Transcript
Introduction to Entrepreneurship From Startups to Venture Financing
ALBERTO ONETTI Chairman, Mind the Bridge Foundation
Firenze, May 13th
Pavia, June 17th
Genova, June 22nd
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
2
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
3
The Problem we have (1)
} Italy has grown slowly during the past decade – slower than
Germany, France or the UK (0.27%/yr. since 2001)
} Its competitiveness – its rising unit labor costs – has slipped, as
wages rose but productivity stagnated } Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti &
Napolitano, New York, 2011
4 -6,0
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Real GDP growth (Percent)
ITA
EEA
Source: OECD Economic Outlook 88 database
The Problem we have (2)
} In Italy competitiveness has slipped, as wages rose but
productivity stagnated
} Unemployment is lower than the German/French experience
BUT
} Participation rate (58%) is the second lowest in Europe
} Worst employment problem pertains to youth (28%
unemployment for people between 15-24) } Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti &
Napolitano, New York, 2011
5 -1
-0,5
0
0,5
1
1,5
ESP ITA GBR DEU EEA FRA US
Average TFP growth (Percent)
1980-1995
1995-2005
Source: EU KLEMS database
Wood Textile Food
Plastic&Rubber
Metals
Industrial Machinery
Automotive
Biotech Software Pharma
Chemical
Electronics
State of Entrepreneurship in Italy
ITALY: INDUSTRY CONTRIBUTION TO GDP (2009)
Source: CrESIT 2011
} Lack of large companies
} In Italy SMEs are 98% of the total
} Mostly mature business
} Primarily Services (66% of GDP)
} Manufacturing is only 17% (it was 21% in 2000)
} Innovative industries play a minor role (2-6%)
} Strong family business vocation
6
State of Venture Finance in Italy
US 29,7 Silicon Valley
10,8
Europe 7,41 Italy 0,169
Italy Europe Silicon Valley US Annual VC Investments (B US$) 2008
} Lack of an established venture capital community } Of the €3.8B invested yearly (avg. 2005-2009), approximately €70M
went to early-stage investments (AIFI & Pricewaterhouse-Coopers 2005-2009)
} Only 255 start-ups were able to get funded in the last three years } In 2009: 79 deals despite the financial crisis (€98M invested)
} Small size of the stock market } The stock market capitalization to GDP ratio is lower than 60%,
versus 140% in the US and 170% in the UK (IMF & World Federation of Exchange)
7
State of Italian R&D
8
} Quality basic research
} Cumulative R&D investments are €17B (4% of GDP) (ICE, Cotec, Istat)
} 400k scientific publication in the period 1998-2008 ranking 8th in the
global classification (7th for number of citations) (Thomson Reuters,
2008)
} Biotech: 233 clinical trials in progress during 2009 (Ernst & Young 2010)
} Issues in turning research into business
} Lack of efficient technology transfer offices
} Universities do not offer incentives for lecturers to spin-off business
initiatives
} Scarcity of skilled executives with strong entrepreneurial skills
} Italian scientists do not think business
Italy: Key Issues
9
} A few startups often lacking high-quality business plans (deal “trickle”)
} Legal barriers to entry and exit (Italy is not a “corporate haven”)
} Reduce labor market rigidities
} Obstacles in bridging research into business
} Lack of managerial skills
} High mortality (“crisi del primo miglio”) and “Dwarfism”
} Change the mindset
} Lack of seed funds
} Exit on the domestic market
} High Tech “Leviathans” are not here
} Small size of the stock market and lack of large corporations doesn’t help
} Language barriers
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
10
Ingredients for a Start-up
11
What is an Entrepreneur
12
AGE 41 year old 68.8% between 35-43
SEX 79.7% men 20.3% women
STUDIES 64% University student
MARITAL STATUS 60% married
FAMILY BUSINESS 60.3%
COMPANY ORIGIN 76% Creation 20% Inheritance 4% Purchase
FINANCE Own/Family/VC
EMPLOYMENT IN 5 YEARS
Average Entrepreneur’s Profile
13 5
MtB Entrepreneur’s Profile
14
} He/She is 35 } 86% is male, only 14% is female } 67% has a scientific/technological background, while
33% has a business/humanistic education } 42% holds a Ph.D. or MBA and the 33% got it abroad } Only 5% does not hold a university degree } 28% has prior entrepreneurial experience
Source: CrESIT/Mind the Bridge 2011
What makes a successful entrepreneur?
