ALBERTO ONETTI
Chairman, Mind the Bridge Foundation
MARCO MARINUCCI
Executive Director, Mind the Bridge Foundation
Introduction to Entrepreneurship
From Startups to Venture Financing
MtB Italy Tour 2012
AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
2
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
3
AGENDA
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
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
The Problem we have (1)
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
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
The Problem we have (2)
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
7
Lack of an established venture capital community
Of the €3.66B invested yearly (avg. 2007-2011), approximately €90M
went to early-stage investments, AIFI & PricewaterhouseCoopers 2007-
2011
356 startups were able to get funded in the last five years
In 2011: 106 early stage deals despite the financial crisis (+34%
compared to 2009) with € 82M invested (-16% compared to 2009), AIFI
& PricewaterhouseCoopers 2011
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)
State of Venture Finance in Italy
Italy
Europe
Silico…
US
0.108
5.69
11.63
28.425
Annual VC Investments in Billion US $
2011
8
Italian active VCs invested over
~ 450M€ in ~ 120 deals
Source: Booz & Company Analysis
Active Venture Capital firms
Invested Capital - M € Not exhaustive selected
examples
# of Firms in Portfolio
Venture capital created following 2008
State of Italian R&D
9
Quality basic research
74k scientific publications in the period 1996-2010 ranking 8th in the global
classification (SCImago Journal & Counrty Rank, 2010)
Italy is in the top 10 countries (4th position) for number of publications
(2001-2011) in comparison to R&D expenditure in 2011 (Italian International
Growth agenda, Booz&Co analysis)
Biotech: 660 clinical trials in progress during 2010, 15.7% of the overall
number in Europe (Osservatorio Nazionale Sperimentazione Clinica 2011)
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
10
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
Italy: Key Issues
AGENDA
11
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Ingredients for a Start-up
12
What is an Entrepreneur
13
Average Entrepreneur’s Profile
14
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
5
MtB Entrepreneur’s Profile
He/She is 32
87% is male, only 13% is
female
49% has a
scientific/technological
background, while 51% has a
business/humanistic
education
25% holds a Ph.D. or MBA and the 20% got it abroad
Only 10% does not hold a
university degree
21% has prior entrepreneurial experience
15 Source: CrESIT/Mind the Bridge 2011
What makes a successful entrepreneur?
16
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
• 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 . . .
17
Scientists vs Entrepreneurs
18
AGENDA
19
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Business Idea
20
THE BIG IDEA!!!
… THAT MATTERS A LOT, BUT IT’S ALL
ABOUT EXECUTION …
The question every entrepreneur
must answer
21
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
“Business plans and 5 years financial
projections are a waste of time”
22
Dave McClure
“They came to me with no business plan”
Intel 1968
The Lean Startup
23
24
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
25
Good and Bad Business Plans
26
• 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
Ba
d
Go
od
• 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)
Talking $$$
27
Financials: Key Data
28
Bookings Billings
Cash on Hand
Burn (net/gross)
Revenue Cash-In
Financials: Statement of Operations
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 2012
30
How to present the Financials
Source: Alberto Onetti, Financials: Forecasting&Reporting
AGENDA
31
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Founders’ capital/ savings
Family/friends, Angels, Early stage
VC (Series A)
Venture Debt/Loans, ARs, Strategic
Partners, Retained earnings
VC (Series B+), Corporate VC,
Private placement, Investment banking,
Public markets
The Funding Decision
32
Bootstrapping Equity Financing
Early sources
Later sources
Investment Strategy
33
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
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
34
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
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
Revenue, EBITDA, DCF
Ultimately
Bid vs. Ask negotiation
37
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
38
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
39
VC Average Investment Portfolio
40
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?
41
Looks to see who sent it 15 sec
Analyzes key aspects
sector location investment required 60 sec
Reads the plan 15 min
Decides whether or not to request a formal presentation
10min
Total: 26 min 15 sec
VC Average Investment Portfolio
42
Remember:
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 numbers and they look for big market opportunity be ambitious
since the beginning but have realistic objectives.
They are not always expert as you are about the
topic use simple words, get straight to the point
Smile it’s ok to have fun when you pitch
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
45
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
The History of the Valley
46
47
The (REAL) History of the Valley
The (REAL) History of the Valley
48
1930 1940 1950 1960 1970 1980 1990 2000
WA
VES O
F IN
NO
VA
TIO
N
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 (@#$!)
in Silicon Valley
51
are you not local
how many exits again?
