INTRODUCTION TO ENTREPRENEURSHIP. FROM STARTUPS TO VENTURE FINANCING

With the support of:

Mind the Bridge ItalyTour 2010Torino, June 10th

ALBERTO ONETTI, CHAIRMAN, MIND THE BRIDGE FOUNDATION

Agenda

AGENDA

STATE OF ENTREPRENEURSHIP IN ITALY

Source: CrESIT 2010ITALY: INDUSTRY CONTRIBUTION TO GDP (2009)

Lack of large companies In Italy SMEs are 98% of the total

Mostly mature business Primarily Services (67% of GDP), Manufacturing is only 24% Innovative industries play a minor role (2-5%)

Strong family business vocation “One man only at the helm.” “Companies are life-long enterprises.” “First get some revenue, and then invest.” “Think real.”

STATE OF VENTURE FINANCE IN ITALY

Lack of an established venture capital community Of the €3.8B invested yearly (avg. 2005-2009), approximately €70M went to early-stage

investments (AIFI & Pricewaterhouse Coopers 2005-2009) Only 255start-ups were able to get funded in the last three years, with an average deal

size of €1M (AIFI & Pricewaterhouse Coopers 2007-2009) In 2009: 79 deals despite the financial crisis (€98M invested, -15% compared to prior

year, while overall investments declined by 52%) (AIFI & Pricewaterhouse Coopers 2009) Small size of the stock market does not help

The stock market capitalization to GDP ratio is lower than 60%, versus 140% in the United States and 170% in the United Kingdom (IMF & World Federation of Exchange)

The aforementioned lack of large companies makes the exit from investment difficult

US 29.7Silicon Valley 10.8

Europe 7.41

Italy 0.169

Italy Europe Silicon Valley USAnnual VC Investments (B US$) 2008

[Source: Dow Jones Venture source, PWC/National VC Association, AIFI]

STATE OF ITALIAN R&D

Quality basic research Cumulative R&D investments are €17B (4% of GDP), whose 30% from

universities and 20% from public and non-profit (ICE, Cotec, Istat) 400k scientific publication in the period 1998-2008 ranking 8th in the global

classification (7th for number of citations) (Thomson Reuters, 2008) Biotech: 233 clinical trials in progress during 2009 (Ernst & Young 2010)

Issues in turning research into business Lack of efficient technology transfer offices Universities do not offer incentives for lecturers to spin-off business initiatives Scarcity of skilled executives with strong entrepreneurial skills Italian scientists do not think business

ITALY: KEY ISSUES

Deal flow (# deals and quality) High mortality (“crisi del primo miglio”) Bridging research into business

Mindset Managerial skills

Exit on the domestic market Technology hot shots aspire to sell out to new economy “leviathans” Language barriers

AGENDA

INGREDIENTS FOR A STARTUP

WHAT IS AN ENTREPRENEUR

AVERAGE ENTREPRENEUR’S PROFILE

MANAGER VS ENTREPRENEUR

AGENDA

The Big Idea!!!

… That’s Matters a Lot, but It’s All About Execution …

THE QUESTIONS EVERY ENTREPRENEUR MUST ANSWER

THE TEAM:The team and your relevant

experience in the domain you're addressing

BUSINESS PLAN

THE OPPORTUNITY:The problem we solve (description of your product highlighting the benefits to the users/customers)The competive advantage (why your product is better. Compelling reason to buy)

THE BUSINESS MODEL:What are you looking for (capital you are raising- use of proceeds)Financials (Burn and cash positive projections)

THE MARKET:The market you are

addressing (market size, potential growth,

competition)

THE BUSINESS PLAN

WHY A BUSINESS PLAN

What investors want to see

They have to see:

Realistic forecasts based, as far as possible, in fact

Monthly / quarterly projections for at least 1 year

BUSINESS PLAN? OK VS KO

They do not wish to see:

Plans full of glowing references to a prosperous, but ill-defined future

Unsupported projections or unrealistically inflated figures

KO

OK

TURNING SCIENTISTS INTO ENTREPRENEURS

TALKING $$$

P&L 2009 (if established)

2010 2011 (forecast)

2012 2013 Revenue (000) Number of main customers/users Avg rev per cust (000) Gross Margin Operating Expenses Operating Margin EBIT (000) Head Count R&D Mktg&Sale Production G&A Total

P&L 2009 established

2010 anticipatory

2011 forecast

2012 forecast

2013forecast

Revenue (000)# of main customers

users

Avr rev. per cust.

Gross MarginOperating Expenses

Operating Margin

Ebit (000)Headcount

R&DMktg & SalesProduction

G&ATotal Expenses

FINANCIALS: STATEMENT OF OPERATIONS

WHO READS A BUSINESS PLAN?

