add partners investing in future global leaders University of Exeter Lecture 28 November 2002
Agenda § § What does it take to start a company ? What is Venture Capital ? What do VCs do ? A peek into Add Partners – Strategy – Portfolio § VC returns § Q&A add partners investing in future global leaders
Components of a Startup Founders Financing add partners Product / Service that addresses a market need Staff / Management team investing in future global leaders
Financing Options § § § Personal funds of founder(s) Friends & Family Angel investors Bank loans Private equity / venture capital add partners investing in future global leaders
Venture Capital is … § money provided by professionals who invest alongside management in young rapidly growing companies that have the potential to develop into significant economic contributors § an important source of equity for startups § Examples of venture-backed companies: Intel, Compaq, Sun Microsystems, Ariba add partners investing in future global leaders
Venture capitalists generally … § Finance new and rapidly growing companies; § Purchase equity securities; § Assist in the development of new products and services; § Add value to the company through active participation; § Take higher risks with the expectation of higher rewards; § Have a long-term orientation add partners investing in future global leaders
Example Capitalisation Table Acme Inc Capitalisation Table 1 st Round Current Number of Shares Founder 1 Founder 2 Allocated ESOP Unallocated ESOP % Ownership Pre-Money Valuation Post-Money Valuation Share Price New Shares Fully Diluted Number of Shares Fully Diluted % Ownership 7, 200, 000 1, 200, 000 78. 3% 13. 0% 91. 3% 7, 200, 000 1, 200, 000 24. 2% 4. 0% 28. 2% 800, 000 8. 7% 2, 170, 000 800, 000 2, 170, 000 2. 7% 7. 3% 10. 0% 9, 200, 000 30. 9% 61. 8% Add Partners Investor B Investor C Investor D TOTAL Investment In $ 0. 0% 9, 200, 000 00 100. 0% 29, 770, 000 add partners 2, 000, 000 4, 000 2, 000 6, 000 0. 22 29, 770, 000 100. 0% investing in future global leaders
Why use Venture Capital ? Make a company grow bigger, faster than it otherwise would. § Combination of funding and added value § Price is reflective of both financial investment and added value investment add partners investing in future global leaders
Types of VCs § Investment Focus – generalists or specialists § Stage of Investments: – – Seed Early stage Expansion stage Late stage / pre-IPO § Others: – Acquisition, turnaround or recapitalisation – MBO / MBI / BIMBO add partners investing in future global leaders
Add Partners’ Strategy Early Stage • 1 st or 2 nd round • Revenue visibility Pan European • Focus on UK, Germany, France & Scandinavia Technology • Infrastructure enablers • Technology validated Hands On • Development capital of € 3 -5 million • Active investor • Global potential add partners investing in future global leaders
Adding Value to Future Global Leaders Financing Exposure • Media • Analysts • Conferences Partners • Technology leaders • Keiretsu • Universities add partners • Syndication partners • IPO • M&A Recruiting • Specialized headhunters • Pool of contacts Portfolio Company Customers • Technology leaders • Telcos, banks, insurance co’s investing in future global leaders
Anatomy of a Deal § What do we look for in a company ? – Size of market – Product / Technology – Strength of management team § Term sheet – Valuation – Investor rights § Exit Considerations – Trade sale – IPO add partners investing in future global leaders
Valuation Metric ? add partners investing in future global leaders
From start-up to IPO Nov 2001 Nov 2002 Nov 2004 May 2006 May 2008 Company Incorporated Incomplete team. Management Team strengthened. Product working. 2 -4 reference customers Turnover of € 500 k to € 1 m Business model well proven. Turnover of at least € 20 m in 2007. Product not yet proven (pre-beta) Raise € 4 m VC at € 2 m pre-money valuation Loss-making Turnover of € 4 m to € 6 m in 2005. Profitable. Loss making still. IPO – e. g. raise € 20 m to € 50 m at € 150 m pre. Raise € 15 m at € 35 m pre-money Raise € 6 m at € 12 m pre-money add partners investing in future global leaders
Current Portfolio Terahertz Photonics www. terahertz-photonics. com • Optical component and backplane materials • Lead 1 st Round, Aug 2000 • Co-investors: Scottish Equity Partners Freever Livingston, Scotland www. freever. com • Messaging platform technology & services Paris, France • Lead 2 nd Round, Sep 2000 • Co-investors: Net Partners, CDC Innovation, Apollo Invest XIAM www. xiam. com • Information routing technology • Lead 2 nd Round, Nov 2000 • Co-investors: Vertex, Delta Partners add partners Dublin, Ireland investing in future global leaders
Current Portfolio Surf. Kitchen www. surfkitchen. com • Portal infrastructure and applications software • Lead 1 st Round, Jan 2001 • Co-investors: n/a Scientific Systems www. scisys. com • Plasma measurement and control solutions • 2 nd Round, Sep 2001 • Co-investors: Vertex, ACT Partners Tempo. Soft Dublin, Ireland www. temposoft. com • Human Capital Management software • Lead 3 rd Round, Sep 2001 • Co-investors: Atlas Venture, CDC Innovation add partners Zurich, Switzerland Paris, France investing in future global leaders
Current Portfolio Proximion www. proximion. com • Optical components and subsystems • 2 nd Round, Sep 2001 • Co-investors: Celtic House, Innovations Kapital Phyworks Kista, Sweden www. phyworks-ic. com • Communications ICs • Lead 1 st Round, Feb 2002 • Co-investors: Atlas Venture, Prelude Polar. Lake www. polarlake. com • Transactional XML Processing Software • Lead 1 st Round, November 2002 • Co-investors: Delta Partners add partners Bristol, UK Dublin, Ireland investing in future global leaders
Venture Capital Returns (1) add partners investing in future global leaders
Venture Capital Returns (2) add partners investing in future global leaders
A Convergence of Favorable Factors Reshapes the European Technology Landscape Entrepreneurship on the rise Real Deals, Tornado Insider, serial entrepreneurs Success of technology clusters Cambridge, Thames Valley, Munich, Flanders, Kista Development of venture capital US VCs in Europe, European VCs more focused Local growth exchanges Restructuring of technology giants add partners Easdaq, Euro NM, Techmark & European NASDAQ Nokia, Ericsson, Alcatel, Siemens, Philips, ST Micro investing in future global leaders
Contact Details Maisy Ng Add Partners Limited 34 Dover Street London, W 1 S 4 NG UK Tel: +44 (0) 20 7399 2280 Fax: +44 (0) 20 7629 8398 www. addpartners. com add partners investing in future global leaders
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