part 4: global entrepreneurship class
DESCRIPTION
Professor Brian Butler. Class at university FBV in Recife BrazilTRANSCRIPT
Global EntrepreneurshipDeveloping Global Mindset for Entrepreneurs
Brian David Butler
TeachingBrian Butler is currently a professor with Forum-Nexus which is co-sponsored by the IQS Business School of the Ramon Llull University in Barcelona and the Catholic University of Milan He teaches classes on International Finance and Global Entrepreneurship in Europe every July and January
In Miami Brian has taught Finance Economics and Global Trade at Thunderbirdrsquos Global MBA program in Miami
He previously worked as a research analyst at the Columbia University Business School in New York City
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian David Butler
InternationalA global citizen Brian was born in Canada raised in Switzerland (where he attended international British school) educated through university in the US started his career with a Japanese company moved to New York to work as an analyst married a Brazilian and has traveled extensively in Latin America Asia Europe and North America
Brian currently lives in Recife Brazil where he is teaching classes on ldquoGlobal Entrepreneurshiprdquo at the university ldquoFaculdade Boa Viagemrdquo
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
KookyPlan ndash wiki for Entrepreneurs
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Schedule for today
1 First frac12 - Finance
2 After break Discussion about Group Projects Presentation of homework ndash transferrable
ideas
3 Continue - Finance of startups (part A)
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Brian David Butler
TeachingBrian Butler is currently a professor with Forum-Nexus which is co-sponsored by the IQS Business School of the Ramon Llull University in Barcelona and the Catholic University of Milan He teaches classes on International Finance and Global Entrepreneurship in Europe every July and January
In Miami Brian has taught Finance Economics and Global Trade at Thunderbirdrsquos Global MBA program in Miami
He previously worked as a research analyst at the Columbia University Business School in New York City
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian David Butler
InternationalA global citizen Brian was born in Canada raised in Switzerland (where he attended international British school) educated through university in the US started his career with a Japanese company moved to New York to work as an analyst married a Brazilian and has traveled extensively in Latin America Asia Europe and North America
Brian currently lives in Recife Brazil where he is teaching classes on ldquoGlobal Entrepreneurshiprdquo at the university ldquoFaculdade Boa Viagemrdquo
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
KookyPlan ndash wiki for Entrepreneurs
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Schedule for today
1 First frac12 - Finance
2 After break Discussion about Group Projects Presentation of homework ndash transferrable
ideas
3 Continue - Finance of startups (part A)
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Brian David Butler
InternationalA global citizen Brian was born in Canada raised in Switzerland (where he attended international British school) educated through university in the US started his career with a Japanese company moved to New York to work as an analyst married a Brazilian and has traveled extensively in Latin America Asia Europe and North America
Brian currently lives in Recife Brazil where he is teaching classes on ldquoGlobal Entrepreneurshiprdquo at the university ldquoFaculdade Boa Viagemrdquo
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
KookyPlan ndash wiki for Entrepreneurs
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Schedule for today
1 First frac12 - Finance
2 After break Discussion about Group Projects Presentation of homework ndash transferrable
ideas
3 Continue - Finance of startups (part A)
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
KookyPlan ndash wiki for Entrepreneurs
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Schedule for today
1 First frac12 - Finance
2 After break Discussion about Group Projects Presentation of homework ndash transferrable
ideas
3 Continue - Finance of startups (part A)
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Schedule for today
1 First frac12 - Finance
2 After break Discussion about Group Projects Presentation of homework ndash transferrable
ideas
3 Continue - Finance of startups (part A)
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Schedule for today
1 First frac12 - Finance
2 After break Discussion about Group Projects Presentation of homework ndash transferrable
ideas
3 Continue - Finance of startups (part A)
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Group Project - proposalsbull Group 1bull Roberta bull Luiza bull Arthur bull Italo
bull Transferrable Idea Clube de Estrelinha
bull Countries Brazil to USA
Clube Estrelinha
Other ideas
bull Group 2bull Diogo bull Carol bull Ana Maria bull Emanuel
bull Transferrable Idea assigned NET FLIX
bull Countries USA to Brazil
bull Group 3bull Pedro bull Rodrigo bull Augusto bull Juliana
bull Transferrable Idea assigned TIVO
bull Countries USA to Brazil
Tivo
shopping cart Or others
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
bull First step ndash you need to get my
approval for which project you wish to submit
I need to SEE example of working in other country ndash photos website reviews by magazines news articles etc
Send me by email
bull Second step
bull MARKET RESEARCH Divide up your team to conduct
thorough market research ndash Including full analysis of what
makes the business work in foreign country with estimates of cost profits business model
Including PEST analysis comparing factors between countries
Including full analysis of competition in new country and full cost profit analysis of market potential
Group Project
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Group Project ndash Step 1
bullGetting approval for your project
bullIf you do not have a project of your own approved or one in mindhellip you might consider one of the following (pre-approved) projectshellip
bullTIVO or NETFLIX bullLocalization to Brazilhellip
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
bull NET FLIX
bull httpenwikipediaorgwikiNetflix
bull Netflix (NASDAQ NFLX) is a service offering online flat rate DVD and Blu-ray disc rental-by-mail and video streaming in the United States
bull TIVO
bull httpenwikipediaorgwikiTivo
bull TiVo is a brand and model of digital video recorder (DVR) TiVo was introduced in the United States and is now available in New Zealand Canada Mexico Australia Taiwan and the UK TiVo DVRs provide an electronic television programming schedule whose features include Season Pass recordings which record every episode of a series and WishList searches which allow the user to find and record shows that match their interests by title actor director category or keyword
