inaugural asian business angel forum keynote

© 2009 Felicis Ventures LLC

Inaugural Asian Business Angels Forum Angel Investing as Foundation for Entrepreneurship

Aydin Senkut Founder & Managing Director Felicis Ventures

http://www.felicisvc.com Twitter.com/asenkut


Aydin Senkut – Felicis Ventures Bringing operational excellence & scaling experience to funding start-ups

Acquired by Google

Acquired by Twitter

Mixer Labs

Acquired by Shanda Games

Acquired by AT&T

Acquired by Intuit

Acquired by IAC

Acquired by Google

Acquired by Microsoft

  First Google Product Manager & International Sales

  Angel Investor with 50+ investments, 11 exits

  One of the top 25 Tech Angels according to Businessweek (March 8, 2010)


Angel Investing – Why Does It Matter ? Biggest Success Stories of Today were once backed by Angel Investors


•  Usually the first outside investor

•  Invest with the expectation of a financial return

•  Invest usually locally and regionally

•  Participate actively in the investment process

•  Usually care about the entrepreneurs and the companies they invest in / interested in building personal relationships with companies & employees

•  Offer advice and guidance to founders

What is an Angel Investor ? Anyone who provides private capital to a [non family] start-up


Angel Investors in VC Ecosystem

Friends, Family or Grants

Rev

enue

/ E

BIT

DA

Individual Angels / Groups / Boutique VCs

Venture Capital Funds

Investment Banks & PE Funds

Acquisition Stage / IPO / Mergers

Idea Start up Intro Rollout Growth Expansion Maturity

Angel Investors $10k – $1MM

Grants of up to $1MM

Inv. Banks / PE $10MM - 100MM+


Angel Investors in the US

* Source: Angel Capital Association Presentation by Ian Sobieski, Band of Angels, Oct 2007

U.S. Millionaires

Estimate Of Informal Investors

225,000

Estimate of Active Angels

(Center For Venture Research)

Investors In Angel Groups


Rising Popularity of Angel Investing 3x Growth in North American Angel Organizations in 7 yrs

* Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)

NUMBER OF ANGEL ORGANIZATIONS


Angel Investing – Investment Focus Internet / Software lead other segments

* Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)


Angel Investments in Perspective In the Context of Venture Capital

Ear

ly S

tage

to L

ate

Sta

ge

2007 Angel Investments 2007 VC Investments

51,000 Deals

Average Deal Size: $500,000

3,416 Deals Average Deal Size:

$7,500,000

* Source: University of New Hampshire Center for Venture Research, Price Waterhouse Coopers


Venture Capital is Highly Concentrated Silicon Valley (40%) and NY (7%) account for nearly half of venture investment

* Source: NVCA Research 2009; PriceWaterhouseCoopers


What Makes Silicon Valley Special

No Success Without Failure

Adaptability

Elite Universities (with Global, Highly-Selected Student Bodies)

Successful Entrepreneurs Act as Mentors & Angel Investors


•  Consumer internet still offers best path to high multiple returns

•  Key differentiator: capital efficiency

•  Virtually all the big successes were first backed by angels

Total $Raised Last Valuation ExitType Multiple InYears Founded Last Valuation at IPO or Exit

Facebook $716.0 $10,000 - 14 5 2004 2009

Twitter $55.0 $285 - 5 3 2006 2009

Zappos $62.8 $920 M&A 15 10 1999 2009

Adify $27.0 $300 M&A 11 2 2006 2008

Google $25.1 $23,100 IPO 920 7 1998 2005

Bebo $15.0 $850 M&A 57 3 2005 2008

Zimbra $14.5 $350 M&A 24 3 2004 2007

Photobucket $13.5 $300 M&A 22 4 2003 2007

YouTube $11.5 $1,650 M&A 143 1 2005 2006

Last.fm $5.0 $280 M&A 56 5 2002 2007

Note:Allamountsinmillions

Silicon Valley Success Story “Internet is the Greatest Legal Wealth Creation in History”


Where Should Angels Invest ?

Great Companies

Focus

Talent Passion

Innovation

Unique Culture and Fun

Finding Great Companies is the Basis of Angel Investing


What Does It Take… …To Be A Successful [ Angel ] Investor ?

