Entrepreneurship & Capital, Engines that Power an Economy Forward, Nastas Presentation in Kazan Russia

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  • 1. Entrepreneurship & Capital: the Engines that Power an Economy ForwardIntro note from Nastas. This presentation is the lead presentation in my MasterClass, ‘Scaling Up Entrepreneurship,’ delivered in Croatia, Kazakhstan & Russia.Modules of the Master Class were presented to staff of the World Bank at their‘Human Capital & Entrepreneurship’ conference .You can view the outline of the Master Class at http://www.slideshare.net/TomNastas/ivi-program-scaling-up-entrepreneurship-progam-description & the calendar of topics, day/time at this link,http://www.slideshare.net/TomNastas/schedule-ivi-program-scaling-up-entrepreneurship-englishThis presentation was delivered in Kazan, Russia, 27 October 2010, to members ofthe Kazan innovation, investment and entrepreneurship community, with regionalGovernment officials attending from the Presidential Administration, Ministries ofScience, Education & Finance.Comments, questions are welcome; please contact me at Tom@IVIpe.com www.IVIpe.com Info@IVIpe.com
  • 2. Entrepreneurship & Capital: the Engines that Power an Economy Forward Thomas D. Nastas 27 October 2011 Kazan, Russia Tom@IVIpe.com www.scalingupinnovation.com www.IVIpe.com Tel. +1.517.899.1432Innovative Ventures Inc. Haslett, MI. USA www.IVIpe.com Info@IVIpe.com
  • 3. Entrepreneurship & $ The Joy of Entrepreneurshiphttp://www.youtube.com/watch?v=T6MhAwQ64c0& feature=player_embedded www.IVIpe.com Info@IVIpe.com
  • 4. Entrepreneurship & $Entrepreneurship & $: The Engines that Power an Economy Forward MIA: take your moneyhttp://www.youtube.com/watch?v=7sei-eEjy4g www.IVIpe.com Info@IVIpe.com
  • 5. www.IVIpe.comInfo@IVIpe.com
  • 6. Topic #1: Entrepreneurship www.IVIpe.com Info@IVIpe.com
  • 7. Topic #2: History of VC www.IVIpe.com Info@IVIpe.com
  • 8. Topic #3: VC in the World www.IVIpe.com Info@IVIpe.com
  • 9. Topic #4: How Venture Capital Works www.IVIpe.com Info@IVIpe.com
  • 10. Topic #1: Entrepreneurship Test: Knowledge of Entrepreneurshiphttp://yalepress.yale.edu/yupbooks/entrepren eurshipquiz.asp www.IVIpe.com Info@IVIpe.com
  • 11. Topic #1: Entrepreneurship What is Entrepreneurship? How can/should it be defined? www.IVIpe.com Info@IVIpe.com
  • 12. Topic #1: Entrepreneurship What is Entrepreneurship?• It’s a process• High uncertainty, many start-ups happen by accident• A means for people (dreamers?) to achieve their goals• To create something where it did not exist before, to create some good, to fix something broken www.IVIpe.com Info@IVIpe.com
  • 13. Topic #1: Entrepreneurship• Requires determination & perseverance since nothing goes to plan• Live with uncertainty, isolation, lack of progress, most of all, rejection “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.” www.IVIpe.com Info@IVIpe.com
  • 14. Topic #1: EntrepreneurshipTraits & Characteristics of Entrepreneurs• Passion vs. Money?• Realize Goals vs. Make Dreams Come True?• Born or Made?• Control vs. Letting Go• Planning vs. Execution www.IVIpe.com Info@IVIpe.com
  • 15. Topic #1: Entrepreneurship Passion vs. Money?• Motivation is to improve things, solve an existing problem, create some good• Get rich as a result of the passion• Wanting to be rich doesn’t create the passion www.IVIpe.com Info@IVIpe.com
  • 16. Topic #1: Entrepreneurship Realize Goals vs. Dreamers?• Cannot reach their goals through other means• As they implement, they have the feeling, the hunch that this thing might be bigger than they imagined• Create products and services that create new markets www.IVIpe.com Info@IVIpe.com
  • 17. Topic #1: Entrepreneurship Born or Made?• A little of both• Combination of following instincts & an environment that developed their talents www.IVIpe.com Info@IVIpe.com