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Group Project ndash know your audience
bullAssume the reader of your report will be an investor that might invest in your project
bullAssume that you might want to do this project yourself (at the end of this semester)
bullThe Group Project should result in a professional-looking document that you could take to present to investors (assuming you needed to raise money to follow your business plan)
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Group Project ndash know your audience
Assume that you would really consider doing this project and assume that I am a Finance professional with money to potentially invest in your project Your job is to convince me to invest in your project
Create a viable marketing and business plan for this market-entry project into the USA Careful analysis needs to be made to see if it would work before I would be willing to invest in your idea
Make sure to read CH 4 from the book (digital sent by email)
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Opportunity Analysis Plan
bullFirst step (before you make a full-fledged business plan)
1 Describe the idea and its competition 2 Market analysis Assess the domestic and
international market for the idea including profit and cost estimates
3 Team analysis An assessment of the entrepreneur and the team and
4 Next-step analysis A discussion of the steps needed to make the idea the basis for a viable business ventureTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Group Project Assignment ndash for next week bull 1 Form Group
bull Please divide up the project among your team and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project (who
is going to research what)
Note you donrsquot have to do the actual research all by next class but you MUST have met with your group discussed the case and divided the task of who will
research whathellip
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Individual presentations
bullEach student is to present their ldquotransferrable ideardquo to the class
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Individual presentations
bullBefore we beginhellipbullOne comment
Use PEST analysis to look for why a business might NOT work when transferred from ONE country to ANOTHER
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
bulluse this framework to look for reasons that the transferable idea might not work here
ie what is Economically or socially or technologically different about Brazil that might make the idea NOT transfer well
bullThe PEST analysis tool is a framework for critically analyzing quickly whether or not a foreign market entry will have a chance or not
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
bull Political factors What is different in the new country that might
make the business NOT work Different laws Different regulations Different
taxes tax policy labour law environmental lawtrade restrictions tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore governments have great influence on the health education and infrastructure of a nation
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
politicalbull ecologicalenvironmental issuesbull current legislation home marketbull future legislationbull international legislationbull regulatory bodies and processesbull government policiesbull government term and changebull trading policiesbull funding grants and initiativesbull home market lobbyingpressure groupsbull international pressure groupsbull wars and conflicts
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
bull Economic factors What is different in the new country that might
make the business NOT work Do consumers have less spending money Is
currency weaker What is different Consider economic growth interest rates exchange rates and the inflation rate These factors have major impacts on how businesses operate and make decisions For example interest rates affect a firms cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
economicbull home economy situationbull home economy trendsbull overseas economies and trendsbull general taxation issuesbull taxation specific to productservicesbull seasonalityweather issuesbull market and trade cyclesbull specific industry factorsbull market routes and distribution trendsbull customerend-user driversbull interest and exchange ratesbull international trademonetary issues
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
bull Social factors What is different in the new country that might make
the business NOT work What social values are different What cultural habits
are different Include the cultural aspects and include health consciousness population growth rate age distribution career attitudes and emphasis on safety Trends in social factors affect the demand for a companys products and how that company operates For example an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore companies may change various management strategies to adapt to these social trends (such as recruiting older workers)
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
socialbull lifestyle trendsbull demographicsbull consumer attitudes and opinionsbull media viewsbull law changes affecting social factorsbull brand company technology imagebull consumer buying patternsbull fashion and role modelsbull major events and influencesbull buying access and trendsbull ethnicreligious factorsbull advertising and publicitybull ethical issues
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
bull Technological factors What is different in the new country that might
make the business NOT work What level of technology are people in the new
country familiar with What standards to they use Include aspects such as RampD activity automation technology incentives and the rate of technological change They can determine barriers to entry minimum efficient production level and influence outsourcing decisions Furthermore technological shifts can affect costs quality and lead to innovation
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
technologicalbull competing technology developmentbull research fundingbull associateddependent technologiesbull replacement technologysolutionsbull maturity of technologybull manufacturing maturity and capacitybull information and communicationsbull consumer buying mechanismstechnologybull technology legislationbull innovation potentialbull technology access licencing patentsbull intellectual property issuesbull global communicationsbull
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Transferrable idea - PEST analysis (or PESTLE)
bull You may also want to considerhellip
bull Legal factors include discrimination law consumer law antitrust law employment law and health and safety law These factors can affect how a company operates its costs and the demand for its products
bull Environmental factors include weather climate and climate change which may especially affect industries such as tourism farming and insurance Furthermore growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 4Saturday April 17th 2010