15
Education matters a lot } 2.0 Startups are founded by highly educated people Experience matters as well } Being a serial entrepreneur is a job } The right startup is never the first one you found Working/Studying abroad does open your mind } It means more network, opportunities, ideas, experience A successful startup is a team effort } One-man bands do not go too far
Manager VS Entrepreneur
16
• What resources do I control?
• What structure determines our organization’s relationship to its market?
• How can I minimize the impact of others on my ability to perform?
• What opportunity is appropriate?
• Where is the opportunity?
• How do I capitalize on it?
• What resources do I need?
• How can I gain control over them?
• What structure is best?
The typical administrator asks . . .
The entrepreneur
asks . . .
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
17
Business Idea
18
THE BIG IDEA!!!
… THAT MATTERS A LOT, BUT IT’S ALL
ABOUT EXECUTION …
The question every entrepreneur must answer
19
Are my Goals well defined
• personal aspirations
• business sustainability/ size
• risk profile
Do I have the right strategy
• clear definition • profitability
and growth potential
• durability (sustainability)
• rate of growth
Can I execute the strategy
• resources • organizational
infrastructure • the founder’s
role
The Business Plan
20
THE OPPORTUNITY } The problem we solve (description
of your product highlighting the benefits to the users/customers)
} The competitive advantage (why your product is better)
} Compelling reason to buy
THE MARKET } The market you are
addressing
} Market size
} Potential growth
} Competition
THE BUSINESS MODEL } How do you make money?
} Financials
} What are you looking for (capital you are raising- use of proceeds)
THE TEAM } The team
} Your relevant experience in the domain you're addressing
BUSINESS PLAN
Why a Business Plan
21
Good and Bad Business Plans
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• Concise • Management, management, management • Realist, logical, convincing, clear • Shows clearly that the opportunity exists in the market • Description of essential resources • Risk analysis • Clear funding needs and return on capital employed • When funding is required, specify the terms of agreement (deal)
• Infatuation with the idea • Insufficient research • Lack of funding • No target group • Over optimistic sales forecasts not based on market analysis • Too long • Badly written: does not get ideas across • Illogical • Scant explanation of opportunity • Superficial analysis of competitors • No executive summary
Bad
G
oo
d
The Business Plan Outline
23
Business model
Assumptions and risks Financial plan Appendices
Strategy and resource plan
Market, customers and competition
Products and services
Management team/key individuals
Company Description
Executive summary
Scientists vs Entrepreneurs
24
Talking $$$
25
Financials: Statement of Operations
26
P&L 2011 established
2012 anticipatory
2012 forecast
2013 forecast
2014 forecast
Revenue (000)
# of main customers users
Avr rev. per cust.
Gross Margin
Operating Expenses
Operating Margin
Ebit (000)
Headcount
R&D
Mktg & Sales
Production
G&A
Total Expenses Source: Mind the Bridge 2011
Financials: Key Data
27
Bookings Billings
Cash on Hand
Burn (net/gross)
Revenue
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
28
Investment Types
29
Seed capital • Design of new products
Start-up capital • Launch of a new product (or
company)
Development capital • Expand sales or production
Consolidation capital • Consolidate and/or reinforce
market position
>$ 100K • 1-3 Years
>$ 2M • 3-7 Years
IPO
Founders’ capital/ savings
Family/friends, Angels, Early stage
VC
Venture Debt/Loans, Acconts receivable,
Strategic Partners, Retained earnings
VC firms, Corporate VC, Private placement,
Investment banking, Public markets
The Funding Decision
30
Bootstrapping Equity Financing
Early sources
Later sources
Investment Strategy
31
Medium Risk High Risk Medium Risk Low Risk
M&A
M&A Valuation
Cumulative Investment
IPO
Investment Focus
IDEA DEVELOPMENT BETA
CUSTOMERS EXPANSION MARKET SHARE
12-24 months 3 months 3-6 months 12-18 months 12-24 months
Vision/ Product Focus Customer / Market Share Focus
Management Focus
Early and Late Stage Financing
32
EARLY
• Seed financing ($ 50k – 1m) • research, assess & develop
initial concept • product development
• Start-up financing ($ 1-3m) • product development,
launch and initial marketing • Often “first round” • For companies that are in the
process of being set up or that are in business for a short time (little revenue, no profits)
• Other early stage financing ($ 2-8m) • To initiate commercial
manufacturing and sales • For companies with
completed product development but without profit
LATE
• Expansion financing ($ 2-50m) • To finance increased
production capacity, market or product development; to provide working capital
• For companies that break even or trade profitably and wish to grow/expand
• Bridge/mezzanine financing ($ 2-50m) • For companies that are in the
period of transition from being privately owned to being publicly quoted
• Other stages ($ 10m-several billions) • Buyout • Replacement capital • Rescue/turnaround
Definition • High net worth individual ($1
million to invest) who provides financing, advice, and networking to early stage companies.
