ALBERTO ONETTI Chairman, Mind the Bridge Foundation MARCO MARINUCCI Executive Director, Mind the Bridge Foundation Introduction to Entrepreneurship From Startup to Venture Financing @MIndTheBridge #jobcreator
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ALBERTO ONETTI
Chairman, Mind the Bridge Foundation
MARCO MARINUCCI
Executive Director, Mind the Bridge Foundation
Introduction to Entrepreneurship
From Startup to Venture Financing
@MIndTheBridge
#jobcreator
AGENDA
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
2
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
3
AGENDA
4
Zero Growth
Italy has not grown since the beginning of the new Millennium –
slower than its European neighbors and US
Average growth rate(2001-2012): US (1.63%), EU (1.42%), IT (0.16%)
The Problem we have
Source: IMF 2013
More info here: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti & Napolitano, New York, 2011
-6
-5
-4
-3
-2
-1
0
1
2
3
4
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Real GDP growth (percent) Italy EU US
5
Youth Unemployment
Unemployment rate in Italy (12%) is lower than in Greece and Spain
(27%), but much higher than in Germany (5.5%).
Worst employment problem pertains to young people (38% for
people between 15-24)
The Problem we have (2)
38pc 8.1pc12pc 5.5pc
Italy: Industry Contribution to GDP
Source: CrESIT 2012
Lack of large companies
In Italy SMEs are 99.9% of the total (EU, SBA Fact Sheet 2012)
95%+ have less than 10 employees and 50%+ have only one (ISTAT, 2013)
Mostly mature business
Primarily Services (73.4% of
GDP)
Manufacturing is only
18.6% (it was 21% in 2000)
Innovative industries play
a minor role (2-6%)
The Problem we have (3)
Where are we heading?
“Before World War II, Argentina was rich. Even
in 1960, the country was twice as rich as Italy.
Today, he says, you can compare the per
capita income of Argentina to that of
Romania. Because it didn’t grow.
The Risk we face
A country could get rich in 1900 just by producing corn and meat, but that is not
true today. But it took them 100 years to realize they were becoming poor. And
that is what worries me about Italy. We’re not going to starve next week. We are
just going to decline, slowly, slowly, and I’m not sure what will turn that around.”
(New York Times 2010)
”In US firm startups account for only 3 percent of employment but
almost 20 percent of gross job creation”Source: “Who Creates Jobs? Small vs. Large vs. Young”. J. Haltiwanger, R.Jarmin, and J. Miranda (2011)
8
On average, 1-year-old firms create
nearly 1 million jobs, while 10-year-old
firms generate 300,000.
Existing firms are net job destroyers,
losing 1 million jobs net combined
per year. By contrast, in their first
year, new firms add an average of 3
million jobs.
During recessionary years, job
creation at startups remains stable
Startups Create Most New Net Jobs inthe United States
Job Creation and Loss by Firm Age(Average per year, by year-group, 1992-2006)
The Solution (1)
9
VC investments generally declined since 2008 all over the world
Vs. 2011: -14% in Europe and -5.5% in US
Vs. 2008: -50% in Europe and -10% in US
Venture Capital: Leaders and Laggards
3.185
10.968
26.874
Source: European Private Equity and Venture Capital Association. PricewaterhouseCoopers /National Venture Capital Association. AIFI & PricewaterhouseCoopers 2008-2012.
U.S.
Silicon Valley
Europe
Italy
Annual VC Investments (Billion US$)
0.175
10
Venture Capital Industry is still in its infancy (but it’s growing)
Approx. €100M invested every year in early-stage investments
Vs. 2011: +65% increase (vs. -10% in private equity)
394 startups funded in the last five years
Where are we? Venture Finance
Companies
Small size of the stock market
Italian market capitalization is on avg. 25% of Italian GDP
110% in US and 140% in UK
Source: AIFI & PricewaterhouseCoopers 2008-2012.
Deals
Amount (M€)
11
BTW, Venture Capital industry is
changing
Berlin
London
Super Angels
We now have a liquid seed-stagefunding structure in Europe. Wedidn’t have this before and so nowthe first €1m roadblock forentrepreneurs has beenremoved.