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Remember our discussion of the 3 types of entrepreneurs
1 Local for local2 High growth3 Global
Question ndash why do ldquohigh growthrdquo companies attract the Venture Capital
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Angel investor Risks
bullChances of success
bullapproximately 30 bullRule of thumb for VC investments of 10
deals 4 will die3 will do ok and only 3 will be a success
bull And only 1 will be a BIG success (BIG payout hellippaying for other failures)
httpkookyplanpbworkscom
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
If you won the lottery
bullWhat would you do with the money
bullNote money IS available
bullNext case study of company raising money for their venture in Chinahellip
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finance
Case study to introduce the topic
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bull Fion Lin and C A Lin are unlikely entrepreneurs The pairmdashwho share the same surname but are not relatedmdashgave up well-paying careers in the venture capital industry to launch a chain of what they call wellness cafes in a part of the world where junk food seems to reign supreme
bull ldquoWe strongly believe that wellness is going to be the next big thingrdquo Mr Lin said (Trend get ahead of it)
bull ldquoIf we position ourselves right we can take advantage of the inevitable boom in the wellness industry as baby boomers get older and Generation X becomes more aware of what they eat and drinkrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bullAfter 2 years of market research and feasibility studies Mr Lin who is chief executive and Ms Lin who is president and chief operating officer discovered a market for healthy food that could be served quickly consumed in comfortable surroundings and sold at affordable prices
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bullThey set up Kosmo testing the waters with an outlet in Shenzhen This was followed by a two-story location at a busy street corner in Lan Kwai Fong where a series of businesses had failed in recent years
bullTwo years later there are three outlets of Kosmo in Beijing four in Hong Kong and five in southern China The company opened 40 outlets (restaurants) between 2007 and 2008 and will move into overseas markets in the next 5 years
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bullldquoOur short-term target is to become the number one wellness lifestyle brand in Chinardquo Ms Lin said ldquoIn the longer term we want to become the leading wellness lifestyle brand globallyrdquo
Note they are dreaming BIG (not just local)
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bullMr Lin said raising cash to fund the venture had never been a problem ldquoIt wasnrsquot that difficult to raise money for Kosmordquo he said ldquoThere is money out there but you have to be different and not a copycat and you have got to identify a market gap and then fill itrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bullHow did they raise the moneystarted by holding talks with people they
had met to find out whether anyone shared their values
Then put together a business plan with revenue models and projections of how those models could support sustainable business growth
They made formal presentations to the people they had identified as having the most potential and 90 came on board
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bull Types of investors available
bull Banks When it comes to financing start-ups banks in Hong
Kong are reluctant to lend money to entrepreneurs without a good track record
So Banks were NOT a great source of capital for their startup
bull Self funding Apart from putting their own money into a venture new
business owners can consider borrowing money from family and friends which is known as bootstrapping
Good potential source of initial funding but limited and has trouble of being too close to familyTextbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
bull Types of investors available
bull Angel investorsThey can also look for angel investorsmdashsuccessful
businessmen willing to invest in a new enterprise Great source of startup capital for MANY
entrepreneurs
bull Venture capitalistsmdashcompanies that fund new enterprises with
considerable growth potentialmdashare another option Professional investors in startups but its difficult to
get their attention due to lots of entrepreneurs competing for their $$ Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funding a new business ndash case study
ldquoVenture capitalists are usually looking for something to invest in for 3 to 4 yearsrdquo said Hanson Cheah managing partner at AsiaTech Ventures
ldquoBecause of the risk they are taking they would expect a very large return They would want their investment to grow four times in 4 yearsrdquo Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Approaching Venture Capitalists
bullMany people approach venture capitalists with innovative ideas but they need a viable business plan if they want to be taken seriously
bull In addition to having a competitive edge in a growing market they should have a management team with the right potential
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Approaching Venture Capitalists
bullMost important there needs to be significant room for growth and that is what Mr Lin and Ms Lin got right
ldquoVenture capitalists wouldnrsquot be interested in a restaurant but they would be interested in a chain of restaurantsrdquo Mr Cheah said
ldquoUnless the business can grow at between 20 and 30 per year most investors would not be interested and it is unlikely that a single outlet could sustain that kind of growthrdquo
Textbook ldquoInternational Entrepreneurshiprdquo Hisrich Ch4
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finance
Inspiration a look at money available
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finance
bull Intro to the role of finance for entrepreneurship
bull Topics to coverTerms and definitions to know understandVenture Capital Angel finance seed funding
bootstrap funding Incubators Business plan challenges
YCombinatorLessons for entrepreneurs what kinds of firms
are attracting global Venture Capital
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Inspiration - raising $$Gemvara
Raises $52 Million For Custom Jewelry Shopping Online
bull 07 Apr 2010
Back in July 2008 we wrote about a company called Paragon Lake that had raised $58 million to put kiosks in jewelery stores to help you design custom jewelry Earlier this year the company got a new name (itrsquos now called Gemvara) its CEO departed (itrsquos now being led by founder Matt Lauzon) and it has a new business model itrsquos now a consumer facing site that allows users to create their own custom jewelery from the comfort of their home
Today the company is announcing that it has raised another $52 million in Series B funding The new round was led by Highland Capital Partners and Canaan Partners who both led Gemvararsquos Series A round
