nicolas berg early stage trends redalpine_eth entrepreneur club_oct2013

Swiss early-stage ecosystemhas gained momentum

Meet the founder event Zurich 3rd Oct 2013

Redalpine Venture Partners Ltd, Pfingstweidstrasse 60, 8005 Zurich, Switzerland, +41 44 271 15 30, www.redalpine.com

early stage investments by entrepreneurs

NICOLAS BERG

Agenda

1. About me & Redalpine

2. Typical Top-10-Swiss-Startup

3. Conditions to enable a high-tech startup cluster

4. Impact of high-tech startup cluster

5. Swiss high-tech startups

6. Swiss early-stage investors

7. Challenges

8. Opportunity & risks

9. Wanted investor types

Copyright Redalpine Venture Partners AG, Switzerland 2

Intro

A typical successful Top-10-Swiss-Startup 2013 From Zurich or Vaud 20 out of 26 founders are not Swiss! ICT, Life Science or Electronics Links to ETH, UZH or EPFL


Speaker: Nicolas Berg

Serial entrepreneur with 10 start-ups (1984-2011) - e.g. founder of Borsalino 1998, sold 2000 at 20x multiple to Ringier- iCEO Sharoo June-September 2013

Full time angel investor in 16 start-ups (2000-2006) - e.g. Investor & Country Manager XING 2004-2010

IPO at 30x multiple 2006 Partner at Redalpine Venture Partners (since 2007)

- Built a portfolio of 20 European high innovation start-ups with Redalpine Capital I & II

- 5 portfolio companies ranked among 13 Swiss top start-ups in 2011

Lecturer, journalist and jury member- Teaching students & entrepreneurs at venturelab.ch since 2006- Jury member of business plan & seed money contests (Venture kick,

SVC, Suvorov)


Redalpine in a nutshell

Manages Redalpine I CHF 20M micro VC fund (2007-2015) Manages Redalpine II CHF 30M* micro VC fund (2012-2020)

- Seed/early-stage in continental Europe (* aims at CHF 60M in 2nd closing)

Most innovative sectors in Europe- Technology/New Media and Life Science

Fund thesis- European seed/early stage offers potential for superior exit multiples- Best choice in Switzerland – leading accelerator in Berlin

Convincing track-record


Conditions to become a high-tech cluster


① Successful startup founders role models 44

② Successful early-stage investors Venture Capital 4

③ International Top-10-university innovation, spin-offs 44

④ Qualified immigrants recruiting, risk takers 44

⑤ Vital support ecosystem entropy thru networking, training 444

⑥ Non bureaucratic research grants transfer 44

⑦ Mature companies of same sector cooperation, M&A, recruiting 44

⑧ General economic conditions & infrastructure image, recruiting 444

⑨ Attractive home market faster & safer Proof of Market 4

Great job creation impact of startups


Jobs

4m

3m

2m

1m

0

- 1m

- 2m

- 3m

- 4m

- 5m

Net job change startups <5 yrsNet job change companies >5 yrs

US start-ups create 3 million jobs per year, existing firms slash 1 million jobs (Kauffman Foundation

Source: Kaufmann Foundation, Business Dynamics Statistics, Tim Kane

US start-ups create 3 million jobs per year

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Spin-offs by international top-10-universities


① Most Swiss university spin-offs by ETH, EPFL, UZH

② Number of spin-offs independent from economic sentiment (e.g. 2008/09)

Top exits of Swiss ICT startups


1996 – 2008 (12 years)

① Oanda Index Ventures

② Search.ch Post Tamedia

③ Scout24/Human Line Ringier

④ Auktion24 Ricardo

⑤ Comparis Investors

⑥ Borsalino Cash Ringier

⑦ Kelkoo Yahoo

⑧ LeShop Bon appétit

⑨ Mediastreams Microsoft

⑩ LeShop Migros

⑪ Endoxon Google

⑫ Jobs.ch Tiger Fund

2009 – 2012 (4 years)① Wuala LaCie② Svox Nuance③ DeinDeal Ringier④ Doodle Tamedia⑤ Liberovision Vizrt⑥ Procedural Esri⑦ Trigami eBuzzing⑧ Fashionfriends Tamedia⑨ Borsalino/Cash Bankzwei⑩ Umantis Haufe⑪ Jobs.ch Ringier/Tamedia⑫ Spontacts Scout⑬ Digitec Migros⑭ Housetrip Index⑮ NetBreeze Microsoft

