Donostia Enpresekin Week of Innovation Great Association with Quality Deal Flow What kinds of Companies are Investors Looking For? Dr. Judith Iglehart, President, International Division October 21, 2014
A little bit about Keiretsu Forum Keiretsu Forum It s not the global distance, it s the knowledge and experience. Bridge from Silicon Valley to the world Exceptional deal flow from research university technology 14 year track record of investments through times of booms and busts Steady expansion globally- 34 chapters/13 years 1100 members (serial entrepreneurs, retirees) who work with emerging companies Private investment, investor education, entrepreneur education Lower risk for private investors through common due diligence practices IBOOK published on Due Diligence Partnerships with other angel groups Nimble, adept at developing programs of interest to members: Clean Tech, DD book, IIF, WISE, BizSmart
Keiretsu Forum s Global Reach - 34 chapters, 3 continents, +170 business plans reviewed monthly, 2040 plans annually, syndicated funding 18 U.S. Locations: C A L I F O R N I A East Bay Orange Co. Los Angeles North Bay San Diego San Francisco Silicon Valley Westlake Village 4 Canada: V A N C O U V E R T O R O N T O WATERLOO Vancouver Island N O R T H W E S T Seattle Kirkland/Eastside Spokane/Inland Portland Boise N E W Y O R K New York City M I D - A T L A N T I C Philadelphia Pittsburgh Washington D.C. Miami 6 Europe: L O N D O N, England ANDALUCIA, Spain B A R C E L O N A, Spain M A D R I D, Spain DONOSTRIO/SAN SEBASTIAN, Spain P A R I S, France 2 Euro-Asia: I S T A N B U L, Turkey TEL AVIV, Israel 4 Asia: CHENNAI, India SINGAPORE B E I J I N G, China S H A N G H A I, China
Angels and VCs invest in Biotechnology Business Products and Services Computers Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications And more (real estate, brand names, orchards)
How Big? Angels vs. VCs 2011 Early StageLate Angel money funds 20x more companies yearly Mostly later stage 3,752 deals $22.5B $29.1B 66,230 deals Mostly early stage Angels Venture Capitalists Sources: University of New Hampshire and PWC MoneyTree
My Hometown paper Friday, October 17, 2014 VC funding approaches level from 2001, the year of the dotcom crash So far in 2014 VCs have invested $33B as compared to $30B in 2013. Y Combinator will move beyond Internet start ups in pure software to experimental, breakthrough technologies like nuclear energy and synthetic biology. Huh? Going head to head with UC s QB3, which is now renting lab benches for $800? QB3@953 --RENT ONE BENCH AT A TIME In 2006 we developed a model to lower the costs of launching a biotech startup: make expensive resources in small quantities. This way startups get exactly what they want when they want it. You can rent one bench at a time and expand when you need as you need it. GET ACCESS TO EQUIPMENT WORTH MILLIONS OF DOLLARS
V C investments in 2014 Investments by industry Q2-13, Q1 and Q2-14 (PWC Money Tree Report 3) Software industry received the highest level of funding of all industries, rising 50% from Q1 to $6.1 B in Q2 14 Software industry counted the most deals in Q2 -- 454, a 7% increase from Q1 14 because largest deal was a software company $1.2 billion Expansion stage investment in a transportation software company is largest deal and single largest quarterly investment since the Money Tree Report began reporting on venture capital investing in 1995. Biotechnology industry was the second largest sector for dollars invested: $1.8 B in 122 deals/ Rose 69% in dollars and 7% in number of deals from prior quarter. 2 large later stage funding rounds totaled $320M Medical Devices and Equipment industry rose 8% in dollars and 12% in deals in Q2 to $649M in 73 deals.. Media & Entertainment industry captured 3rd place with $1.0B flowing into 124 deals. 40% increase in dollars and 9% increase from prior quarter. One large deal. 9 of the 17 Money Tree industries (about half) experienced decreases in dollars in Q2: Business products and services (69% decrease), Telecommunications (43% decrease), Semiconductors (29% decrease). Venture capitalists invested $2.7 billion into 270 Internet-specific companies in Q2 14. 18% higher and 20% larger in deals than Q1 ($2.3B in 225 deals) Internet-specific is a discrete classification assigned to a company with a business model fundamentally dependent on the Internet, regardless of the primary industry category..
Halo Report Q2 2014 Highlights: Investor Syndicates Produce Bigger Rounds Median angel round sizes were down from $990K to $600K, which is consistent with the second quarter a year ago. When angel groups co-invest with other types of investors, however, the median round size jumped to more than $2 million, a five-quarter high. Valuations Continue to Rise Halo Report 2014 Highlights Median pre-money valuations rose to $3.0 million, from $2.7 million in Q1 2014, and after several steady quarters at $2.5 million. -See more at: http://www.angelresourceinstitute.org/en/research/halo-report/halo- Report.aspx#sthash.kTVCyKxb.dpuf
Where angels fit into Deal Flow Stage Pre- Seed Seed/ Start-Up Funding Gap Early Venture Capital Later Venture Capital Source Founder Friends and Family Individual Angels Angel Organizations Venture Funds Amount Invested $25k to $100k $100k to $500k $500k to $2m and up $2m to $5m and up
Where do the best deals come from?. 1. Our Members 2. Our Chapters 3.Serial Entrepreneurs: 4.Other Angel Groups
2013 Keiretsu Angel Fundings in Northern California: 29 with $8.6m
Who are Typical Angels? The term "angel" originally comes from Broadway where it described wealthy individuals who provided money for theatrical productions Successful business people Invest their own money (net worth over $1m) Long term investors (usually 5-7 years) Enjoy advising/assisting entrepreneurs Seek a return commensurate with the risk Invest alone or in angel organizations Individual investment amount $25,000-$100,000
Angel investing is personal Angel investing is all about people and human relationships. Angel investing comes down to finding and backing people who have the right combination of qualities -experience, talent and character- and supporting them as much as you can. Angel investing is one arena where shared knowledge is important.
