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University of Liverpool Technology Showcase The VC Perspective Andrew Round SPARK Impact 2015
SPARK Ventures, and its Impact investing subsidiary SPARK Impact, is a leading venture capital company with a 14 -year track record of investing and developed companies from start-up to trade sale/IPO. It manages or has managed: • • • A listed investment company (SPARK Ventures plc); University Funds (Sulis Seedcorn Fund, Lachesis Fund, Isis College Funds) on behalf of leading UK universities including Oxford; Venture Capital Trusts; Institutional Funds (Quester Venture Partners); The North West Fund for Biomedical, a JEREMIE fund. Its current funds under management are ca. £ 150 M, although this varies due to the listed funds and exit events. 2
£ 500 k Seed Round 1998 £ 570 million IPO 2001 IRR 2183% “SPARK stood out from other VCs in their ability to understand the consumer gap in the market and the applications of technology to the problem. SPARK is a very supportive team, doesn't get rattled when the going gets tough, and adds value across the spectrum. ” Brent Hoberman, Founder Lastminute. com £ 700 k Seed Round 2000 £ 120 million Sale 2007 IRR 63% “SPARK saw exactly what we were trying to do when we simply had a business plan and lots of enthusiasm, they backed both. SPARK understands entrepreneurs because they are entrepreneurs. ” Caspar Hobbs, CEO Mergermarket £ 400 k Seed Round 2007 IRR 74% “SPARK’s magic formula is the belief and excitement they have for the business, combined with a gentle ‘hand on the tiller’ at precisely the right moment. ” Holly Tucker, CEO Notonthehighstreet. com £ 200 k Seed Round 2006 IRR 71% “SPARK’s magic formula is the belief and excitement they have for the business, combined with a gentle ‘hand on the tiller’ at precisely the right moment. ” Holly Tucker, CEO Notonthehighstreet. com 3
£ 900 k Seed Round 2003 IRR 314% £ 120 k Seed Round 2003 IRR 120% Participated in 2007 Series B IRR Confidential 4 Gly. Cart Biotechnology developed glycosylation technology for Monoclonal Antibody-based cancer therapies. Aquired by Roche for £ 160 m. Mirada software allowed the integration of X-ray, CT and MRI scans, allowing both anatomical and functional information to be displayed in a single image. Acquired by CTI Molecular Inc for $21. 7 m. Vivacta is an in vitro diagnostic company with novel technology enabling rapid, reliable and highly sensitive tests to be performed quantitatively at the point of care. Sold to Novartis for $90 m.
Natural Motion sold to Zynga for $527 M 5
Oxford Immunotec floated on NASDAQ 6
The VC Mission Is to make money • For its customers • For its fund managers • Within a defined timeframe (which is often quite short i. e. a few years)
VC Customers The only Customers that matter to the VC are the people who invested in the Fund. The companies in which the VC invests are the means to the end (making money) but The VC will not make money unless it invests in successful companies that make money.
So what are VCs looking for? • Solution to a market problem • Interesting business model • Unique Selling Points (USPs) • People NB not in order of priority, its all about the PEOPLE!
Solution to a market problem • What is the problem? • Who has the problem? • How bad is the problem? • Who’ll pay to overcome the problem? • How is the problem addressed currently? • What is your solution? • Why is it better than current solutions?
Interesting Business Model • What is your company going to do with the VCs money? • Where will the business be when you’ve spent the first tranche of VC money? • How much more money will the business need before it starts generating revenue? • How quickly will the VC see a return on its investment? • How much might that return be? • How realistic are the plans?
Interesting Business Model It always takes longer and costs more than first thought ! Where will the extra funding round come from • VC Reserves (current investors) • More than one VC cheque book? • Model may have to change (how can you keep going without cash) • Management must be flexible or will be replaced
So what are VCs looking for? USPs • What is the business going to sell? • Why would people want to buy it? • What’s to stop other people from copying it ? which is • The Intellectual Property piece of the jigsaw
Why does IP matter? • It’s a trade-able • It may be the only thing of value if the company fails • It’s the barrier to entry for competitors But • It’s expensive • It’s complicated • It’s adversarial
So what are VCs looking for? People • Have they a track record? • Are the inventors involved? • What are the management gaps (and can they be filled)? • Are core team willing to be helped? • What are their long term aspirations?
So what are VCs looking for? People • Good communication skills • VC will be on your side once investe • Functional board • What does the company need? • Now • Next year • The year after….
Take home message when talking to VCs • Understand our remit • Do your homework on the focus of our funds, does your company fit? • Have a clear, brief “pitch” of your opportunity • Know your Business model and USPs • Be prepared to compromise, take advice • Build the VC relationship to see you through the tough times • Accept that you will lose (some) control of your “baby” if VC invests in its growth
The VC perspective… Is to build successful companies, because they will generate lucrative exits !