Key investment Criteria • Geography (close to home) • High growth industry • Growth Potential of the venture • Personal attributes of the
entrepreneur and team • Track record of entrepreneur and
team
The Angel Investor
33
Angel Typologies
34
RELEVANT INDUSTRY EXPERIENCE
RELEVANT ENTREPRENEURIAL EXPERIENCE
High
Low
Low
High
The Venture Capitalist
35
DEFINITION • VC Firms are financial intermediaries that
provide the following to privately held enterprises: • Equity (often coupled with debt) financing • Risk sharing • Managerial expense • Contacts • Reputation
• In exchange, VC firms obtain equity
TYPES OF VCs • Private Fund VC
• Legal Structures: Partnership, Limited Liability Corporation, Corporation
• Stakeholders in a Partnership: General Partners (GP), Special Limited Partners (SLP), Limited Partners, Advisory Board
• Corporate VC • Consider impact on earning of parent • How does it further the parent’s objective?
VC: General Investment Process
36
Limited Partners
VC Firm (General Partners)
Startup Companies
IPO/M&A
Fund Fund Fund
Exit
Distributions Fundraising Commitments
Investment Disbursements Proceeds
VC Compensation Structure
37
• get a management fee + carried interest (about 20% to 30%)
• allocation among partners on seniority, effort, or performance
• vesting for new partners based on seniority, performance and special circumstances (e.g., death, sale of firm, ipo)
GP
• pay reduced management fee • receive carried interest SLP
• pay 2-3% annual management fee ("two and 20" arrangement)
• receive % of the fund’s returns (in the range of 70% - 80%) LP
The Valuation is a two side process
• Size of market opportunity • how big is the market segment, what market
share can you gain? revenue / price model • Comparables
• multiple of revenue (trailing/forward) or EBITDA • Financial Projections
• EBITDA, DCF • Ultimately
• Bid vs. Ask negotiation
How much you need and Why (Cap Incr) e.g. € 1,0M
How much equity you want to give up ( Y %) e.g. 25%
Post Money ValuaPon (V) = Cap Incr / Y = 1/0,25 = € 4,0M
Pre Money ValuaPon = V -‐ Cap Incr = € 4,0M -‐ 1,0M= € 3,0M
The Valuation Process: Pre- e Post-Money Valuation
VC Financing Process: Getting through the Funnel
40
Less than 1% of all leads get funded
5 – 10 Financed
1,000 Leads
150 Meetings
Actively Pursued
70
$ $
$
VC Average Investment Portfolio
41
" DEFAULTS
" BREAKEVEN
" “FIRE SALES”
" ZOMBIES
" IPO/M&A
" GOOD IPO/M&A
" WILD ONES (IPO)
TOTAL
60%
12%
10%
8%
6%
4%
0%
100%
Source: ATV
What does an investor do with a BP?
42
h Looks to see who sent it 15 sec
h Analyzes key aspects sector location investment required 60 sec
h Reads the plan 15 min
h Decides whether or not to request a formal presentation
10min
Total: 26 min 15 sec
Agreement Variables and Control Mechanisms
43
Agreement • Amount and timing of
investment • Form of investment • Terms of investment • Rights
• Puts and call • Registration • Preemptive and first
refusal • Vesting/buy-back
provisions • Board representation
Control Mechanisms • Convertible
Preferred securities • Syndication of
investment • Staging of capital
infusion
Why Venture Capital?
44
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
45
The History of the Valley
46
The (REAL) History of the Valley
47
The (REAL) History of the Valley
48
1930 1940 1950 1960 1970 1980 1990 2000
WA
VES
OF
INN
OV
ATI
ON
INTERNET
PERSONAL COMPUTERS
INTEGRATED CIRCUITS
DEFENSE
Today: 25 of Fortune 100 Adobe Systems AMD Agilent Technologies Apple Inc. Applied Materials Business Objects Cisco Systems eBay Electronic Arts Google Hewlett-Packard Intel Intuit LSI Logic Maxtor National Semiconductor Network Appliance Nvidia Oracle Corporation SanDisk Seagate Technology Solectron Symantec Sun Microsystems Yahoo! …
◊ NASA ◊ Lockheed
◊ HP (47)
◊ Intel (68)
◊ Kleiner Perkins (72)
◊ Apple (80)
◊ 3Com, Adobe, Cisco
◊ Yahoo, ebay, Google (90s)
?
