out of the lab and into the real world j carl allen director and venture capital leader forrester...
TRANSCRIPT
Out of the lab and into the real WorldJ Carl Allen
Director and Venture Capital Leader
Forrester Research, Inc.
Forrester Research, Inc.
• The leading analysts of technology’s impact on business
• Founded in 1983 by George F. Colony
• Headquarters in Cambridge, Mass.; additional research centers in Amsterdam, Frankfurt, London, Norwalk, Conn., Paris, San Francisco, and Santa Clara, Calif.
• 598 employees globally
• 209 research professionals
• 1991 clients
Theme
Taking technology out of the lab and into the
real World
Agenda
• Who is investing in tech start-ups?
• Industry concerns for tech start-ups
• The structural changes in the IT marketplace
» How start-ups can benefit
• The role of tech transfer - - where does it fit?
• Making the funding journey
» Identify your equity customer and plan your funding roadmap
• Q&A
Who is Investing in Technology Start-Ups?
• The 164 BVCA members - - but mostly in the South
• 2003 private equity investment:
» 1274 companies: +7% from 2002
» £4074 million: -9% from 2002
• 185 start-ups were funded by BVCA members in 2003
» £73 million: 2% of total funds invested, 15% of company total, average of £395,000 per deal
• The North West represented only 7% of start-ups
» £5.1 million and 13 deals
• There is a lack of VC focus outside of the South
» Strong London/M4 corridor/Cambridge focus
• Corporates have slashed supply lists by upto 95%: to the detriment of smaller/unquoted vendors*
• 90% of large corporates will not buy solutions >£50k from vendors with <£10M in revenues*
• EXITS: Established vendors are being very selective in acquiring feature/function to boost their offerings: VC’s need to market their assets for sale
» 900 IT M&A deals globally in H2, 2003 and H1, 2004
» Only 70 acquisitions by top 38 vendors, only 12 were European companies
• Liquidity: IPO routes still difficult in the short term, especially in Europe
• The global IT market has structurally changed and there are new rules of engagement
Industry Concerns
*Source: Forrester Research
Background: The Changing Deep Structure of the IT Industry
The New Ecosystem - Follow the Money
CIO/CTO/ IT Dept.CIO/CTO/ IT Dept.
Hardware and Network
Equip.Vendor
Hardware and Network
Equip.Vendor
SoftwareVendor
Transaction
C 1985
Background: The Changing Deep Structure of the IT Industry
The New Ecosystem - Follow the Money
Emerging Tech.
Vendor
Emerging Tech.
Vendor
InvestorInvestor
NetworkService
Provider
CIO/CTO/ IT Dept.CIO/CTO/ IT Dept.
Hardware and Network
Equip.Vendor
Hardware and Network
Equip.Vendor
SoftwareVendor
Transaction
C 1990
Background: The Changing Deep Structure of the IT Industry
The New Ecosystem - Follow the Money
Emerging Tech.
Vendor
Emerging Tech.
Vendor
InvestorInvestor
IT Service Provider
IT Service Provider
NetworkService
Provider
CIO/CTO/ IT Dept.CIO/CTO/ IT Dept.
Hardware and Network
Equip.Vendor
Hardware and Network
Equip.Vendor
SoftwareVendor
Transaction
C 1995
Background: The Changing Deep Structure of the IT Industry
The New Ecosystem - Follow the Money
Emerging Tech.
Vendor
Emerging Tech.
Vendor
InvestorInvestor
Enterprise Lines ofBusiness
Enterprise Lines ofBusiness
IT Service Provider
IT Service Provider
NetworkService
Provider
CIO/CTO/ IT Dept.CIO/CTO/ IT Dept.
Hardware and Network
Equip.Vendor
Hardware and Network
Equip.Vendor
SoftwareVendor
Transaction
C 2000
Where does technology transfer and brokering fit?
The New Ecosystem - Follow the Money
Emerging Tech.
Vendor
Emerging Tech.
Vendor
InvestorInvestor
Enterprise Lines ofBusiness
Enterprise Lines ofBusiness
IT Service Provider
IT Service Provider
NetworkService
Provider
CIO/CTO/ IT Dept.CIO/CTO/ IT Dept.
Hardware and Network
Equip.Vendor
Hardware and Network
Equip.Vendor
SoftwareVendor
Transaction
C 2000
AcademiaAcademia
A Win - - Win Model
Technology Transfer and Brokering
Emerging Tech.
Vendor
Emerging Tech.
Vendor
Hardware and Network
Equip.Vendor
Hardware and Network
Equip.Vendor
SoftwareVendor
AcademiaAcademiaAcademiaAcademia
Cash
Technology
Stock
Tech
nolo
gy
Broker, e.g. PAX
TT
Broker, e.g. PAX
TT
Stock
Cas
h
Royalties
Research
Making the Funding Journey
1. Understand the equity marketing paradox
2. Know your equity customer
3. Plan your equity funding roadmap
1. Understand the equity marketing paradox
• The Entrepreneur/CEO has TWO marketing problems
CEO Product 1Product 2
CapitalCustomers
Angel/seed funding
Venture Capital
Bank Debt
Corporates
Aerospace
Biotech
Semiconductors
E-Commerce
PeopleContext
The Business
Opportunity
The Deal
2. Know Your Equity Customer
Stakeholders Entrepreneur
The Team
EconomyTechnology
Competition
Timing
Customer
Business Model
Opportunity Size
Price
Deal Structure
2. Know Your Equity Customer (Cont.)
3. Plan your equity funding roadmapVersion 1.0 Company
Version 1.5 Company
Version 2.0 Company
Source: VenlogicLLC
Theme
Taking technology out of the lab and into the
real World
Recommendations
• Understand exactly where you fit into the new IT market ecosystem – either directly or using the channels
• Prepare for your two sales pitches
» Your product and your equity
• Identify your equity customer and determine what they need to fully analyse your business
» You only have one chance to pitch
• Do not ‘shop’ the deal
» Be very selective in your approach and focus your energy and budget on the ‘best’ investors for your business
• Cash is king !
» Plan your equity roadmap like a military assault
J Carl Allen
+44 207 323 7685
www.forrester.com
Thank you
Entire contents © 2004 Forrester Research, Inc. All rights reserved.