Hendrik BrandisPartner, Earlybird
United StatesEuropeJeff Clavier
Crowdfunding
Accelerators
RonConway
ReidHoffman
Where are we? Research
12
Quality Research Base
74k scientific publications (1996-2010) ranking 8th globally
Italy is in the top 10 countries (4th) for number of publications (2001-2011)
in comparison to R&D expenditure
Issues in turning Research into Business
Academic spin-offs are not ramping up
Source: IX Rapporto Netval sulla Valorizzazione della Ricerca Pubblica Italiana, 2012Notes: data related to 2010 and 2011 are not final
- On avg. 75 new spin-offs/yr. - 894 new spin-offs since 2000
Geolocation:- North-West: 25.3%- North-East : 24.9%- Center: 26.9%- South & Isles: 22.9%
Top Universities:- Polytechnic of Turin- University of Padua- University of Bologna
Source: SCImago Journal & Counrty Rank, 2010
Source: Italian International Growth agenda, Booz&Co analysis
13
We need more Quantity (deal “trickle”)
Legal barriers to entry and exit (Italy is not a “corporate haven”)
Labor market rigidities
Obstacles in bridging research into business
Managerial/Entrepreneurial skills
We need more Quality
High mortality (“crisi del primo miglio”) and “Dwarfism”
Mindset
Seed funding
We need to get prepared for International Exits (since Day One)
High Tech “Leviathans” are not here
Small size of the stock market and lack of large corporations doesn’t
help
Language barriers
Italy: Startup Check-List
AGENDA
14
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Base Ingredients for a Startup
15
What is an Entrepreneur
16
Between 26 and 35
High level of education
(11% Ph.D or MBA, 42%
Master degree)
Prior entrepreneurial experience (23%
have founded a startup)
and/or working experience (8-9 yrs)
89% are Male
Startup Generation…Who are you?
11% of startups are incorporated abroad
(Silicon Valley, Berlin, Israel, London)
Corporate drain?
The Entrepreneur profile:
Italy vs. US
18
Entrepreneurs 30 to 49 started businesses at ahigher rate than other age groups did
The Kauffman Foundation and LegalZoom
Startup Environment Index 2012 Mind The Bridge Survey 2012
Age distributionIn Italy 84% are in the 26-45 range. 33 is theaverage age
1
2 A third of startup owners were women Female entrepreneurs are only 11%
Gender
19% had master’s degrees while 8%professionals or doctorate
Education
3 42% have a master degree while 11%a Ph.D. orMBA
Prior Experience
4 57% have 6+yrs of priorindustry/work experienceand 44% had startedcompanies in the past
Funding & Incubation period
Almost 80% has 8/9 yrs avg.prior working experienceand 23% has founded atleast one company before
5 80% of early-stage businessowners in US used personalfunds to finance theircompanies.
Bootstrapping rules (58%),while 38% got also fundingby external investors.
More info here: “Startups - Italy vs US - Onetti IID 2013”, A. Onetti, Italian Innovation Day, Mountain View, 2013
What makes a successful
entrepreneur?
19
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
play
One-man bands do not go
too far
AGENDA
20
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Business Idea
21
THE BIG IDEA!!!
… THAT MATTERS A LOT, BUT IT’S ALL
ABOUT EXECUTION …
Manager vs. Entrepreneur
• 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 entrepreneur
asks . . .
• 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?
The typical administrator asks . . .
22
The Business Plan?
“Business plans and 5 years financial
projections are a waste of time”
23
Dave McClure
“They came to me with no business
plan” Intel 1968
“No one besides venture
capitalists and the late
Soviet Union requires five-
year plans to forecast
complete unknowns”
Steve Blank
The Lean Approach
“The Lean Startup method teaches you how to drive a startup, how to steer, when to turn, and when to persevereand grow a business with maximum acceleration.”
Eric Ries
Vision Steer Accelerate
TEST the product, collect
FEEDBACK, understand
CUSTOMERS NEEDS
FAIL fast (Pivoting?) - GROW
fast.
MODIFY your MVP, IMPROVE
it and create HIGH QUALITY
goods
Now you are
ready to SCALE
“Get out of the Building!”
Build-Measure-Learn feedback loop
25
1
3 2
“Using the Lean Startup approach, companies can create order not chaos by providing tools to test a vision continuously.”
What is the problem we aim atsolving?
MVP
Metrics, Traction
No plan survives first contact with customers
Pivoting or scale?
Validated learning
26
“There are some cases where things work despite thelack of a plan. But there is an awful lot of failure theretoo. Winning without a plan is hitting the jackpot,and most people do not hit the jackpot. Since youwant to have as much mastery over things as possible,you need to plan.”
Peter Thiel Entrepreneur and venture capitalist, co-founder of PayPal and
first outside investor in Facebook
Though... Aspirations are not a Plan
27
THE BUSINESS MODEL How do you make money
(Revenue Model)?
How do you structure activities(Cost Structure)
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
THE MARKET
The market you are addressing
Market size
Potential growth
Competition
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
BUSINESS PLAN
The Business Plan
Why a Business Plan
28
Talking $$$
29
Financials: Key Data
30
Bookings Billings
Cash on Hand
Burn(net/gross)
Revenue Cash-In
Financials: Statement of Operations
P&L 2012 established
2013anticipatory
2014forecast
2015forecast
2016forecast
Revenue
Avr rev. per cust.