  • 18. Topic #1: Entrepreneurship Control vs. Letting Go• Have control & not at the same time.• Adaptable since what users want change as do plans.• Trial & error-change their ideas as they develop them to give users what they want.• Deal with rejection early on; the most fragile time. www.IVIpe.com Info@IVIpe.com
  • 19. Topic #1: Entrepreneurship Planning vs. Execution• Attitude & energy for action• Have a general idea of the direction they are headed• Adapt not plan• Strategy is a discovery process vs. a planning process www.IVIpe.com Info@IVIpe.com
  • 20. Entrepreneur’s Work Philosophy www.IVIpe.com Info@IVIpe.com
  • 21. Topic #2: History of VC www.IVIpe.com Info@IVIpe.com
  • 22. Topic #2: History of VC www.IVIpe.com Info@IVIpe.com
  • 23. Topic #2: History of VC Invested $70k (1957) ROI: $377MM (1968) IRR: 101% In $1999-$2010: $415k=$2.4 Billion www.IVIpe.com Info@IVIpe.com
  • 24. Topic #2: History of VC 1969: Pension Fund Reform www.IVIpe.com Info@IVIpe.com
  • 25. Topic #2: History of VC Invested $57k (1978) ROI: $14MM (1981) IRR: 23,000% In $2007-$2010: $185k=$35 million www.IVIpe.com Info@IVIpe.com
  • 26. Topic #3: VC in the World www.IVIpe.com Info@IVIpe.com
  • 27. Topic #3: VC in the WorldInternet & New Economy Business Models • 1999 Vintage Funds Returned 150% • Momentum & Greed replaced common sense • Business Plans Funded without thorough Analysis of their Weaknesses • 1st Mover = 1st Loser www.IVIpe.com Info@IVIpe.com
  • 28. Topic #4: How Venture Capital Works www.IVIpe.com Info@IVIpe.com
  • 29. Topic #4: How Venture Capital Works www.IVIpe.com Info@IVIpe.com
  • 30. $ Flows into VC www.IVIpe.com Info@IVIpe.com
  • 31. Liquidity vs. Profits www.IVIpe.com Info@IVIpe.com
  • 32. Risk & Return www.IVIpe.com Info@IVIpe.com
  • 33. Topic #4: How Venture Capital Works The Reality (Business) of VC (How it Works)Equity is a Great Product, but: 1. It’s Expensive (% ownership) 2. Selective-1/100 SMEs (in USA) seeking VC get $$  Need Big Markets ($50-$100MM)  People (Technical, Mkting, Mgt, Support, etc.) 3. Requires Capital Mkts &/or Strategic Buyers www.IVIpe.com Info@IVIpe.com
  • 34. Topic #4: How Venture Capital Works ProbabilityIndividual Event 80% Company has enough $$ 80% Mgt. Capable & Focused 80% PD Successful 80% Mfging Successful 80% Competitors Behave as Expected 80% Customers Want Product 80% Pricing is Correct 80% IP Issued 17%Combined Probability of SuccessLow Success Rate = Invest 1 of every 100 deals www.IVIpe.com Info@IVIpe.com
  • 35. Topic #4: How Venture Capital Works www.IVIpe.com Info@IVIpe.com
  • 36. Topic #4: How Venture Capital Works Requirements to Receive VC1. Large addressable market or defined niche2. Uniqueness in concept or application to create LT competitive advantage (vs. 1st mover advantage) &/or Do it Better vs. the Competition3. Focused management4. Liquidity potential www.IVIpe.com Info@IVIpe.com
  • 37. Topic #4: How Venture Capital Works Value-Added of VC (Beside $$)1. Sometimes Create the Deal2. Raise New $$$ & Add Corporate Governance, Experience & Contacts3. Keep Interests Aligned4. BOD Participation, not Manage the Firm5. Encourage Founders to Think in Kilometers, not Centimeters www.IVIpe.com Info@IVIpe.com
  • 38. Topic #4: How Venture Capital Works VC & PE in CIS & Russia1. Two major investors EBRD & US Gov’t2. Enterprise Funds in CEE3. Enterprise Funds in CIS/Russia4. EBRD Funds in CEE, CIS & Russia5. Approximately $4 Billion Committed, 75%+ from the Multilaterals (w/IFC & DFIs)6. Growth in Oligarch Funds/PE www.IVIpe.com Info@IVIpe.com
  • 39. Topic #4: How Venture Capital Works VC to PE in Russia Today1. 1st in VC (1994-1999). Deals w/VC Characteristics. Migrated to PE financing/growth in Post Financial Crisis2. Expansion Stage Financing, US$2-$20 million/deal with limited syndication3. Deals = For Domestic Economy, FMCC, F&B, Retailing, Real Estate, Wholesaling, Transportation & Western Successes Transplanted to Russia, Sabarro Pizza www.IVIpe.com Info@IVIpe.com
