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Transcript of Nicolas Berg_venture ideas eth nov 2013
How a startup should deal with investors
Venture ideas @ETH – 7th November 2013
Redalpine Venture Partners Ltd, Pfingstweidstrasse 60, 8005 Zurich, Switzerland, +41 44 271 15 30, www.redalpine.com
early stage investments by entrepreneurs
NICOLAS BERG
Agenda
1. ABOUT me, Redalpine Venture Partners & Eco system of startups & venture investors
2. RESEARCH everything about your potential investors!
3. WHY do you go for investors?
4. Why should an investor invest in YOUR startup?
5. What MOTIVATES an investor & how does he select deals?
6. HOW do I identify, approach, pitch for & negotiate with investors?
7. How do I treat investors AFTER I got money?
Copyright Redalpine Venture Partners AG, Switzerland 2
Speaker: Nicolas Berg
Serial entrepreneur with 10 start-ups (1984-2011) - e.g. founder of Borsalino 1998, sold 2000 at 20x multiple to Ringier- iCEO Sharoo June-September 2013
Full time angel investor in 16 start-ups (2000-2006) - e.g. Investor & Country Manager XING 2004-2010
IPO at 30x multiple 2006 Partner at Redalpine Venture Partners (since 2007)
- Built a portfolio of 20 European high innovation start-ups with Redalpine Capital I & II
- 5 portfolio companies ranked among 13 Swiss top start-ups in 2011
Lecturer, journalist and jury member- Teaching students & entrepreneurs at venturelab.ch since 2006- Jury member of business plan & seed money contests (Venture kick,
SVC, Suvorov)
Copyright Redalpine Venture Partners AG, Switzerland 3
Redalpine in a nutshell
Manages Redalpine I CHF 20M micro VC fund (2007-2015) Manages Redalpine II CHF 30M* micro VC fund (2012-2020)
- Seed/early-stage in continental Europe (* aims at CHF 60M in 2nd closing)
Most innovative sectors in Europe- Technology/New Media and Life Science
Fund thesis- European seed/early stage offers potential for superior exit multiples- Best choice in Switzerland – leading accelerator in Berlin
Convincing track-record
Copyright Redalpine Venture Partners AG, Switzerland 4
Intro
A typical successful Top-10-Swiss-Startup 2013 2/3 from Zurich or Lausanne 20 out of 26 founders were not Swiss! 80% ICT, Life Science or Electronics 2/3 with links to ETH, UZH or EPFL
Source: Top 100 Swiss Startups
Copyright Redalpine Venture Partners AG, Switzerland 5
Intro
A typical successful Top-10-Swiss-Startup 2013 2/3 from Zurich or Lausanne 20 out of 26 founders were not Swiss! 80% ICT, Life Science or Electronics 2/3 with links to ETH, UZH or EPFL
Source: Top 100 Swiss Startups
Copyright Redalpine Venture Partners AG, Switzerland 6
Numbers
8b People400m European100m DACH (German speaking Europe)8m Swiss
What’s ambitious & successful?B2C/P2P: 1% of above numbers x CHF 100 = ?
8m Swiss200’000 Swiss millionaires2000 Active angel investors40 professional full-time angels10 really successful angels5 deal proposals per day 5 deals done per year = <0.5% probability for each deal proposal
Copyright Redalpine Venture Partners AG, Switzerland 7
Great job creation impact of startups
Copyright Redalpine Venture Partners AG, Switzerland 9
Jobs
4m
3m
2m
1m
0
- 1m
- 2m
- 3m
- 4m
- 5m
Net job change startups <5 yrsNet job change companies >5 yrs
US start-ups create 3 million jobs per year, existing firms slash 1 million jobs (Kauffman Foundation
Source: Kaufmann Foundation, Business Dynamics Statistics, Tim Kane
US start-ups create 3 million jobs per year
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Spin-offs by international top-10-university
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① Most Swiss university spin-offs by ETH, EPFL, UZH
② Number of spin-offs independent from economic sentiment (e.g. 2008/09)
Top exits of Swiss ICT startups
Copyright Redalpine Venture Partners AG, Switzerland 11
1998 – 2008 (10 years)
① Scout24/Human Line Ringier② Auktion24 Ricardo③ Comparis Investors④ Borsalino Ringier⑤ Kelkoo Yahoo⑥ Silverwire HP⑦ Oanda Index Ventures⑧ Search.ch Post Tamedia⑨ LeShop Bon appétit⑩ Mediastreams Microsoft⑪ LeShop Migros⑫ Endoxon Google⑬ Jobs.ch Tiger Fund⑭ Green TIC
