A Venture Capital Perspective - Gamiel Gran Partner Sierra Ventures

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A Venture Capital Perspective - Gamiel Gran Partner Sierra Ventures

  1. 1. A Venture Capital PerspectiveGamiel Gran - Partner Sierra Ventures <br />October 6, 2011<br />
  2. 2. Venture Capitalist Perspective <br />Agenda<br /><ul><li>State of Venture Capital – Investment climate, IPO’s from a long term perspective
  3. 3. Big Data and Analytics – Massive Scale in Real-time – Those who can leverage will win
  4. 4. Cloud - The New Data Center – ‘X-as-a-Service’ and at commodity prices
  5. 5. Mobility – The New Starting Point – consumerization sets the standard for access, simplicity and adoption
  6. 6. Social – The New Internet – the social chain as the new dimension across the globe
  7. 7. Sierra Ventures – Our Approach
  8. 8. Getting Funded – some insights </li></li></ul><li>The Venture Capital Process<br />ENTREPRENEURS<br />(Starting and Building Companies)<br />VENTURE CAPITALISTS<br />(Finding and Funding Entrepreneurial Companies)<br />INSTITUTIONAL INVESTORS<br />(Limited Partners – e.g. Endowments, Pension Funds)<br />Venture Capital 101 Stanford University Graduate School of BusinessPeter C. Wendell, Managing Director Sierra Ventures <br /><ul><li>Long-term funders of VC firms (10-year contract, funds flow slowly)
  9. 9. Need out-sized returns (DJIA+5)
  10. 10. Want access to “best” firms; comp issues
  11. 11. Can drive cyclicality
  12. 12. Equity investors (Not lenders); strike deals
  13. 13. Pick winners and add value; wide variety of outcomes
  14. 14. Firms often specialize and have multiple funds
  15. 15. Long-terms funds, but liquidity focused
  16. 16. VC as change agent; Value add
  17. 17. Large sorting task; Deal flow
  18. 18. Defining and focusing the pursuit of an opportunity
  19. 19. Marshalling resources / maintaining control
  20. 20. Attempting to create “virtuous cycle of success”</li></li></ul><li>Institutional Investors<br />INSTITUTIONAL INVESTORS<br />(Limited Partners – e.g. Endowments, Pension Funds)<br /><ul><li>Asset allocation; Return expectations
  21. 21. L.P. - G.P. contracts; Compensation
  22. 22. Management Fees vs. Carry
  23. 23. History; Long view
  24. 24. Long-term funders of VC firms (10-year contract, funds flow slowly)
  25. 25. Need out-sized returns (DJIA+5)
  26. 26. Want access to “best” firms;
  27. 27. Can drive cyclicality</li></li></ul><li>Venture Capitalists<br />VENTURE CAPITALISTS<br />(Finding and Funding Entrepreneurial Companies)<br /><ul><li>VC as change agent; Value add
  28. 28. Large sorting task; Deal flow
  29. 29. The "pitch" and the "deal" (ownership)
  30. 30. Buyers and Sellers; Liquidity
  31. 31. Perform or perish; Firm focus
  32. 32. Equity investors (Not lenders);
  33. 33. Pick winners and add value; wide variety of outcomes
  34. 34. Firms often specialize and have multiple funds
  35. 35. Long-terms funds, but liquidity focused</li></li></ul><li>Entrepreneurs<br />ENTREPRENEURS<br />(Starting and Building Companies)<br /><ul><li>Size of outcome – Aligned Incentives
  36. 36. Shared vision (evolving)
  37. 37. Fit with VC (permanence)
  38. 38. Deals, valuation, and terms
  39. 39. Defining and focusing the pursuit of an opportunity
  40. 40. Marshalling resources / maintaining control
  41. 41. Attempting to create “virtuous cycle of success”
  42. 42. Outcomes vary widely, thus creating “inefficient market” for VC’s </li></li></ul><li>Annual Venture Capital Investments From 1981 - First Half 2011<br />PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters <br />
  43. 43. Venture Capital InvestmentsBy industry: Q2 2011<br />Visit www.pwcmoneytree.com for Industry definitions<br />PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters <br />8<br />
  44. 44. Venture Capital InvestmentsBy region: Q2 2011<br />PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters <br />Q2 2011 Total Investments - $7,516.1 million in 966 deals<br />9<br />
  45. 45. Corporate Acquisitions <br />Successful Exits Create Successful Entrepreneurs <br />Cash of <br />Top Consolidators<br />$300+B<br />Source: Capital IQ<br />
  46. 46. IPO Market Recovering from Dry Spell <br />IPO <br />($ Billions)<br /><ul><li>IPO Market Opened for High Quality Companies
  47. 47. High Revenue Bar
  48. 48. Longer Time</li></ul>*Source: Thompson Reuters & NVCA<br />
  49. 49. Venture Capital Market SummaryMany Positive Signs <br />Not So Good News<br /><ul><li>Valuations are on the rise
  50. 50. “social” phase of the digital revolution (Groupon, Facebook).