Common Challenges? Acting alone, most angels: Do not see a consistent flow of quality deals Have limited capability to conduct the breadth of due diligence needed to lower risk Post investment, lack the breadth of capabilities and network to fully assist their entrepreneurs Have limited capital for investing in follow-on rounds
And above all Investors want a CEO that they trust to perform They want a capable team, preferably with experience in the sector They want financials that make sense They want negotiable, realistic valuations They want an articulated Exit plan (when will the company be acquired? by whom? for how much?)
Myths about investing Myth-busting Entrepreneurship," by Dane Strangler, Kauffman Foundation Four commonly held beliefs: a. Small business plays the most important role in growing the economy= in fact the age of the firm is a more important variable than the size of the firm. New and young companies create most jobs and innovations, not necessarily small companies. (Think Hewlett and Packard, Mark Zuckerberg, Bill Gates, Larry and Sergei, Steve and Steve). New and Young. Disrupters. b. Studies refute the popular stereotype that most entrepreneurs are 23-year-olds starting tech companies in their local coffee shop or their bedroom = "the 'peak age' for starting a company is in the mid to late 30s, early 40s. c. Efforts to recreate Silicon Valley in the hopes of creating a hotbed of high-tech startups don t work= "Silicon Valley is a very unique place that's never going to be replicated. Others need to stop trying to be a Silicon fill-in-the-blank, not just in the U.S., but anywhere around the world. (Trillions in research dollars to universities in CA, federal matching funds for early VCs, risk taking, etc.) d. "Most research shows that incubators are not effective at all for actually producing companies.
What I m seeing internationally Investors worldwide want access to what they call Silicon Valley deal flow (to Keiretsu Forum that means our vetted deal flow) Investors worldwide want to balance their portfolios with investments at home and abroad like investors in the US they don t want to miss the next big thing. No one knows what the next big thing will be. (Nobody at Stanford or in SV originally understood the platform for Google). VCs are moving into seed stage investing and Angel Groups are syndicating investments above $3M and starting funds to protect their investments with additional funds as companies grow. (Keiretsu Capital)
More SF news -- the share economy SF Airbnb charged with violating city zoning laws because legal residents are away when Airbnb clients are there, and violating state tax laws. As YouTube did with TV and the blogosphere did to mainstream media, the share economy blows up the industrial model of companies and people consuming, and allows everyone to be both consumer and producer, along with the potential for cash that the latter provides. Shervin Pishevar, a VC at Menlo Ventures and investor in Getaround, TaskRabbit, Uber and other startups in this space, believes these services will have a major impact on the economics of cities. This is much bigger than any specific app, he says. This is a movement as important as when the web browser came out. FORBES estimates the revenue flowing through the share economy directly into people s wallets will surpass $3.5 billion this year, with growth exceeding 25%.
So what works for angel investors? If you invest early and make non-monetary contributions by mentoring or serving as a company Director, the returns from early stage investing can be very rewarding. If you participate in an intensive Due Diligence, you lower your risks.
Due Diligence IBook, free, online at IBook The Keiretsu Forum is pleased to offer our member-designed Due Diligence Handbook free of charge as an ibook to benefit startup investors and entrepreneurs around the world. We hope this resource will serve as a valuable tool in supporting your own due diligence efforts.
Sample Fundings Case 1a: Recent Funding $3.12 million invested; first close May 2012 Savara is an emerging specialty pharmaceutical company. Its lead product, AeroVanc (vancomycin hydrochloride inhalation powder), addresses an unmet clinical need in the treatment of methicillin-resistant Staphylococcus aureus (MRSA) infections in patients with cystic fibrosis (CF) Members of 16 Keiretsu Forum chapters collaborated in the due diligence and participated in the funding
Sample Fundings Case 2a: Follow-on Funding $2.1 million invested; milestones driven investing: presented to Keiretsu Forum 4 times: 2006-2011 LesConcierges is the world s premier provider of global concierge services and solutions luxury personal services company More than 200 concierges, 1 million requests per year 89 cities worldwide, serving 16 languages Premier onsite concierge service Leading proprietary concierge technology platform, web portal and mobile applications
Sample Fundings Case 2b: Follow-on Funding
Sample Fundings Case 3a: Exit Keiretsu Forum venture capital member Claremont Creek Ventures led a $2.0 million round in February 2006 PropertyBridge, Inc., a company that enables electronic rent payments and other lease-related transactions over the Internet MoneyGram International Inc. acquired PropertyBridge for $28 million in September 2007 providing 5X return on the Claremont Creek Ventures investment PropertyBridge is now RentPayments
Sample Fundings Case 3a: Exit
Sample Fundings Case 3b: 13x Exit
Sample Fundings Case 3c: 30% IRR Exit
Thank you for your time and interest Please contact me at judith@keiretsuforum.com, or visit our website at www.keiretsuforum.com, or at http://www.keiretsuforum.com/global-chapters/do nostia-san-sebastian / And, if you would like to present your company or visit our chapters anywhere in the world, please contact Miguel Costa at mcosta@keiretsuforum.com