Accelerating Value Creation with Venture Capital

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Accelerating Value Creation with Venture Capital

  1. 1. Accelerating Value Creation with Venture Capital Investors in Industry Benchmarking Industry-Science Relationships October 16, 2000
  2. 2. Agenda • How do we define Venture Capital? • What are our Investment Criteria? • What is our Investment Process? • Who are we? Investors in Industry
  3. 3. Venture Capital mainly invests in young innovative high-tech companies in early stages of their development Investment focus in Europe 100 % = 14.461 Mio. Euro (1998) Actual High-Tech VC market 27,8 % 1.664 Mio. Euro "Non-Tech“ 72,2% * Source: evca yearbook 1999 Seed 1,2% Expansion Buy-out Replacement Start-up 10,2% 30,0% 51,1% 7,5% Investors in Industry
  4. 4. Venture Capital is an essential financing possibility for young innovative companies Banks and financial institutions • Short- and long-term loans as liabilities • Investment companies of banks Capital investment companies • Federal investment companies Venture Capital • Independent VC-companies (as 3i) companies • Corporate VC of big industrial companies • Kreditanstalt für Wiederaufbau (KfW) Government support programs • Deutsche Ausgleichsbank(DtA) • Private persons (Business Angels) Other investors • Direct investments of industrial companies Investors in Industry
  5. 5. Venture Capital differs from classic financing forms significantly Classic financing Venture Capital forms Targeted established company young, innovative company type high-tech company Industrial and technical know-how of could must investment company Support low high Aim of interest, dividends, increase of company‘s investment company increase of value value Participation „unlimited“ four to eight years Number of financing one several steps Valuation traditional future- and success- oriented Investors in Industry
  6. 6. Venture Capital offers active management support based on detailed product and business know how and experiences in company build-up Financing Qualified management support • providing equity • Contract structure/shareholder‘s • preparing the financing plan structure/investment plans including other financial sources • complete management (public resources, banks, • Company strategy and development investment companies) plan • preparing further financing rounds • selecting and acquiring + • Marketing and sales strategy • Internationalisation international co-investors • identify and select partners • syndicate leader / lead-investor • Going public and trade sale Investors in Industry
  7. 7. Companies could organise their growth successfully with venture capital Venture Capital financed companies ... • with a turnover development twice or three times bigger than other companies, expand far 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
  8. 8. Agenda • How do we define Venture Capital? • What are our Investment Criteria? • What is our Investment Process? • Who are we? Investors in Industry
  9. 9. There are several decisive criteria for the assessment of a business plan ... No No investment or Is there a qualified business concept ? Yes revision of business plan Is there a competitive product/technology advantage No No investment or Yes that can be expanded ? revision of business plan No No investment or Is there an attractive, fast growing market ? revision of business plan Yes No Are there a convincing strategy and operation planning ? No investment or revision of business plan Yes Is the qualified management able to realise the business No No investment or plan and to take on own risks ? completing management team Yes Is a ROI of 40 - 100 % p.a. for the investors realisable No No investment due to the plan AND investment conditions ? Yes Is an exit possible later? No No investment Yes Investment Investors in Industry
