Accelerating Value Creation with Venture Capital · 2016-03-29 · * Source: evca yearbook 1999...
Transcript of Accelerating Value Creation with Venture Capital · 2016-03-29 · * Source: evca yearbook 1999...
Investors in Industry
Benchmarking Industry-Science Relationships October 16, 2000
Accelerating ValueCreation with
Venture Capital
Agenda
• How do we define Venture Capital?
• What are our Investment Criteria?
• What is our Investment Process?
• Who are we?
Investors in Industry
* Source: evca yearbook 1999
High-Tech27,8 %
"Non-Tech“72,2%
Venture Capital mainly invests in young innovative high-techcompanies in early stages of their development
Seed 1,2%Start-up 10,2%
Expansion 30,0%
Buy-out 51,1%
Replacement 7,5%
ActualVC market1.664 Mio. Euro
Investment focus in Europe 100 % = 14.461 Mio. Euro (1998)
Investors in Industry
• Short- and long-term loans as liabilities
• Investment companies of banks• Federal investment companies
• Independent VC-companies (as 3i)• Corporate VC of big industrial companies
• Kreditanstalt für Wiederaufbau (KfW)• Deutsche Ausgleichsbank(DtA)
• Private persons (Business Angels)• Direct investments of industrial companies
Banks and financial institutions
Capital investment companies
Venture Capitalcompanies
Government support programs
Other investors
Investors in Industry
Venture Capital is an essential financing possibility foryoung innovative companies
Classic financing Venture Capitalforms
Targeted established company young, innovativecompany type high-tech company
Industrial and technicalknow-how of could mustinvestment company
Support low high
Aim of interest, dividends, increase of company‘sinvestment company increase of value value
Participation „unlimited“ four to eight years
Number of financing one severalsteps
Valuation traditional future- and success-oriented
Venture Capital differs from classic financing formssignificantly
Investors in Industry
Financing
• providing equity• preparing the financing plan
including other financial sources(public resources, banks,investment companies)
• preparing further financing rounds• selecting and acquiring
international co-investors• syndicate leader / lead-investor
Qualified management support
• Contract structure/shareholder‘sstructure/investment plans
• complete management• Company strategy and development
plan• Marketing and sales strategy• Internationalisation• identify and select partners• Going public and trade sale
Venture Capital offers active management support based ondetailed product and business know how and experiences incompany build-up
+
Investors in Industry
Companies could organise their growth successfully withventure capital
Venture Capital financed companies ...
• with a turnover development twice or three times bigger than other companies, expandfar stronger
• have a better return despite higher expenditures for investment and R & D
• have a higher return on turnover than other German companies
• have a very good equity financing with 27% on average(in comparison: average of German companies - 17%)
• employ staff above average
Source: Coopers & Lybrand, BVK (1998)
Investors in Industry
Agenda
• How do we define Venture Capital?
• What are our Investment Criteria?
• What is our Investment Process?
• Who are we?
Investors in Industry
There are several decisive criteria for the assessment of a business plan ...
No No investment or revision of business planYes
No
No
No
No
No
No
No investment orcompleting management team
No investment
No investment
Yes
Yes
Yes
Yes
Yes
Yes
Is there a qualified business concept ?
Is there a competitive product/technology advantagethat can be expanded ?
Is there an attractive, fast growing market ?
Are there a convincing strategy and operation planning ?
Is the qualified management able to realise the businessplan and to take on own risks ?
Is a ROI of 40 - 100 % p.a. for the investors realisable due to the plan AND investment conditions ?
Is an exit possible later?
Investment
No investment orrevision of business plan
No investment orrevision of business plan
No investment orrevision of business plan
Investors in Industry
For a successful investment a number of factors are important
• Internationalisation strategy• Partnerships• Time-to-market• Aiming at international market
leadership, e.g. acquisition ofother technologies and shares
• „Option plan“ for staff
• Qualified business plan• Sufficient financing• Potential of management
teams• Right calculation of
marketing and sales costs
• Defined added-value• Measurable
competitiveadvantage
• New/fast growingmarket
Keyfactors:
Phase:
Business idea/ technology
Product/ services
Product launch and marketing
Investors in Industry
Agenda
• How do we define Venture Capital?
• What are our Investment Criteria?
• What is our Investment Process?
• Who are we?
