david blumberg, founding partner blumberg capital: entrepreneurship, innovation & venture...
TRANSCRIPT
Entrepreneurship, Innovation & Venture Funding
For PitchPerfectMay 13, 2015
David J. Blumberg Managing Partner
Fueling Innovation
Blumberg Capital Mission
We help innovative entrepreneurstransform early stage
information technology companiesinto large scale businesses.
Blumberg Capital Overview
8 Investment professionals with entrepreneurial experience
~$500M assets under management across 4 funds
Focus on capital efficient Information Technology companies
Disciplined strategy of leading Seed and Series A investments
Investing in tech hubs (US, Israel, Germany, Canada…)
Large and sustainable funnel of proprietary deal flow
Chief Information Officer Council & Chief Marketing Officer Council
Talent Lead for recruiting assistance
Solid track record: current funds in top decile
CONFIDENTIAL 3
Blumberg Capital Investment Strategy
Growth Capital
Angels
Early Stage Lead
Key Tenets: Go early; go big Target 15-25% equity in seed or
series A round Follow on with winners
CONFIDENTIAL 4
Our “lead the early stage” strategy fills a funding gap in the market
Differentiated Financial Strategy: BC owns ~15% of the average
portfolio company BC serves on ~90% of company
boards
Selected Blumberg Capital Portfolio
CONFIDENTIAL 5
Financial Services
Social Media & E-commerce
Enterprise Software & SaaS
Acquired (PANW)
Best Time Ever For Entrepreneurs - Why Now?
Dramatic decline in CapEx for startups
Rise of efficient distribution channels: SaaS, Mobile Apps, Social Media
Growth of emerging markets
Access to education, formal / informal, models
Growth / professionalization of angel investors
Large companies seek partners for innovation
CONFIDENTIAL
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion
s
US Venture Capital: $ Invested by Quarter
Seed Stage Early Stage Expansion Stage Later Stage
Source: PWC Moneytree as of Q2 2014
Monitoring VC Activity Levels
CONFIDENTIAL 8
Venture capital investments hit a frenzy in 2000; today’s level more sober.
Seed stage is 2% of total in past year
Technology is Continuing Secular Growth
Source: KPCB, Morgan Stanley, Bloomberg, CapIQ
Technology Company Market Capitalization as % of S&P 500
CONFIDENTIAL 9
In 2000, technology stocks represented 35% of the S&P index. Recent levels below 20% while post crash growth has been significant and steady.
3.2 5.96.911.3
16.3
28.134.9
62.3
40.4
155.0
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Series Seed Series A Series B Series C Series D or Later
Median Company Valuation by Funding Stage ($M)
Source: Pitchbook
Early Stage Investing is Stable and Attractive
CONFIDENTIAL 10
Late stage market valuations have increased substantially and are more volatile, while Seed and Series A stages have been impacted less.
Blumberg Invests in Top VC Markets
Note: Survey of 331 venture capital, private equity, and growth equity investorsSource: WSJ, 8/13/2014, based on data from the National Venture Capital Association and Deloitte
11CONFIDENTIAL
Entrepreneurship Requirements
Passion / Commitment / Persistence
Vision
Credibility / Integrity
Domain expertise
Functional skill set
Supportive peer group / mentors
CONFIDENTIAL
Innovation: Why, What, How, Who, When ? Why
Pain / Necessity Lack of alternatives Value proposition
What Market size / Risk factors Differentiated advantages / Competitive landscape Customer feedback / External validation
How Technological edge / Intellectual property What is in the secret sauce?
Who Right team – mix of skills, compatibility
When Market timing, channels
CONFIDENTIAL
Due Diligence – Trust But Verify!
Take nothing for granted; expect the unexpected
Market checks – consulting with industry experts
Customer checks – yours and ours (via CIO / CMO / CISO Counsels)
Founder checks – formal and informal references
Financial checks - analysis and review of assumptions
Legal checks - use a good attorney/solicitor
15CONFIDENTIAL
Post-investment Support
Network introductions Sales Business development Recruiting Financing
Operational expertise
Strategic/financial consulting
Follow-on investing, based on merit
16CONFIDENTIAL
Accelerating Change – Risks/Opportunities
McKinsey estimates the economic impact of the Digital / Mobile revolution will be 5-10X Internet in the 1990s
All business models are at risk
Major corporations are desperate for innovation
40% of existing companies will fail in this transition
8 trends: Distributed co-creation; Consumers as innovators; Distributed talent management; Higher value interactions; Expanding automation; Unbundling production from delivery; Analytics for management; Data businesses
17CONFIDENTIAL
Entrepreneurs Opportunity Knocks; Carpe Diem! Developed economies high consumer income, rule of
law, low corruption
Natural trade bridge between EU and US and ROW
Strong digital / mobile infrastructure
Leading universities & research institutions
World class centers for international finance, logistics, manufacturing, fashion, automotive, machinery, etc.
Polyglot, educated workforce
Too much government intervention; work rules, taxation and regulation; slow growth; demographics
18CONFIDENTIAL
Year In Review: Significant Macro Changes
CONFIDENTIAL 19
Mobile permeates all sectors
Crowdsourcing/social/cloud is disrupting many industries
Big Data 2.0 (algorithms and machine learning) addressing the application layer
Turnover in large VC firms and more first time funds
Increasing corporate venture activity
Increasing regulation and taxation burden
Emerging markets are still growing, but also riskier
Geo-political tensions – Iran, Islamic State, Russia, China, Nigeria
Newsflash: Capitalism Works!
1949 Typewriter 35mm camera AM FM table radio 3-speed phonograph
2009 Laptop PC Color ink jet printer, scanner, copier 8Mpixel digital camera Portable GPS 32” color HDTV 8GB iPod Nano Microwave Refrigerator freezer combo DVD/DVR Home theatre system Cordless phone AM/FM radio Camcorder Playstation II 7 more things…
Source: G.Beck
Average summer student earnings at minimum $US wage