  51. 51. Is this a bubble in the making?
  52. 52. Capital intensive sectors (Life Sciences, Cleantech) challenges
  53. 53. due to government policy uncertainties, both at the federal and state levels
  54. 54. VC fundraising is down
  55. 55. IPO and M & A markets are still weak by historical standards
  56. 56. Macro trends – US, Japan, European Recession – Double Dip? </li></ul>Global Fuel<br /><ul><li> China based companies 23% US IPO’s in 2010 vs. 1% in 2009
  57. 57. 90% kids under 15 live in emerging markets
  58. 58. Global Internet usage 1.8 trillion min/mo
  59. 59. Internet Users: China 420m, US 220m
  60. 60. Cell Phone Users: China 790m, US 270m
  61. 61. China #1 in car sales
  62. 62. India population surpass China by 2020
  63. 63. China the largest PC Market in 2Q11 </li></ul>Good News<br /><ul><li>Money Flow is Up:
  64. 64. $7.5B invested Q2’11
  65. 65. 19% above Q1’11
  66. 66. 4% above Q2’10
  67. 67. IPO’s are trending Up:
  68. 68. Some big IPO’s, e.g. Linked In
  69. 69. M&A is trending Up:
  70. 70. Top 15 public tech firms have $300B cash
  71. 71. E.g. Google bought 48 companies for $2B in 2010
  72. 72. New and Huge Markets
  73. 73. Cloud Computing
  74. 74. Social
  75. 75. Mobile
  76. 76. Big Data Analytics: Extra
  77. 77. Advertising to Internet/Mobile just beginning </li></li></ul><li>Major IT DisruptorsVenture Capitalist Perspective of Emerging Technologies <br />Agenda<br /><ul><li>State of Venture Capital – Investment climate, IPO’s from a long term perspective
  78. 78. Big Data and Analytics – Massive Scale in Real-time – Those who can leverage will win
  79. 79. Cloud - The New Data Center – ‘X-as-a-Service’ and at commodity prices
  80. 80. Mobility – The New Starting Point – consumerization sets the standard for access, simplicity and adoption
  81. 81. Social – The New Internet – the social chain as the new dimension across the globe
  82. 82. Sierra Ventures – Our Approach
  83. 83. Outlook and Questions</li></li></ul><li>Big Data is at the Center of a New Wave of Opportunity…Insights still difficult <br />… And Organizations Need Deeper Insights<br />44x<br />2020<br />35 zettabytes<br />Business leaders frequently make decisions based on information they don’t trust, or don’t have<br />1in3<br />as much Data and ContentOver Coming Decade<br />1in2<br />Business leaders say they don’t have access to the information they need to do their jobs<br />Velocity<br />Variety<br />of CIOs cited “Business intelligence and analytics” as part of their visionary plansto enhance competitiveness<br />80%<br />83%<br />Volume<br />2009<br />800,000 petabytes<br />Of world’s datais unstructured<br />of CEOs need to do a better job capturing and understanding information rapidly in order to make swift business decisions<br />60%<br />
  84. 84. Big Data – Segments of Opportunity <br />Analytical<br />Applications<br />Spreadsheets/<br />Visualization<br />Design &<br />Deploy<br />Processing<br />Platform<br />*Now Teradata<br />*Now EMC<br />*Now HP<br />Hadoop <br />Distributions<br />Connectors/<br />Integration<br />File Storage<br />*Now Hitachi<br />
  85. 85. Major IT DisruptorsVenture Capitalist Perspective of Emerging Technologies <br />Agenda<br /><ul><li>State of Venture Capital – Investment climate, IPO’s from a long term perspective
  86. 86. Big Data and Analytics – Massive Scale in Real-time – Those who can leverage will win
  87. 87. Cloud - The New Data Center – ‘X-as-a-Service’ and at commodity prices
