How Innovation Linkages in Asia Unlock Value: A VC’s ... · Software development largely...
Transcript of How Innovation Linkages in Asia Unlock Value: A VC’s ... · Software development largely...
How Innovation Linkages in Asia Unlock Value:
A VC’s Perspective
US – Asia Technology Management Center School of Engineering
Stanford University
October 9, 2008
October 2008 2 ICCP Venture Partners, Inc.
Founded in 1997; four funds under management
Leverages U.S. technology innovation with Asian economic innovation (cost-effective technology manufacturing and global outsourcing/offshoring)
Proven “Trans-Pacific” investment strategy anchored on the globalization thesis of “The World is Flat” 28 portfolio companies: 18 companies in the U.S. and 10 in Asia
Value-added interface -- unlocking value by facilitating cross-border linkages
Capitalize on synergies in companies operating in both geographies
Recognized by Cambridge Associates (Boston) to be top quartile of Asian and US venture capital funds
ICCP VENTURE PARTNERS: OVERVIEW
October 2008 3 ICCP Venture Partners, Inc.
Economic innovation* is defined as any of the following:
1. Introduction of a new good or new quality of good
2. Introduction of new method of production
3. Opening of a new market for manufacturing
4. Conquest of new source of raw materials
5. Carrying out a new organization of any industry
Innovation should add value and result in more profit
* Joseph Schumpeter, Theory of Economic Development, 1934
ECONOMIC CONCEPT OF INNOVATION
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Economic innovation has been the catalyst of the Asian economic miracle – leading geography for low-cost technology manufacturing and global outsourcing/offshoring fueled by vast and talented labor pool, improved infrastructure, and government incentives
Leading U.S. technology companies have strong presence in Asia (Philippine example) Manufacturing –Texas Instruments, Marvell, SunPower Corp.,
Cypress Semiconductors, Fairchild Semiconductor Outsourced services – Dell, Microsoft, Hewlett-Packard, IBM,
Electronic Arts
THE PHILIPPINES AND EMERGING ASIA
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THE PHILIPPINES AND EMERGING ASIA
Software development largely outsourced to India
USA Semiconductor testing and assembly, and software development outsourced to the Philippines
Philippines + Only former U.S. colony in Asia + Only Asian country that shares an affinity for
American culture + Democratic form of government and constitution
are modeled after the U.S. + Legal, intellectual property protection, accounting,
corporate governance, and business practices are consistent with U.S. standards
+ According to the Economic Intelligence Unit, the Philippines has a workforce that is consistently ranked as among the very best in Asia
Asia is more than just China and India
China, India, and Southeast Asia form a highly competitive ecosystem for U.S. technology companies
Semiconductor testing and assembly largely outsourced to China
October 2008 6 ICCP Venture Partners, Inc.
Marvell Technology (NASDAQ: MRVL) is a Silicon Valley-based integrated circuits designer for storage, communications and consumer applications
NASDAQ 100 Index stock
COMPANY CASE STUDY # 1 Deal Attributes Products were already being
shipped Unique and highly-defensible IP Secured contracts from major
disk drive manufacturers Hardworking Indonesian-Chinese
founders Successful management
experience in start-up situations Attractive returns based on
sensitized financials Likely exit via IPO over the short
to medium term at attractive indicative valuations
Recognized value of manufacturing in Asia
Investment Statistics
October 2008 7 ICCP Venture Partners, Inc.
Outsourced product design and assembly of electronic components to the Philippines
Other new projects slated for the Philippines
COMPANY CASE STUDY # 1 Asian Economic Innovation
Has operations in Asia Pacific Headquarters in Singapore
with IC assembly & test, technology design center, sales & technical support
Design centers in India Product packaging & testing
in Singapore, Taiwan and Malaysia
88% of 2007 revenue accounted for by Asia -- China, Japan, Malaysia, Korea, Singapore, Thailand, Philippines, and Taiwan
October 2008 8 ICCP Venture Partners, Inc.
COMPANY CASE STUDY # 1 Marvell: Actual Annual Revenue (in US$ MM)
October 2008 9 ICCP Venture Partners, Inc.
Sitoa Corporation is a software-driven marketplace
COMPANY CASE STUDY # 2
Consistently exceeded revenue targets
First to develop a complete solution for online retailing – flattening the barriers to global commerce
Strong senior and middle management team
Offensive and defensive patent-pending IP
Had already signed up a number of major retailers and suppliers
Very capital efficient
Deal Attributes
Investment Statistics
October 2008 10 ICCP Venture Partners, Inc.
COMPANY CASE STUDY # 2
Asian Economic Innovation
Current Outsourcing creation of
consumer-ready product content to a software company in the Philippines
Evaluating partnerships with Philippine retailers and suppliers
Evaluating partnerships with Asian logistics providers and e-commerce players
Roadmap Expand retailer and supplier
base in Asia, initially Philippines
Outsource other software development projects to the Philippines
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COMPANY CASE STUDY # 2 Sitoa Business Model
Product Partners
Retailers
Rapid access to leading online retailers
Minimal additional technology investment
Retail account management and merchandising
Connect once, sell to many
Low cost access to new merchandise
Enter into new categories instantly
Additional revenue stream without the inventory risk
Merchandising and category management
Game changing platform
Merchandising partner
Single, unified source for product information, orders and logistics
Connect once, trade with many
Proven, scalable technology
October 2008 12 ICCP Venture Partners, Inc.
COMPANY CASE STUDY # 2 Sitoa International Roadmap
U.S. Outlets
U.S. Suppliers
U.S. Consumers
Int’l Suppliers
Int’l Outlets
Phase 1: U.S. Domestic
Phase 2: Int’l Supplier Direct Sourcing
Int’l Consumers
Phase 3: Int’l Demand, existing U.S. Suppliers
Phase 4: Int’l Demand, Int’l Supply Base
October 2008 13 ICCP Venture Partners, Inc.
COMPANY CASE STUDY # 2 Sitoa: Actual Annual Revenue (in US$ MM)
October 2008 14 ICCP Venture Partners, Inc.
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