Start-up Ecosystem Investor Selection Screening Female Founder Summit 2017 Christian K. Winkler, Principal at btov Female Founder Summit Zurich, November 06, 2017
Agenda Introduction Part 1: The start-up investment industry Part 2: Selecting your investor Part 3: The screening of your business by potential investors
About btov btov, founded as brains to ventures More than 250 btov investors On average >20 transactions p.a. (43 deals in 2016) 25-35 pre-screened ventures are introduced p.a. 2 major events p.a. in Germany and Switzerland Focus on tech-based ventures from Seed to Growth Five venture capital funds focusing on: Digital Tech or Industrial Tech Ringier Digital Ventures, Zurich Helvetia Venture Fund, Berlin/St. Gallen Discretionary mandate for a major Swiss family office CHF 125mn investment volume btov was established in 2000 has about EUR 330mn assets under management managed 46 transactions in 2016 makes 80% of its investments in DACH, and about 20% in Europe, the U.S., and Israel has 25 friendly employees and unusual offices in Berlin, Luxembourg, and St. Gallen 3
About Christian K. Winkler 2002 to 2005 2006 to 2006 2005 to 2007 2007 to 2010 2010 to 2014 2014 to 2016 2014 to 2015 2015 to 2016 Since 2016 studied economics & business administration (BSc) at University Maastricht Production Readiness intern at Volkswagen Group China in Beijing MSc and CEMS Master at Erasmus University Rotterdam and WU Vienna Consultant at Corporate Development at Credit Suisse in Zurich and Analyst at Investment Banking strategy and Corporate M&A Americas in New York Business manager for the UHNWI and Family Office coverage for the Latin American market area at Credit Suisse in Zurich and Bogota Senior Project Manager and front expert for the investment and advisory process in Digital Private Banking at Credit Suisse in Zurich and Singapore Start-up fundraising for Gaia Technologies, Green Roofing solutions Start-up boating charter & sharing platform btov Partners AG, started as Investment Manager, then appointed Principal in the Private Investor Network and Managed Partner Funds teams Member of the Community of European Management Schools (CEMS) group, responsible for VC and Entrepreneurship related issues for students and alumni 4
Agenda Introduction Part 1: The start-up investment industry Part 2: Selecting your investor Part 3: The screening of your business by potential investors
Selected financiers on the DACH map DACH = Germany, Austria & Switzerland Early Stage Expansion / Growth Bridge / IPO MBO/ MBI Bootstrapping, FFF Banks / Debt Financing Incubators / Accelerators Capital markets Canton/Government programs/aids CH: >60 Private Equity Financiers Business Angels, Crowdfunding/-investing Venture Capitalists Private VCs Corporate VCs https://www.startupticker.ch/en/news/october-2017/startupticker-lanciert-verzeichnis-vonfinanzierungsmoglichkeiten?utm_source=newsletter286&utm_medium=email&utm_campaign=newsletter286 6
The Venture Capital business model
A Venture Capital Dreamcase Initial investment of Sequoia in WhatsApp: USD 250k in October 2009 Second investment of Sequoia in WhatsApp: USD 8m in April 2011 Third investment of Sequoia in WhatsApp: USD 50m in July 2013 Total Investment = USD 58 250 000. Company was taken over by Facebook: USD 19b in February 2014 Sequoia is said to have had a stake in WhatsApp worth about USD 3b The rule of the game is (simplified) to pay back the investors their investment (USD 58.25m). Off the residual of USD 2 941 750 000, 20% go back to Sequoia as Carried Interest, i.e. USD 588 350 000. They have about 80 confirmed employees, let s make it an even 100, for the sake of the argument The potential Carried Interest payout to each employee would be about USD 5.8m per person
The "battlefield" after 10 years of start-up investments Arguably the asset class with the highest investment risk 20% 30% 50% Investments that failed completely Walking dead Stars and superstars
Agenda Introduction Part 1: The start-up investment industry Part 2: Selecting your investor Part 3: The screening of your business by potential investors