  10. 10. For a successful investment a number of factors are important Business idea/ Product/ Product launch technology services and marketing Phase: Key • Defined added-value • Qualified business plan • Internationalisation strategy factors: • Measurable • Sufficient financing • Partnerships competitive • Potential of management • Time-to-market advantage teams • Aiming at international market • New/fast growing • Right calculation of leadership, e.g. acquisition of market marketing and sales costs other technologies and shares • „Option plan“ for staff Investors in Industry
  11. 11. Agenda • How do we define Venture Capital? • What are our Investment Criteria? • What is our Investment Process? • Who are we? Investors in Industry
  12. 12. A structured process is applied to evaluate investment projects Time required between 5 to 16 weeks Financial & Investment Subscription Pre-selection Due diligence Term-sheet legal due decision and and financial diligence contract transaction • Business • Product, • Letter of intent • Financial • Formal • Formal plan review market and • Negotiation of and legal approval by procedures • On-site visit management financial and review the fund’s according to • Definition of assessment contractual • Project supervisory applicable timing and • Initial terms and review with board law deliverables references and conditions references • Completing all • Financial data collection and market necessary transaction • First • Project review experts contracts feedback • Applying for government programs Close teamwork between investor and company management Investors in Industry
  13. 13. INTERSHOP: Support- omponents c 1996 1997 1998 u Evaluation of business plan u IPO - concept u IPO u Re-orientation of strategy u Bank syndicate u Support of the board u Financing u Selection of American co-investors u Bridge-financing u Bridge-financing u France Telecomas co-investor u Stock option concept u Deutsche Telekom as co-investor u New legal structure (GmbH, Inc., AG) u Support in legal structure and negotiations u Coaching of organisational growth u Support of management selection u “Sales support“ Investors in Industry
  14. 14. Agenda • How do we define Venture Capital? • What are our Investment Criteria? • What is our Investment Process? • Who are we? Investors in Industry
  15. 15. 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 Investors in Industry
  16. 16. 3i Group plc Product Venture capital for start-up companies and providing funds for growing, independent medium-sized businesses, management buy-outs and management buy-ins. Year of foundation 1945 Offices Headquarter in London 36 offices in Europe (18 of them in Great Britain) 2 offices in Asia: Singapore and Tokyo 2 offices in the USA: Boston and Palo Alto Shareholders A large number of institutional investors and small shareholders Listed on the London Stock Exchange since 1994 Investments Since 1945 in over 13,400 companies total investment volume about DM 38 billion Investors in Industry
  17. 17. 3i Philosophy • Europe’s leading venture capital company • Market leadership not only in relation to the number of investments, but also 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
  18. 18. The 3i service • Venture Capital for new, fast-growing companies, typically in the technology 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
  19. 19. The portfolio in German-speaking countries * in DM million 350 2000 1900 1800 300 1700 Number of companies 276 1600 Portfolio costs in DM million 1500 250 1400 1300 1200 200 1100 1100 1000 900 150 800 121 700 100 600 80 546 500 60 400 46 51 50 37 379 300 28 29 32 18 292 200 7 236 231 112 132 151 100 9 43 97 0 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 each as at 31.03. * Investments of 3i Group plc including co-investment funds. Investors in Industry
  20. 20. The portfolio in German-speaking countries * broken down according to Product categories 1 Sales volumes in DM1 100 million or Other (incl. BIMBO) MBOs more 4% 14% 50-100 8% million MBIs 5% 8% Young technology Growth finance companies 18% (emerging business) 56% up to 50 million 87% Status: 31.03.00 * Investments of 3i Group plc and co-investment funds 1 Basis: number of companies Investors in Industry