  • 40. Topic #4: How Venture Capital Works Emerging Interest in Tech-Russia1. Intel Capital, AddVenture, etc.2. One-off Deals by PE Investors, Barings3. Russian Gov’t Initiatives-Regional VC, RVC & Rusnano4. Multiple Infrastructure Groups Emerging; doing Conferences, Exhibitions, facilitating Collaborative R&D, etc. www.IVIpe.com Info@IVIpe.com
  • 41. Topic #4: How Venture Capital Works Why Little €/$ Goes to Russian Tech1. Capital Seeks the Highest Rate of Return  Strong Growth in Non-tech, Retailing, Distribution, FMCC, F&Bs, etc.2. Competition from Stock Mkt & Real Estate3. Competition from Israel, US, Europe, etc. www.IVIpe.com Info@IVIpe.com
  • 42. Topic #4: How Venture Capital Works Most Tech Opts in Int’l MktsWhere Demand Is ButGaining Access is ExpensivePenetration & Growth Takes Much Time www.IVIpe.com Info@IVIpe.com
  • 43. Topic #4: How Venture Capital Works Most Tech Opts in Int’l Mkts Where Demand Is Gaining Access is Expensive Penetration & Growth Takes Much TimeRussian Deal Flow is too Young to Meet Int’l Test Instead, Target Domestic Market, e.g., Tech for Oil/Gas Industry, Auto Components, Systems Integration www.IVIpe.com Info@IVIpe.com
  • 44. Topic #4: How Venture Capital WorksFACT: Russia Has Good Ideas: Ideas ≠ Deals1/200 SMEs seeking VC get €/$: Why Reject? Undeveloped Opportunity Lack of Uniqueness/No Competitive Advantage Too much $$$, too much time & too little reward People (mgt./employees) Lack of Transparency, No Clear Title/Ownership of IP www.IVIpe.com Info@IVIpe.com
  • 45. Topic #4: How Venture Capital Works What’s Common Here? www.IVIpe.com Info@IVIpe.com
  • 46. Topic #4: How Venture Capital Works SummaryEntrepreneurship & VC are linkedVC only successful if entrepreneurs aresuccessful www.IVIpe.com Info@IVIpe.com
  • 47. Where is the Technology?
  • 48. Technology In Many Places! Just Look & DefineSlaughter Raising Genetic Engineering & Breeding Butcher Distribution, Storage & Retail LocationsProcessing- Ham, Kielbasa Delivery 16-19 November 2009 www.IVIpe.com Info@IVIpe.com
  • 49. Thomas D. Nastas Tom@IVIpe.com www.IVIpe.com Tel. +7.985.923.4727 Tel. +1.517.899.1432Innovative Ventures Inc. Haslett, MI USA 23 June 2010
  • 50. Case Study Discussion & Analysis: HotmailWhat are objectives (implicit/explicit)?What decisions (implicit/explicit) must s/hemake/face?What problems, opt’s, & risks does s/he face? www.IVIpe.com Info@IVIpe.com
  • 51. Case Study Discussion & Analysis: Hotmail• Does the opportunity fit Hotmail’s core competencies?• Did they think imaginatively about the business model?• Did their product change the lives of their customers?• What are the learning curve lessons from Hotmail that you can apply to your work situation? www.IVIpe.com Info@IVIpe.com
  • 52. Case Study Discussion & Analysis: Hotmail• What was their value creation model?• Did they create value? For whom?• Were the macro-economic and environment factors in Hotmail’s favor? Did demand exist? In their target market(s)? What about customers ability to pay? What about future forecasts? www.IVIpe.com Info@IVIpe.com
  • 53. Case Study Discussion & Analysis: Hotmail• What changes do customers need to make to use the service?• How did ‘partners’/competitors impact their model & chance for success?• Were they undercapitalized? www.IVIpe.com Info@IVIpe.com
  • 54. Case Study Discussion & Analysis: HotmailWhat evidence do I have to help make the decision?Is the evidence reliable/unbiased? Can I improve it?What alternative courses of action are available?What criteria should I use to evaluate the alternatives? www.IVIpe.com Info@IVIpe.com
  • 55. Case Study Questions to Ask YourselfWhat action should I take?How should I convince others in the case & theclassroom that my approach is best?What did I learn from this case?How does it relate to past cases & my ownexperience? www.IVIpe.com Info@IVIpe.com