Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
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Building a local Ecosystem by John Sechrest @sechrest
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Growing the Startup Ecosystem by growing stronger Entrepeneurs and stronger Angel Investors using the Angel Conference model
Transcript of Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
Building a local Ecosystemby John Sechrest
@sechrest
Mapping the Clusters
Including non-tech Clusters
Life cycle of a business
Outside Investment Stages
Angel Conference Model
20-60 companies apply 20-40 investors join LLC $5500 for each investor 10 weeks of due diligence Workshops for Angels and Entrepreneurs Large Final Event
How does Angel Investing work?
Company Pitches
Due Diligence Feedback
Detailed Event Program
Select an investment
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10
20
30
40
50
60
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Exit Multiple
Per
cent
of E
xits
Angel Investing Distribution of Returns
UK: Overall Multiple: 2.2X
US: Overall Multiple: 2.6X
0
10
20
30
40
50
60
< 1X 1X to 5X 5X to 10X 10X to 30X > 30X
Exit Multiples
Per
cent
of T
otal
Exi
tsDistribution of Returns by Venture Investment
Overall Multiple: 2.6X
Avg. Holding Period: 3.5 years
$20M
$40M
$60M
$80M
Blue bars: % of exits in that CategoryGreen Bars: $’s returned in that Category
Hold: 3.0 yrs.
Hold: 3.3 yrs.
Hold: 4.6 yrs.
Hold: 4.9 yrs. Hold: 6.0 yrs.
0
10
20
30
40
50
60
70
80
90
0
100
200
300
400
500
600
Series1 Series2Revenue in (current portfolio): $84.6M +47% from 2011
FTE’s in (current portfolio): 535 +16%
Rev/FTE (current portfolio): $158K +27%
Raised $7.1M $88M cumulative
Economic Impact of Angel Oregon Alumni
As a reminder: Angel Investor Performance Project
More than half fail to return capital
Wins take longer to exit than losses
“Asset Class” return of approx 2.6X
10% of exits = 90% of cash returned
www.AngelResourceInstitute.org
Estimated Multiple of AO as a Portfolio
Multiple by year, if portfolio were cut off after that year
Assumes even investment in every presenting company
Underspecified Terms/Dilution as an imaginary portfolio
2006 2007 2008 2009 2010 2012 AIPP0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Series4Series3Series2Series1
5 Types of Angel Groups
Angel Networks 98% Managed Angel
Funds - Founders Coop
Passive Angel Funds – Side car funds
Active Angel Funds – Oregon Angel Fund
Angel Conference
Cities with Angel Conferences
Portland ( Since 2003 ) Bend Corvallis/Eugene ( Since 2009 ) The Gorge Medford Seattle ( Since 2012 )
WWW.SEATTLEANGEL.COM
Where are they now?Tracking the Angel Oregon
Alumni
Willamette University Angel Fund
6/2/13
Median Early Stage Pre-Money Valuation
*
*Including all rounds with angel groups before Series A
$2.5MMedian
$1.5M1st Quartile
$3.7M3rd Quartile
$0.11M
$6.6M
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10
20
30
40
50
60
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Exit Multiple
Per
cent
of E
xits
Angel Investing Distribution of Returns
UK: Overall Multiple: 2.2X
US: Overall Multiple: 2.6X
0
10
20
30
40
50
60
< 1X 1X to 5X 5X to 10X 10X to 30X > 30X
Exit Multiples
Per
cent
of T
otal
Exi
tsDistribution of Returns by Venture Investment
Overall Multiple: 2.6X
Avg. Holding Period: 3.5 years
$20M
$40M
$60M
$80M
Blue bars: % of exits in that CategoryGreen Bars: $’s returned in that Category
Hold: 3.0 yrs.
Hold: 3.3 yrs.
Hold: 4.6 yrs.
Hold: 4.9 yrs. Hold: 6.0 yrs.
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10
20
30
40
50
60
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Exit Multiple
Per
cent
of E
xits
2X better multiple for 20+ due
diligence
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10
20
30
40
50
60
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Exit Multiple
Per
cent
of E
xits
60% better multiple for deals related to industry
expertise
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10
20
30
40
50
60
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Exit Multiple
Per
cent
of E
xits
Follow-On Investment from Same Angel Investor
3X better multiple in dealswhere the investor did not make
a follow-on investment.
30% of deals had follow on investments.
6/2/13
Diminishing Marginal Returns to Raising Capital
6/2/13
Diminishing Returns to Invested Capital
Private Acquisition Size from ‘96 to ‘06
Only 15%> $50M
… But Trending Up at Year EndMedian Angel Round Size Reaches Five Quarter High in Q4 2012
Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012$0.00
$0.50
$1.00
$1.50
Series1Series2
*
*Angel rounds include angels & angel groups only
$950K $950K $900K
$1.25M
$850K
$500K $550K $550K$620K $690K
$M
Median Early Stage Pre-Money Valuation Stays the Same in 2012
*
*Including all rounds with angel groups before Series A
$2.5MMedian
$1.5M1st Quartile
$3.7M3rd Quartile
$0.11M
$6.6M