2009 – 2012 (4 years)① Wuala LaCie② Svox Nuance③ DeinDeal Ringier④ Doodle Tamedia⑤ Liberovision Vizrt⑥ Procedural Esri⑦ Trigami eBuzzing⑧ Fashionfriends Tamedia⑨ Borsalino/Cash Bankzwei⑩ Umantis Haufe⑪ Jobs.ch Ringier/Tamedia⑫ Spontacts Scout⑬ Digitec Migros⑭ Housetrip Index⑮ NetBreeze Microsoft
Top exits of Swiss life science startups
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1999-2004 (5 years)
① Actelion IPO
② Prionics 30x pay-back
③ Axovan Actelion
④ Jomed IPO
2005 – 2008 (4 years)
⑤ Arpida IPO
⑥ Glycart Roche ($200m)
⑦ Serono Merck (€10.2b)
⑧ Speedel Novartis ($880m)
2009 – 2013 (4 years)
① Esbatech Alcon ($589m)
② Neurimmune Biogen
③ Levitronix Thoratec
④ Okairos GSK
⑤ Glycovaxyn Investors
⑥ Endosense St. Jude Medical
⑦ Neocutis Merz Pharma
About 2000 Swiss early-stage investors
Copyright Redalpine Venture Partners AG, Switzerland 13
ICT: Early-stage VCs, angels & founders with recent top exit
① Index Ventures
② VI Partners
③ Brains-to-ventures
④ Redalpine
⑤ Creathor
⑥ Beat Schillig
⑦ Peter Schüpbach
⑧ Klaus Hommels
⑨ Oliver Jung
⑩ Roland Zeller (…)
Live Science: Early-stage VCs, angels& founders with recent top exit
① Index Ventures
② VI Partners
③ Redalpine
④ Nexgen
⑤ NVF
⑥ BioBAC Basel
⑦ Bruno Oesch
⑧ Peter Pfister
⑨ Jürg Geigy
⑩ George Haas (…)
Opportunities & risks
Copyright Redalpine Venture Partners AG, Switzerland 15
①Early-stage angel investments deliver 27% IRR
- 8 studies in US/UK on historical return in business angel markets, RSCM 2010
②But <10% of virtual portfolio (>6000) delivered >70% of returns
③«Average» investor got 27% IRR, but median investor looses money
Why do you go for investors?
Secure innovation lead/USP Unlock maximum market potential Gain experience & network Probably better exit Share risk (upside & downside)
Best startups are sourced by best investors Best startups approach best investors
Alternatives Grow slower loose lead Self financed independent Work capital financed by customers, bank credit or leasing
Copyright Redalpine Venture Partners AG, Switzerland 18
Why investors go for startups
Adrenalin
Being useful providing network & know-how
High profits possible
High-innovation startups as an asset class provide 25% IRR
But majority of investors (median) looses money
Alternatives
Consume (Villa, yacht, golf, hotels, private jet)
Classic assets (Listed equity, funds, bonds, money market)
Alternative assets (real estate, commodities, gold, hedge fund)
Copyright Redalpine Venture Partners AG, Switzerland 19
What drives the investor (motivation)
Profit opportunity
- High-innovation startups as an asset class provide 27% IRR,but majority of investors (median) looses money!
Adrenaline
Being active & useful
- Network- Knowledge
Alternatives Consume (Villa, yacht, golf, hotels, private jet) Classic assets (Listed equity, funds, bonds, money market) Alternative assets (real estate, commodities, gold, hedge fund)
Copyright Redalpine Venture Partners AG, Switzerland 20
What investors are looking for (criteria)
Team, team, team- At least 2 extraordinary personalities that can
IMPLEMENT milestones of next 2 years Disruptive idea, technology or business model Attractive market 10% probability for 30x exit multiple
Copyright Redalpine Venture Partners AG, Switzerland 21
Founder types
Which founder types investors like or don’t like …
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Close to reality distortion, psycho
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Selectively focused, autistic
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Stubborn and autistic
Resistant to advice – or asking mom, dad and grandma till she gets the answer she wants
Says “smart investor” but thinks “just give me the money for MY company, sugar daddy!”
Copyright Redalpine Venture Partners AG, Switzerland 25
Naïve model pupil
Reacts and obeys to any advice naïve, model pupil or weather vane Definitely not an entrepreneur!