Manage your investor selection carefully (there are certain similarities to «online dating») How much capital do you plan to raise? How much revenue does your company make? What s the present stage of your company? What s your industry? What is/are your market(s)? Additional requirements regarding the investor? Result: «Long list» of potential investors See: http://www.bvkap.de/privateequity.php/cat/78/title/suche_nach_beteiligungskapital
What you need Short presentation or executive summary Long presentation or 20-30 page (max!!) business plan Due diligence data room Financial DD Legal DD Technical DD Commercial DD Your own draft version of a term sheet (more on that later in this session) A person you trust to prove-read whatever term sheet you plan to sign
Agenda Introduction Part 1: The start-up investment industry Part 2: Selecting your investor Part 3: The screening of your business by potential investors
Investment Process of a VC btov investment decision process ensures a thorough consideration of all relevant aspects First Identification Screening Term sheet Due diligence Execution examination Active acquisition Venture approaches b-to-v btov network First screening and first discussion with founders Presentation in front of investment team Tracking within proprietary CRM system Deal examination by 1-3 investment professionals Consultation of experts & angel network Competitive analysis, team interviews, etc. Examination of investment case, market environment, performance and team Terms negotiation Investment memorandum Final examination of business and legal aspects Consultation of advisory board Execution of deal by investment team Negotiation of contracts with external legal support if necessary One team member takes ownership Entire Investment Team agrees on next steps Entire Investment Team agrees on deal Investment committee agrees on deal [1] Investment committee makes final decision [1] >3 000 ventures p.a. 200 ventures 20-30 ventures 10-20 deals
Summary of Marc Andreessen s monologue Investors look for outliers show them what your outlier quality is or why your company has the potential to be an outlier understand investors and never be frustrated by rejections! Investors should invest in strength, not in lack of weakness do not even try to pitch your company as the picture-perfect-daughter-in-law firstly, because that s not you and secondly, because that s not even the goal play the game actively, i.e. talk about your strengths and weaknesses and do not allow investors to find out about them trust!
Screening Executive Summary Roadmap (Founders & Investors) Terms and Conditions of Investment Check and cross-check Team Product & Service Financials (PY/Act/Budget) Business Model Market & Competition 16
So this is all complicated / unclear what now? Executive Summary Roadmap (Founders & Investors) Terms and Conditions of Investment Check and cross-check Team Product & Service Financials (PY/Act/Budget) Business Model Market & Competition 17
So what about numbers? Importance of unit economics
Grasping unit Economics? 5. CAPITAL EFFICIENCY ABANDONED CART RATE COST OF CUSTOMER ACQUISITION LIFETIME VALUE INCENTIVE PROGRAMS PRODUCT/BRAND ASSORTMENT FREQUENCY PURCHASE TRENDS CUSTOMER CHURN/MO. NEW CUSTOMERS/MO. REVENUE BY DAY/WEEK/SEASON COST PER SKUS GROSS PROFIT/TRANSACTION INVENTORY TURNS SHRINKAGE PICK RATES DELIVERY TIME MRR #ITEMS PURCHASE TRENDS # CLICKS TO CHECK-OUT COST OF CUSTOMER SERVICE CUSTOMER CONTACT RATE TICKET SIZE PURCHASE TRENDS ACTIVE CUSTOMERS/MO.
But mistakes are inevitable
This is how you work your way from Screening to Due Diligence Roadmap (Founders & Investors) Executive Summary Team Commercial DD Terms & Conditions of Investment Check & cross-check Product & Service Financials (PY/Act/Budget) Business model Market & Competition Technical DD Financial DD Legal DD 21
Discussion & Questions Thank you!
Contact Details Christian K. Winkler Principal btov Partners AG Blumenaustrasse 36 CH-9000 St. Gallen T +41 71 242 2002 M +41 78 665 14 64 Christian.winkler@btov.vc www.btov.vc 23