  88. 88. Mobility – The New Starting Point – consumerization sets the standard for access, simplicity and adoption
  89. 89. Social – The New Internet – the social chain as the new dimension across the globe
  90. 90. Sierra Ventures – Our Approach
  91. 91. Outlook and Questions</li></li></ul><li>CLOUD COMPUTING Tectonic Market Shift<br />Cloud Computing – Enterprise Adoption<br />Virtualization Software – Market Size ($B)<br />CLOUD PROVIDERS<br />ENTERPRISE<br />SMB<br />Large<br />Virtualization<br />Amount ($-Billion)<br />Private Cloud<br />Public Cloud<br />Hybrid Cloud<br />Source: IDC<br />Portfolio<br />Investment Opportunities<br />
  92. 92. Major IT DisruptorsVenture Capitalist Perspective of Emerging Technologies <br />Agenda<br /><ul><li>State of Venture Capital – Investment climate, IPO’s from a long term perspective
  93. 93. Big Data and Analytics – Massive Scale in Real-time – Those who can leverage will win
  94. 94. Cloud - The New Data Center – ‘X-as-a-Service’ and at commodity prices
  95. 95. Mobility – The New Starting Point – consumerization sets the standard for access, simplicity and adoption
  96. 96. Social – The New Internet – the social chain as the new dimension across the globe
  97. 97. Sierra Ventures – Our Approach
  98. 98. Outlook and Questions</li></li></ul><li>Mobile: At the tipping point...<br />
  99. 99. Mobile: It’s all about the App <br />
  100. 100. Wireless – Segments of Opportunity <br />(via PhoneGap)<br />Applications<br />Distribution <br />(App Stores)<br />Security<br />(Aptana Studio IDE)<br />Testing/ Deployment<br />*Now Teradata<br />*Now EMC<br />*Now HP<br />Wireless Clouds<br /> (in progress)<br />Analytics<br />
  101. 101. Mobile: Themes to TrackRapid New App Deployment is Key <br />
  102. 102. Major IT DisruptorsVenture Capitalist Perspective of Emerging Technologies <br />Agenda<br /><ul><li>State of Venture Capital – Investment climate, IPO’s from a long term perspective
  103. 103. Big Data and Analytics – Massive Scale in Real-time – Those who can leverage will win
  104. 104. Cloud - The New Data Center – ‘X-as-a-Service’ and at commodity prices
  105. 105. Mobility – The New Starting Point – consumerization sets the standard for access, simplicity and adoption
  106. 106. Social – The New Internet – the social chain as the new dimension across the globe
  107. 107. Sierra Ventures – Our Approach
  108. 108. Outlook and Questions</li></li></ul><li>Social: The new platform for access <br />
  109. 109. Social: Disrupting Traditional MarketsEnterprise... Must evolve to the Social Enterprise <br />
  110. 110. Social: Gamification as the new Engagement Model <br />
  111. 111. Social: Disrupting the Internet Landscape<br />WORLD WIDE SOCIAL NETWORK USERS (Billions)<br />GLOBAL SOCIAL NETWORKS (~100M USERS)<br />100%<br />80%<br />60%<br />40%<br />20%<br />0%<br />GENERAL<br />% of Internet Users<br />Social Network Users (B)<br />NICHE<br />GLOBAL<br />REGIONAL<br />Source: eMarketer and Sierra Ventures<br />Portfolio<br />Investment Opportunities<br />
  112. 112. Major IT DisruptorsVenture Capitalist Perspective of Emerging Technologies <br />Agenda<br /><ul><li>State of Venture Capital – Investment climate, IPO’s from a long term perspective
  113. 113. Big Data and Analytics – Massive Scale in Real-time – Those who can leverage will win
  114. 114. Cloud - The New Data Center – ‘X-as-a-Service’ and at commodity prices
  115. 115. Mobility – The New Starting Point – consumerization sets the standard for access, simplicity and adoption
