“Investing in tomorrow’s business”

Videesha Kunkulagunta, Principal @justvideesha

o  Investor at Berlin based Redstone Digital GmbH (www.redstone.vc) o  Digital Policy Fellow at the German Marshall Fund of the United States o  Previously: PROfounders Capital (London), EIR @Telco, ex-generalist banker, internal operations o  Third culture kid lived in Singapore, London and now Berlin o  Design fan & travel junkie o  Mentor: Seedcamp, Techstars, Axel Springer Plug&Play, Startup Bootcamp

Brief Intro

From the 1960s: A “traditional” model of Venture Capital

Partners Non-Partners

Analyst Associate Principal

Venture Partner

The “traditional” Venture Capital firm

General Partner

General Partner

Examples:

§  Private Investors §  Fund of Funds §  Endowments §  Family Offices §  Foundations §  Pension Funds

“Partners” pitch to Limited Partners (LPs)

#1 Return on investment to LPs

§  Taking risk §  Brand signal: marketing §  Partner experience §  Partner network

Promise “Value Add”

Fee Structure: §  2% - management fee §  20% - carry (net value

created)

Earn fees - The “2 plus 20”

Example: §  Fund Size: EUR 100m §  Term: 10 years §  Investable capital: EUR

80m §  Fees: EUR 20m

Get to work – Venture Capital a “relationship-driven” business

Source: Harvard Business Review, 1998

70% involves “hands on” Portfolio management

Fund Returns

Typical Returns Profile: §  30% to 40% fail §  30% - 40% return the

investment §  10%-20% produce returns

“The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined. “ – Peter Thiel

“Traditional” Venture Capital Examples

What it means though…

“Venture Capital is un-scalable. Production equals the time each partner has” – Bill Gurley, Benchmark Capital

So what’s changed?

Drivers of change – It’s easier to start a company

Hardware

Internet

Tools/Services

Resources/Experience

Price

Number of companies

Low

High

A re-invention of pre-seed/seed stage investment

Main growing trends: (i)  Micro-VCs (ii)  Accelerators (iii)  Crowd-funding

(i) Rise of Micro-VCs – Will there be a “correction”?

Source: CBInsights, 2015

“Micro-VC” Definition: Raised or raising less than USD/EUR/GBP 100m

(ii) Accelerators – Room for growth?

Not all

about

tech

Only 0.2%

accelerated

A “platform” for first time entrepreneurs

Source: CBInsights, Alchemist accelerator

(iii) Crowdfunding Platforms – Filling a debt/social capital gap?

73%

On the rise

Source: Crowdfunder, Massolution Report, 2015

What’s next?

Venture Capital ripe for re-invention

New VC models at every stage

Strong Corporate Participation

Increased Diversity

Increased LPs Direct/Co- Investing

Internationalisation of VCs

Further Technical Enablement

Experimentation with traditional fund structures e.g. no fee.

Traditional corporation has tech embedded and looks at non strategic areas.

Different skill sets, race, gender etc.

LPs are getting more sophisticated.

Great companies are being built everywhere

Role of the VC changes.

Increased Specialisation Funding more non-traditional categories e.g. food, hardware, robotics.

(i) Independent Start-Up Studios – “company builders” plus fund

20

Core Elements: §  Create companies from an idea §  Create several companies at once §  Shared resources for companies

Examples:

E-commerce (Germany)

Fin-Tech (Germany)

Sector - agnostic (UK)

(ii) Our model: Assist LPs “Venture Capital as a Service”

Professional and easy investing

Control over Investments

Corporate VC

Corporate Accelerator

Corporate Incubator

Investment in VC Funds

Investment in Incubators

Investment in Accelerator

(iii) Other emergent trends

§  Increasing Venture Capital fund IPOs – as portfolio companies stay private longer §  More private equity funds launch dedicated venture funds §  Private equity funds invest earlier - the growth stage EUR 10m – EUR 50m investments

§  Corporate labs and funds will continue to launch

Thank You

Any Questions?

@justvideesha

Appendix

Source: Kmuehmel

Venture Capital Only one source of financing

Drink champagne What my parents think I do What my friends think I do What society thinks I do

What entrepreneurs think I do What I think I do What I really do

Appendix