Capital Network

Proprietary Deal-flow

Domain Expertise

Judgment (Pattern Recognition)


Seeding Future Winners - Incubators LEADING EXAMPLE IN THE US

•  Review 600+ companies every 6 months

•  Each batch around 20+ companies (~4% acceptance rate)*

•  Investment: $5K USD + $5K USD per founder

•  Stake: Usually 2-10%

INTERESTING FACTS •  25% of accepted companies are international

•  Last batch, more than half the companies changed what they were working on

•  Last Investor Day included 27 companies and 210 Investors

KEY RESULTS Companies Acquired •  Reddit (acquired by Conde Nast) •  Parakey (acquired by Facebook) •  Omnisio (acquired by Youtube/Google) •  Zenter (acquired by Google) •  Anywhere.fm (acquired by iMeem)

Companies with sizeable VC rounds •  Heyzap •  Loopt •  Scribd

•  Justin.tv •  Xobni •  Posterous


  Strong brand & highly selective (admission ratio of 1-5%)

  Limited time (~3 months) to encourage execution and fast iteration

 Heavy Mentorship in all key product areas (especially engineering, product, and fund-raising)

 Community and participation (Biggest success factor cited by founders)

  Active involvement of investors increases funding rate to 75%*

* Techstars

How Can Incubators Succeed ? Filter, Stress, Mentor, Engage & Create an Eco-system


Growth is Key to Successful Investing Key: Target the Fastest Growing Internet and Mobile Markets

Global Rank Country

2007Users Added(000s) 2007Y/Y Growth Penetration

1 China 73,000 53% 16%

2 US 9,800 5% 73%

3 Brazil 7,400 17% 26%

6 India 5,000 7% 7%

8 Russia 4,311 17% 21%

INTERNET USER NET ADDITIONS

Global Rank Country

2007 Net Subs Added(000s) 2007Y/Y Growth Penetration

1 China 86,228 19% 41%

2 India 67,570 41% 21%

4 Brazil 21,062 21% 64%

5 Russia 19,326 13% 120%

7 US 13,596 6% 85%

MOBILE SUBSCRIBER NET ADDITIONS

Source: Morgan Stanley Research, ITU


Growth is Happening Faster Example: Disruptive Platforms - Time to Success much Shorter

Platform

Approximate Time Since Inception Users Y/Y Growth

Applications Available

Applications Downloaded

Skype 6 yrs 405MM 47% - -

Youtube 4 yrs 363MM 40% - -

Facebook 5 yrs 236MM 135% 52K+ 308MM+

iTunes Store 8 yrs 75MM - 10MM+ 6B+

Nintendo Wii 2 yrs 45MM 125% ~1K 189MM+

iPhone / iPod Touch 2 yrs 33M 265% 35K++ 1B+

Amazon Kindle 1 yrs - 239% 240K+ -

Source: Morgan Stanley Research; dates from inception based on Wikipedia; user numbers current as of mid 2009


Next Big Things

Other • Data Driven Smart Web Apps

• Crowd Labor

Education

Search • Local / Real-time Search

• Subjective Search

Health • Personal Genomics

• Electronic Health Records

Mobile • Mobile Social Gaming

• Viral Mobile Apps

• Online Education / Next Generation Text Books

• Specialized Networks around College Admissions


Drastic Changes in Exits Start-ups Need Less Capital, Exits Shrinking…

Source: 2009 report by NVCA and Thomson Reuters

•  Ave exit size down about 4x in 2 years – M&A sweet spot is $100M

•  First big jump in Q2 of 2009

0

50

100

150

200

250

300

350

400

Q1-2006 Q2-2006 Q3-2006 Q4-2006 Q1-2007 Q2-2007 Q3-2007 Q4-2007 Q1-2008 Q2-2008 Q3-2008 Q4-2008 Q1-2009 Q2-2009

Average IPO Offer Amount

Average M&A Deal Size


Singapore in Context

Singapore Silicon Valley

Population •  4.22M

GDP •  $700+ billion*

Universities •  13

Population •  4.84M

GDP •  $163 billion*

Universities •  4

Silicon Valley in Comparison

Source: CIA World Factbook, Wikipedia; SV GDP estimated as roughly 5% of US economy


Singapore Silicon Valley

Singapore in Context Silicon Valley in Comparison

Companies in Fortune Global 500 Companies in Fortune 500


Rank Company Country Market Capitalization

1 Google US $102B 2 Amazon US $29B 3 Yahoo US $19B 4 eBay US $15B 5 Yahoo JP Japan $14B 6 Softbank Japan $13B 7 Activision US $13B 8 Tencent China $12B 9 Baidu China $6B

10 Rakuten Japan $6B 11 Electronic Arts US $6B 12 Alibaba China $5B 13 NHN Korea $5B 14 NetEase China $3B 15 Expedia US $2B

Food For Thought

TOP GLOBAL INTERNET COMPANIES

What will it take to have an entry from Singapore here ?

Source: Morgan Stanley Research, 2009 – Mary Meeker / State of the Internet presentation

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