  116. 116. Social – The New Internet – the social chain as the new dimension across the globe
  117. 117. Sierra Ventures – Our Approach
  118. 118. Outlook and Questions</li></li></ul><li>Sierra Ventures <br />29<br />
  119. 119. Sierra Ventures – since 1982 - $1.5Billion AUM Investing Strategy – Early Stage, Global, IT Sectors <br />Stage<br />Size<br />Geography <br />$3 – $8M Initial<br />$8 – $12M Total<br />Ownership 20%-25%<br />Growth<br />Early Stage<br />30<br />(MMYT) <br />(MERU) <br />(NASD: FIRE) <br />(NASD: AUTH)<br />Investments and ExitsAcross the U.S / Canada.<br />Some IPO’s<br />&<br />Acquisitions <br />
  120. 120. Sierra Ventures Deal Flow Thousands of Ideas to a Few Funded <br />0.33% deals reviewed are funded<br /><ul><li>Independent origination
  121. 121. Sub-group evaluation
  122. 122. Partnership decision</li></ul>31<br />
  123. 123. Sierra – Stages of Success <br />SOURCING<br />EXIT<br />SCALING<br />
  124. 124. Sierra CIO Advisory Board Global IT Leaders -- Meet Monthly <br />Technology<br />Finance<br />Telco / Media<br />Consumer / Manufacturing / Industrial<br />Retail / Hospitality<br />Pharma/Health/Govt.<br />
  125. 125. Sierra CIO Summit<br />Enable Strategic Exchange of Best Practices for CIO Board Members <br />Five Sierra “CIO Summits” held since 2006 – Each with a Major Keynote<br />Marc Benioff<br />CEO<br />Eric Schmidt<br />CEO<br />Meg Whitman CEO<br />Mark Hurd<br />CEO<br />Enrique Salem<br />CEO<br />Tom Siebel<br />CEO<br />Charles Phillips <br />Co-President<br />Joe Tucci<br />CEO<br />34<br />
  126. 126. Sierra Ventures<br />Tracking: The Ripple Effect of Disruptions<br />Social<br />Cloud<br />BigData<br />Mobile<br />Private<br />Cloud Software<br />Social Media Presence<br />PredictiveAnalytics<br />Mobile App Dev Platform<br />
  127. 127. Recent Liquidity Events<br />Greenplum purchased by EMC for $400M (closed 8/2010) <br />American Fiber Systems purchased by Zayo Group for $115M (closed 9/2010)<br />Simplify Media purchased by Google (closed 3/2010) <br />MakeMyTrip.com completes $80M IPO (8/2010) <br />CarWale purchased by Axel Springer (closed 12/2010) <br />Makara purchased by Redhat (closed 11/2010)<br />InvenSense files for $100M IPO led by Goldman and Morgan Stanley<br />
  128. 128. Sierra Ventures Recent Investments <br />Alpine Data Labs received $2.75M from Sierra (2/2011): San Mateo, CA Predictive Analytics model & score against all data<br />DynamicOps received $7.975M from Sierra (2/2011): Burlington, MA Cloud automation - private cloud & VDI deployments <br />Payvment received $4.5M from Sierra (11/2010): Palo AltoSocial network powered e-commerce platform<br />Appcelerator received $6.5M from Sierra (10/2010): Mt. ViewMobile application cross-platform development solution<br />Prelert received $1.25M from Sierra (8/2010): Framingham, MAIT incident and root cause analysis solution<br />Runa received $3.75M from Sierra (7/2010): Mountain View, CAOnline conversion marketing solution <br />
  129. 129. Investor Deck Presentation Guidelines<br /><ul><li>Product Timing [1 slide]
  130. 130. Define recent trends that make your solution possible
  131. 131. Show us the historical evolution of your category if it is an existing market
  132. 132. Business Model [open]
  133. 133. Source of Revenue and ASP
  134. 134. Distribution channels
  135. 135. Customer list and pipeline
  136. 136. Competition [1-2 slides]
