Venture capital презентация

Content
I. Not all the money is the same
II. Credits
III. Formal and informal vc
III. Formal VC
IV. Informal BA

I « Not all the money is the same »

Equity

Valley of death

Definitions
Private equity = equity capital to enterprises not quoted on a stock market
Venture capital = equity investments made for the launch, early development or expansion of a business
Seed money = financing provided to research, assess and develop an initial concept before a business has reached the start-up phase
Start-up = financing provided for product development and initial marketing

Definitions
Expansion = financing provided for the growth and expansion of a company which is breaking even or trading profitably
Replacement capital = purchase of existing shares in a company from another private equity investment organization, or from (an)other shareholder(s)
Buy-out = management buy-out/-in : financing to enable current operating management and investors to acquire an existing product line or business

CAPITAL
NEEDS
TIME
High
Risk
Low
Risk
Growth
Idea
Development
Business
Creation
Family
Seed
Capital
Business
Angels
Early Stage
Finance
Development
Finance
Going Public: IPO
Development Agencies
Bank Finance
Business
Development
Industrial Production
Large Company
SME
SME Financing Needs Over Time

Marktstandaarden

Financing of a company: concepts
bank
Venture capitalist
Business angel
entrepreneur
concept
prototype
Product
introduction
marketing
Product
suppor
regional
expansion
sales
time
expansion
Start-up
Seed
money
Sweat
equity
know how
time
research
engineering
prototype
1st marketing plan
proof of concept
product development
business plan
production prototype
marketing plan
1st personnel
start marketing
management team
market studies
working
capital
CF

Composition of investments
Source: EIBIS (2019)

II. Venture capital
Credits versus venture capital

III. Formal versus informal

General Partners
$
20%
“Carry”
$
1.5-3% Fee
Portfolio Company
Portfolio Company
Portfolio Company
Portfolio Company
Portfolio Company
new
Follow-On
Venture
Fund
Follow-On
new
Follow-On
new
Follow-On
new
new
Follow-On
$
$
$
$
$
$
$
$
$
$
Limited Partners

VC: AGENCY PROBLEM
AND THE CARRIED INTREST
Enterprise
« Costs » Own funds
Intangibles - x % founder - y % VC
VC fund
Investees Investors
- Start-ups -banks
-Early Stage -pens.
-Scale-up -public
DILUTIE
DUE DILIGENCE
%
€

Flows of Risk Capital
Investors
-Provide Capital
Money
Limited partners:
-Pension Funds
-Sovereign Wealth Funds
-Individuals
-Corporations
-Insurance Corps
-Endowments
-Trusts
-Governments
State and Foreign
Target:
Return of Principal
Plus multiple of capital
Venture Capital Firms
-Identify and screen ops
-Transact deals
-Monitor progress
-Raise additional funds
Portfolio companies
-Spend money
-Make progress (?)
Gatekeepers-1% annual fee
Money
Entrepreneurs
Opportunity
-Recognition
-Creation
-Execution
Value creation
Harvest
2-3% annual fees
General Partners
~ 20% of capital gain
IPOs, mergers,
alliances
Equity

INVESTORS

Investors by stage

Fundraising – Investment - Divestment

Where does the money comes from?

Success is easier in US
[e-mail]

EXITROUTES

What does a vc want?
Management capacity and track record
Market and growth potential
Market niche
Return (liquidity/exit)
Market is more important than technology

Due diligence (analysis of business
plan/market/technology/competition/...)
Analysis of gaps
Optimal financial structure
Valuation
Stock option plan (milestones)
What does a VC offers
before investment?

choice of distribution channels
product/marketing strategy
fixing priorities
networks:
financial advice (next rounds)
What does VC offers
during investment?

What does VC offers
after the investment??
R&D, fiscal advice
M&A
Exit Organisation (IPO, trade sale, …)
International experience
Smart money

VC Market
Supply
Venture capitalist avoid risk (MBO preference)
Pervert risk – return relation
Demand
Lack of investment readiness (pecking order theory)
Market lacks transparancy

Pervert risk – return relation

MBO has higher return than VC

Venture capital

Unicorns

Average employment growth (VC-backed companies)

Average sales growth (VC-backed companies)

Offer rarely meets demand (p.208)

Natural tendency for « big deals »
Need
high fees
High
volume
Prove
good return
Larger
Volume
To pay
expensive fund
managers
Big deal

Corona-impact:
The Outlook for European VC-Backed Startups
Source: European Startups.co (2020) Europe’s Startup Ecosystem Navigating The COVID-19 Crisis, Launch report, 22 April.