BeWise lecture: Sven Illing "Introduction to Venture Capital" @ Estonian Business School 16 Oct 2014
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Transcript of BeWise lecture: Sven Illing "Introduction to Venture Capital" @ Estonian Business School 16 Oct 2014
Title
Introduction to
venture capitalSven Illing, iCapital
October 16, 2014 at Estonian Business School for JCI Tallinn BeWise
Background
2001 – 2003 co-founder of software company Vision Group
2006 – 2010 helped startups at Tartu Science Park Judge at Garage48.org, Brainhunt, Seed Forum
2009 - ... founder of iCapital investing + advising startups on business development & raising capital co-founder of GameFounders startup accelerator (2012) investment adviser at Buildit startup accelerator (2014)
Contacts:
[email protected]@contactsvenangel.co/contactsven
Topics today: broad & narrow
Some data about VC industry in the U.S. and Europe
Early stage financing options for start-ups
Practical steps in the capital raising process
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How much did VC-s invest in the US in 2013?
$29.4B in 3,995 venture deals
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nvca.org
How many VC-s in the US?
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NVCA Yearbook 2014 | www.nvca.org
Who are the top VC-s?
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How many VC firms in Europe?
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Venture capital in Europe - investments
Topics today
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Venture capital in Europe - exits
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2013 European Private Equity Activity, evca.eu
Venture capital in Europe – exits by route
How to fund your startup?
How to fund your startup Bootstrapping
Banks, credit cards
FFF
Grants and support
Crowdsourced donations/pre-orders: Kickstarter, Indiegogo etc
Crowdfunding: seedrs.com, crowdcube.com etc
Meet investors online: AngelList, Gust, F6s etc
Startup accelerators
Business angels
VC-s
Bootstrapping
„We made 500 of each (Obama O's and Cap'n McCains). They
were a numbered edition on the top of each box, and sold for
$40 each. The Obama O's sold out, netting the funds we needed
to keep Airbnb alive. The Cap'n McCains... they didn't sell quite
as well, and we ended up eating them to save money on food.“
Joe Gebbia, co-founder of Airbnb http://www.avc.com/a_vc/2011/03/airbnb.html
Airbnb in 2014
500,000 listings in 33,000 cities in 192 countries
What website?
http://www.crunchbase.com/organization/airbnb
Meet investors online: AngelList
Online service that matches early stage companies with angel investors. Syndicated investments platform.
36 000 startups (Oct 2014)
800 000 people (founders, advisors etc ), inc 34 000 investors
Thousands of startups on AngelList have gone on to raise big rounds.
AngelList
Latvia – 18 startups (2012) 127 (Oct 2014) http://angel.co/latvia
Avg valuation $2.5M
Estonia – 50 startups (2012) 195 (Oct 2014) http://angel.co/estonia
Avg valuation $3.7M
Startup accelerators
> 2000 globally (F6s.org); <200 major ones (seed-db.com); 20 top programs
These used to be usual terms: 3 months program full of mentoring and pitch training $20 000 for 8% equity ends with a demo day (pitching to investors)
Top programs: Y Combinator, TechStars, 500 Startups in the US Seedcamp, Startupbootcamp in Europe Vertically focused accelerators, e.g. Rockhealth, GameFounders
1ST STARTUP ACCELERATOR IN NORTHERN AND EASTERN EUROPE
FOCUSED ON HARDWARE
• Up to 20kEUR for 6-12% of equity EUR inve
• 3 months program program• 90+ mentors high-profile • prototyping facilities
Application round open until Dec 15
for Spring 2015 batch
Angel investing in the US (2013)
300 000 active angels
385 business angel networks with 10-15 000 acredited angels
Angels invested $24,8B into 70 730 ventures:
Software – 23% of the number of investments; Media – 16%;
Healthcare – 14%; Biotech -11%; Retail – 7%; Financial Services –
7%
Average angel deal size - $350k (syndicated)
Average equity received -12.5% with a deal valuation of $2.8M
Average individual investments - $83k
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http://paulcollege.unh.edu/research/center-venture-research
Angel investing in Europe (2013)
468 business angel networks
271 000 business angels
33 430 investments, 5.5B EUR in total
Average investment per startup 165kEUR
Average investment per business angel 20kEUR
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www.eban.org
Angels & FFF invest most
In the US:
VC-s invest <$1B in seed stage and <$10B in early stage
Business angels invested $20B into 62 000 companies in 2010
FFF-s invested $60B (mostly into non-tech)
462 active firms (2010)
300 000 angels
millions on FFFnvca.org
Fundraising process
Fundraising
Why fundraise?
