T H E T R U T H A B O U T I P O S O F H I G H T E C H C O M PA N I E S
E R I K P. M . V E R M E U L E N
Cash Flow
Time
Valley of Death
Research Commercialization
Years between being founded and
going public1 2 3 4 5 6 7 8
Revenue to Expense Ratio:
111.83%
Revenue to Expense Ratio:
103.46%Revenue to
Expense Ratio: 124.03%
Investors
Portfolio Companies
Exit VC
The Importance of IPOs
V C - B A C K E D E X I T S
Aquisition US IPO US Acquisition EU IPO EU
Internet Bubble Regulatory Period Financial Crisis
Rules-bas
ed - Regu
lated
Market
Principles-based -
Unregulated Market
I P O A LT E R N AT I V E S
0
1500
3000
4500
6000
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
NASDAQ (total listed companies)AIM (total listed companies)
U S I P O A C T I V I T Y I N C R E A S E S
0
5000
10000
15000
20000
25000
0
18
36
54
72
90
2009 2010 2011 2012 2013 2014 (1H)
Deal Count Capital Invested
65
89
58
4843
1212
4348
58
89
65
T H E C O R N E R S T O N E O F T H E J O B S A C T I S T H E C R E AT I O N O F A N I P O O N -
R A M P, W H I C H P R O V I D E S E M E R G I N G G R O W T H C O M PA N I E S W I T H A P H A S E - I N
P E R I O D T O F U L LY C O M P LY W I T H VA R I O U S D I S C L O S U R E A N D A C C O U N T I N G
R E Q U I R E M E N T S
Emerging Growth Companies
A R E W E I N A T E C H B U B B L E ?
Profitable at IPO (ratio >100%)Almost Profitable at IPO (ratio 81-100%)Not Profitable at IPO (ratio 0-80%)
I M PA C T O F T H E J O B S - A C T ?B2B B2C EnergyFinancial Services Healthcare Information TechnologyMaterials & Resources
I M PA C T O F T H E J O B S - A C T ?Deal Size $0-50M Deal Size $51M-100MDeal Size $101M-150M Deal Size $151M-200MDeal Size >$200M
0
5000
10000
15000
20000
25000
0
18
36
54
72
90
2009 2010 2011 2012 2013 2014 (1H)
Deal Count US Capital Invested US
65
89
58
4843
1212
4348
58
89
65
Deal Count EU Capital Invested EU
262017
2214
6614
2217 20
26
A S I M I L A R T R E N D I N E U R O P E
T H E E U R O P E A N I P O L A N D S C A P E
A LT E R N AT I V E M A R K E T S V E R S U S M A I N E Q U I T Y M A R K E T S
AIM Alternext First North EURONEXTLSE Other Regulated Main Markets NASDAQ NYSE
US Markets
Main Markets
Ecosystem France (all-inclusive)
A LT E R N AT I V E M A R K E T S V E R S U S M A I N E Q U I T Y M A R K E T S
VisibilityliquidityTrading Volume
Main Markets
Alternative Markets
Todays stock markets have a casino-type mentality driven by factors like the rise of automated trading and shorter-term average holding periods. People dont take the time to do research and really get to know a company before they invest in it
A Return to Old-Fashioned Investing?
T I M E T O I P O L E N G T H E N S
Source: Dow Jones VentureSource
Years
Median time from initial equity funding to IPO (US)
Employees liquidity needs
0
5000
10000
15000
20000
25000
2009 2010 2011 2012 2013 2014 (1H)
Deal Count US Capital Invested US
65
89
5848
43
1212
4348
58
89
65
MegaRounds US Capital Raised MegaRounds US
10294
64
77
292121
29
77
64
94102
I P O V E R S U S M E G A R O U N D S I N T H E U N I T E D S TAT E S
Remain Private
IPO WHERE? / WHAT?
0
12,5
25
37,5
50
Jan/10 Apr/10 Jul/10 Oct/10 Jan/11 Apr/11 Jul/11 Oct/11 Jan/12 Apr/12 Jul/12 Oct/12
Mutual Funds19%
Hedge Funds8%
Family Officies8%
Issuers2%
Asset Managers45%
Accredited Individuals19%
BuyersQ1 2012
Buyers Sellers
High Tech Companies
1. Checking legal compliance
2. Providing legal assistance
2. Providing transaction procedures and assistance, such as standardized contracts
4. Increasing transparency and information:, e.g., SharesPost Venture-Backed Index and SecondMarkets Trusted Networks
Private Secondary Markets
Ex-employees Employees Founders InvestorsOther
Source: SecondMarket, Private Company Report, Q2-4, 2010
Composition of Sellers
Source: SecondMarket, Private Company Report, Q-4, 2010
Composition of Buyers
Source: SecondMarket, Private Company Report, 2011
Composition of Buyers 2011 (by dollar value)
Source: SecondMarket, Private Company Report, Q-1, 2012
Composition of Buyers 2012 Q1(by dollar value)
G L O B A L T R A N S A C T I O N S I N U N R E G I S T E R E D E Q U I T Y- R E L AT E D S E C U R I T I E S ( $ B )
0
2
4
6
8
10
12
14
16
18
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
19,3
12,4
8,29,3
4,6
2,4
5,7
3
1,30,90,60,50,3
12
3
Lawrence J. Ellison: Tech moguls like Larry Page, Sergey Brin and Mark Zuckerberg run public companies that are essentially private fiefdoms theyve structured their corporate control so theres no
way that investors or board members can unseat them. Thank Steve Jobs for that!
1 8% OF THE OUTSTANDING SHARES /
57% OF THE VOT ING R IGHTS
CEO=CHA IR
1 8% OF THE OUTSTANDING SHARES /
57% OF THE VOT ING R IGHTS
CEO=CHA IR
Accommodate innovations in shareholdings and management
structures - more flexibility
T H E A N S W E R : T H E N E E D F O R PA RT Y A U T O N O M Y
Coordinator Coordinator Coordinator
CEO
Chairman
Management/ Tone-at-the-
top
Corporate Culture
Corporate values/mission
statement
Brand
The Coordinator The Coordinator and InvestorsThe Coordinator and the Group
Communication Conversation
Investor relations
Investor conferences
/meetings
Connection Collaboration Co-Creation
Group companies Third parties
Group center Headquarters
Ownership
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