Venture Business- the Israeli Modelor “Startup Nation” from the inside By Roostam Tiger
Israel – The “Startup Nation”• 4,000+ high-tech companies, 80+ venture funds• ~$2B invested, ~$2.5B M&A annually• World #1 in per-capita startups, 70X EU• World #1 in per-c. VC investment 2.5X US, 30X EU• World #2 in abs. NASDAQ companies (after US)• World #2 in abs. available venture capital (after US)
The Venture Game• $100M Fund• 10 years, 15% AAR = $400M = 4X on money• ~40% avg. stake = $1B value = 10X on money• 20%-70% success rate = 30X on money• Seed: $1M inv, $3M val => $300M+ exit• Late: $10M inv, $30M val => $300M+ exit• $300M exit, 1.5X-15X multiple = $70M+ sales• => ~$1B market
What’s a Good Startup for VC• Viable business • Solves real pain (future!) • Better than alternatives io n! • Viable business model a ct Tr• Executable • Realistic plan • Team balanced, capable, committed• Good opportunity • Scalable • Attractive deal terms
Additional CriteriaSeed•Before traction, significant revenues = high risk•Other risk reduction = experience, higher outlook•More close work after investmentInternational•More proven and independent•Growth stage = traction + revenues $2M/y +
What’s a Good Investment• “Smart money” – experience, connections, help• Funds required for next milestone• Reasonable valuation• Reasonable stake
Tips on the way to Investment• Plan for long process – 2-6 months• Be introduced – no cold-calls• 2 docs – exec. sum, presentation• Short, focus on few most important• Understand involved people• Listen!• ‘No’ is fine; use to improve• Approach incrementally, shape the story
Common Pitfalls“Tech is great; surely we can do smth with it”“The pain is there, the product is not a problem”“It’s clear in my mind, I just need to write it down”“With 50 slides it’s a better picture than with 10”“The market is so huge, we just grasp 0.1% of it”“And we will also do that and that and that”“But in my case there are no numbers”“We have no competition”“ Competitors don’t have this small feature”
How VCs Think• Pitch: Concept, Market, Opportunity• Meeting: Team, Story, Business• Discussion: Traction, Scale, Competition• DD: References, Tech, Numbers, Books• Decision: Intuition, Chemistry “We decide with heart, then rationalize with brain”
What’s After the Investment?• 5-10 years of hard Teamwork • Additional fundraisings!• (Several) pivots and near-deaths!The VC (partner) role• Advice, connections• On board level• VC’s real power – veto + CEO replacement
Alternatives• Pro Angels Unconstr., “smart money”, fast, great for seed Not professionals, no larger investments• Angels (FFF) You’re the boss No approval, no business help, unpredictable• Government Cheap money, good for start Small, very constrained, no business help• Bootstrap You’re the boss Very slow development, no business help
Current Hot Fields• Mobile – devices, LBS, commerce, enterprise• Cloud – infrastructure, security, management• Social – gaming, commerce, marketing• Advanced advertising – media, content, targeting• Content monetization, personalization• Simplifying enterprise IT• “Gameification of Life”• Connected planet
To Russia With Love? “The Unknown is Scaring”•Yuri Milner, Yandex, Skolkovo … – known brands•But … unknown business conduct , ethics•Now is the time!Innovation source•Strong tech. expertise, no business innovation•Lack of entrepr. workforce, culture, support
Innovation in RussiaSTRONG MISSING•Education •Inspiration•Expertise •Risk taking•Work culture •Entrepren. community•Capital •Supporting culture•Going BIG •Business environment•New: Gov. support! •Polished gov. support
Possible Cooperation• Invest in growth Russia companies• Help build effective entrepreneurial community• Help in due-diligence• Create mutual companies• Create mutual VC fund
Wanna be a Good Entrepreneur?• Understand your customer, market and industry• Have a Vision• Believe in yourself and your vision• Be committed• Don’t fear to fail• Be focused• Communicate correctly• Network “It’s all about people!”
Enjoy!“My father taught me to work; he did not teach me to love it.” - Abraham Lincoln Good Luck! Have fun on the way up!
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