introduction to venture capital -mvca event - 25 feb 2016
TRANSCRIPT
Introduction to Venture Capital
Kamarul Nizam Kassim
Partner, Intres Capital Partners
MVCA VC 101 Session 2016, 2016/02/25
Sime Darby Convention Centre
“Never go into venture capital if you want a peaceful life.”
― Georges Doriot, Founding Father of Venture Capital.
Agenda
I. Intres Capital Partners
II. Introduction to Venture Capital
3 Private and Confidential
Intres Capital Partners
• Intres Capital Partners Sdn Bhd incorporated in November 2014 to manage Axiata Digital Innovation Fund.
• Intres Capital Partners is a subsidiary of Malaysia Venture Capital Management Berhad (“MAVCAP”) with minority shareholding by Questmark Capital and Teak Capital.
5 Private and Confidential
Intres Capital Partners
6 Private and Confidential
Amin Shafie Jamaludin Bujang Kamarul Nizam Kassim Chok Kwee Bee
• Previously Head of
Investments while
working in MSC
Venture Corporation
(“MSCVC”) from 2000
to 2009.
• Graduated with a BBA
in Computer
Information Systems
from Western Michigan
University.
• Current Chairman of
the Malaysian Venture
Capital Association
(MVCA).
• Past deals include
Redtone, Inforient and
CTMS.
• Currently the Chief Executive
of MAVCAP, a wholly-owned
venture capital firm of the
Ministry of Finance Inc.
• Previously the Director of
Investments with Malaysian
Technology Development
Corporation (MTDC). Before
MTDC, he was an investment
analyst with a number of local
and international firms over a
period of 15 years,
specializing in the energy and
telecommunications sectors.
• Graduated with BBA in
Economics (Wichita State
University, USA) and Masters
in Laws (International Islamic
University, KL).
• Past Chairman of Malaysian
Venture Capital Association
and a member of the
Malaysian Venture Capital
Development Council.
• Previously Vice President in the
CEO Office and Investment in
MAVCAP.
• Prior to joining MAVCAP in
2012, Kamarul was the Head of
Business Growth Fund with
Malaysian Technology
Development Corporation
(MTDC).
• Before MTDC, spent over 10
years in various investment
roles with Royal Dutch Shell,
Maybank Investment Bank and
KPMG in Malaysia and Ireland.
• Graduated with BA in
Accounting and Finance from
Liverpool John Moores
University, United Kingdom
(First Class Honours).
• Chartered Accountant with the
Association of Chartered
Certified Accountants (“ACCA”),
United Kingdom.
• Previously with Walden
International, a Silicon
Valley based venture capital
firm, overseeing the
operations of Walden
International and BI Walden
in Malaysia.
• Before becoming a VC, she
was Head of Corporate
Finance at AmInvestment
Bank.
• Currently a member of the
Malaysian Venture Capital
Development Council
(MVCDC).
• Past deals include
Jobstreet, Says.com and
Groupsmore.
6
Introduction to Venture Capital
1) What is Venture Capital?
2) Why go for Venture Capital?
3) How does Venture Capital work?
4) When do you raise Venture Capital?
5) Who are these Venture Capitalists?
What is Venture Capital?
Venture capital is NOT just Money.
Venture capital is instrument to align various resources to the business ventures with the highest possible returns.
Hence, different from Loans and Grants.
10 Private and Confidential
VC at work
Resources (money, talent, connection, time)
What is Venture Capital?
11 Private and Confidential
Type Grant Venture Capital Loan
Source Government. Government, Private. Government, Private.
Repayment Upon failure to meet milestone.
Liquidity events e.g. IPO, Trade Sale, Redemption.
Monthly repayment.
Other Features
• No equity dilution,
• Minimal cost of financing,
• Stringent reporting,
• Fund utilization highly specific.
• Hands-on involvement by VC,
• Equity dilution,
• High cost of financing,
• Board seat.
• No equity dilution,
• Lower cost of financing,
• Stringent profit track record required,
• Offtake required,
• Collaterals required.
Why go for Venture Capital?
13 Private and Confidential Abridged from: http://www.bloomberg.com/bw/stories/2006-07-17/venture-capital-the-good-bad-and-uglybusinessweek
Why go for
Venture Capital?
Credibility. Potential customers, business partners feel more assured about your
strong financial backing.
Experience, advice, and
mentoring. VCs can guide you through your
journey.
Big picture. VCs develop a good feel for the trends.
Networking. VCs large network will help you with warm
introductions.
Shared risk. Good VCs will support you when things
get tough and keep reserves for
later funding rounds.
Exit assistance. VCs will watch for the best exit strategy.
How does Venture Capital work?
15 Private and Confidential
Company and interested VCs meet
Company pitch to VCs:
• Business plan • Financial projections • Competitive analysis • Etc, etc.
VCs engage in due diligence:
• Technological • Market • Competition • Business development • Legal and accounting
Lead investor is identified, rest are
follow-on investors.
Negotiations:
• Company valuation • Size of round • Lead’s share of round • Other investment terms
Process repeats several times, Builds on previous rounds
All VCs exit the Company via IPO or other liquidity events.
END GAME:
When do you raise Venture Capital?
17 Private and Confidential
Angel Investors
Venture Capital & Private Equity
Government Grants
Debt/Project Financing
Seed Start-up Early Stage Expansion Growth Pre-IPO Public
When do you raise Venture Capital?
18 Private and Confidential
Revenue
Friends & Family
Angels
Crowdfunding
Incubator/accelerator
Seed/early-stage VC
Government grants
Formal VC/growth capital
Private equity
IPO
Corporate VC Corporate accelerator
Specialty bank loans/guarantees
High Risk (Risk Level/Appetite) Low Risk
Low Valuation (Value Of The Company) High Valuation
Small investments (Typical Investment Size) Large investments
Time since
Incorporation
When do you raise Venture Capital?
Bear in mind this:
Adding VC is like adding rocket fuel to your company. VC’s want to get your business into orbit (e.g. to scale) quickly and reach huge levels of revenue.
VCs want relatively BIG outcomes. When you raise money from a VC, they will demand a veto right over the sale of the company. You might be very happy selling your business for $10 million and owning 50% of the company. Your VC is not necessarily going to be happy getting $3 million for his 30% stake for which he invested $1 million. Wait, but isn’t that a 3x return? Yes, but in aggregate it’s still just $3 million and if the VC has a $100 million it is just 3% of the money that he needs to get to reach his “hurdle rate” of when he’s entitled to earn carry (e.g. big bucks). Not economical for the VC to spend too much time with a company for such a small total return. Take away: Companies that have BOTH ITEMS above in mind, should raise from Venture Capital. Otherwise, advisable to seek other financing options.
19 Private and Confidential
Who are these Venture Capitalists?
21 Private and Confidential
Types of VC
Financial VCs:
• Most common type of VC,
• An investment firm,
• Capital raised from institutions and individuals,
• Organized as formal VC funds with limits on size, lifetime and exits,
• Main compensation: carried interest,
• Motivation: Maximize return on investment via trade sale, IPO and M&As.
Strategic VCs:
• Division of established corporations,
• Corporate funding for strategic investment,
• Help companies whose success may spur revenue growth of group,
• Not exclusively concerned with return on investment,
• Provide investees with valuable connections and partnerships.
Thank You
Intres Capital Partners Sdn Bhd Level 11, Menara Bank Pembangunan
Jalan Sultan Ismail, 50300 Kuala Lumpur www.intrescapital.com