jakarta venture night: building great companies and industry

GLOBIS CAPITAL PARTNERS

Building Great Companiesand Industry

- Startup Strategy and Finance -Jakarta Venture Night

Jakarta – 12th Jan 2012

Shinichi (Shin) TakamiyaGlobis Capital [email protected]/

GLOBIS CAPITAL PARTNERS 1

1.1. IntroIntro2. Defining the Business3. Strategizing4. Organizing Resources5. Outro

Agenda


About Me Shinichi Takamiya

Principal, Globis Capital Partners• In charge of consumer internet investments

Portfolio:Q Entertainment, Indisoftware, Yumemi, Shimauma Print System, RocketStart, iStyle, Kayac, Pixta, One of Them, Aucfan

Prior to Globis:• Project Leader, Arthur D. Little: management

consulting• MBA Harvard Business School (Second Year

Honor)• BA Economics, University of Tokyo (graduation

thesis Honors Award)• 8+ years of overseas experience in UK, US,

Holland• Internet geek (but unfortunately not an engineer),

avid tennis player, and Jazz lover


Leading VC in Japan with JPY38.5B under management:• Globis Incubation Fund (1996 JPY 540M)• Apax Globis Japan Fund (1999 JPY 20B)• Globis Fund III (2006 JPY 18B)

Specialized in value-added investment:• Lead/co-Lead investors with board seat• Management value add – best practice venture management• Deployed 50+ executives/managers to portfolio Companies

Industry insider• Bus. dev. and partnership for portfolio companies• Hub of the startup and internet industry since dawn• CEO Conferences (G1 and Asuka) and Globis Business School Network (14Kstudents/y)

Pioneering Japan VC & Venture Industry:• 90+ portfolio companies• Proven track record: IPO 25%, buyout 25%

- GREE (Mobile social network) x97- ngi Group (internet ad tech & incubator of mixi) x31- Works Application (No.1 ERP in Japan) x20

• Teach at Japan VC Association training program

About Globis Capital Partners


History of Japanese StartupsThe system of creating new companies and industries isworking in Japan (although cyclical).

Source: Azusa KPMG as of Sep 2011

27

90

150187

167144

86107

204

169

124 121

175158

188

121

49

19 22 36

00

50

100

150

200

250

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Number of IPOs

5 years 5 years 5 years 5 years+?

2 Key to the successful establishment of the system…

Number of Companies Going Public


Key to Success EcosystemEcosystem within and surrounding the startup community wascrucial.

Startups

Investors

InvestmentBanks

ProfessionalServices Banks

Corporations


Key to Success Entrepreneurs’ AspirationsEntrepreneurs’ started to “think big”.

Social Impact

Self-Actualization

Financial Return

Means of Living

Entrepreneurs’Aspirations


1. Intro2.2. Defining the BusinessDefining the Business3. Strategizing4. Organizing Resources5. Outro

Agenda


Vision - How High Do You Want to Go?You can only get as high as you envision.

EnterpriseValue

t

Social Impact

Self-Actualization

Financial Return

$ Multimillion

$ Million

$ Multibillion

Entrepreneurs’Aspirations

Means of Living

“The Summit”


Business DomainSweet spot of a company’s business domain resides in betweenvision, capabilities, and market attractiveness.

Vision

CapabilitiesMarket

Attractiveness

• Future view of the world• Value proposition and the

difference the company makes• Values and culture

• Market size• Market growth• Degree of

competition

• Basis ofcompetition –“Necessity”

• Competitiveadvantage –“Differentiator”


Business ModelThe business portfolio and the profit model is key to feasibility.