AGENDA

THE FUNDING DECISION

Founders’ capital/savings

Venture Debt/LoansAcconts receivableStrategic PartnersRetained earnings

VC firmsCorporate VC

Private placementInvestment banking

Public markets

Family/friendsAngels

Early stage VC

Bootstrapping Equity Financing

Early sources

Later sources

THE ANGEL INVESTOR

THE VENTURE CAPITALIST

AGREEMENT VARIABLES AND CONTROL MECHANISMS

VC FINANCING PROCESS: GETTING THROUGH THE FUNNEL

1,000 Leads

150 MeetingsActively Pursued

70

$

$ 5 – 10 Financed

Less than 1% of all leads get funded

$ $

$

hLooks to see who sent it15 sec

hAnalyzes key aspectssectorlocationinvestment required 60 sec

hReads the plan 15 min

hDecides whether or not to request a formal presentation

10min

Total: 26 min 15 sec

WHAT DOES AN INVESTOR DO WITH A BUSINESS PLAN?

DEFAULTS

BREAKEVEN

“FIRE SALES”

ZOMBIES

IPO/M&A

GOOD IPO/M&A

WILD ONES (IPO)

TOTAL

60%

12%

10%

8%

6%

4%

0%

100%

VENTURE CAPITALS: AVERAGE INVESTMENT PORTFOLIO

Source: ATV

WHY VENTURE CAPITAL ?

VENTURE CAPITAL INVESTMENTS SLOWED DOWN, BUT US STILLS LEADS THE WAY

AGENDA

THE HISTORY OF THE VALLEY

THE (REAL) HISTORY OF THE VALLEY

THE (REAL) HISTORY OF THE VALLEY

1930 1940 1950 1960 1970 1980 1990 2000

WAV

ES O

F IN

NOVA

TION

INNOVATION NETWORKS

INTERNET

PERSONAL COMPUTERS

INTEGRATED CIRCUITS

DEFENSE

Today:25 of Fortune 100Adobe SystemsAMDAgilent TechnologiesApple Inc.Applied MaterialsBusiness ObjectsCisco SystemseBayElectronic ArtsGoogleHewlett-PackardIntelIntuitLSI LogicMaxtorNational SemiconductorNetwork ApplianceNvidiaOracle CorporationSanDiskSeagate TechnologySolectronSymantecSun MicrosystemsYahoo!…

◊ NASA◊ Lockheed

◊ HP (47)

◊ Intel (68)

◊ Kleiner Perkins (72)

◊ Apple (80)

◊ 3Com, Adobe, Cisco

◊ Yahoo, ebay, Google (90s)

?

THE MAIN PILLARS

◊ Is that replicable / portable?

◊ Is it sustainable long-term?

◊ What is the impact of the changing international outlook?

KEY QUESTIONS

SOFT FACTORS

◊ The importance of Dynamism, speed: continuous evolving world

◊ Approach to Risk

◊ Value of Failure (not just a downside but a must-have)

◊ Importance of the Hub: a world of opportunities

◊ Think Big

KEY TO SUCCESS

WHY NOW?

talent abounds

from scarcity comes clarity

innovation comes from hunger

startup cost ~0

IT’S THE BEST OPPORTUNITY

(5) LESSONS FROM GOOGLE

1. the team is all (almost)

2. healthy disregard for the impossible

3. big problems are better than small ones

4. users first

5. don’t pay attention to the VC bandwagon

AGENDA

bridging opportunities of the Silicon Valley with Italian talent

associating mentors and role models

professionalizing the business planning skills

using and building the network

“give back” to build a bigger pie

Mission:to promote a new Italian entrepreneurial ecosystem that is:

ETHICAL, HIGHLY PROFESSIONAL, INTERNATIONALLY FOCUSED, EXCELLENCE DRIVEN

Model:funded by foundations/companies/private sector/donors

not government partnering with the most relevant actors

INDEPENDENT

CON

NEC

TIN

G TA

LEN

T MIND THE BRIDGE FOUNDATION

CON

NEC

TIN

G TA

LEN

T

BUILDING THE BRIDGE: THE PILLARS

Discovering and Nurturing the Italian Talents (MtB Italy Tour 2010) Selecting the best of breed (Annual MtB Business Plan Competition &

MtB Call for Ideas) Providing training & education to the new generation of entrepreneurs

(MtB Bootcamp and Coaching) Showcasing the most promising startups and opening an international

debate (MtB Venture Camp @ Corriere della Sera) Hosting&mentoring the most promising startups in the Silicon Valley (MtB

Gym) Pitching US investors / partners (MtB Gran Finale events)

BUILDING THE BRIDGE: THE TIMELINE

2009 SELECTED START-UPS

Revolutionary antenna system (Milano)

Wi-Fi-derived solutions (Milano and Boston)

Comprehensive non-invasive solution for both vertebral fractures and bone strenght assessment (Lecce)

Solution to update any digital information (Sassari)

Social-network which allow users to create music through the web (Treviso)

Social marketplace for travel, where experts can provide users with information and personalized offers (Milano)

Virtual and Augmented Reality technology (Pisa)

THANK YOU FOR YOUR ATTENTION

Questions & Answers

Contacts info@mindthebridge.org

www.mindthebridge.orgUSEFUL LINKS:

www.mindthebridge.orghttp://siliconvalley.corriere.it/

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