How much?
When?
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Fundraising
From whom?
How to get a meeting with an investor?
Who can make the best intros?
Ranking from „Pitching Hacks“: • Entrepreneurs• Fellow-investor• Tech gurus, professors• Lawyers, accountants etc• Communists• Someone the investor met at a party once
http://venturehacks.com/pitching
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Introducing Airbnb
from: Paul Graham
to: Fred Wilson, AirBedAndBreakfast Founders
date: Fri, Jan 23, 2009 at 11:42 AM
subject: meet the airbeds
One of the startups from the batch that just started, AirbedAndBreakfast,
is in NYC right now meeting their users. (NYC is their biggest
market.) I'd recommend meeting them if your schedule allows.
I'd been thinking to myself that though these guys were going to
do really well, I should introduce them to angels, because VCs would
never go for it. But then I thought maybe I should give you more
credit. You'll certainly like meeting them. Be sure to ask about
how they funded themselves with breakfast cereal.
There's no reason this couldn't be as big as Ebay. And this team
is the right one to do it.
--pg http://www.paulgraham.com/airbnb.html
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Fundraising
How to prepare?
• research the angel / the firm and partner
• elevator pitch, 1-pager, deck
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Where to look up investors?
www.angellist.com
www.crunchbase.com
www.forbes.com/midas/list/
www.evca.eu/about-private-equity/for-entrepreneurs/find-an-
investor/#csearch
www.gust.com
www.angelcapitalassociation.org/directory/
www.eban.org/members/
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What do investors look for?
• Team
• Team
• Team
• Traction
• Market size
• Disruptive technology, patented/protected
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Team
Nieh * says that though he was excited to work with Fadell
again when it came time to invest in Nest, “…our excitement
went off the charts when we met Matt Rogers, Tony’s co-
founder, who was responsible at Apple for iPod software
development and one of the first engineers on the original
iPhone team. We would have invested had they been looking
to start a food truck.”
http://techcrunch.com/2014/01/13/google-just-bought-connected-device-company-nest-for-3-2b-in-cash/
* Peter Nieh is a partner at Light Speed Venture Partners and investor in Nest Labs
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Size matters
from: Fred Wilson to: Paul Graham date: Fri, Feb 13, 2009 at 5:29 PM subject: Re: airbnb
I met them today
They have an interesting business
I'm just not sure how big it's going to be
fred
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http://www.paulgraham.com/airbnb.html
Fundraising
Valuation
Lead-investor
Termsheet
Due diligence
Closing
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Early stage investors in Estonia
Smartcap.ee (Early Fund II, 25M EUR)
estvca.ee – Estonian Venture Capital Association has 16 full members
new funds coming
estban.ee – 70+ business angels invested >3M EUR in 2013 average investment 68k EUR in 2013 9 pitching events annually; uses Gust.com syndication
Estonian startups with most capital raised (as of Oct 2014)
EUR
1. Transferwise.com 24 100 000
2. AdCash.com 20 000 000
3. GrabCAD.com 11 299 000
4. Fits.me 11 000 000
5. Fortumo.com 5 150 000
6. Realeyes.com 4 705 000
7. Zeroturnaround.com 4 360 000
8. Clifton.ee 3 925 000
9. Modesat 3 750 000
10. Erply.com 3 243 846
11. Pipedrive.com 2 383 000
12. Defendec.com 1 850 000
Source: As reported by media or people familiar with the matter. Crowdsourced by Estonian startup community
Finding capital
„Someone once told me that the probability of an
entrepreneur getting venture capital is the same as getting
struck by lightning while standing at the bottom of a
swimming pool on a sunny day. This may be too optimistic.“
Guy Kawasaki, partner at Garage Technology
Ventures
Thank you!
Red Bull Stratos jump by Felix Baumgartner