Investors in Industry
A structured process is applied to evaluate investment projects
• Businessplan review
• On-site visit• Definition of
timing anddeliverables
• Firstfeedback
• Letter of intent• Negotiation of
financial andcontractualterms andconditions
Financial & legal due diligence
Investment decision and
contract
Subscription and financial
transactionPre-selection Due diligence Term-sheet
• Product,market andmanagementassessment
• Initialreferences anddata collection
• Project review
• Financialand legalreview
• Projectreview withreferencesand marketexperts
• Formalproceduresaccording toapplicablelaw
• Financialtransaction
• Formalapproval bythe fund’ssupervisoryboard
• Completing allnecessarycontracts
• Applying forgovernmentprograms
Close teamwork between investor and company management
Time required between 5 to 16 weeks
Investors in Industry
u Evaluation of business plan
u Re-orientation of strategy
u Financing
u Selection of American co-investors
u New legal structure (GmbH, Inc., AG)
u Stock option concept u France Telecom as co-investor
u Deutsche Telekom as co-investor
u Bridge-financing
u Bank syndicate
u IPOu IPO - concept
u Bridge-financing
u Support of the board
u Support of management selectionu “Sales support“
u Support in legal structure and negotiationsu Coaching of organisational growth
INTERSHOP: Support-components
1996 1997 1998
Investors in Industry
Agenda
• How do we define Venture Capital?
• What are our Investment Criteria?
• What is our Investment Process?
• Who are we?
Investors in Industry
Investors in Industry
3i Deutschland
• Total of 8 offices with 100 employees, 65 of whom are investment specialists
• Teams of Technology and Transaction experts in each office
• Currently approx. 300 companies in the portfolio of 3i Germany
• Successful IPO’s, e.g. MobilCom, INTERSHOP, BROKAT, ACG, Morphosys, Openshop, ISRA
• Acquisition of Technologieholding in February 2000– Strengthening of 3i market position and know-how in the area of early-stage financing– Expertise of Technologieholding in globalisation of portfolio companies
• 3i offers Venture Capital for all stages, from Seed Capital to IPO
3i Group plc
Product Venture capital for start-up companies and providing fundsfor growing, independent medium-sized businesses,management buy-outs and management buy-ins.
Year of foundation 1945
Offices Headquarter in London36 offices in Europe (18 of them in Great Britain)2 offices in Asia: Singapore and Tokyo2 offices in the USA: Boston and Palo Alto
Shareholders A large number of institutional investors and smallshareholdersListed on the London Stock Exchange since 1994
Investments Since 1945 in over 13,400 companiestotal investment volume about DM 38 billion
Investors in Industry
3i Philosophy
• Europe’s leading venture capital company
• Market leadership not only in relation to the number of investments, butalso with respect to
– Innovation - Customer service– Marketing - Fast decision-making– Professionalism and competence - Supply capability
• Flexible exit policy• “Involved investor” – partnership instead of control• Independent of banks• Trust in management as primary focus• Each case is different – individual customer-tailored solutions
Investors in Industry
The 3i service
• Venture Capital for new, fast-growing companies, typically in thetechnology sector
• Growth capital for established, but growing medium-sized companies(Mittelstand)
• Private Equity for restructuring and succession solutions
– Management buy-out (MBO)– Management buy-in (MBI)
• Pre-IPO financing
Investors in Industry
6080
51463732292818
7
121
276
9 43
546
97 112 132 151236 231
292379
1100
0
50
100
150
200
250
300
350
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000010020030040050060070080090010001100120013001400150016001700180019002000
Number of companies
Portfolio costs in DM million
each as at 31.03.
* Investments of 3i Group plc including co-investment funds.