  137. 137. List your direct and indirect competition
  138. 138. Show where your product physically sits in the ecosystem
  139. 139. Provide detail on the advantages/disadvantages of your product vs. what is currently
  140. 140. available through competitors (matrix view preferred)
  141. 141. Financials [1-2 slides]
  142. 142. Income Statement, Balance Sheet and Cash Flow statement and forecast
  143. 143. Summary of the Cap table
  144. 144. Summarize the current financing round</li></ul>Company Snapshot [1-2 slides]<br />Simple single sentence overview of the company<br />Snapshot Data<br />Date of Incorporation<br />Number of Employees<br />Office Locations<br />Total funds raised to Date<br />Team [1-2 slides]<br />Founders & Management<br />Board of Directors/Board of Advisors<br />Problem [1 slide]<br />Describe the customer pain<br />Describe how that pain is met today<br />Total Addressable Market [1 slide]<br />Calculate or provide third party research on the TAM (top down and bottoms up)<br />Solution [open]<br />Explain your Company’s value proposition in order to solve the problem described in the<br />previous “Problem” slide<br />Describe the Product (functionality, features, architecture, what core IP do you have).<br />Show your Product development roadmap<br />Provide use cases (or customer case studies if appropriate)<br />
  145. 145. Steps <br />Who to pursue – do your diligence <br />Crunchbase, PEHub, VentureBeat, VC sites, VC FB/Twitter <br />Introduction <br />Work your network – <br />Paragraph from your ‘recommender’ <br />Pre-View Call <br />Likely a phone call – Ask questions – Have examples <br />Know their background <br />Enable possible next steps – “We wont begin fundraising until... “<br />First Meeting <br />Investor Deck – Team, Traction, Technology <br />Build your advocate – what’s their outcome goal <br />Partner Meeting <br />Mixed Audience – do your homework <br />Predefine an outcome – to move to due diligence calls (have some done already)<br />Due Diligence <br />Your contacts .... And those you don’t know. (help make it simple)<br />Term Sheet <br />Study the terms early – How competitive is the deal <br />
  146. 146. Due Diligence Effort <br />Tab 1 Executive Summary/Business Plan<br />Tab 2 Investor Presentation<br />Tab 3 Sales & Market Briefing <br />Tab 4 Product Information <br />Tab 5 Technology Information <br />Tab 6 Competitive analysis <br />Tab 7 Operations - Engineering Schedule/Manuf process/Quality Metrics<br />Tab 8 Financials<br />Tab 9 Customer references <br />Tab 10 Future product roadmap(go over new products, what’s exciting..) <br />Tab 11 Valuation & Exit Analysis <br />Tab 12 Management Bios & References <br />Tab 13 Cap Tables & Term Sheets <br />Tab 14 Patents & Applications (patent review – what’s defendable?) <br />Tab 15 Market research, white papers, news articles, etc. <br />Tab 16 Misc. emails, etc. <br />
  147. 147. Funding and Rounds <br />Funding Expectations: $10M company or $200M+... <br />Less is More: Raise what you need – Milestones support valuation<br />Preferred = Risk<br />Founder: 1-4 (2 equal partners ideal) <br />Convertible Debt (Bridge Loan) at 20% discount to next round <br />Venture Debt: too early must be collateralized, venture debt generally 20-30% of last round, Servicing the debt with Capital OK, warrants nominal, Prime+1.5pts <br />Employee Option Pool: 20% <br />CxO Hires: CEO 5-7%, COO 2-3%, VPS/VPE/VPM ~1½%<br />

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