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platf
orm
bull 07 Apr 2010
Quirky a social network for product development has raised $6 million in Series A funding led by RRE Ventures with Village Ventures Contour Venture Partners Lowercase Capital and a small group of angel investors participating in the round
Prior to the closing of this round Quirky had raised $16 million in seed capital from friends and family
As we reported in our initial review of the site Quirky is a platform for product ideas that are born on napkin doodles and in other unorthodox ways The site then tries to use crowdsourcing to develop the product by engaging participants in collaborating on every aspect of product creation ndash from ideation design naming manufacturing marketing to sales Itrsquos like a social network for product development
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Inspiration - raising $$bull Quirky Raises $6 Million For Social Product Development Platform
bull Founded by serial entrepreneur Ben Kaufman (he created mophie and kluster) Quirky lets users submit their product idea for $99 Users can also vote rate and influence other peoplersquos product ideas Every week users can post ideas on quirky to be rated by the quirky community After a seven day evaluation period the quirky community chooses one product from the pool of submitted ideas to move forward through the process Quirkyrsquos community engages and contributes to every part of the productrsquos development weighing in on everything from naming to logo selection to packaging
bull Since the sitersquos launch last summer the platform and its community have helped developed 12 different products including a cord untangler and a portable mug spoon The new funding will be used towards the construction of a full-scale rapid prototyping shop the hiring of a global sales force greater retail distribution 24-hour design and engineering capacities and added interactive collaboration tools
bull Quirky is similar to one of Kaufmanrsquos previous ventures NameThis and other sites IdeaBlob and Innocentive
bull CrunchBase Information quirky
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Be inspired ndash see what kinds of companies are getting $$ funded
Key source of inspirationhellip Tech Crunch is awesome
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Be inspired ndash see what kinds of companies are getting $$ funded
VentureBeatcomKey source of inspirationhellip if you see how much $$ is being raised each week
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Be inspired ndash see what kinds of companies are getting $$ funded
Sign up for the weekly newsletter email
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finding Venture Capitalists
bull Donrsquot just ldquofindrdquo them ENGAGE them in discussions on twitter
Twitter follow VCs and Angels on Twitter bull Angel Investorsbull Atlas Venturebull August Capitalbull Baroda Venturesbull Best Buy Capitalbull Benchmark Capitalbull Betaworksbull Bessemer Venture Partnersbull Clearstone Venture Partnersbull DFJ Growth Fundbull Emergence Capital Partners
bull Full list found here httpventuremavencomvenrock
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finding Venture Capitalists
bull External Links to Research VC firms
Pratts Guide the best source available - go to your local library and look for this book
Website httpwwwcrunchbasecomfinancial-organizations (listed alphabetically)
Website httppunctuativecomvcdb find by geography and school background
Peer-review website called TheFunded But beware the reviews are by entrepreneurs (many of which were told no) so know that the information as biased and might not reflect happily funded entrepreneurs experience That said the site does give some much needed insight and reviews of VCs
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finding Venture Capitalists
bullstartup incubators bullmodel introduce new companies to
Venture Capitalistsoffering startups seed funding guidance and connections in exchange for equityDreamIt VenturesrsquoY CombinatorTechStars
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finding Venture Capitalists
bullFlorida
bullsee more Venture Capital in Florida and for entrepreneurs see startups in Florida
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finding funding sources
bull For social ventures
bull List of funding resources - LINKS bull Latin America
ACCION International Americas Society Amigos de las Ameacutericas Institute of the Americas Intercultural Center for Research and Education Organization of American States Pan American Development Foundation Partners of the Americas Resource Center for the Americas
bull bull More at
httpkookyplanpbworkscomInvesting-in-socially-good-projects
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Money available for BIG ideas (with great teams)
In Brazilhellip
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Private Equity in Brazilbull Blackstone prepares Brazil fundbull Blackstone Group is gearing up for a $675 million
fund set to invest in Brazil contributing $500 million of its own capital The fund will invest in infrastructure civil construction food health and education Reuters
bull Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos which already has two funds in Latin Americas largest country
httpwwwaltassetscom
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Recent headlines ndash of fundraising for Brazilian Private Equity (PE)
bullBrazilian PE fundraising to triple for year to June 2011
bullCategory Brazil | Publishing date 14 Apr 2010
bullBrazil-based private equity funds could raise up to $15bn from investors by mid-2011 driven by a growing economy and increased financial risk-taking according to Reuters
httpwwwaltassetscom
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
ldquoPrivate Equityrdquo Industry
Venture Capital
Angel Investors
Private Equity funds
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
PE and VC ndash whats the difference
bull PE (private equity) can refer to the entire Industry (which includes both PE and VC) or just to Private Equity fund
bull Private Equity = a general term to describe the industry PLUS its also a fund-specific term to define investments in more mature funds as described hereldquoEnquanto o venture capital estaacute relacionado a
empreendimentos em fase inicial o private equity estaacute ligado a empresas mais maduras em fase de reestruturaccedilatildeo consolidaccedilatildeo eou expansatildeo de seus negoacuteciosrdquohttpwwwabvcapcombrUpLoadArquiv
oSobre20o20setorpdf
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Recent headlines
bullAdvent raises largest ever Latin America PE fund with $165bn close
bullCategory Latin America | Publishing date 12 Apr 2010
bullAdvent International has closed its latest Latin American fund on $165bn making it the biggest ever private equity fund to be raised for the region
httpwwwaltassetscom
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Recent headlines bull Brazilian buy-out funds (PE) sitting on $9b