The Main Pillars
49
FINANCIAL MARKET M&A, IPO dream
ENTREPRENEURS The garage
culture
UNIVERSITIES
highly connected with
biz world
◊ Is that replicable / portable?
◊ Is it sustainable long-term? ◊ What is the impact of the changing
international outlook?
KEY QUESTIONS
Soft Factors
50
◊ The importance of Dynamism, speed: continuous evolving world ◊ Approach to Risk
◊ Value of Failure (not just a
downside but a must-have) ◊ Importance of the Hub: a world of
opportunities ◊ Think Big
KEY TO SUCCESS
Raising money today (@#$!) in Silicon Valley
51
" are you not local
" how many exits again?
" don’t show me the buyer (don’t IPO me…)
" haven’t jumped yet
DON’T TALK TO ME IF YOU…
52 Source: MoneyTree Report 2011, Data: Thomson Reuters
$14 $19,4
$50,9
$98,6
$37,6
$20,7 $18,8 $21,7 $22,5 $26 $29,9 $28,1 $18,3 $21,8
$4,4 $5,5
$16,8
$31,8
$11,6 $6,8 $6,3 $7,8 $8,1 $9,6 $10,9 $11 $7,3 $8,5
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Investments B US$ (1997-2010) US Silicon Valley
3.201 3.694
5.556
7.973
4.543
3.157 2.990 3.145 3.201 3.754 4.035 4.025
2.927 3.277
875 1.049 1.703
2.169
1.108 808 874 951 994 1.209 1.265 1.252 915 961
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Deals (1997-2010) US Silicon Valley
Why Now
53
" talent abounds " from scarcity comes clarity " innovation comes from hunger " startup cost ~0
IT’S THE BEST OPPORTUNITY
5 Lessons from Google
54
1. the team is all (almost)
2. healthy disregard for the impossible
3. big problems are better than small ones
4. users first
5. don’t pay attention to the VC bandwagon
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
55
Mind the Bridge Foundation
56
Ø bridging opportunities of the Silicon Valley with Italian
talent
Ø associating mentors and role models
Ø professionalizing the business planning skills
Ø using and building the network
Ø “give back” to build a bigger pie
Mission: to promote a new Italian entrepreneurial ecosystem that is:
ETHICAL, HIGHLY PROFESSIONAL, INTERNATIONALLY FOCUSED, EXCELLENCE DRIVEN
Model: funded by foundations/companies/private sector/donors
not government partnering with the most relevant actors
INDEPENDENT
CO
NN
ECTI
NG
TA
LEN
T
Building the Bridge: the Pillars
57
Ø Discovering and Nurturing the Italian Talents MtB Italy Tour 2011
Ø Selecting the best of breed MtB Business Plan Competition
Ø Providing training & education to the new generation of entrepreneurs MtB Bootcamp and MtB Coaching
Ø Showcasing the most promising startups and opening an international debate MtB Venture Camp @ Corriere della Sera
Ø Hosting & Mentoring the most promising startups in the Silicon Valley MtB Gym
Ø Pitching US investors / partners MtB Gran Finale events
MtB Italy Tour 2011 Q1 & Q2
MtB Business Plan Competition July 31st 2011
MtB Venture Camp 4-5 November 2011
MtB GYM March 2012
MtB US Roadshows April 2012
Building the Bridge: the Timeline
58
- MtB Affiliates - Online Signups
MtB GYM Every Quarter
Jun 17th
MtB Italy Tour 2011
59
Ø Education The MtB Startup Business School gives you the “nuts and bolts” regarding entrepreneurship, business planning, venture capital market and Silicon Valley eco-system
Ø Honest Feedback Thanks to the Gym session the startups selected have the opportunity to present their business idea in front of a panel of investors and entrepreneurs
Ø Fine tuning the business idea Everybody can largely benefit from the discussion of all the business ideas as well as the education program in the morning.