(COGS)
Gross Margin
(Operating Expenses)
(R&D)
(Mktg & Sales)
(Engineering)
(G&A)
Operating Margin
Headcount
Source: Mind the Bridge
32
Avoid TMI!
More info here: “Financials: Forecasting&Reporting”, A. Onetti, MTB Gym
AGENDA
33
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Founders’ capital/ Savings/
Family/Friends
Seed Investors, Crowdfunding,
Angels,Early stage VC
(Series A)
Venture Debt/Loans, Working Capital Lines, Strategic
Partners, Retained earnings
Later Stage VC (Series B+),
Corporate VC, Private placement,
Public markets
The Funding Sources
34
Bootstrapping Equity Financing
Early sources
Later sources
The Funding process is Milestone
Based
Source: Onetti-Zucchella, Business Modeling for Life Science and Biotech Companies. Creating Value
and Competitive Advantage with The Milestone Bridge, Routledge, forthcoming
But Keep the Eyes on the Ball
ACQUIRED BY:
ACQUIRED BY:
FOR $1.1 BILLION
FOR $1 BILLION
ACQUIRED BY:
FOR $1.03 BILLION
“Investments are just a tool …
The Exit is the real prize”
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
37
The Venture Capitalist
38
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
39
Limited Partners
VC Firm (General Partners)
Startup Companies
IPO/M&A
Fund Fund Fund
Exit
Distributions Fundraising Commitments
Investment DisbursementsProceeds
The Valuation is a two side process
Size of market opportunity
how big is the market segment, what marketshare can you gain? revenue / price model
Comparables
multiple of Revenue (trailing/forward) orEBITDA
Financial Projections
Revenue, EBITDA, DCF
Ultimately
Bid vs. Ask negotiation
40
How much you need(Cap Incr)e.g. € 1,0M
How much equity you want to give up ( Y%)e.g. 25%
Post Money Valuation (V) = Cap Incr / Y = 1/0,25 = € 4,0M
Pre Money Valuation = V - Cap Incr= € 4,0M - 1,0M= € 3,0M
The Valuation Process:
Pre- e Post-Money Valuation
41
Less than 1% of all
leads get funded
5 – 10
Financed
1,000 Leads
150 Meetings
Actively
Pursued
70
$ $
$
VC Financing Process:
Getting through the Funnel
42
VC Average Investment Portfolio
43
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
Tumblr-Yahoo Deal
Dealing with VCs
44
VCs see tons of pitch every day be short
and immediate, use body language and
show passion
They don’t know your product use
screenshots, videos, prototypes
They are positively impressed by big numbersand they look for big market opportunity
be ambitious since the beginning but have
realistic objectives.
They are not always expert as you are aboutthe topic use simple words, get straight tothe point
Smile it’s ok to have fun when you pitch
Valuation is only one piece of
the puzzle
45
Agreement• Amount, valuation
and timing of investment
• Form of investment
• Terms of investment
• Rights
• Liquidation Preferences
• Drag Along
• Pay to Play
• Vesting/buy-back provisions
Control Mechanisms
• Board representation
• Convertible Preferred securities
• Syndication of investment
• Staging of capital infusion
Why Venture Capital?
46
AGENDA
47
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
The History of the Valley
48
49
The (REAL) History of the Valley
The (REAL) History of the Valley
501930 1940 1950 1960 1970 1980 1990 2000
WA
VES O
F IN
NO
VA
TIO
N
INTERNET
INTEGRATED
CIRCUITS
DEFENSE
Today:
25 of Fortune 100
Adobe SystemsAMDAgilent TechnologiesApple Inc.Applied MaterialsBusiness ObjectsCisco SystemseBayElectronic ArtsGoogleHewlett-PackardIntelIntuitLSI LogicMaxtor
National SemiconductorNetwork ApplianceNvidiaOracle CorporationSanDiskSeagate TechnologySolectronSymantecSun MicrosystemsYahoo!…
◊ NASA
◊Lockheed
◊ HP (47)
◊ Intel (68)
◊ Kleiner Perkins (72)
◊ Apple (80)
◊ 3Com, Adobe, Cisco
◊ Yahoo, ebay, Google (90s)
?
