Debt & Equity A Match Made in Heaven? The Investor s Perspective Colin Walsh 26 th May 2010
Agenda What is venture capital What does Crescent do Players in the Irish Market Added Value from venture capital The VCs technology wish-list Business plans & raising the money
What is Venture Capital? The provision of cash in the form of equity capital to companies to finance growth and development
what does Crescent do? Crescent manages: Hambro NI Ventures LP 14m, established 1995 12 investments now made, now fully exited Crescent Capital II LP 22.5m, established 2004 12 investments to date Leading local VC investor in NI Authorised and Regulated by the FSA
Players in the Irish market 4 th Level Ventures University Seed Fund ACT Venture Capital Limited AIB Seed Capital Fund Alchemy Partners Atlantic Bridge Bank of Scotland (Ireland) Venture Capital Clarendon Fund Managers Claret Capital Crescent Capital Delta Partners Dublin Business Innovation Centre Enterprise Equity Venture Capital Group ETV Capital Limited EVP Early Stage Technology Fund E-Synergy Limited/NISPO Fountain Healthcare Growcorp Group Limited Intel Capital ION Equity Kernel Capital NCB Ventures Novus Modus Powerscourt Investments Qubis Limited Seroba Kernal Life Sciences TVC Holdings plc University Challenge Fund (NI) Ulster Innovations Limited Western Development Commission
Venture Capital s Added Value Advice Credibility Contacts Perspective Courage Money
at Crescent Capital, we focus on... strategic management corporate finance corporate development follow-on funding rounds talent management proactive non-executive involvement is key to our approach
The Ten Commandments (Colin s technology company Investment Criteria wish-list)
1. A market driven rather than technology driven approach
2. Proprietary technology making market entry difficult for competitors
3. Leverage through growth with higher sales resulting in improving net margins
4. Limited dependence on major customers or suppliers
5. A capacity and enthusiasm for exporting
6. At least the nucleus of an entrepreneurial management team in place
7. A simple transaction, simply expressed
8. An opportunity for Crescent Capitals executives to bring their expertise to bear through active participation in corporate decisions
9. No other outside investor with a significant equity stake
10. A good personal rapport between the principal players and the Crescent Capital executives
Suggested Business Plan Format 1. Executive Summary (include the ask!) 2. Sector and background to the business 3. Description of Products and Market 4. Principal Customers and Competitors 5. Operation of the Business 6. Management 7. Financial Position and requirements 8. Appendices Management CVs Product Literature Organisation Charts Projections
Equity providers: Founders FFF Angels VCs Grants from development agencies Debt providers: Banks Leasing Factoring Venture Debt Loans from development agencies
Myth No 1 There is no money for start-ups and early stage
Myth No 1 VCs, Angels, INI & Enterprise Ireland invested in dozens of start-ups & early stage last year
Myth No 2 The banks wont take risks by supporting small companies
Myth No 2 Banks are lenders not investors They lend against assets - buildings, machinery, stock, debtors etc. The bank is not there to take undue risks with (your) capital!
The banks work along with the equity providers The real cost of money from each reflects the level of risk being taken by each
Final Tips Make sure the debt/equity structure reflects the needs of the business
Final Tips Make your projections realistic The investors will sensitize them anyway You are only kidding yourself
Final Tips Overconfidence, a most fruitful source of accident, should be especially guarded against Ship s Master Regulation No 2, White Star Line, April 1912
Reality is always worse than worst case e