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Selectively honest, dishonest
Communicates only good news instantly Not honest Secret agenda
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Con artist, scammer, manic
Communicates only good news instantly Not honest Dubious genius
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Egotist, no team player
Poor alpha animal, can’t delegate Never recruits strong team member Non empathic, poor motivator
Copyright Redalpine Venture Partners AG, Switzerland 29
Money driven, not by results
Exit, salary, participation and bonus in focus
Vision, cause and results only second priority
Self marketer
Copyright Redalpine Venture Partners AG, Switzerland 30
What many investors like or dislike
I follow the lead wolf (brand name) in my investor network, and I avoid startups in fundraising mode since >9 months
I go for the hockey stick ORI don’t want to loose any investment
As soon as there is a gap to the plan I quit ORas soon as there is good news I invest more
If there are no news for several months I expect bad news ORIf I get good & bad news instantly my confidence rises
Founders that follow each of my advises have no clew ORfounders that never listen are autistic
Good people help the weak and poor OR professional investors focus on strongest portfolio companiesCopyright Redalpine Venture Partners AG, Switzerland 31
Identify best investors for your startup
Best exits in your sector last 5 years? Identify investors and founders of those startups!
Which top investors are close to me (1-2h by car/plane) and have an affinity to my market and idea?
Which investors have resources just now? (time, money; stage ofinvestment portfolio, last closing or exit)
Check references on investors contacting portfolio companies
Only best investors are good enough for ambitious startups
Ambition level of founder and investor must match (1b, 100m, 10m exit goal?)
Always pitch for & negotiate with 2-4 alternative investors Copyright Redalpine Venture Partners AG, Switzerland 33
Examples for good early stage VCs
Switzerland Index Ventures, Geneva Brains-to-ventures, St. Gallen Redalpine Venture Partners, Zürich VI Partners, Zug/Morges Creathor, Zürich/Germany Innovationsstiftung SZKB, Schwyz
European early-stage VCs Atomico, HTGF, Earlybird, Sofinnova, Eden, Partec,
Wellington …
Superangels & Fresh Angels (entrepreneurs with a good exit)
Copyright Redalpine Venture Partners AG, Switzerland 35
How do I approach investors
Tailor made approach, do research first (portfolio CEO’s) Identify door openers in your network to target
- Portfolio companies- Co-Investors- Lawyer, Banker, Incubator, University tech transfer etc.
Phone, Email, Youtube, Powerpoint, Word, Excel… Find out best timing for first contact Never look desperate
- If it hurries it’s often not interesting (except if top investors already arelined up with subscriptions)
Good investors want to discover startups «Didn’t answer my mail» doesn’t mean noCopyright Redalpine Venture Partners AG, Switzerland 36
How do I pitch for investors
Be extremely well prepared (exercise 30x, get feedback!) Enthusiastic, relaxed, competent Simple, simple, simple – reduced to the MAX Only target is to achieve a next meeting
Switzerland: Benefit of Venturelab, CTI coaching, Startup Weekend, actor school, CTI-invest, Venturekick …
Pitch: 10-12 Slides 5-10 Min not smaller than Font 24
Copyright Redalpine Venture Partners AG, Switzerland 37
How do I negotiate with investors
Agile, not stubborn and not soft
Learn venture terms before you negotiate- Tag along, ABV, pre money, liquidation preference, anti dilution,
options…
- Choose experienced M&A lawyer with startup experience in your sector
Always tell the truth, but don’t tell everything if not necessary
Show self-confidence, always organize more than one option
Investor must see that founder is hurt hardest if there is no success
Investor must feel that founders will fight 100% to succeedCopyright Redalpine Venture Partners AG, Switzerland 38
How do I treat my investors?
Honestly
Pro-actively information information information!
- Communicate good news instantly
- Bad news as well!
Ask actively & regulary for advice & network
Always remember who is the owner of the company:All shareholders, not only you!
Copyright Redalpine Venture Partners AG, Switzerland 39
Thank you
Questions?
Remarks?
Read!