n in dry powderbull Category Brazil | Publishing date 01 Mar 2010bull
Brazilian private equity funds are poised to spend billions spurred by what people familiar with the country say is the strongest investment environment for 20 years Brazilian buy-out groups have $9bn in dry powder to deploy in the country according to Bloomberg who cited representatives of the countryrsquos private equity and venture capital association Abvcaphttpwwwaltassetscom
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Recent headlines
bullCarlyle makes first Brazil deal with $250m buy-out (PE) of holiday package firm CVC
bullCategory Brazil | Publishing date 08 Jan 2010
bullThe Carlyle Group has made its maiden private equity investment in Brazil acquiring CVC Brasil said to be the largest tour operator in Latin America
httpwwwaltassetscom
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Recent headlines bull Banco Bradesco
Banco Espiacuterito Santo establish Brazilian private equity firm 2bCapital
bull Category Private Equity News | Publishing date 17 Sep 2009
bullBanco Bradesco and Banco Espiacuterito Santo have partnered to create 2bCapital a new private equity fund manager targeting Brazil2bCapital will be controlled on an equal basis by the subsidiaries BRAM - Bradesco Asset Management and Espiacuterito Santo Capital according to a statement httpwwwaltassetscom
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Money availablehellip
httpvc-brazilcomblog
bullldquoForeign direct investment will jump 74 percent this year to $45 billion matching the record in 2008 as the country builds houses subways
railroads roads hotels and stadiums for the soccer and Olympic gamesrdquo
Goldman Sachs Group Inc Chief Economist Jim OrsquoNeill said at a conference in Rio de Janeiro on Feb 22
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Money availablehellip
httpvc-brazilcomblog
bullldquoThe word is out that there are considerable amounts of money looking for a home so the sellers tend to ask for high valuationsrdquo
said Mark Mobius who manages $34 billion in emerging market assets at Singapore-based Templeton Asset Management Ltd
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Money available
bullIf you have good original ideasbullWith a solid business planbullMoney is surely availablehellip
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
4 Venture Capital Finance in Brazil
A look at the Brazilian VC industry
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Private Equity Firms in Brazil
bullInternational Firms with PE operations in BrazilCiti (based in Miami)Blackstone Group (see news article here) -
partnership with Patria Investimentos
httpkookyplanpbworkscomprivate+equity+in+Brazil
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funds in Brazil
httpvc-brazilcomblog
bull Big Players ndash PE active in BrazilRio Bravo Investimentos run by former central
bank President Gustavo FrancoGrupo Santander BrasilArminio Fraga - the former Brazilian central
bankerrsquos fund company Gavea Investimentos LtdaSan Francisco-based Paul Capital Partners Axxon Group in Rio de JaneiroCarlyle Group the worldrsquos second-largest private
equity firm plans to invest $12 billion in Brazil in five years
Templeton Asset Management Ltd
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funds in Brazil
httpvc-brazilcomblog
bullStartup VC fundsIdeiasnet Monashees Criatec FIR Confrapar
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Funds in Brazilbull Government Funds
BNDES FINEPPrevi Petros Funcef e Fapes jaacute tem parte de seus
ativos aplicados em VCPE
bull ldquoAs primeiras accedilotildees realizadas pelo governo para o desenvolvimento da atividade de venture capital datam de 1974 por meio de programas do Banco Nacional de Desenvolvimento Econocircmico e Social (BNDES) e em 1976 pela Financiadora de Estudos e Projetos (Finep)rdquo
httpwwwabvcapcombrUpLoadArquivoSobre20o20setorpdf
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Helping Entrepreneurs in Brazil
bullInstituto Gecircnesis PUC-RiobullSebraebullhttpwwwportaltudoemfamiliacombr
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Private Equity Firms in Brazil
bull Local Brazilian Firmsbull Axxon Groupbull Bradesparbull Companhia Riograndense de Participaccediloes (CRP)bull CVC Opportunity Equity Partnersbull Decisatildeo Gestatildeo de Fundos (DGF)bull Dynamo Venture Capitalbull Eccelera do Brasilbull FIR Capital Partners new fund 2008 $150 million high tech
focus Draper Fisher Jurvetson partner in Brazilbull Forma Incbull GP Investimentos (see article below) new fund 2008 $2000
million (is this right wow)bull Icatu Equity Partnersbull IdeiasNet bull Itambybull ITC Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Private Equity Firms in Brazil
bull Local Brazilian Firms - continued
bull Jardim Botacircnico Partners (JB Partners)bull Latin Tech Capital Incbull Mercatto Venture Partnersbull Multicapitalbull Paacutetria Private Equity - partnership with Blackstone Group (USA)bull Patrimocircnio Investimentos e Participaccediloacutees Ltdabull Rio Bravobull Stratus Investimentos Ltdabull Sul America Capital Partnersbull The Southern Cross Group Brazilbull TK Partnersbull TMG Capital Partnersbull Trivegravella Investimentosbull Votorantim Ventures
httpkookyplanpbworkscomprivate+equity+in+Brazil
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Venture Capital activity in BrazilbullABVCAPs president Luiz Eugenio
Junqueira Figueiredo says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Venture Capital = ldquocapital empreendedorrdquo
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
About ABVCAP (wwwabvcapcombr)
bull Brazilian Association for Private Equity amp Venture Capital (ABVCAP)
bull The ABVCAP was founded in 2000 It is a nonprofit institution geared toward the development stimulus and dissemination of long-term investments in the real sector of the Brazilian economy from investment and capitalization vehicles for companies corporate projects and infrastructure in Brazil Therefore ABVCAP operates like a representative entity in Brazil for private equity and venture capital
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
About ABVCAP (wwwabvcapcombr)
bull It is ABVCAPs mission to expand and improve the several long-term investment fronts in Brazil in tune with the main international practices on the subject when applicable to the Brazilian market and conditions In this context ABVCAPs mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assetscompanies on the stock exchanges
bull For more information Monique Azeredo ABVCAP Press Liaison 55 (21) 3970-2432 mazeredoabvcapcombr ABVCAP Associaccedilatildeo Brasileira de Private Equity amp Venture Capital Avenida Rio Branco 123 sl 806 CEP20040-005 - Rio de Janeiro - RJ - Brasil Tel + 55 21 3970 2432 Fax + 55 21 2292 5607
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
About LAVCA (Latin American VC association)bull LAVCAs mission is to promote the growth of the