PERSONAL
COMPUTERS
◊ Apple (2000s)
MOBILE
◊ Facebook, Twitter, Zynga, Linkedin (2000s)
SOCIAL
The Main Pillars
51
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
52
◊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
53
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…
54Source: MoneyTree Report 2013, Data: Thomson Reuters
19,8
51,3
99,2
38,1
20,8 18,6 22,4 22,9 26,630,8 30,5
19,7 23,328,4 26,9
5,4
16,7
31,9
11,86,9 6,4 7,8 8,0 9,6 11,3 11,2 8,1 9,2 11,6 11
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Investments (1998-2012)
US Silicon Valley
3.728
5.590
8.032
4.582
3.183 3.004 3.178 3.2623.827 4.124 4.111
3.0653.526 3.673 3.770
1.0481.698
2.176
1.115 814 878 955 997 1.222 1.283 1.281 968 1.057 1.158 1.176
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Deals (1998-2012)
US Silicon Valley
VC Investments: Trends
Why Now
55
talent abounds
from scarcity comes clarity
innovation comes from hunger
startup cost ~0
IT’S THE BEST OPPORTUNITY
56
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
Are the New Kings Coming From
Europe?
57
AGENDA
58
Entrepreneurship in Italy: Where are we?
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
59
Our mission your
SUCCESS
Learn
Startup School
Growth
Accelerator
Succeed
Success Stories
Job Creator Tour
STARTUP SCHOOL
(Apr, Jul, Aug, Nov)
Venture Camp
(8/9 Nov)
60
Building the Bridge: The 2013 Timeline
Education
MTB JOB CREATOR TOUR
61
Education
The MtB Startup Business School gives you
the “nuts and bolts” regarding
entrepreneurship, business planning,
venture capital market and Silicon Valley
eco-system
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
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
The best project wins a
seat @MTB Startup
School!
62
SESSIONS
Last Session
April 8th – April 26th
UPCOMING
July 1st – July 19th
July 29th – Aug 16th
Nov 11th – Nov 29th
Be a Silicon Valley Startups for 3 weeks!
Students, Graduate students
Engineers, Scientist
Wannabe Entrepreneurs
WHERE?
One Market Plaza, Steuart Tower,
San Francisco
HOW TO APPLY?
Check it out here!
www.school.mindthebridge.org
Who can participate?
APPLY NOW!
LEARN: MtB Startup School
Watch the
video here!
Accelerator Program(winter & summer batch)
63
GROWTH:
MTB Gym
Mind the Seed Fund
WINTER BATCHJanuary – March
OPENING SOON!
SUMMER BATCH
STARTS ON
August 26th, 2013
Demo Days
2012 FACTS
$6.45M FUNDING - $32.4M VALUATION
$1.6M Funding – Team 3->10 full time – 1.5M
daily viewers (+66% in last 4 months)
$1.9M Funding – Team +50% - US entity - #19
hottest startups in the world (Web Summit)
$1.2M Funding – Team 2->11 full time –
US entity - 2013 prototype launch in orbit
$500K Funding (500Startups) – Team 0->5 –
US Entity - Top 5 iOS edu app, Best Design
$600K Funding (2 rounds) – Team: 3->8 full
time – 2X registered users (600K)
6 months pivoting (>Thailand)
$650K Funding – Team 2->4 – New launch
coming
2013 BATCHES
CAUTION …. RISING STARS!
Winter 2013 Batch Summer 2013 Batch
10 weeks accelerator program @Gym in San Francisco and up to $65k in seed funding
Building Success Stories
April 2012Enters 500Startups (+$65K)
Sep 2011Second round of $1.1M funding (IAG, ZernikeMeta Ventures)
April 2011 - EXITMerges with Avrio RMS Group (US)
Feb 2012Wins Seedcamp Berlin, raises $1.350M (Seedcamp, industrial partner)
win
ner
s
Feb 2012$1M+ round with Filas Lazio and Angels Investors
Since Gym inception (Aug 2010):30 startups incubated,
20 funded ($9.5M+), 2 exits 66
SUCCEED:
Sep 2012$1,5M+ round with Vertis and Principia
Feb 2013
Winner of Mobile Premier
Awards 2013 in Barcelona.
Jan 2013
€500K round of funding
Venture Camp 2013
Milan, 8-9 Nov 2013
ObjectivesFostering a sustainable Italian
ecosystem for entrepreneurship
Providing entrepreneurs with direct
exposure to venture capital investors both from Italy and Silicon
Valley
Boosting ideas with high potential
Mind the Bridge VentureCamp is a 2-day event held in
Milan to promote a healthier
Italian entrepreneurialecosystem.
Meet Startups
Learn
Network
Find Links
Join the Wave…
Don’t Miss it!
THANK YOU FOR YOUR
ATTENTION
Questions & AnswersSOCIAL MEDIA:
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WEBSITE
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CONTACTS
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