Guy Kawasaki: The Art of Start
Amis: Winning Angels
Slides:
Slideshare.net/nicoberg (Nicolas Berg)
Copyright Redalpine Venture Partners AG, Switzerland 40
Bonus slides for investors
Copyright Redalpine Venture Partners AG, Switzerland 41
①Scouting talents delivers better multiples than acquiring stars
②Pro-active investors know where the puck is going to be
③PE best asset class 10 out of 20 years (and worst 4 out of 20)
④ PE best in class if combined with commodities and healthy bonds* (* = bonds from governments & corporations with little debt)
Grow big stars by scouting many talents
Copyright Redalpine Venture Partners AG, Switzerland 42
Analogue to a football team you have 2 options:
invest $100m to buy a star (Bale, Messi or Ronaldo) try to earn $110m extra with him (1.1x) or
invest $5m to scout & train 20 young talents sell best one (Doumbia, Shaquiri) for $20m (4x)
good Micro VCs prefer a movie rather than a photo (= 3 pitches)
Invest pro-active – don’t follow the crowd
An ice hockey player can either: skate to the place where the puck is now – as most
players – or to the place where the puck is going to be (Wayne Gretzky)
Source: http://www.brainyquote.com/quotes/authors/w/wayne_gretzky.html
Copyright Redalpine Venture Partners AG, Switzerland 43
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Private equity best in class – sometimes
Source: UBS QIS
Equally weighted Portfolio
Liquidity USD
Bonds USD
Corporate Bonds USD
Equitiy Developed Countries
Hedge Funds
Real Estate USA
Commodities
Private Equity USA
Returns year by year1990 1992 1993 1994 1999 2000 2001 2002 2004 2005 2006 2007 2008 2010
29.1% 48.3% 14.2% 31.5% 5.3% 60.6% 36.8% 54.0% 48.5% 40.9% 49.7% 13.4% 32.1% 45.5% 32.2% 25.6% 36.4% 32.7% 6.6% 41.9% 28.3%
17.5% 41.0% 12.3% 26.3% 5.1% 22.2% 34.4% 18.6% 24.3% 34.6% 27.3% 10.3% 11.6% 36.4% 17.3% 12.9% 22.8% 9.0% 4.1% 30.0% 23.0%
9.0% 19.4% 9.7% 22.5% 4.4% 20.7% 33.9% 16.2% 8.7% 26.5% 11.3% 9.3% 10.1% 33.1% 15.6% 9.5% 20.1% 8.3% -4.9% 26.1% 11.9%
8.8% 18.5% 8.7% 14.0% 3.1% 20.6% 17.8% 15.8% 8.6% 24.9% 9.1% 4.9% 3.5% 20.7% 14.7% 8.5% 10.4% 7.4% -23.3% 19.7% 11.8%
7.1% 18.3% 8.2% 13.0% 1.7% 20.3% 14.4% 13.7% 5.8% 14.9% 8.7% 2.8% 2.0% 19.8% 11.8% 7.8% 9.3% 6.6% -25.4% 18.7% 9.0%
1.5% 16.7% 7.1% 12.2% 1.4% 16.6% 13.5% 10.2% 2.9% 5.6% 6.8% -3.9% 1.0% 12.0% 5.4% 3.4% 5.2% 5.7% -38.4% 13.5% 9.0%
-4.7% 14.5% 4.4% 10.3% -2.4% 12.1% 5.8% 8.2% -5.1% -0.7% 4.1% -16.8% 0.2% 8.2% 3.1% 2.7% 4.3% 4.6% -40.7% 13.4% 5.2%
-17.0% 7.1% 4.2% 3.5% -3.5% 11.1% 4.0% 6.0% -17.8% -2.0% -13.2% -18.0% -19.9% 3.2% 2.7% 2.0% 4.3% 4.2% -46.5% 3.3% 5.1%
-34.2% -6.1% -5.2% -12.3% -3.9% 6.5% 3.3% -14.1% -35.7% -6.0% -18.6% -31.9% -32.5% 1.3% 1.5% 1.7% -15.1% -17.1% -50.7% 1.4% 0.5%
BEST ASSET CLASSHighest return that year
WORST ASSET CLASS Lowest return that year
Nur zur Veranschaulichung. Die Marktbedingungen können sich ändern und die Renditen schwanken. Bitte lesen Sie die Erklärungen unter «Simulierte historische Performance» am Ende dieses Dokuments. Bitte beachten Sie, dass diese Seite immer in Verbindung mit den Risikoinformationen und Begriffserklärungen im Anhang zu dieser Präsentation zu lesen ist.
1991 1995 1996 1997 1998 2003 2009
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PE always best in class – if combinedGo for a mix with low correlation and high returns: Combine PE with commodities, corporate bonds or real estate
Source: UBS WMR; generated by QIS
Private Equity
Real Estate (REITS)
Hedge Funds
Commodities
Equity MSCI World
Bonds (USD)
Bon
ds (
US
D)
Com
mod
ities
Hed
ge F
unds
Re
al E
sta
te R
EIT
S
Pri
vate
Eq
uit
y
Eq
uity
MS
CI
Wo
rld
0.12 0.18
0.18
0.12
0.27
0.27
0.72 1.00
1.00
1.00
1.00
1.00
1.00
0.72
0.42
0.42
0.160.18-0.07 0.04
0.480.09 0.16 0.16
0.160.040.28
0.18
0.08
0.08
0.09-0.07 0.28
0.48 0.30
0.30
«You miss 100% of the shots you don't take.»
Wayne Gretzky, Hockey legend
«To evaluate the potential of a new idea requires a clear understanding of the market dynamics. We trust in the team of Redalpine to master this challenge successfully.»
Jürg Staub, Reichmuth & Co
www.redalpine.com
www.facebook.com/redalpine
www.twitter.com/redalpine
Redalpine Venture Partners AGPfingstweidstrasse 60CH-8005 ZürichSwitzerland
phone +41 44 271 15 30