An introduction to the basics of Early-Stage-VC

The Basics of VCThe economics of an early-stage VC-fund

PointNineCap @ Pirates on Shore Poznan - June 2014

early stageAn intro to

Agendacześć

About Us

Intro to Venture Capital

About us@PointNineCap● Berlin-based, 2011● 45mEur, 2 funds● Seed & Series A (500k-1m €)● Europe & North America

@Mathias● Made @ Wuppertal (DE)● Business/Finance Studies @

ESB (DE) & Neoma (FR)● Ecommerce @ OTTO (DE)● Consulting @ Deloitte (SA)● VC @ Mountain Partners (CH)● M&A @ Naspers (CH/CEE)● VC @ PointNineCap● Mentor/Supporter @ Seedcamp,

LauncHub and Kisura

Sources of Startup financingIntro to the basics of early stage VC

Idea Startup Early Maturity Growth

Equi

ty

Clients

Crowdfunding

F&F

Accelerators

Angels

VC

Private equity

IPO

DebtExte

rnal

✓ Validate opportunity✓ Sustainable✓ “Easy”✓ Feedbackx Requires productx Risk of funded competitors

Clients: 4 Business Models

Supply Demand%

Software Users$

Product Customers$$

SaaS

Marketplace

eCommerce

Intro to the basics of early stage VC

Venture Capital: StagesPros:

✓Less maturity✓Quick growth✓Knowledge

Cons:

x Distraction, Effort, slow and hardx Less controlx Addictive

Intro to the basics of early stage VC

How does it work

1Closed fund(+) 40mEur

0 Institutional investorsPension funds

2FocusStage, Geography, Segment etc.Seed, West, Internet

3 Investments(ie. seed, 500k for 15%)

4Support growthStrategy, hiring, etc.

5Exits100mEur

6Allocation40mEur + 80%

85mEur -> founders15mEur -> fund

First 40mEur to

investors.

Next: 20% to fund

(carry), 80% a

investors

Intro to the basics of early stage VC

How does it work (ii)Maths

Fund size 40mEurGoal x3 cash-on-cashExits proceeds 120mEurAvg Ownership 15%Exits req. 800mEur

● Investments 40● Hit rate 33% hits

Requirements

● Big market = international!● Great team and ambition= full-

time & main occupation!● Fast growth = scalable!● Sustainable position =

Sustainable comp advantage!

Exit requirement (rule of thumb): x5 fund size

Intro to the basics of early stage VC

Fund Duration

time to build & sell a company: roughly 7 years→ average fund duration 7-10 years

How does it work (iii)

3y 5y 7y 10y

Investment Period Divestment Period

Extension Extension

Intro to the basics of early stage VC

How does it work (iv)Intro to the basics of early stage VC

→ Every investment needs to have “fund-maker” potential

Out of a hypothetical portfoliothat consists of 10 companies...

Intro to the basics of early stage VC

Relevant players (incomplete excerpt)

Intro to the basics of early stage VC

Questions? Feedback?

If you want to stay in touchwww.pointninecap.com

+ Some say we have a pretty cool newsletter! ;)

Follow us on Twitter and facebook@PointNineCap | /PointNineCap

mathias@pointninecap.comLinkedIn | XING | facebook | Angel.co

Thanks!

Further Reading● www.pointninecap.com

● Christoph’s Blog - The Angel VC (Partner at .9$)

● Pawel’s Blog (Partner at .9$)

● CB Insights on Berlin’s Startup Ecosystem

● European Tech Exits

● VentureLoop-Jobs @ Point Nine Family & Berlin Startup Jobs

● The Economist about Tech Startups (in Europe)

● The Economist - Comeback Capital: Venture Investing in Europe

● VentureBeat about Point Nine Capital

● WSJ about Michael Wolfe & Point Nine

● TechCrunch - Vend raises from Peter Thiel

● WSJ - Clio raises from Bessemer Ventures

● TechCrunch - Zendesk’s stellar IPO

Intro to the basics of early stage VC