Transcript
June 2015
Introduction to Venture Financing
Douglas Abrams
2
6XXXX
Douglas Abrams
About the facilitator
• Wharton MBA
• JP Morgan – Vice PresidentIB Technology, GM Internet Marketing
• Parallax Capital Mgmt – Co-founder and MD Private Equity
• Extream Ventures – Co-founder and MDS$20 million seed fund
• Expara – Founder and MDIDM Ventures Incubator, advisory, training
• NUS – Adjunct Associate Professor, Business School, Entrepreneurship, Sasin – Visiting Professor, Venture Capital
3
6XXXX
Douglas Abrams
2000 20152000 2002 2004 2006 2008 2010 2012 2014
Parallax
BANSEA
Expara
Sasin
EIDMV I Expara Thailand
Expara Malaysia
i4-X
NUS KIMBA Extream EIDMV II EV III
Expara timeline 2000-2015
3Overview of Expara
4
6XXXX
Douglas Abrams
VC mindset
• Risk and return are highly correlated
• You cannot increase return without taking more risk
Return
Risk
Potential outcomes
5
6XXXX
Douglas Abrams
Why invest in venture capital?
As of June 30, 2014. The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,508 U.S. venture capital funds (963 early stage, 165 late & expansion stage, 374 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. (1)Pooled end-to-end return, net of fees, expenses, and carried interest.(2) 2007-2015 Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc
Case Shiller Real Estate Index 4.1Expara IDM Ventures (2) 43.03
6
6XXXX
Douglas Abrams
Impact of VC on a diversified portfolio
Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
7
6XXXX
Douglas Abrams
Companies founded with venture capital
www.nvca.org
8
6XXXX
Douglas Abrams
SEA exit markets at an inflection point
Exit activity in SEA, especially in Singapore, exploded in 2013• Increased investment in startups since 2007 is beginning to yield results
• Number of exits increased from 6 in 2010 to 20 in 2013
• Singapore alone has had 30 exits since 2007, 13 in 2013
• Value of exits increased from 51 MM in 2010 to 400 MM in 2013
9
6XXXX
Douglas Abrams
Some recent exitsCompany Country Acquiror Price Year
ZopIM Singapore Zendesk US$29.8MM 2014Non-Stop Games Singapore King US$ 100MM 2014sgCarMart Singapore SPH S$60 MM 2013DS3 Singapore Gemalto S$50 MM est. 2013Asian Food Channel Singapore Scripps Networks Undisclosed 2013Reebonz Singapore MediaCorp and Existing investors S$250MM 2013Yfind Singapore Ruckus Wireless Undisclosed 2013Techsailor Singapore TO THE NEW Undisclosed 2013travelmob Singapore HomeAway Undisclosed 2013Catcha Digital Media Singapore Opt Inc Undisclosed 2013GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013Viki Singapore Rakuten US$200MM 2013SGE Singapore Tech In Asia Undisclosed 2013ThoughtBuzz India To The New Undisclosed 2013AyoPay Indonesia MOL AccessPortal Undisclosed 2013Tongue in Chic Malaysia PopDigital Undisclosed 2013Ocision Malaysia Star Publication US$ 4.36MM 2013Glamybox Vietnam VanityTrove Undisclosed 2013PaymentLink Singapore Wirecard US$41.2MM 2013Dealguru Singapore iBuy S$34.28 MM 2013Buy Together Hong Kong iBuy S$21 MM 2013Dealmates Malaysia iBuy S$10 MM 2013PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012HungryGoWhere Singapore Singtel S$12 MM 2012AdMax Network Singapore Komli Media Undisclosed 2012TheMobileGamer Singapore Singtel US$1.5 MM 2012
10
6XXXX
Douglas Abrams
Key elements for success
• Solving a painful problem for customers – Value proposition
• Developing an innovative product – Innovation
• Customers and competitors – Market identification and analysis
• Reaching customers – Marketing, sales and distribution strategy
• Competing when others enter - Sustainable competitive advantage
• Make money – Business model and financial plan
• Team – A team or B team
11
6XXXX
Douglas Abrams
Key venture finance terms
Business model
Financial projections
Valuation
Funding required and equity offered
Use of Proceeds
Exit Strategy and ROI
Cap table
12
6XXXX
Douglas Abrams
Company valuation methods
• Price to earnings (p/e)
• Dividend yield
• Multiple of book value
• Comparables
• Discounted Cash Flow (DCF)
• VC method
13
6XXXX
Douglas Abrams
How much equity does the investor receive?
• Pre-money valuation– Amount invested by VC ÷ (Agreed pre-money value of business
+ Amount invested by VC) – $3MM pre + 1 MM VC = 25% VC equity
• Post-money valuation– Amount invested by VC ÷ post-money valuation– $4MM post = 25% VC equity
14
6XXXX
Douglas Abrams
How do VCs make money?
• Trade sale – sell to another company
• IPO – sell to the public through listing on an exchange
15
6XXXX
Douglas Abrams
Stages and sources of funds
Founder’s Capital
Seed/Angel
Series A, B, C
Mezzanine Pre-IPO IPO
VC hurdle rates 60-100% 40-60% 20% Why are these rates so high?
OM F,F&F
Incubators corporations government
Customers, suppliers, strategic partnersVCs, Banks for VC loans
16
6XXXX
Douglas Abrams
Calculate investor’s ROI including dilution
17
6XXXX
Douglas Abrams
Key elements of a venture deal
Board of directors
Protective provisions
Drag-along agreement
Conversion
Control
Price-per-share
Valuation
Amount of financing
Liquidation preference
Vesting
Options pool
Anti-dilution
Pay-to-play
Economics
18
6XXXX
Douglas Abrams
Contact us
• Douglas Abrams
• Expara, Expara IDM Ventures– dka@expara.com– www.expara.com
• Block 71 Ayer Rajah Crescent
• #$02-10/11 S139951
• 65-9780-5381
top related