Building Companies in  A  Global Economy Promod Haque, Managing Partner, NVP [email_address]
NVP - Actively Partnering with Entrepreneurs to Build Significant Businesses <ul><li>44 year heritage  </li></ul><ul><li>M...
NVP Investment Strategy <ul><li>Early-stage projects with world-class technologies and entrepreneurs </li></ul><ul><li>Lat...
Selected NVP Success Stories
NVP Value Proposition Money Network of Portfolio Companies Experienced VCs with  Operating Experience Large VC Firm with H...
The VC Business Model Has Changed  <ul><li>Exit Valuations Have Dropped and Are Trending Towards Those of the Early ’90’s ...
Hybrid Investments &  Micro-Multinational Companies <ul><li>U.S cannot afford to focus on a U.S.-centric market alone   </...
NVP Hybrid Investments <ul><li>30% of NVP portfolio companies have operations overseas, and that figure is rising </li></u...
What NVP Looks For in Companies <ul><li>Breakthrough projects with world-class technologies  </li></ul><ul><li>Passion and...
Key Attributes of Disruptive Technology Companies <ul><ul><li>Founding/management teams that shape opportunities, execute ...
Characteristics of a Successful    Founding Team <ul><li>Skill sets of the founders are balanced and complimentary </li></...
What We Look For In Entrepreneurs <ul><li>“ Conventional wisdom paints the entrepreneur as a driven, undisciplined romanti...
What’s Hot <ul><li>IP Managed Services </li></ul><ul><ul><li>Revenues from IP VPN services in the US will rise from $2.9 b...
Thank You! www.nvp.com Questions?
Contact Information <ul><li>Promod Haque, Managing Partner </li></ul><ul><ul><li>+1 650 321-8000 </li></ul></ul><ul><ul><l...
 
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Building Companies in A Global Economy

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  • Thank you very much for having me here this morning. In the next 30 minutes or so. I’d like to: Provide you with a quick overview of Norwest Venture Partners Tell you about the types of technologies and entrepreneurs we are currently funding, Discuss the cross-border investments we’ve made in the past few years that have proven to be very successful. Outline some areas of technology that we think are promising as we look ahead I would like this presentation to be interactive, so please feel free to ask me questions along the way. I will also save time for questions at the end.
  • Norwest Venture Partners provides funding and guidance to emerging growth information technology companies and has actively partnered with entrepreneurs to build great companies for more than 44 years.  NVP currently manages $1.8 billion in venture capital and is based in Palo Alto, California USA. We have funded more than 350 companies since inception We focus on early stage (and select late stage) investments in Information Technology including: Systems (Communications, Enterprise) Services (Communications, Infrastructure) Software (Infrastructure, Applications) Semiconductors &amp; Components Consumer/Internet Technologies
  • Following is our firm’s investment strategy. We look for: Early-stage projects with world-class technologies and entrepreneurs Later-stage companies with existing customers, strong sales and top tier management and co-investors “Special situations” with definable, unusual opportunities
  • NVP is best known for its investments in companies like PeopleSoft , where we were the sole venture investor, Vantive, Tivoli, Forte, Documentum, Cerent (which was sold to Cisco for $7.8B), Siara, Extreme Networks, Verio and Brocade.