Top exits of Swiss life science startups


1999-2004 (5 years)

① Actelion IPO

② Prionics 30x pay-back

③ Axovan Actelion

④ Jomed IPO

2005 – 2008 (4 years)

⑤ Arpida IPO

⑥ Glycart Roche ($200m)

⑦ Serono Merck (€10.2b)

⑧ Speedel Novartis ($880m)

2009 – 2012 (3 years)

① Esbatech Alcon ($589m)

② Neurimmune Biogen

③ Levitronix Thoratec

④ Okairos GSK

⑤ Glycovaxyn investors

About 2000 Swiss early-stage investors


ICT: Early-stage VCs, angels & founders with recent top exit

① Index Ventures

② VI Partners

③ Brains-to-ventures

④ Redalpine

⑤ Creathor

⑥ Beat Schillig

⑦ Peter Schüpbach

⑧ Klaus Hommels

⑨ Oliver Jung

⑩ Roland Zeller (…)

Live Science: Early-stage VCs, angels& founders with recent top exit

① Index Ventures

② VI Partners

③ Redalpine

④ Nexgen

⑤ NVF

⑥ BioBAC Basel

⑦ Bruno Oesch

⑧ Peter Pfister

⑨ Jürg Geigy

⑩ George Haas (…)

Challenges for early-stage investors


①Early-stage smaller transactions small fund lower fees

②Active investment managers higher returns 5 startups per manager

③Diversified portfolio 15+ better risk return 3+ investment managers

④Entrepreneurial skills needed to select winning early-stage deals

Opportunities & risks


①Early-stage angel investments deliver 27% IRR

- 8 studies in US/UK on historical return in business angel markets, RSCM 2010

②But <10% of virtual portfolio (>6000) delivered >70% of returns

③«Average» investor got 27% IRR, but median investor looses money

Wanted investor types for Switzerland


①Serial entrepreneurs with at least one top exit

②Micro VC funds - managed by serial entrepreneurs (age 25-45) and successful angels - Very active investment approach in seed and early-stage - Diversified portfolio of 15+- Entrepreneurial LPs (serial entrepreneurs 50+, family offices)

③Co-investment & side-car funds - Less active or passive investment manager approach- Government and corporate funded (e.g. HTGF)- Driven by economic impact, not returns only

Interfaces to Corporate Finance


①Exit planning starts at deal selection & term-sheet negotiation

②Professional & fair term sheets & shareholder agreements- Tag along, drag along- Minority rights & corporate governance- Pooling- Single liquidation preference- Gentlemen rules (e.g. against excessive squeeze outs/dilution)- Business lawyers that offer broad range of templates & product pricing at early-stage- Big-4 consulting companies may further bigger rounds or exit

③ Early research & market reach cooperation M4E) might further better exit- Examples: Glycart, StudiVZ, Borsalino

④ Corporate investor at early-stage might reduce risks- But: might add cost, and- reduce maximized exit multiple

Bonus slides


①Scouting talents delivers better multiples than acquiring stars

②Pro-active investors know where the puck is going to be

③PE best asset class 10 out of 20 years (and worst 4 out of 20)

④ PE best in class if combined with commodities and healthy bonds* (* = bonds from governments & corporations with little debt)

Grow big stars by scouting many talents


Analogue to a football team you have 2 options:

invest $100m to buy a star (Bale, Messi or Ronaldo) try to earn $110m extra with him (1.1x) or

invest $5m to scout & train 20 young talents sell best one (Doumbia, Shaquiri) for $20m (4x)

good Micro VCs prefer a movie rather than a photo (= 3 pitches)

Invest pro-active – don’t follow the crowd

An ice hockey player can either: skate to the place where the puck is now – as most

players – or to the place where the puck is going to be (Wayne Gretzky)

Source: http://www.brainyquote.com/quotes/authors/w/wayne_gretzky.html


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Private equity best in class – sometimes

