maria dramalioti taylor - 10 non-textbook lessons for entrepreneurs copy
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Fundraising in Europe: 10 non-textbook lessons for entrepreneurs
Maria Dramalioti-Taylor x.Million Capital Ventures
maria@x.xmillioncapital.eu www.dramalioti-taylor.org
Mobile Monday, Athens 16.01.12
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Agenda
• Venture/Angel Capital: – How to decide if you need it – How to navigate the VC scene
• Raising Capital in EU vs US: – What is really going on?
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x.Million: news kids on the block
What? How much? When & where?
€50k €1m
Other
Retail
MOB & WEB
Seed €100k
STARTUP & SEED
EUROPE
€250k € 500k
How we work: - Lean, K.I.S.S. - Back exceptionally talented people - Look beyond web 2.0
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Portfolio highlights
2012 Fund I > €10M
2011 Pilot fund: €10M
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Agenda
• Venture/Angel Capital: – How to decide if you need it – How to navigate the VC scene
• Raising Capital in EU vs US: – What is really going on?
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Large potential market
Original
idea
Best-in-market founding team
ENTREPRENEUR HAS… …money to move
*FASTER* than OWN capital allows
Hiring Faster product development Infrastructure Commercialisation Geographical expansion
#1 – Sell shares only when you need speed
1
2
3
…intensifying competition
THEREFORE FACES…
…AND NEEDS…
…SO SELLS shares to to pay for..
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THE STARTUP FUNDING SPECTRUM
+
NET
CASH
PO
SITI
ON
Closed
ALPHA
Public
BETA
SCALE - STAGE
1st Revenue
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#2- Illuminating but not necessarily true (John Kay)
+
NET
CASH
PO
SITI
ON
Closed
ALPHA
Public
BETA
SCALE - STAGE
1st Revenue
Venture Debt
Grants Bootstrapping Family
Angel Capital Venture Capital Series A (€2m-€20m)
Venture Capital Series B,C,D (€5m-€20m)
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DO IT LIKE A JACANA
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#3 – Decode the Business Angels
• Angels invests own money
• Small amounts, early, at low valuation – €10k-€250k at valuation €0.5-€2m
• Exit: – sell at €5-10m valuation & make 2-5x
– bring VCs, get diluted (may) make 10x
• FOCUS ON: getting capital back
Angels are like women: temperamental & (mostly) irreplaceable
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#4 – Decode the Venture Capital business
• VCs raise a fund every 2-4 years – Invest other people’s
money
• Invest the funds over 5 years • Exit (sell) via M&A or IPO • They take:
– 2.5% pa management fee on funds managed
– Carry = 20% x [Total Return at Exit] – [Total Amount Invested]
• FOCUS ON: returning 3x-5x
capital back to investors in 4Y-5Y
VCs run a business. They make it sound like Black Magic. IT IS NOT.
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TEST: Can you see the (main) difference?
10x 9%
1x-5x 35%
Loose your shirt 56%
10x 10%
1x-2x 20%
3x-5x 30%
Write downs 40%
10x 10%
1x-2x 30%
3x-5x 10%
Loose your shirt 50%
Ca. 2,000 ANGEL UK investments
Typical VC portfolio
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10x 9%
1x-5x 35%
56%
Fund Investors share of profits Angel Maria
Angel George
Angel Dimitris
TEST: Can you see the (main) difference?
1x-2x 20%
3x-5x 30%
10x 10%
1x-2x 30%
3x-5x 10%
Write downs 50%
Ca. 2,000 ANGEL UK investments
Typical VC portfolio
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#5 – γνῶθι..τω επινδυτή
www. http://www.instigatorblog.com
Angels may not let you fail, VCs may give you a big success
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#6 - Mind the AC/VC disconnect
VC ANGEL CAPITAL ANGE
L /V
C DI
SCON
NECT
£500k £2m
+
Closed
ALPHA
Public
BETA
SCALE - STAGE
1st Revenue
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NOTE: The blurring of AC/VC in the US
www.dramalioti-taylor.org
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#7 –A new taxonomy of investors
Venture Accelerators Accelerator academy, Seedcamp, Astia, Ycombinator, 500hats, Springboard… Super Angels high batting avg. Angellab, Cherry Coutou, Husein Kanji Lean VCs treats every entrepreneur as an individual x.Million, pro-founders…
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#8 - Connect the fundraising dots
Fight the information asymmetry Sources www.thefunded.com www.fredestin.com Angellist www.Ventureshacks.com
“what they offer” vs. “what you need” – Initial capital per idea – Sector focus: do they
understand it? – Risk tolerance: can they
deal with uncertainty? – Compatibility: will their
pride suffer if you fail? – Terms (& strings attached)
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Agenda
• Venture/Angel Capital: – How to decide if you need it – How to navigate the VC scene
• Raising Capital in EU vs US: – What is really going on?
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#9 - Bust the US VC myth
US
0.15% GDP
EU
5.8x 0.026% GDP
Investments per capital in US is 5.8x higher than EU
US VC is big Investment is at a high • OVERALL VC INVESTMENTS
– $7.5 bn, 966 deals, 19% up – on track to $26 bn & 6th
most active year
• INTERNET AT 10-YEAR HIGH – $2.3 bn (72% up from Q1) 275
deals (46% up from Q1) – 5/10 top deals in Internet
Data: US, Q2/11
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#9 - Bust the US VC myth
It is also …bubbly
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#9 - Bust the US VC myth
US VC fundraising
lowest for 15 years
Data: Q2/2011, US
… VCs invest more dollars than raising…level of investment
unsustainable without exits and, subsequently, fundraising…
NVCA, 2011
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#9 - Bust the US VC myth
IF VIX >30 THEN IPOs drop dramatically
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#9 - Bust the US VC myth
Exits of the same order of magnitude need only ½ the VC capital in EU
EU =
1/2
x U
SA
IF US VC is big
THEN EU VC
is effective
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#9 - Bust the US VC myth
US IT is big EU feeds it Global tech industry is dominated by US companies
EU companies bought by US tech companies using offshore cash
Source: Hussein Kanji,2011
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#10 – Focus on the social graph
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#10 – Focus on the social graph
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85% of worlds population covered by wireless signals vs 80% of world population connected to the electrical grid
#10 – Focus on the social graph
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#10 – Learn to read the VC barometer
stage-agnostic - likely bias due to large follow on rounds
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Post-bubble EU VC industry: survival of the fittest
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LESSON 9: Exploit geo-differences, create arbitrage
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IRR %
2x 3x 4x 5x 6x 8x 10x
2Y 41 73 100 124 145 183 216
3Y 26 44 59 71 82 100 115
4Y 19 32 41 49 56 68 78
5Y 15 25 32 38 43 52 58
6Y 12 20 26 31 35 41 47
7Y 10 17 22 26 29 35 39
8Y 9 15 19 22 25 30 33
9Y 8 13 17 20 22 26 29
10Y 7 12 15 17 20 23 26
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Time to Exit: Angels vs VCs
http://www.techvibes.com/blog/what-happens-to-exits-when-vcs-invest
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Milestones & Rounds
http://vcperspectives.com/wordpress/page/3/
ANGEL ACTIVITY: US vs.UK
US angel activity EU angel activity
0.8x 0.3x
ANGEL ACTIVITY: US vs.UK
US angel activity EU angel activity
6x
2.5x
HNWI Population by Country, 2010
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