venture capital and private equity industry in Latin America through research education networking best practices and the advocacy of sound public policy LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers
bull bull For more information about LAVCA please visit
wwwlavcaorgbull partnership with Brazil
httpwwwlavcaorglavcaallpressnsf022F827D6A517B6258625730C006B201C
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
About ABDI (wwwabdicombr)
bull Brazilian Agency for Industrial Development (ABDI) bull The Agency was founded in December 2004 Its mission is to
promote Brazilian technological and industrial development by increasing competitiveness and innovation ABDIs main focus is in the guidelines and strategies set forth by the Industrial Technological and Foreign Trade Policy (PITCE) for which it is the coordinator articulator and promoter
bull For more information Marcia Oleskovicz ABDI Press Liaisonbull 55 (61) 3962-8700 marciaoleskoviczabdicombr bull road show to attract foreign investors bull httpwwwlavcaorglavcaallpressnsf43119c4ae488f44886256f
c800005ff2d267cf8a8a23a6ed8625726800695bbfOpenDocument
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
httpvc-brazilcomblog
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Challenges to VC industry in Brazil
Challenges ndash high ldquohurdle raterdquo
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bullTraditional high interest rates (fighting stubbornly high inflation)
bullHigh interest rates has been a BARRIER to the development of a local Venture Capital industryhellip who can explain why
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
bull Becausehellip
bull Think like an investorhellip if you could earn 18 in safe bank deposits or publicly traded bonds stocks (relatively safer than Venture capital because of the ldquoliquidityrdquohellip can pull money out quickly)hellip why would you take the EXTRA risk and invest in a startup
bull Contrast this with USAhellip where interest rates are near zero Note that PEVC industry thrives on low-interest economies (where local investors look for extra yield)
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Private Equity Firms in Brazil
bullLocal Challenges (high Cost of Capital)
bullOne of the major difficulties of private
investing in Brazil is the relatively high cost of capital and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities
httpkookyplanpbworkscomprivate+equity+in+Brazil
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
bull ldquoWhen looking at a private investment it is important to
also keep one eye on the returns that can be achieved in the stock market Equity investors have a choice about where to put their money On one hand they can easily invest in the stock market and achieve the expected average return (using an ETF they would get the market return and would assume the market risk) The benefit of investing in the stock market is that it is very liquid transparent and efficient They can take their money out at any time Also because the companies publish all of their financial data online its easy to check their balance sheets and compare them vs other companies in the market This is not true with private companies
bull With private companies investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity less transparency etc) httpkookyplanpbworkscom
private+equity+in+Brazil
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Challenges in BrazilBut in Brazil there is a problem in that
ordinary investors have come to expect 10-11 returns as normal (average) for assuming very little risk With the stock market booming in recent years (it was the top performer in the past 12 months) there is an environment where local investors are facing a very large hurdle when analyzing local private investments If more money can be made in the stock market many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets
httpkookyplanpbworkscomprivate+equity+in+Brazil
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Opportunity for Foreign PE capitalbull This creates an opportunity for foreign investors who
may be more patient and more willing to finance deals that Brazilians are not
bull Similar to situation back in the mid 1990s when Japanese investors had a much lower cost of capital than US competitors and were therefore more willing and able to consider investing in projects that paid back in a longer time period
bull If the WACC is too high then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back)
bull But competitors (foreigners) with lower WACC are able to look at longer-term investments and be more patient in their investment analysis
httpkookyplanpbworkscomprivate+equity+in+Brazil
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Limited time onlyhellip
bullWhile the VC industry is starting to boom in Brazil (as a result of recently falling interest rates)hellip
bullhellip what do you think will happen to the Venture Capital industry in Brazil hellip IF interest rates go back up
httpkookyplanpbworkscomprivate+equity+in+Brazil
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finance
Intro to finance for entrepreneurship
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Learn to think like an investorhellipbullMost students ask
ldquohow can I raise money for my idea from Venture Capitalistsrdquo
Itrsquos a good question but easier to answer if your flip it around and consider the question from a VCrsquos point of view
bullWhy would a VC investPut yourself in their shoeshellip
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Class discussion
bullCash FlowsbullValuation
How do you value an IDEA (may not even be a company yet)
NPV (net present value) of whatOptions
bullRiskbullRisk capitalbullExpect big payoff (4x money in 4 years)
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Making yourself more attractive to investorshellip
bull Goal of the entrepreneur (Raising money) should be to LESSEN the risk for the VC
bull How to (appear to be) less risk Have a GREAT TEAM (at least one partner with years of
substantial experience in industry or recognizable expertise)
Sustainable competitive advantage Blue ocean strategy ndash new market new product Original idea
bull But notehellip VCrsquos hear ldquooriginal ideasrdquo and ldquoblue ocean strategiesrdquo all day long So how do you really stand out and how do you really ldquolessonrdquo the risk for investors Have a great TEAM
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finance
Sample startup ndash creating shares and getting started
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Issuing Shares ndash attracting investors (and partners)
bull In order to accommodate equity financing two things have to happen
bull 1 You must convince the investor you have a worthwhile enterprise
bull 2 You must have a business entity that can
accommodate investmentmdash that is you must do the paperwork with your partnership limited liability company or corporation to officially grant ownership interests to investors
httpkookyplanpbworkscomissuing-shares
