A HIGH WIND, EVEN TURKEYS CAN FLY »> BET ON HUGE MARKET AND PROVEN TRACTION
TEAM
MARKET
DEAL FLOW vs THESIS DRIVEN
DEAL FLOW CENTRIC INVESTMENT (PASSIVE)- PAST BUYER’S MARKET- 1980’s : 183 VC @ $42m- THIN & SHALLOW
THESIS DRIVEN INVESTING (ACTIVE)- TODAY SELLER’S MARKET- 2000’s : 3300 VC @ $280m- WIDE & DEEP
DEMAND / SUPPLY INVERSION
WHAT’S AN INVESTMENT THESIS (example 1)
SOFT TECH VC- 3 ASSES RULES
WHAT’S AN INVESTMENT THESIS (example 2)
USV @AVC- Thesis in one Tweet
WHAT’S THE MANDATE LPs GAVE GPs?
WHAT IS YOUR STRATEGY TO PROVIDE RETURNS TO LPs- SECTOR- STAGE- GEOGRAPHY- PORTFOLIO SIZE / DEAL SIZE- NUMBER OF DEALS / PARTNERS- VALUE ADDED / BOARD SEATS- FAILURE RATE / MULTIPLE TARGETED- WHY IS THIS COMPELLING ? WHAT SECRET INGREDIENT ?
(Cycles ? Differientiators ?)
WHAT VCs DO TO SPOT A DEAL ?
> RISK / REWARD ANALYSIS
BUSINESS PLAN TOPIC COVERAGE 1/3
1. The Business:
- Company’s business
- Strategy
- Mission statement
2. The Market:
- Historic and projected sizes in dollars
- Market trends
3. Product Offering:
- Product description
- Development schedule and launch date(s)
- Product differentiation
4. Distribution:
- Key customers
- Customer acquisition strategy
- Sales channels /Partnerships
5. Competition:
- Key competitors
- Competitive advantages
- Barrier to entry
6. Management Team:
- Roles and responsibilities
- Background of team members
- Board composition
BUSINESS PLAN TOPIC COVERAGE 2/3
7. Financials:- Revenue model, margin analysis- Historic and forecasted P&L (first two years by quarters)- Projected cash flow (first two years by quarters)- Current balance sheet- Projected head count by functional area (G&A, sales, marketing, product
development)- Capitalization schedule8. The Deal:- Amount to be raised- Anticipated valuation- Use of proceeds- Options plan
BUSINESS PLAN TOPIC COVERAGE 3/3
WHAT ELSE THAN BP DO VCs LOOK AT ?
INVESTMENT STRATEGY COMPATIBILITY - AMOUNT / STAGE / GEOGRAPHY / SECTOR
PORTFOLIO COMPATIBILITY
QUALITY OF THE SOURCE
SHOPPED DEAL / AUCTION
CO-INVESTORS (FIT/QUALITY)
QUALITY OF LEGAL COUNSEL / INVESTMENT READINESS
PERSONAL FIT
ISAI BUSINESS CASE
ISAI[isaj] n.f. (jap. name: different, remarkable)
Acronym : Internet Savvy Active Investors
VISION: RECYCLE $/EXP. OF SUCCESSFUL FOUNDERS
FOUNDERS WHO HAVE MADE IT HELP OTHER FOUNDERS
TO MAKE IT
WHO ARE WE ?
AN ENTREPRENEURS’ FUND- 130 ENTREPRENEURS
- €150M UNDER MANAGEMENT
INTERNET SECTOR SPECIALIZED(MARKETPLACES/SAAS/MOBILE/ADTECH)
EARLY STAGE FOCUSED(SEED/POST SEED/SERIES A)
FRANCE BASED(OR ABROAD WITH FRENCH ANGLE)
> BORN 6 YEARS AGO
WHO ARE WE ?
OUR TEAM
OUR COFOUNDERS
OUR PORTFOLIO
OUR ENTREPRENEURS’ FUND MODEL
OUR LPs ENTREPRENEURS HELP US SOURCE DEALS - GLOBALLY
- HIDDEN MARKET
OUR LPs ENTREPRENEURS HELP US SCREEN DEALS
OUR LPs ENTREPRENEURS ADD VALUE TO BOARD MEETINGS
MISSION: HELP OTHERS SUCCEED
WHAT’S OUR (INITIAL) INVESTMENT THESIS ?
TARGET USUAL SUSPECTSTEAM/PRODUCT/MARKET/COMPETITIVE ADV.
SELECT THOSE WITH ISAI CRITERIA- CAPITAL EFFICIENCY- PROVEN TRACTION- PROGRESSIVE AMBITION- VALUATION < 3/5M- ETC…
> BUILD A WHITE PONEY IN 3/5 YEARSEXIT > 15/30M€
WHERE’S THE TRICK IN OUR THESIS ?
WE OPERATE ‘AVENUE DE LA GRANDE ARMEE’
…NOT ON ‘SAND HILL ROAD’- IPO (FR) = DEAD END- SMALL M&A MARKET- EXITS > $80M ARE VERY RARE
WHITE PONEY CAN TURN INTO :- CENTAURS (> $100m)- UNICORNS (> $1Bn)
> FROM 2X (LOW FAILURE RATE) UP TO 4X (1/3 WINNERS)
ISAI’S « MAGNIFICENT SEVEN »
1. Oustanding TEAM
2. Proven Traction / Velocity
3. Low Capital Intensity
4. Defensible Position
5. Progressive Ambition
6. Fair Valuation
7. Value Added Board Position(s)
SOURCING & SCREENING
TRADITIONAL DEAL FLOW SOURCING
INBOUND- BRAND / BLOG POST / PRESS / SOCIAL PRESENCE / WHITE PAPER
INCUBATORS
TRADITIONAL DEAL FLOW SOURCING
INBOUND- BRAND / BLOG POST / PRESS / SOCIAL PRESENCE / WHITE PAPER
INCUBATORS
ACCELERATORS
TRADITIONAL DEAL FLOW SOURCING
INBOUND- BRAND / BLOG POST / PRESS / SOCIAL PRESENCE / WHITE PAPER
INCUBATORS
ACCELERATORS
BOUTIQUES
TRADITIONAL DEAL FLOW SOURCING
INBOUND- BRAND / BLOG POST / PRESS / SOCIAL PRESENCE / WHITE PAPER
INCUBATORS
ACCELERATORS
BOUTIQUES
STARTUPS STUDIO
TRADITIONAL DEAL FLOW SOURCING
INBOUND- BRAND / BLOG POST / PRESS / SOCIAL PRESENCE / WHITE PAPER
INCUBATORS ACCELERATORS BOUTIQUES STARTUPS STUDIO ANGEL GROUPS / SEED FUND LPs + ECOSYSTEM REFERALS OTHER PRO-ACTIVE RESEARCH
- SPECIALIZED MEDIA / COMPETITIVE ANALYSIS / TECH EVENTS / STARTUP JURY
ISAI DEAL FLOW / CONVERSION FUNNEL
ISAI DEAL FLOW EVOLUTION
643
1105
1377
1529 1507 1505
ISAI DEAL FLOW COVERAGE
ISAI look at 4/5 opportunitiesISAI look at 2/3 opportunities
89 rounds« Seed Stage »
145 rounds « Post Seed » & « Series A »
ISAI DEAL FLOW SOURCING
Deal flow Step 0 Deal flow Step 3
BEST DEAL FLOW COMES FROM OUR 130 ENTREPRENEURS LPs NETWORK
Download slides on twitter/chraynaud