Source: UBS QIS

Equally weighted Portfolio

Liquidity USD

Bonds USD

Corporate Bonds USD

Equitiy Developed Countries

Hedge Funds

Real Estate USA

Commodities

Private Equity USA

Returns year by year1990 1992 1993 1994 1999 2000 2001 2002 2004 2005 2006 2007 2008 2010

29.1% 48.3% 14.2% 31.5% 5.3% 60.6% 36.8% 54.0% 48.5% 40.9% 49.7% 13.4% 32.1% 45.5% 32.2% 25.6% 36.4% 32.7% 6.6% 41.9% 28.3%

17.5% 41.0% 12.3% 26.3% 5.1% 22.2% 34.4% 18.6% 24.3% 34.6% 27.3% 10.3% 11.6% 36.4% 17.3% 12.9% 22.8% 9.0% 4.1% 30.0% 23.0%

9.0% 19.4% 9.7% 22.5% 4.4% 20.7% 33.9% 16.2% 8.7% 26.5% 11.3% 9.3% 10.1% 33.1% 15.6% 9.5% 20.1% 8.3% -4.9% 26.1% 11.9%

8.8% 18.5% 8.7% 14.0% 3.1% 20.6% 17.8% 15.8% 8.6% 24.9% 9.1% 4.9% 3.5% 20.7% 14.7% 8.5% 10.4% 7.4% -23.3% 19.7% 11.8%

7.1% 18.3% 8.2% 13.0% 1.7% 20.3% 14.4% 13.7% 5.8% 14.9% 8.7% 2.8% 2.0% 19.8% 11.8% 7.8% 9.3% 6.6% -25.4% 18.7% 9.0%

1.5% 16.7% 7.1% 12.2% 1.4% 16.6% 13.5% 10.2% 2.9% 5.6% 6.8% -3.9% 1.0% 12.0% 5.4% 3.4% 5.2% 5.7% -38.4% 13.5% 9.0%

-4.7% 14.5% 4.4% 10.3% -2.4% 12.1% 5.8% 8.2% -5.1% -0.7% 4.1% -16.8% 0.2% 8.2% 3.1% 2.7% 4.3% 4.6% -40.7% 13.4% 5.2%

-17.0% 7.1% 4.2% 3.5% -3.5% 11.1% 4.0% 6.0% -17.8% -2.0% -13.2% -18.0% -19.9% 3.2% 2.7% 2.0% 4.3% 4.2% -46.5% 3.3% 5.1%

-34.2% -6.1% -5.2% -12.3% -3.9% 6.5% 3.3% -14.1% -35.7% -6.0% -18.6% -31.9% -32.5% 1.3% 1.5% 1.7% -15.1% -17.1% -50.7% 1.4% 0.5%

BEST ASSET CLASSHighest return that year

WORST ASSET CLASS Lowest return that year

Nur zur Veranschaulichung. Die Marktbedingungen können sich ändern und die Renditen schwanken. Bitte lesen Sie die Erklärungen unter «Simulierte historische Performance» am Ende dieses Dokuments. Bitte beachten Sie, dass diese Seite immer in Verbindung mit den Risikoinformationen und Begriffserklärungen im Anhang zu dieser Präsentation zu lesen ist.

1991 1995 1996 1997 1998 2003 2009

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PE always best in class – if combinedGo for a mix with low correlation and high returns: Combine PE with commodities, corporate bonds or real estate

Source: UBS WMR; generated by QIS

Private Equity

Real Estate (REITS)

Hedge Funds

Commodities

Equity MSCI World

Bonds (USD)

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0.12 0.18

0.18

0.12

0.27

0.27

0.72 1.00

1.00

1.00

1.00

1.00

1.00

0.72

0.42

0.42

0.160.18-0.07 0.04

0.480.09 0.16 0.16

0.160.040.28

0.18

0.08

0.08

0.09-0.07 0.28

0.48 0.30

0.30

«You miss 100% of the shots you don't take.»

Wayne Gretzky, Hockey legend

«To evaluate the potential of a new idea requires a clear understanding of the market dynamics. We trust in the team of Redalpine to master this challenge successfully.»

Jürg Staub, Reichmuth & Co

www.redalpine.com

www.facebook.com/redalpine

www.twitter.com/redalpine

Redalpine Venture Partners AGPfingstweidstrasse 60CH-8005 ZürichSwitzerland

phone +41 44 271 15 30