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Issuing Shares ndash attracting investors (and partners)
bullCorporations are the ideal means for making an investment Shares can be issued to reflect ownership interests and state laws provide for different level of stock ownershipmdash for example nonvoting and voting shares
bullBut isnrsquot forming a corporation a little too pretentious for an invention No it isnrsquot Corporation law facilitates the formation of very small liberally regulated corporations
httpkookyplanpbworkscomissuing-shares
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Attraction to investors of investing in a startup corporation
bullldquoIn general when it comes to investment there is something about owning speculative stock in a real corporation that appeals to the adventurous capitalist in most of us
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullProbably the most important question that arises when granting equity to strategic partners is what percentage of the shares of the company the inventor should grant to each partner
bullThere is one simple answer to this question
bullAs little as possible while still respecting the profit motive of the investor
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullIf you give up a big chunk of stock to early partners you almost certainly wonrsquot be able to attract the right capital later on
bullThus when your product is ready to ldquoroll outrdquo you will be severely handicapped by not having sufficient finance and your enterprise will remain ldquosmall potatoesrdquo that is an interesting little business that could have made it big
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullCarried to its extreme you might believe that an offer of one percent of your company is fair
bullNot so
bullAn offer of one percent would likely insult the intelligence of any potential strategic partner and kill any deal before it got beyond the exploratory conversation
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullTen percent of a startup company is the kind of minimum talking figure that might attract me if I were a designer or patent attorney
bullBut only if that ten percent were in some equitable relationship to the amount of stock you claimed for your own as the founder and for the other partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullThe mechanism for ldquodividing the pierdquo is that of issuing stock or shares
bullFor example suppose you start out with a declaration that your corporation has 100 shares These shares represent its total value at the time you incorporate
bullThe true value may be nothing or even negative at this time but thatrsquos not the point
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullNow you take in three equal partners who are each given 10 shares in exchange for their contributions You hold 21 shares The remaining 49 shares are held ldquoin the treasuryrdquo which may be only an envelope in your milk-crate file at this time This is an example of the humble beginning of a corporation that at least has defined who owns how much
httpkookyplanpbworkscomissuing-shares
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the (shares) ldquopierdquoSales
partner 1partner 2partner 3You keepKeep in Treasury
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Finance
Attracting Angel investors
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullSome angels will want 51 percent so that they can control the company and kick out any partners who are not effective (or even kick out some who are effective in order to kick in their own people)
bullOther angels will want a substantial chunk but not control preferring that the control and the burden of succeeding remain with the entrepreneur and his or her strategic partners
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullThus it seems prudent to never yield more than a total of 49 percent except in the most desperate circumstances
bullIn other words you and all of your partners should hold at least 51 percent forever if possible (The more successful you become the less likely yoursquoll be able to hold onto that 51 percent Not necessarily a bad situation)
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullHow Much Equity Does an Angel Want
bullAngels want a piece of your businessmdash usually represented by corporate shares
bullangel investors typically receive 21 equity in the businesses in which they invest However of course an angel who wants to control the business will seek a majority stake
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullThe actual amount an angel wants from your company depends on how much the investor is placing into the business and how your invention business
bullis valued Typically the investment equals a percentage of the business value So if your invention business is valued at $100000 an angel would as a very general rule expect to pay $25000 for a 25 ownership interest
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bull Obviously there are a few challenges herebull One is to determine the appropriate market
value for your invention businessmdash a difficult task considering the speculative nature of many inventions especially inventions that have not yet been market-tested
bull Another challenge is not only to determine what the company is worth at the time of investment but also to consider its value at the time when the angel plans to cash inmdash for example the value of the company when it is sold in five years
httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bullBut keep in mind that the investor is going to be looking for a return between 20 and 50 annually
bullSo if an investor puts in $250000 for a onequarter interest of a business valued at $1000000 and expects to cash out in five years with a 40 per year return your business would have to be worth $5400000 in five years in order for the angel to receive $1350000 (a 40 return on $250000 over 5 years)httpkookyplanpbworkscomissuing-shares
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Dividing the Pie With Strategic Partners
bull Also angels may want more than an ownership interest They may want management power a right for future financingmdash for example to buy more shares at a fixed price or to prevent their ownership rights from being dilutedmdash and or some degree of control over the venture
bull Making these decisions may be beyond the skill of an inventor Seek advice when you are asked to make concessions such as creating voting classes ceding control or power to board members or granting management control particularly if you intend to keep a majority interest and control over the board
httpkookyplanpbworkscomissuing-shares
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
International IQ moment
Inspiration from global travels
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Potala Palace Lhasa (Dalai Lamas palace)bull Now a Chinese museum
