nicolas berg_swiss early-stage trends_redalpine_seca_sep2013

Swiss early-stage ecosystem�has gained momentum

SECA evening event Zurich 11. September 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.  Conditions to enable a high-tech startup cluster 3.  Impact of high-tech startup cluster 4.  Swiss high-tech startups 5.  Swiss early-stage investors 6.  Challenges 7.  Opportunity & risks 8.  Wanted investor types 9.  Interfaces to Corporate Finance M&A

Copyright Redalpine Venture Partners AG, Switzerland 2

Speaker: Nicolas Berg

§  Serial entrepreneur with 10 start-ups (1984-2011) -  e.g. founder of Borsalino 1998, sold 2000 at 20x multiple to Ringier -  CEO Sharoo since June 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 à role models ✔✔ ② Successful early-stage investors à Venture Capital ✔ ③  International Top-10-university à innovation, spin-offs ✔✔ ④ Qualified immigrants à recruiting, risk takers ✔✔ ⑤ Vital support ecosystem à entropy thru networking, training ✔✔✔ ⑥ Non bureaucratic research grants à transfer ✔✔ ⑦ Mature companies of same sector à cooperation, M&A, recruiting ✔✔ ⑧ General economic conditions & infrastructureà image, recruiting ✔✔✔ ⑨ Attractive home market à faster & safer Proof of Market ✔

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Great job creation impact of startups


Jobs�4m�3m�2m�1m�

0�- 1m�- 2m�- 3m�- 4m�- 5m�

Net job change startups <5 yrs

Net 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)

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Top exits of Swiss ICT startups


1996 – 2008 (12 years) ①  Oanda à Index Ventures ②  Search.ch à Post à Tamedia ③  Scout à Ringier ④  Auktion24 à Ricardo ⑤  Comparis à Investors ⑥  Borsalino à Cash Ringier ⑦  Kelkoo à Yahoo ⑧  LeShop à Bon appétit ⑨  Mediastreams à Microsoft ⑩  LeShop à Migros 11 Endoxon à Google 12  Jobs.ch à Tiger Fund

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2009 – 2012 (4 years) ①  Wuala à LaCie ②  Svox à Nuance ③  DeinDeal à Ringier ④  Doodle à Tamedia ⑤  Liberovision à Vizrt ⑥  Procedural à Esri ⑦  Trigami à eBuzzing ⑧  Fashionfriends à Tamedia ⑨  Borsalino/Cash à Bankzwei ⑩  Umantis à Haufe 11  Jobs.ch à Ringier/Tamedia 12  Spontacts à Scout 13  Digitec à Migros 14  Housetrip à Index

Top exits of Swiss life science startups


1999-2004 (5 years) ① Actelion à IPO ② Prionics à 30x pay-back ③ Axovan à Actelion ④ Jomed à IPO

2005 – 2008 (4 years) ① Arpida à IPO ② Glycart à Roche ($200m) ③ Serono à Merck (€10.2b) ④ Speedel à Novartis ($880m)

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2009 – 2012 (3 years) ① Esbatech à Alcon ($589m) ② Neurimmune à Biogen ③ Levitronix à Thoratec ④ Okairos à GSK ⑤ Glycovaxyn à 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 (…)

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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


① Early-stage à smaller transactions à small fund à lower fees ② Active investment managers à higher returns à 5 startups per manager ③ Diversified portfolio 15+ à better risk return à 3+ investment managers ④ Entrepreneurial skills needed to select winning early-stage deals

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Opportunities & risks


① Early-stage angel investments deliver 27% IRR - 8 studies in US/UK on historical return in business angel markets, RSCM 2010

② But <10% of virtual portfolio (>6000) delivered >70% of returns ③  «Average» investor got 27% IRR, but median investor looses money

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Wanted investor types for Switzerland


① Serial entrepreneurs with at least one top exit ② Micro 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)

③  Co-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

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Interfaces to Corporate Finance


① Exit planning starts at deal selection & term-sheet negotiation ② Professional & 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

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Bonus slides


① Scouting talents delivers better multiples than acquiring stars ② Pro-active investors know where the puck is going to be ③ PE 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)

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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) �à try to earn $110m extra with him (à1.1x) or

§  invest $5m to scout & train 20 young talents �à sell best one (Doumbia, Shaquiri) for $20m (à4x)

§  à 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 year 1990 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 CLASS Highest 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 combined Go 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)

Bon

ds (U

SD

)

Com

mod

ities

Hed

ge F

unds

Rea

l Est

ate

RE

ITS

Priv

ate

Equi

ty

Equ

ity M

SC

I Wor

ld

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

0.16 0.18 -0.07 0.04

0.48 0.09 0.16 0.16

0.16 0.04 0.28

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 AG Pfingstweidstrasse 60 CH-8005 Zürich Switzerland

phone +41 44 271 15 30

nicolas berg_swiss early-stage trends_redalpine_seca_sep2013

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