Maria Dramalioti Taylor - 10 non-textbook lessons for entrepreneurs copy

Fundraising in Europe: 10 non-textbook lessons for entrepreneurs

Maria Dramalioti-Taylor x.Million Capital Ventures

[email protected] www.dramalioti-taylor.org

Mobile Monday, Athens 16.01.12

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Agenda

•  Venture/Angel Capital: –  How to decide if you need it –  How to navigate the VC scene

•  Raising Capital in EU vs US: –  What is really going on?

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x.Million: news kids on the block

What? How much? When & where?

€50k €1m

Other

Retail

MOB & WEB

Seed €100k

STARTUP & SEED

EUROPE

€250k € 500k

How we work: -  Lean, K.I.S.S. -  Back exceptionally talented people -  Look beyond web 2.0

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Portfolio highlights

2012 Fund I > €10M

2011 Pilot fund: €10M

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Agenda



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Large potential market

Original

idea

Best-in-market founding team

ENTREPRENEUR HAS… …money to move

*FASTER* than OWN capital allows

Hiring Faster product development Infrastructure Commercialisation Geographical expansion

#1 – Sell shares only when you need speed

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2

3

…intensifying competition

THEREFORE FACES…

…AND NEEDS…

…SO SELLS shares to to pay for..

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THE STARTUP FUNDING SPECTRUM

+

NET

CASH

PO

SITI

ON

Closed

ALPHA

Public

BETA

SCALE - STAGE

1st Revenue

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#2- Illuminating but not necessarily true (John Kay)

+

NET

CASH

PO

SITI

ON

Closed

ALPHA

Public

BETA

SCALE - STAGE

1st Revenue

Venture Debt

Grants Bootstrapping Family

Angel Capital Venture Capital Series A (€2m-€20m)

Venture Capital Series B,C,D (€5m-€20m)

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DO IT LIKE A JACANA

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#3 – Decode the Business Angels

•  Angels invests own money

•  Small amounts, early, at low valuation –  €10k-€250k at valuation €0.5-€2m

•  Exit: –  sell at €5-10m valuation & make 2-5x

–  bring VCs, get diluted (may) make 10x

•  FOCUS ON: getting capital back

Angels are like women: temperamental & (mostly) irreplaceable

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#4 – Decode the Venture Capital business

•  VCs raise a fund every 2-4 years –  Invest other people’s

money

•  Invest the funds over 5 years •  Exit (sell) via M&A or IPO •  They take:

–  2.5% pa management fee on funds managed

–  Carry = 20% x [Total Return at Exit] – [Total Amount Invested]

•  FOCUS ON: returning 3x-5x

capital back to investors in 4Y-5Y

VCs run a business. They make it sound like Black Magic. IT IS NOT.

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TEST: Can you see the (main) difference?

10x 9%

1x-5x 35%

Loose your shirt 56%

10x 10%

1x-2x 20%

3x-5x 30%

Write downs 40%

10x 10%

1x-2x 30%

3x-5x 10%

Loose your shirt 50%

Ca. 2,000 ANGEL UK investments

Typical VC portfolio

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10x 9%

1x-5x 35%

56%

Fund Investors share of profits Angel Maria

Angel George

Angel Dimitris

TEST: Can you see the (main) difference?

1x-2x 20%

3x-5x 30%

10x 10%

1x-2x 30%

3x-5x 10%

Write downs 50%

Ca. 2,000 ANGEL UK investments

Typical VC portfolio

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#5 – γνῶθι..τω επινδυτή

www. http://www.instigatorblog.com

Angels may not let you fail, VCs may give you a big success

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#6 - Mind the AC/VC disconnect

VC ANGEL CAPITAL ANGE

L /V

C DI

SCON

NECT

£500k £2m

+

Closed

ALPHA

Public

BETA

SCALE - STAGE

1st Revenue

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NOTE: The blurring of AC/VC in the US

www.dramalioti-taylor.org

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#7 –A new taxonomy of investors

Venture Accelerators Accelerator academy, Seedcamp, Astia, Ycombinator, 500hats, Springboard… Super Angels high batting avg. Angellab, Cherry Coutou, Husein Kanji Lean VCs treats every entrepreneur as an individual x.Million, pro-founders…

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#8 - Connect the fundraising dots

Fight the information asymmetry Sources www.thefunded.com www.fredestin.com Angellist www.Ventureshacks.com

“what they offer” vs. “what you need” –  Initial capital per idea –  Sector focus: do they

understand it? –  Risk tolerance: can they

deal with uncertainty? –  Compatibility: will their

pride suffer if you fail? –  Terms (& strings attached)

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Agenda



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#9 - Bust the US VC myth

US

0.15% GDP

EU

5.8x 0.026% GDP

Investments per capital in US is 5.8x higher than EU

US VC is big Investment is at a high •  OVERALL VC INVESTMENTS

–  $7.5 bn, 966 deals, 19% up –  on track to $26 bn & 6th

most active year

•  INTERNET AT 10-YEAR HIGH –  $2.3 bn (72% up from Q1) 275

deals (46% up from Q1) –  5/10 top deals in Internet

Data: US, Q2/11

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It is also …bubbly

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US VC fundraising

lowest for 15 years

Data: Q2/2011, US

… VCs invest more dollars than raising…level of investment

unsustainable without exits and, subsequently, fundraising…

NVCA, 2011

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IF VIX >30 THEN IPOs drop dramatically

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Exits of the same order of magnitude need only ½ the VC capital in EU

EU =

1/2

x U

SA

IF US VC is big

THEN EU VC

is effective

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US IT is big EU feeds it Global tech industry is dominated by US companies

EU companies bought by US tech companies using offshore cash

Source: Hussein Kanji,2011

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#10 – Focus on the social graph

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85% of worlds population covered by wireless signals vs 80% of world population connected to the electrical grid


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#10 – Learn to read the VC barometer

stage-agnostic - likely bias due to large follow on rounds

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Post-bubble EU VC industry: survival of the fittest

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LESSON 9: Exploit geo-differences, create arbitrage

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IRR %

2x 3x 4x 5x 6x 8x 10x

2Y 41 73 100 124 145 183 216

3Y 26 44 59 71 82 100 115

4Y 19 32 41 49 56 68 78

5Y 15 25 32 38 43 52 58

6Y 12 20 26 31 35 41 47

7Y 10 17 22 26 29 35 39

8Y 9 15 19 22 25 30 33

9Y 8 13 17 20 22 26 29

10Y 7 12 15 17 20 23 26

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Time to Exit: Angels vs VCs

http://www.techvibes.com/blog/what-happens-to-exits-when-vcs-invest

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Milestones & Rounds

http://vcperspectives.com/wordpress/page/3/

ANGEL ACTIVITY: US vs.UK

US angel activity EU angel activity

0.8x 0.3x

ANGEL ACTIVITY: US vs.UK

US angel activity EU angel activity

6x

2.5x

HNWI Population by Country, 2010

Maria Dramalioti Taylor - 10 non-textbook lessons for entrepreneurs copy

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