  • Our firm prides itself on doing whatever it takes to make our portfolio companies successful We help our companies evolve their strategies while working actively with our CEOs to drive their recruiting processes. Our key value proposition to our companies includes: -International business development support -Value added services such as PR, research and CEO Forums Later stage follow-on and financing support We are a large VC firm with a history of going through the up and the down cycles of the economy We are experienced VC’s with operating experience We have a deep network of relationships and portfolio companies
  • The Ground Rules Have Changed when it comes to VC Business Models.. Exit Valuations Have Dropped and Are Trending Towards Those of the Early ’90’s During 1999-2000, the average venture-backed M&amp;A transaction was almost $300M; That number had dropped significantly. During 1999-2000, over 450 venture-backed companies went public; In 2001-2002, that number had been reduced to less than 60 Entrepreneurs have to learn to Use Capital Wisely today and focus on Capital Efficiency We believe it should take $15-20 million to build enterprise software company and $30-35 million to build communications equipment or communications component companies For example, if $5M is raised at a pre-money valuation of $5M, VC’s own 50% and the founders own 50%. If another $15M is raised at a pre of $20M, management owns ~30% (the VC’s own ~ 70%) $20M invested - ~70% ownership - $120M exit: VC gets ~$80M – 4.0x return $35M invested - ~70% ownership - $150M exit: VC gets ~$105M – 3.0x return Therefore, can’t raise more than that in today’s environment without VC’s losing money or getting washed out in down rounds—it won’t work We need to get back to pre-90’s mentality.
  • U.S cannot afford to focus on a U.S.-centric market alone Venture capitalists are leveraging their expertise in other countries to help develop partnerships and channels these companies need to prosper in the global marketplace. NVP is definitely seeing more cross-border or “hybrid” investments from day one This enables companies to control costs, while leveraging talent in other areas of the globe Company headquarters and “customer facing jobs” located in the U.S. because early adopters of technology are based in the U.S. Other strategic portions of business located offshore (product development, QA, etc.) NVP rarely looks at investing in new private companies unless they have some form of operations in India (or other countries) and are taking an overall multinational and global approach to doing business
  • Globalization has definitely affected our investment strategy. o        Today, our firm rarely looks at investing in new private companies unless they have some form of operations in India (or other countries) and are taking an overall multinational and global approach to doing business. o        In fact, at least 30% of Norwest Venture Partners companies have moved jobs overseas, or have operations in India, Eastern Europe, etc.--and that figure is rising. Even more specifically, six of the most recent companies in which Norwest Venture Partners has invested (in the past 18 months) are considered to be &amp;quot;hybrid&amp;quot; or &amp;quot;cross-border&amp;quot; investments. In an effort to use capital the most efficiently, many of our portfolio companies are outsourcing parts of their research and development functions. Enterprise Software : India, China and Eastern Europe Telecommunications Hardware : India and China Enterprise Data Equipment : India and China Let me tell you a little bit more about some of these companies….
  • This is our investment criteria…. Breakthrough projects with world-class technologies Passion and vision of entrepreneurs Proven track record? Prior NVP interaction? High domain expertise Marketplace opportunity Unique value proposition to the customer Customer validation and traction Capital efficiency
  • These are key attributes of what we consider to be disruptive technology companies: Founding/management teams that shape opportunities, execute deals and achieve revenue. Innovative core development teams that have developed distinctive technologies based on customer needs Technology discontinuity/value proposition aligned, solving a significant problem distinctively Secure blue chip customers Understand how to develop and leverage strategic alliances
  • These are what we believe to be the characteristics of a successful founding team: The Skill sets of the founders are balanced and complimentary They have the Ability to articulate their vision to investors, employees and customers They Understand their limitations and are willing to be accountable to a board of directors They are Focused, tenacious, persistent and patient in their execution Lastly, they are Willing to enlarge the “inner circle” as the company grows over time
  • We also look for certain types of entrepreneurs when we back a company. This quote really summarizes the characteristics of an entrepreneur who we would back.