Profit ModelBusiness Portfolio

Cash Flow

t• Stable cash flow• High profitability

Cash Flow

t• Short term cash flow &

capacity utilization

• High scalability &profitability after threshold

• Moderate scalability &profitability

• Shared risk

Cash Flow

t

Cash Flow

t

• Organic scalability

• Low sustainability• Low scalability

• “Deep J” - big upfrontinvestment

• Control and collaboration

After Service/Subscription Model

Self-Branded Bus.Model

Contract Work Model Revenue Share/Project Finance Model

Pro

fitab

ility

Growth RateHighLow

Low

High

Issues to Consider• Synergy v.s. conglomerate discount• Fast growth by focus v.s. Stability by

diversification• Resource allocation – balance and speed


1. Intro2. Defining the Business3.3. StrategizingStrategizing4. Organizing Resources5. Outro

Agenda


Growth StrategyEvolve strategy per different stage

Cash Flow

t

“Proof of Concept”• Fast validation and

iteration of theservice/bus model

• Cash management• Key management

assembly

“Auto-Pilot”• Setup processes and

system• Operational excellence

– fast PDCA• Team assembly

“Power Play”• Fueling growth with

ample cash & resources• Strategic alliance to

leverage partnership• Exit planning

Essenceof the

Strategic

Startup Stage Growth Stage Later Stage


Competitive StrategyEstablish defendable and sustainable advantages – not a mererelative strength

“Participate”NecessaryCapabilities

Crystallizing Strengths• “Only One”• “Structural Sustainability”

Reverse Leverage• “Sunk cost”• “Segregation”

Type of Competitive Advantage

“Perform”Key Success

Factors

“Win”“Win”CompetitiveCompetitiveAdvantageAdvantage


Finance StrategyEssence of finance strategy:

Leverage outside funding to accelerate business growthDesign the capital table deductively according to the goal

Cash Flow

t

Cash Flow

t

Self Funding& Organic Growth

Outside Funding& Accelerated Growth

1122

IPOIPOMngmt Share 33.4%

Seed Round: 85%

Series A: 66.6%Series B: 50.1%

Series C: 40%

1122


1. Intro2. Defining the Business3. Strategizing4.4. OrganizingOrganizing ResourcesResources5. Outro

Agenda


FundsSuitable finance per different stage of a startup

Cash Flow

Stage ofa Startup

Convertible Bond

Equity

Debt

Instruments and StageType of Financing Instruments

for Startups

Debt Low Mid-Large($500K-5M) • Bank

Equity High Large($500K-10M)

• VC• Angel• “Friends &

Family”

CB VariableLow

Small(-$1M)

• Angel• VC

Cost ofCapital

Investment/Loan Size(Image in Jpn) Provider


Funds Fund Raising Tips

1. Cap table is irreversible2. Blindly high valuations are not always good – balance

dilution and the following rounds3. Design financing rounds around business milestones4. Save management time for business – finance enough to

keep you running for18-24 month 5. What does the investor bring other than money?6. Long term relationship starting way before and after

financing


Team

Vision/Passion• “Make sure you only hire people that really love

your product or service and are capable and willing to make decisions on what is best for your company.”

• “It's hard to tell with these Internet startups if they're really interested in building companies or if they're just interested in the money. I can tell you, though: If they don't really want to build a company, they won't luck into it. That's because it's so hard that if you don't have a passion, you'll give up. ”

A-Team• “A people hire other A people, B people hire C

people, who the f*ck hired you?”

Shuffle• “What kind of person could you get to run a small

business if you told them that when they came in, they couldn't get rid of people that they thought weren't any good?”


ProcessOperation excellence crucial to the success of a startup

PDCA Cycle

Plan

Do

Action

Check

• Speed, speed, speed• All level of the organization –

management to operation• Culture

Key Performance Index

Sales Registered Users

Retention Rate

Conversion Rate

ARPPUHeavy Users

Mid Users

Light Users

Item A

Item B

Item C

Step 1

Step 2

Step 3

Search

Listing

Affiliate

• Measurable• Aligned with strategy• Actionable

=x

x

x


1. Intro2. Defining the Business3. Strategizing4. Organizing Resources5.5. OutroOutro

Agenda


Take Aways

1. Huddle around – ecosystem is the key2. Think big!

…and the rest is “hows”3. Management is about constantly balancing the trade offs

• Defining the business domain: attractiveness v.s. feasibility• Business model: growth v.s. stability

4. Things that have to change and that cannot change• Growth strategy: flexible recalibration per stage of the company• Competitive advantage: defendable and sustainable

5. Securing and allocating resources with speed are critical tothe success of the “have nots” – startups

6. Processes key to operational excellence required in theinternet ear


Thank You!Thank You!

jakarta venture night: building great companies and industry

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