The portfolio in German-speaking countries *
Investors in Industry
in DM million
MBOs 14%
MBIs8%
Growth finance18%
Young technology companies
(emerging business)56%
Other (incl. BIMBO)4%
Status: 31.03.00* Investments of 3i Group plc and co-investment funds1 Basis: number of companies
The portfolio in German-speaking countries *broken down according to
up to 50 million87%
50-100 million
5%
100 million or more8%
Product categories1 Sales volumes in DM1
Investors in Industry
Rhineland- Palatinate, Saarland
5%
Hesse14%
NRW19%
Baden-Württemberg11%
Bavaria24%
Others3%
"Neue Länder" **5%
Hamburg7%
Foreign Countries7%
Berlin11%
Status: 31.03.00* Investments of 3i Group plc and co-investment funds1 Basis: number of companies
The portfolio in German-speaking countries *broken down according to
Communication/ Networking
7%
Telecoms/ IT / Services
28%
Electronics and other technologies
11%
Non-Technology35%
Life Sciences/Health
Care17%
Software/ Computer services
22%
Sector distribution1 Regional distribution1
Investors in Industry
** Saxony, Saxony-Anhalt, Turingia, Brandenburg, Mecklenburg-Vorpommern
Stock market flotations
Investors in Industry
To date almost 1,000 3i-backed companies have listed on stock exchanges in Europe and theUS. Flotations in the German-speaking countries include:
Category Example Sector Stock market Stock marketflotation segment
1. Growth MobilCom Telecommunikations 1997 Neuer Marktcapital 1 & 1 Marketing Services 1998 Neuer Marktyoung INTERSHOP eCommerce 1998 Neuer Markttechnology BROKAT Online-Security 1998 Neuer Marktcompanies i:FAO Internet and travel 1999 Neuer Markt
Morphosys Biotechnology 1999 Neuer MarktBinTec Communication products 1999 Neuer MarktACG ChipCards 1999 Neuer MarktMicronas Chips and Microsensors 1999 SWX/NMRicardo.de Online-auction house 1999 Neuer MarktAdcon Telemetry 1999 Neuer MarktWaveLight Medical laser systems 1999 Neuer MarktPOET Database systems 1999 Neuer MarktDCI eCommerce 2000 Neuer MarktOpenShop Internet Shopping 2000 Neuer MarktInternolix eCommerce 2000 Neuer Markt
Stock market flotations
Category Example Sector Stock market Stock marketflotation segment
1. Growth Kontron Computer hardware 2000 Neuer Marktcapital Actelion Biotechnology 2000 Neuer Marktyoung ISRA Automation Software 2000 Neuer Markttechnology Girindus Scale-up Production 2000 Neuer Marktcompanies Alphaform Rapid prototyping 2000 Neuer Markt
microlog logistics Logistic services 2000 Neuer Markt
Curasan RegenerativeBiomedicine 2000 Neuer Markt
CAA SW for in-carcomputing systems 2000 Neuer Markt
GeneScan Biochips 2000 Neuer MarkteJay Music software 2000 Neuer Markt
Investors in Industry
Stock market flotations
Investors in Industry
Category Example Sector Stock market Stock marketflotation segment
2. Growth Teles Telecommunikation 1998 Neuer Marktcapital Gretag Image processingestablished systems 1998 Neuer Marktcompanies
3. MBO/MBI Schlott Gravure 1997 AH/SMAXWesumat Washing machines 1997 AH/SMAXAS Création Wallpaper manufacturer 1998 AH/SMAXAC Service IT services 1998 Neuer MarktLoewe Consumer elektronics/TV 1999 AH/SMAX
4. Preparation Markant Food retail chain 1994 Geregelterfor Südwest Marktstock market CPU Bank software 1999 Neuer Marktflotation Miracle Enterprise Rosource 1999 SWX
PlanningAbit Software & Services 2000 Neuer Marktweb.de Internetportal 2000 Neuer Markt
Office MünchenBavaria, AustriaMaximilianstraße 3580539 MünchenTel. 089/24 23 77-0, Fax -77Contact: Dr. Sebastian Kern
Office ZurichSwitzerlandOthmarstraße 8CH-8008 ZurichTel. 0041 1 250 44 -00, Fax-10Contact: Markus Reich
3i Deutschland Gesellschaft für Industriebeteiligungen(65 Professionals, 35 Support Staff)
Investors in Industry
Office DüsseldorfNorth Rhine-WestphaliaBurggrafenstraße 540545 DüsseldorfTel. 02 11/9 54 44-0, Fax -49Contact: Ulrich Eilers
Office LeipzigSaxony, Saxony-Anhalt, ThuringiaNikolaistr. 5504109 LeipzigTel. 0341/98 44 5-0, Fax -99Contact: Stefan Friese
Office FrankfurtCentral GermanyBockenheimer Landstraße 5560325 FrankfurtTel. 069/71 00 00-20, Fax -39Contact: Peter Cullom, Stephan Helmstädter
Office HamburgNorth GermanyNeuer Wall 7120354 HamburgTel. 040/37 47 67-0, Fax -67Contact: Robert Stein
Office BerlinBerlin, Brandenburg, Mecklenburg-VorpommernFriedrichstr. 6010117 Berlin030/76 71 53-0, Fax -19Contact: Stefan Friese
Office StuttgartBaden-WürttembergKronprinzstraße 1170173 Stuttgart07 11/22 29 22-0, Fax -29Contact: Andreas Kochhäuser
Office MunichBavaria, AustriaLenbachplatz 380333 MunichTel. 089/548 62-0, Fax -299Contact: Rudolf Franz