Goals and channels
Firenze
Genova
Pavia
May 13th
Jun 22th
Business Plan Competition 2011
60
WHO: High knowledge based companies already established or planning to incorporate before the end of the year
WHAT: Executive Summary (in the required format*) & Business Plan/Pitch Presentation
WHEN: Deadline July 31st , 2011
HOW: Competition Rules*
PRIZES: Selected participants to Mind the Bridge Business Plan Competition may be eligible to receive prizes and equity investments. * Download at www.mindthebridge.org
Business Plan Competition 2011: Some Prizes
61
Premio Gaetano Marzotto all’Idea Imprenditoriale Giovane sviluppata nell'area Hi-Tech con possibilità di sviluppo internazionale
RCS Digital Publishing Prize Target: Innovative and Promising Ideas to transform either the user experience of digital readers or the appeal of digital publishing platforms for advertisers
2010 Selected Startups
62
!
2010 Winners
Marco Brini - IID Stanford
Barbara Labate - IID New York
Venture Camp
64
Mind the Bridge Venture Camp is a 2-day event held each year in Milan at Corriere della Sera (the leading Italian newspaper) to promote a healthier Italian entrepreneurial ecosystem. Selected entrepreneurs present their business ideas to a large audience, including potential investors and partners. Selected startups will be invited to participate in the MtB Gym, a tutoring program between Italy and the Silicon Valley.
Entrepreneurs + Investors + Partners
Venture Camp Objectives
65
MEET MtB Business Plan Competition 2011 finalists
showing their business pitches
FIND successful links between Italy and the
Silicon Valley LEARN from examples of
Italian entrepreneurial success
NETWORK with entrepreneurs, potential
investors, partners and mentors
Opportunities for good ideas Event Goals
Fostering a sustainable Italian ecosystem for entrepreneurship
Inspiration + Policy
+ Networking
Boosting ideas with high potential
Providing entrepreneurs with direct exposure to venture capital investors both from Italy and the Silicon Valley
Venture Camp 2011
66
Milano, Italy
November 4-5, 2011
MtB GYM
67
San Francisco @ Pier 38
Affiliates + Individual Subscriptions
The GYM
68
Mind the Bridge Gymnasium is a startup incubator. Positioned in Pier 38 (San Francisco) we share the space with some of the hottest startups (50+) in Silicon Valley (Socialmedia.com, WordPress, Tweetme, etc.) Selected Startups are assigned a Mentor, supported in Business Development activities and given Training Sessions. Training Sessions include: Financing, Immigration Visas, Build a team, Corporate Operations, Presentation Skills, Taxes Mentors + Training+ Office Space
The GYM: Open Now!
69
Accelerate the startup chances of success • Hosting: office space @ Pier38 in San Francisco • Mentoring: assign a dedicated mentor per startup • Coaching: provide regular classes (training modules)
Build critical mass of startups A constant flow of startups hosted(10-15) to maximize the “educational impact”
Become a social hub for Italian entrepreneurship in Silicon Valley Events, Mind-the-Beer, etc (social Gym)
Targets • Early stage startups interested in a getting plugged into the Silicon Valley • Italian “origin” • Min 3 months, average 6 months. • Starting at beginning of each quarter possibility to stay longer (as an affiliate startup)
Access Affiliates Channel Individual Subscriptions
MtB Startup Summer School
70
The Program: Lessons and Hands On
Theoretic Learning: Lessons (20 hrs)
Ø Introduction to the Silicon Valley ecosystem Ø Corporate Operations and Legal Aspects in Silicon Valley Ø Corporate Finance Ø Business development Ø Fund raising with investors Ø Communication skills Ø Visa issues Ø Human resources
Practical Learning: Visits (20 hrs) + Business Planning (50 hrs)
Ø Google’s headquarter – Mountain View Ø Funambol’s headquarter -Redwood City Ø University of California, Berkeley Ø Stanford University
Be a Silicon Valley Startup for 3 weeks
MtB Startup Summer School
71
WHO CAN PARTICIPATE? Students, PhD Students, Wanna-be-Entrepreneurs
SESSIONS Three sessions are scheduled in 2011 1. July 5th– 23rd 2. August 1st – 20th 3. September 5th – 24th
WHERE? Pier 38, San Francisco
HOW TO APPLY? Send an email to: summerschool@mindthebridge.org
Be a Silicon Valley Startup for 3 weeks
72
THANK YOU FOR YOUR ATTENTION
Questions & Answers
informaPon@mindthebridge.org
www.mindthebridge.org USEFUL LINKS:
mindthebridge.blogspot.com siliconvalley.corriere.it
BLOGS: Facebook: Mind the Bridge -‐ ConnecMng Talent Twi\er: MindTheBridge
SOCIAL MEDIA:
EMAILS:
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