  21. 21. The portfolio in German-speaking countries * broken down according to Sector distribution1 Regional distribution1 Software/ Bavaria Computer Non-Technology Baden-Württemberg 24% services 35% 11% 22% Rhineland- Berlin Palatinate, Saarland Telecoms/ IT / 11% 5% Services 28% Hesse 14% Foreign Countries Electronics and 7% other technologies Life Hamburg 11% Sciences/Health 7% Care NRW Communication/ "Neue Länder" ** 17% 19% Others Networking 5% 3% 7% Status: 31.03.00 ** Saxony, Saxony-Anhalt, Turingia, Brandenburg, * Investments of 3i Group plc and co-investment funds Mecklenburg-Vorpommern 1 Basis: number of companies Investors in Industry
  22. 22. Stock market flotations To date almost 1,000 3i-backed companies have listed on stock exchanges in Europe and the US. Flotations in the German-speaking countries include: Category Example Sector Stock market Stock market flotation segment 1. Growth MobilCom Telecommunikations 1997 Neuer Markt capital 1&1 Marketing Services 1998 Neuer Markt young INTERSHOP eCommerce 1998 Neuer Markt technology BROKAT Online-Security 1998 Neuer Markt companies i:FAO Internet and travel 1999 Neuer Markt Morphosys Biotechnology 1999 Neuer Markt BinTec Communication products 1999 Neuer Markt ACG ChipCards 1999 Neuer Markt Micronas Chips and Microsensors 1999 SWX/NM Ricardo.de Online-auction house 1999 Neuer Markt Adcon Telemetry 1999 Neuer Markt WaveLight Medical laser systems 1999 Neuer Markt POET Database systems 1999 Neuer Markt DCI eCommerce 2000 Neuer Markt OpenShop Internet Shopping 2000 Neuer Markt Internolix eCommerce 2000 Neuer Markt Investors in Industry
  23. 23. Stock market flotations Category Example Sector Stock market Stock market flotation segment 1. Growth Kontron Computer hardware 2000 Neuer Markt capital Actelion Biotechnology 2000 Neuer Markt young ISRA Automation Software 2000 Neuer Markt technology Girindus Scale-up Production 2000 Neuer Markt companies Alphaform Rapid prototyping 2000 Neuer Markt microlog logistics Logistic services 2000 Neuer Markt Curasan Regenerative Biomedicine 2000 Neuer Markt CAA SW for in-car computing systems 2000 Neuer Markt GeneScan Biochips 2000 Neuer Markt eJay Music software 2000 Neuer Markt Investors in Industry
  24. 24. Stock market flotations Category Example Sector Stock market Stock market flotation segment 2. Growth Teles Telecommunikation 1998 Neuer Markt capital Gretag Image processing established systems 1998 Neuer Markt companies 3. MBO/MBI Schlott Gravure 1997 AH/SMAX Wesumat Washing machines 1997 AH/SMAX AS Création Wallpaper manufacturer 1998 AH/SMAX AC Service IT services 1998 Neuer Markt Loewe Consumer elektronics/TV 1999 AH/SMAX 4. Preparation Markant Food retail chain 1994 Geregelter for Südwest Markt stock market CPU Bank software 1999 Neuer Markt flotation Miracle Enterprise Rosource 1999 SWX Planning Abit Software & Services 2000 Neuer Markt web.de Internetportal 2000 Neuer Markt Investors in Industry
  25. 25. 3i Deutschland Gesellschaft für Industriebeteiligungen (65 Professionals, 35 Support Staff) Office Berlin Office Hamburg Office München Berlin, Brandenburg, Mecklenburg-Vorpommern North Germany Bavaria, Austria Friedrichstr. 60 Neuer Wall 71 Maximilianstraße 35 10117 Berlin 20354 Hamburg 80539 München 030/76 71 53-0, Fax -19 Tel. 040/37 47 67-0, Fax -67 Tel. 089/24 23 77-0, Fax -77 Contact: Stefan Friese Contact: Robert Stein Contact: Dr. Sebastian Kern Office Düsseldorf Office Leipzig Office Stuttgart North Rhine-Westphalia Saxony, Saxony-Anhalt, Thuringia Baden-Württemberg Burggrafenstraße 5 Nikolaistr. 55 Kronprinzstraße 11 40545 Düsseldorf 04109 Leipzig 70173 Stuttgart Tel. 02 11/9 54 44-0, Fax -49 Tel. 0341/98 44 5-0, Fax -99 07 11/22 29 22-0, Fax -29 Contact: Ulrich Eilers Contact: Stefan Friese Contact: Andreas Kochhäuser Office Frankfurt Office Munich Office Zurich Central Germany Bavaria, Austria Switzerland Bockenheimer Landstraße 55 Lenbachplatz 3 Othmarstraße 8 60325 Frankfurt 80333 Munich CH-8008 Zurich Tel. 069/71 00 00-20, Fax -39 Tel. 089/548 62-0, Fax -299 Tel. 0041 1 250 44 -00, Fax-10 Contact: Peter Cullom, Stephan Helmstädter Contact: Rudolf Franz Contact: Markus Reich Investors in Industry

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