  • Let me switch gears for a minute and talk about some of the areas of technology that we think are “hot” and the areas of technology in which we are interested in pursuing: (MENTION SECURITY HERE, TOO)! IP Managed Services Revenues from IP VPN services in the US will rise from $2.9 billion in 2004 to $8.1 billion in 2009, the high-tech market research firm In-Stat forecasts. IP VPN services will also be a key battleground for service providers looking to capture many customers who will converge their voice, data, and video traffic onto a single service in the future Same thing applies to enterprises, so there is accelerating market demand from enterprise customers (to converge their own networks via IP managed services) End-to-End Custom ASIC Solutions Predictable, reliable and cost-effective alternatives to traditional chip design and supply chain models enable more companies to use an ASIC approach for their mainstream designs VOIP Infrastructure According to Insight Research, the global market for VoIP will reach $82 billion in 2005 and $196.5 billion by 2007. Much of this growth is driven by businesses, but Gartner predicts that by 2008, almost 20% of US homes will have VoIP telephones. The Telecommunication Industry Association predicts that 26 mln users will have VoIP by 2008. Investment in hybrid systems, which handle VoIP and traditional calls, will grow from $1.5 bln to $2 bln. By 2007 Gartner expects 97% of new phone systems installed in North America to be VoIP or hybrids. IPTV Rapid advances in broadband access and compression technologies will drive down delivery costs exponentially Service Oriented Architecture Industry analyst IDC forecasts SOA software market to hit $1.2 billion in 2005 and reach $10.9 billion by 2008
  • Building Companies in A Global Economy

    1. 1. Building Companies in A Global Economy Promod Haque, Managing Partner, NVP [email_address]
    2. 2. NVP - Actively Partnering with Entrepreneurs to Build Significant Businesses <ul><li>44 year heritage </li></ul><ul><li>Managing >$1.8 billion in venture capital </li></ul><ul><li>Funded over 350 companies </li></ul><ul><li>Focused on early stage and select later stage IT investments: </li></ul><ul><ul><li>Systems (Communications, Enterprise) </li></ul></ul><ul><ul><li>Services (Communications, Infrastructure) </li></ul></ul><ul><ul><li>Software (Infrastructure, Applications) </li></ul></ul><ul><ul><li>Semiconductors & Components </li></ul></ul><ul><ul><li>Consumer/Internet Technologies </li></ul></ul>
    3. 3. NVP Investment Strategy <ul><li>Early-stage projects with world-class technologies and entrepreneurs </li></ul><ul><li>Later-stage companies with existing customers, strong sales and top tier management and co-investors </li></ul><ul><li>“Special situations” with definable, unusual opportunities </li></ul>
    4. 4. Selected NVP Success Stories
    5. 5. NVP Value Proposition Money Network of Portfolio Companies Experienced VCs with Operating Experience Large VC Firm with History Through Down Cycles Later Stage Follow-On Financing Support Value Added Services: PR, Research, Forums Intl. Business Development
    6. 6. The VC Business Model Has Changed <ul><li>Exit Valuations Have Dropped and Are Trending Towards Those of the Early ’90’s </li></ul><ul><li>Requires Prudent Use of Capital </li></ul><ul><ul><li>$15-20 million to build enterprise software company </li></ul></ul><ul><ul><li>$30-35 million to build a hardware/systems company </li></ul></ul><ul><ul><li>$30-40 million to build a semiconductor company </li></ul></ul><ul><li>Focus on Capital Efficiency </li></ul><ul><li>Capital efficient business models are still possible </li></ul><ul><li>NVP investing in “hybrid” companies and we see this trend continuing </li></ul>
    7. 7. Hybrid Investments & Micro-Multinational Companies <ul><li>U.S cannot afford to focus on a U.S.-centric market alone </li></ul><ul><li>Venture capitalists are leveraging their expertise in other countries to help develop partnerships and channels these companies need to prosper in the global marketplace </li></ul><ul><li>NVP is definitely seeing more cross-border or “hybrid” investments from day one </li></ul><ul><li>NVP rarely looks at investing in new private companies unless they have some form of operations overseas </li></ul><ul><li>Early-stage private companies must take an overall multinational and global approach to doing business </li></ul>