the Potala Palace was traditionally the seat of the Dalai Lama Tibetan Buddhists spiritual leader Famous for its imposing white walls surrounding the inner red palace the building sits at 3700 meters or over 12000 feet The Potala Palace is located in Lhasa the capital of the Tibetan Autonomous Region
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
International IQ
bullUnderstand sensitivity of ldquoTibet-issuerdquo to Chinese politics internationally
bullUnrest politics riots OlympicsbullRelations with US Obama Europe
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Homework for this weekbull One group assignment ndash cancelled Will re-
assign this task next week
bull 2 individual assignments
bull Due Dates If you want feedback PRIOR to next classhellip you
must email me the homework before WEDNESDAY at midnight (before next class)
Otherwise all homework is due at the start of our next class Saturday
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Homework 1bull Find company abroad that has raised money
What problem are they addressing How solving What trend are they getting in front of If you were to localize that business to Brazil would the same
problem exist Same solution be appropriate Are the same trends important in Brazil (Include a PEST analysis)
bull Plan on taking that business model to Brazil (creating a similar business in Brazil) You will need to raise money (either in Brazil or from foreign
sources of capital) I will be the VC (venture capitalist) Your job convince me to invest ndash in 5 minutes
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom Be prepared to present your analysis in Class (with class review)
To present in class 5 minutes to convince class to invest in your project
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Homework 2
bull Dream Company
bull What would you do if you won the lottery But you could only spend the money on creating a businesshellip what business would you create
Tell me 1-3 ideas
What if I told you the $$ would only be available to ldquohigh growthrdquo business but if you had an idea with big enough growth potential then UNLIMITED money was available
To turn in Maximum 1 page ndash word document ndash submit by email to
briandbutlergmailcom
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-
Mid-term Exam ndash May 8th 2010
Note you should start preparing nowhellip
Exam May 8th 2010 -- 830 am-10ambull 15 hrs to take exambull Mixture of
Multiple choice Short answer (15 words max) Essay (half page max)
bull How to prepare Study all slides from my lectures
- Global Entrepreneurship
- Brian David Butler
- Brian David Butler (2)
- KookyPlan ndash wiki for Entrepreneurs
- Global Entrepreneurship developing the global mindset for ent
- Schedule for today
- Group Project - proposals
- Group Project
- Group Project ndash Step 1
- Slide 10
- Group Project ndash know your audience
- Group Project ndash know your audience (2)
- Opportunity Analysis Plan
- Group Project Assignment ndash for next week
- Individual presentations
- Individual presentations (2)
- Transferrable idea - PEST analysis (or PESTLE)
- Transferrable idea - PEST analysis (or PESTLE) (2)
- Transferrable idea - PEST analysis (or PESTLE) (3)
- Transferrable idea - PEST analysis (or PESTLE) (4)
- Transferrable idea - PEST analysis (or PESTLE) (5)
- Transferrable idea - PEST analysis (or PESTLE) (6)
- Transferrable idea - PEST analysis (or PESTLE) (7)
- Transferrable idea - PEST analysis (or PESTLE) (8)
- Transferrable idea - PEST analysis (or PESTLE) (9)
- Transferrable idea - PEST analysis (or PESTLE) (10)
- Global Entrepreneurship developing the global mindset for ent (2)
- Homework for this week
- Homework 1
- Homework 2
- Remember our discussion of the 3 types of entrepreneurs
- Angel investor Risks
- If you won the lottery
- Finance
- Funding a new business ndash case study
- Funding a new business ndash case study (2)
- Funding a new business ndash case study (3)
- Funding a new business ndash case study (4)
- Funding a new business ndash case study (5)
- Funding a new business ndash case study (6)
- Funding a new business ndash case study (7)
- Funding a new business ndash case study (8)
- Funding a new business ndash case study (9)
- Approaching Venture Capitalists
- Approaching Venture Capitalists (2)
- Finance (2)
- Finance
- Inspiration - raising $$
- Inspiration - raising $$ (2)
- Inspiration - raising $$ (3)
- Be inspired ndash see what kinds of companies are getting $$ funded
- Be inspired ndash see what kinds of companies are getting $$ funded (2)
- Be inspired ndash see what kinds of companies are getting $$ funded (3)
- Finding Venture Capitalists
- Finding Venture Capitalists (2)
- Finding Venture Capitalists (3)
- Finding Venture Capitalists (4)
- Finding funding sources
- Money available for BIG ideas (with great teams)
- Private Equity in Brazil
- Recent headlines ndash of fundraising for Brazilian Private Equity
- ldquoPrivate Equityrdquo Industry
- PE and VC ndash whats the difference
- Recent headlines
- Recent headlines (2)
- Recent headlines (3)
- Recent headlines (4)
- Money availablehellip
- Money availablehellip (2)
- Money available
- 4 Venture Capital Finance in Brazil
- Private Equity Firms in Brazil
- Funds in Brazil
- Funds in Brazil (2)
- Funds in Brazil (3)
- Funds in Brazil (4)
- Helping Entrepreneurs in Brazil
- Private Equity Firms in Brazil (2)
- Private Equity Firms in Brazil (3)
- Venture Capital activity in Brazil
- Venture Capital = ldquocapital empreendedorrdquo
- About ABVCAP (wwwabvcapcombr)
- About ABVCAP (wwwabvcapcombr) (2)
- About LAVCA (Latin American VC association)
- About ABDI (wwwabdicombr)
- Slide 86
- Challenges to VC industry in Brazil
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy
- Venture Capital is relatively ldquolaterdquo coming to Brazilhellipwhy (2)
- Private Equity Firms in Brazil (4)
- Slide 91
- Challenges in Brazil
- Opportunity for Foreign PE capital
- Limited time onlyhellip
- Finance (3)
- Learn to think like an investorhellip
- Class discussion
- Making yourself more attractive to investorshellip
- Finance (4)
- Issuing Shares ndash attracting investors (and partners)
- Issuing Shares ndash attracting investors (and partners) (2)
- Attraction to investors of investing in a startup corporation
- Dividing the Pie With Strategic Partners
- Dividing the Pie With Strategic Partners (2)
- Dividing the Pie With Strategic Partners (3)
- Dividing the Pie With Strategic Partners (4)
- Dividing the Pie With Strategic Partners (5)
- Dividing the Pie With Strategic Partners (6)
- Dividing the (shares) ldquopierdquo
- Finance (5)
- Dividing the Pie With Strategic Partners (7)
- Dividing the Pie With Strategic Partners (8)
- Dividing the Pie With Strategic Partners (9)
- Dividing the Pie With Strategic Partners (10)
- Dividing the Pie With Strategic Partners (11)
- Dividing the Pie With Strategic Partners (12)
- Dividing the Pie With Strategic Partners (13)
- International IQ moment
- Potala Palace Lhasa (Dalai Lamas palace)
- Slide 120
- International IQ
- Slide 122
- Homework for this week (2)
- Homework 1 (2)
- Homework 2 (2)
- Mid-term Exam ndash May 8th 2010
-