10 non textbook lessons for european entrepreneurs
DESCRIPTION
What I have learned from working with entrepreneurs (and being one), with VCs and angels in Europe, why we are different to our US counterparts and why this *may* matter.TRANSCRIPT
x.Million Capital Ventures 1
Maria Dramalioti-Taylor
Managing Partner
x.Million Capital Ventures SA
07.11.2012
Fundraising in Europe
10 non-textbook lessons for
entrepreneurs
2
Agenda
• Venture/Angel Capital:
– How to decide if you need it
– How to navigate Angels & VCs
• On raising Capital in UK/EU
UK Entrepreneur: “Why bother? I am off to the US”
UK Investor: ”Go, but not before you see this…”
x.Million Capital Ventures 3
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..
x.Million Capital Ventures 4
#2- Know your place in the FUNDING SPECTRUM
+
NET CASH
POSITION
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)
5
DO IT LIKE A JACANA
6
#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 1.5-
3x
– bring VCs, get diluted
(may) make 5-10x
• AIM: 2x capital (but
mostly get capital back)
Angels are
like women:
temperamental
& (mostly)
irreplaceable
7
#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]
• AIM: ONE 10x home run
VCs run a
business.
They make it
sound like
Black Magic.
IT IS NOT.
x.Million Capital Ventures 8
#5 – γνῶθι…τω επινδυτή
SOURCE: www. http://www.instigatorblog.com
Angels may
not let
you fail,
VCs may
give you a
big
success
x.Million Capital Ventures 9
VC ANGEL CAPITAL A
NG
EL
/V
C
DIS
CO
NN
EC
T
€ 500k € 2m
+
Closed
ALPHA
Public
BETA
SCALE - STAGE
1st Revenue
NE
T C
AS
H P
OS
ITIO
N
#6 - Series “A” Crunch: MIND THE GAP
x.Million Capital Ventures 10
Germany & UK are more affected by the VC/AC disconnect
US , 4,705 US , 5,585
US , 14,339
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
< $ 0.5M $0.5M - $2M >$2M
Deal
Vo
lum
je (
no
n U
S)
-
100
200
300
400
500
600
700
800
900
Deal
Vo
lum
e (
US
)
UK
Germany
Russia
Source: Data from ThomsonOne, Period: 10 years
ICT Deal volume per deal size bracket
#6 - Series “A” Crunch in NUMBERS
x.Million Capital Ventures 11
NOTE: The blurring of AC/VC in the US is coming
to Europe (maybe)
www.dramalioti-taylor.org
x.Million Capital Ventures 12
#7 – A new taxonomy of investors
#Venture Accelerators
Astia (for female geeks)
Seedcamp
Springboard
Accelerator Academy
500 stratups
Y-Combinator
….
# Super Angels
AngelLab
AngelList
# The NEW lean VC
They treat every entrepreneur as an individual
x.Million, EC1 CAPITAL et al.
Aim for the one that suits
your needs best
Interesting blog:
http://disruptivegrowth.wo
rdpress.com/2010/10/14/do-
accelerators-help-raise-
funds/
x.Million Capital Ventures 13
#8- Connect the fundraising dots
Fight the
information
asymmetry
Sources www.thefunded.com
www.fredestin.com
venturehacks.com
earlystageadventures.com
www.adventurista.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)
14
Agenda
• Venture/Angel Capital:
– How to decide if you need it
– How to navigate the VC scene
• On raising Capital in UK/EU…
UK Entrepreneur: “Why bother? I am off to the US”
UK Investor: ”Go, but not before you see this…”
15
#9 - The US VC is prone to “bubbles”, when they
burst startups become orphaned
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 &… … some say already in a “bubble”
16
#9 – US VCs face an IPO crunch
IF Index >30
THEN
IPOs drop
dramatically
CBOE @ 06.11.12:
17
#9 – Startups in the US need 2x avg. capital to
build £100m business
EU = 1/2 x USA
Source: Early Bird Ventures, 2012
18
#9 – US tech acquisition of EU
companies is a well travelled road to exit
#US tech companies hold record offshore cash
Source: Zephyr M&A, 2012
0%
20%
40%
60%
80%
100%
20122011201020092008200720062005200420032002
EU acquisitions by US companies non EU acqusitions by US companies
Go. See. Come back.
x.Million Capital Ventures 19
x.Million Capital Ventures 20
# 10 - EU Growth drivers to ride on
EU-5
$292
EU-5
$172
2010 2015
eCommerce ($bn)
The $172bn eCommerce market in Europe will grow 1.7x
between 2010-15
EU5: 1.7x in 5 Yrs
$172 bn <
10% of EU-5 retail
x.Million Capital Ventures 21
# 10 - EU Growth drivers to ride on
$ 1,299
$ 122
2011 2015
EU-5 Mobile Ad spending will grow 10x between 2011-2012
(2x as fast as in the US)
EU5 growth: 10x in 4 Yrs
Mobile Ad Spending (mn)
x.Million Capital Ventures 22
# 10 - EU Growth drivers to ride on
0.62
6.52
1.730.1 0.88
11.8610.71
1
Fixed ( excl POTS) Mobile Short Range Other ( MAN, Satellite)
2011:
8.99bn connected devices
1.8 connected devices
per person
2020:
24bn connected devices 6.6 connected devices per person
Internet of Things: The ratio of Devices /Humans is expected to grow 3x by 2020
23
85% of worlds population
covered by wireless signals
vs
80% of world population
connected to the electrical
grid
Wireless connectivity flattened our world
Source: Mary Meeker, KPCB, 2012
Your turn
to talk x.Million Capital Ventures
24
25
European consumers are shifting online…
United States
East & West Europe
Internet Users
90M
150M
26
European consumers are going mobile fast …
United States
East & West Europe
Mobile Subscriptions
2004, Mobile subscriptions
EU > US
27
2x
…and are more social than most