don’t show me the buyer (don’t
IPO me…)
haven’t jumped yet
DON’T TALK TO ME IF YOU…
52 Source: MoneyTree Report 2011, Data: Thomson Reuters
3,728
5,590
8,032
4,582
3,183 3,004 3,178 3,262 3,827
4,124 4,111
3,065 3,526 3,673
1,048 1,698
2,176
1,115 814 878 955 997 1,222 1,283 1,281
968 1,057 1,158
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Deals (1998-2011)
US Silicon Valley
19.8
51.3
99.2
38.1
20.8 18.6 22.4 22.9
26.6 30.8 30.5
19.7 23.3
28.4
5.4
16.7
31.9
11.8 6.9 6.4 7.8 8.0 9.6 11.3 11.2 8.1 9.2 11.6
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Investments B US$ (1998-2011)
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 Silicon Valley
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
55
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
Mind the Bridge Foundation
56
bridging opportunities of the Silicon Valley with Italian
talent
associating mentors and role models
professionalizing the business planning skills
using and building the network
“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
EC
TIN
G T
ALE
NT
57
Discovering and Nurturing the Italian Talents
MtB Italy Tour 2012
Selecting the best of breed
Seed Quest
Providing training & education to the new generation of
entrepreneurs
MtB Startup School, MtB Bootcamp and MtB Coaching
Showcasing the most promising startups and opening an
international debate
MtB Venture Camp @ Corriere della Sera
Hosting & Mentoring the most promising startups in the Silicon Valley
MtB Gym
Pitching US investors / partners MtB Gran Finale events
Building the Bridge: the Pillars
MtB Italy Tour 2012 Q1 & Q2
MtB Seed Quest 2012 July 31st 2012
MtB Venture Camp Oct/Nov 2012
MtB GYM
Feb/March
2013
MtB US
Roadshows
March/April
2013
Building the Bridge: the Timeline
58
- MtB Affiliates - Online Signups
MtB GYM Every Quarter
MtB Startup
School
Every1-2 months
MtB Italy Tour 2012
59
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
Seed Quest 2012
60
WHO: High knowledge based companies already
established or planning to incorporate before the end
of the year
WHAT: Executive Summary (online*) & Business
Plan/Pitch Presentation
WHEN: Deadline July 31st , 2012
HOW: Competition Rules*
* Check it out at www.seedquest.mindthebridge.org
61
2012 Selected
Startups
2012 Winner
Italian Innovation Day
Elena Favilli and
Francesca Cavallo
Berkeley
February 23rd
Venture Camp 2012
63
November 2012
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.
MEET MtB Seed Quest 2012
finalists showing their
business pitches
FIND successful
links between
Italy and Silicon
Valley
LEARN from examples of Italian
entrepreneurial success
NETWORK with
entrepreneurs, potential
investors, partners and
mentors
Objectives
Fostering 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
NETWORK with entrepreneurs, potential
investors, partners and mentors
Opportunities for good ideas
“Let’s build a mentorship based acceleration program”
MtB GYM
Targets
Early stage startups interested in a
getting plugged into Silicon Valley
Italian “origin”
Min 3 months, average 6 months.
Starting at beginning of each
quarter possibility to stay longer
(as an affiliate startup)
San Francisco
@One Market
Plaza We share the space with some of the hottest startups (50+) in Silicon
Valley (Socialmedia.com,
WordPress, Tweetme, etc.)
The Gym’s Goals
66
Accelerate the startup
chances of success
• Hosting: office space
@One Market Plaza, Steuart
Tower 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)
Access Affiliates Channel
Individual Subscriptions
Building Success Stories
March 2011 Round of $500K with Angles (Piol, Magnocavallo)
April 2012 Enters 500Startups (+$65K)
September 2011 Second round of $1.1M funding (IAG, ZernikeMeta Ventures)
April 2011 - EXIT Merges with Avrio RMS Group (US)
March 2011 Wins Plug&Play Intl startup EXPO SV, raises $700K (Sep 2011)
Feb 2012 Wins Seedcamp Berlin, raises $1.350M (Seedcamp, industrial partner)
Feb 2012 $1.2M round with IAG, Innogest, Xcapital
Dec 2011 Wins LeWeb
win
ner
s
Feb 2012 $1M+ round with Filas Lazio and Angels Investors
Since Gym inception (Aug 2010): 18 startups incubated,
8 funded ($5M+), 2 exits 67
MtB Startup Summer School
68
SESSIONS
Three sessions are scheduled in the
next months
1. July 9th – July 27th
2. August 6th – August 24th
3. September 2nd – September 21st
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!
MtB Startup Summer School
69
Theoretic Learning: Introduction to the Silicon Valley
Ecosystem
Investment Outlook and Success
Drivers
Value Proposition
Presentation Skills
Business Development
Marketing & PR
Corporate Financial Reporting
Corporate Operation and Legal
Aspects
Intellectual Property Rights
Visa Options
The Exit Strategy
+ Networking Events
workshops
mentoring
weekly presentation
THANK YOU FOR YOUR
ATTENTION
Questions & Answers SOCIAL MEDIA:
Facebook:
Mind the Bridge - Connecting Talent
Twitter: MindTheBridge
Google+: Mind the Bridge Foundation
http://mindthebridge.blogspot.com
http://www.youtube.com/user/mindthebridgeTV
http://siliconvalley.corriere.it/
http://www.linkedin.com/groups?gid=2142980
WEBSITE
WWW.MINDTHEBRIDGE.ORG
WWW.SEEDQUEST.MINDTHEBRIDGE.ORG
WWW.SCHOOL.MINDTHEBRIDGE.ORG
WWW.GYMNASIUM.MINDTHEBRIDGE.ORG
CONTACTS