    8. 8. NVP Hybrid Investments <ul><li>30% of NVP portfolio companies have operations overseas, and that figure is rising </li></ul><ul><li>Six of the most recent companies in which NVP has invested (in the past 18 months) are considered to be &quot;hybrid&quot; or &quot;cross-border&quot; investments </li></ul><ul><li>Many of these companies are focusing heavily on India as a strategic market or have operations in India </li></ul>Acquired by Acquired by
    9. 9. What NVP Looks For in Companies <ul><li>Breakthrough projects with world-class technologies </li></ul><ul><li>Passion and vision of entrepreneurs </li></ul><ul><ul><li>Proven track record? </li></ul></ul><ul><ul><li>Prior NVP interaction? </li></ul></ul><ul><ul><li>High domain expertise </li></ul></ul><ul><li>Marketplace opportunity </li></ul><ul><li>Unique value proposition to the customer </li></ul><ul><li>Customer validation and traction </li></ul><ul><li>Capital efficiency </li></ul>
    10. 10. Key Attributes of Disruptive Technology Companies <ul><ul><li>Founding/management teams that shape opportunities, execute deals and achieve revenue. </li></ul></ul><ul><ul><li>Innovative core development teams that have developed distinctive technologies based on customer needs </li></ul></ul><ul><ul><li>Technology discontinuity/value proposition aligned, solving a significant problem distinctively </li></ul></ul><ul><ul><li>Secure blue chip customers </li></ul></ul><ul><ul><li>Understand how to develop and leverage strategic alliances </li></ul></ul>
    11. 11. Characteristics of a Successful Founding Team <ul><li>Skill sets of the founders are balanced and complimentary </li></ul><ul><li>Ability to articulate their vision to investors, employees and customers </li></ul><ul><li>Understand their limitations and are willing to be accountable to a board of directors </li></ul><ul><li>Focused, tenacious, persistent and patient in their execution </li></ul><ul><li>Willing to enlarge the “inner circle” as the company grows over time </li></ul>
    12. 12. What We Look For In Entrepreneurs <ul><li>“ Conventional wisdom paints the entrepreneur as a driven, undisciplined romantic, operating in a frenzy of energy. With a little luck, he achieves his goal just before he goes under. </li></ul><ul><li>On the contrary, the typical successful entrepreneur is a mature and careful person who fearfully recognizes that there’s much more he doesn’t know about his new business than he’d like. He’s thirsty for help from any sensible and credible source. He’s in a hurry, but only because time is precious. And he knows that cash flow is king.” </li></ul><ul><li>James McManus </li></ul><ul><li>Marketing Corporation of America </li></ul>
    13. 13. What’s Hot <ul><li>IP Managed Services </li></ul><ul><ul><li>Revenues from IP VPN services in the US will rise from $2.9 billion in 2004 to $8.1 billion in 2009 </li></ul></ul><ul><li>End-to-End Custom ASIC Solutions </li></ul><ul><ul><li>Predictable, reliable and cost-effective alternatives to traditional chip design and supply chain models enable more companies to use an ASIC approach for their mainstream designs </li></ul></ul><ul><li>VoIP Infrastructure </li></ul><ul><ul><li>The global market for VoIP will reach $82 billion in 2005 and $196.5 billion by 2007 </li></ul></ul><ul><li>IPTV </li></ul><ul><ul><li>Rapid advances in broadband access and compression technologies will drive down delivery costs exponentially </li></ul></ul><ul><li>Service Oriented Architecture </li></ul><ul><ul><li>Industry analyst IDC forecasts SOA software market to hit $1.2 billion in 2005 and reach $10.9 billion by 2008 </li></ul></ul>Source: In-Stat; Gartner; Insight Research
    14. 14. Thank You! www.nvp.com Questions?
    15. 15. Contact Information <ul><li>Promod Haque, Managing Partner </li></ul><ul><ul><li>+1 650 321-8000 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>Norwest Venture Partners </li></ul><ul><li>525 University Avenue, Suite 800 </li></ul><ul><li>Palo Alto, California USA 94301 </li></ul><ul><li>www.nvp.com </li></ul>

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