Uncle California Accelerator


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Uncle California bridges Budapest with the Silicon Valley.

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Uncle California Accelerator

  1. 1. { UNCLE CALIFORNIA         San  Francisco  –  Boston  –  Budapest 2014
  2. 2. Silicon Valley Hungarian Accelerator “a  bridge  between  Hungary'ʹs  innovation  and  a   successful  US  business”   “reverse  brain  drain  in  a  smart  way”
  3. 3. Only in Silicon Valley…
  4. 4. Ñ  Founded  in  2013,  Uncle  California  is  a  San  Francisco-­‐‑based   accelerator  structured  around  two  investment  themes  with   strong  pipelines  in  both: Ó  No  1:  assist  Hungarian  start-­‐‑ups  to  access  the  Silicon  Valley  and   Boston  ecosystems     Ó  No  2:  match  American  founders  with  Hungarian  technical   background Ñ  We  have  a  team  in  place  in  Silicon  Valley,  Boston,  and   Budapest  with  an  established  professional  network  in  the   Silicon  Valley  and  Boston  start-­‐‑up,  accelerator,  and  venture   capital  communities  coupled  with  50+  years  of  experience  in   Central  Europe Ñ  We  are  currently  fundraising  for  a  small  private  fund  to  be   matched  by  a  generous  matching  grant  from  the  Hungarian   government’s  Gazella  program Uncle  California
  5. 5. Ñ   Balazs  Laszlo  Karafiath  is  an  entrepreneur  &  communication   researcher.  His  current  venture  is  Culture2  Inc.  based  in  San   Francisco.  He  is  the  co-­‐‑founder  of  Darwin’s  Marketing   Evolution,  a  research  &  consulting  company  successfully   incorporating  meme  science  into  marketing  practice.  He  was  a   World  Fellow  of  2006  at  Yale  University.  In  1997,  he  founded   Carnation,  Inc.,  a  start-­‐‑up  internet  consulting  and  marketing   company.  Laszlo  co-­‐‑founded  Central  Europe’s  biggest  week-­‐‑ long  music  and  arts  festival,  Sziget  at  the  age  of  20.  Laszlo  is   an  active  angel  investor  in  Budapest  and  San  Francisco.  He  is   based  in  San  Francisco. Meet  the  Team
  6. 6. Ñ   Barnabas  Gero  is  a  corporate  finance  professional  with  over   10  years  experience  in  M&A,  equity  fundraising,  and  project   finance.  Barnabas  has  received  his  Mphil  in  Management  from   Columbia  Business  School  and  afterward  worked  for  an   incubator  called  IronStreetLabs  in  New  York.  After  returning   to  Hungary,  Barnabas  worked  for  Citigroup  and  Deloiae  in   corporate  finance.  In  the  last  five  years,  Barnabas  has  been  an   independent  advisor  to  numerous  companies  such  as  Lapker,   Richmond  Capital  Partners,  or  Helit,  while  acting  as  the  head   of  corporate  finance  at  PannErgy,  a  Budapest  Stock  Exchange-­‐‑ listed  geothermal  developer.  Since  moving  back  to  the  United   States  in  2012,  Barnabas  has  been  focusing  exclusively  on   building  Uncle  California.  He  is  based  in  San  Francisco. Meet  the  Team
  7. 7. Ñ  The  objective  of  the  program  is  to  support  the  development  of   the  Hungarian  start-­‐‑up  ecosystem  and  promote  Budapest  to   become  the  start-­‐‑up  center  of  Central  Europe Ñ  The  program  includes  selection  of  accredited  accelerators   (“Gazellas”)  which  invest  private  funds  along  a  generous  non-­‐‑ refundable  matching  grant  in  promising  start-­‐‑ups  and  seek  to   accelerate  them  toward  international  prominence Ñ  The  goal  of  the  program  is  to  seed  start-­‐‑ups  that  could  be   successful  internationally,  while  keeping  technical  operations   in  Hungary Ñ  In  the  first  round  of  the  program  (“G1”)  four  accredited   accelerators  (the  “Gazellas”)  were  selected,  while  the  second   round  of  the  program  (“G2”)  is  to  be  announced  shortly.   The  Gazella  Program
  8. 8. Ñ  The  amount  of  matching  grant  allocated  to  each   Gazella  is  approximately  $2.5  million,  while  up  to  $1   million  of  private  capital  is  required  to  trigger   disbursement  of  the  above  matching  grant   Ñ  Although  the  non-­‐‑refundable  matching  grants  are   disbursed  directly  to  start-­‐‑ups,  Gazellas  have   complete  discretion  in  their  selection  of  recipients   and  will  act  as  private  investors,  using  customary   private  investment  processes  and  corporate  control   techniques Ñ  Finally,  Gazellas  are  allowed  to  acquire  up  to  20%   stakes  in  the  start-­‐‑ups    in  exchange  for  the  above   services. A  balanced  system  of  matching   grants  and  private  investments
  9. 9. Ñ  Uncle  California  will  apply  for  accredited  accelerator  status  in   the  upcoming  G2  and  seeks  to  raise  soft  commitments  from  a   group  of  venture  capital  and  angel  investors  in  the  Bay  Area,   Boston,  and  Hungary Ñ  The  investors  will  invest  directly  into  start-­‐‑ups  sponsored  by   Uncle  California  and  no  investor  is  under  obligation  to  invest   Ñ  Given  the  parameters  of  the  program,  private  ticket  sizes  for   each  start-­‐‑ups  will  be  between  $100,000  to  $200,000 Ñ  In  each  transaction,  the  private  investors  would  receive   warrant  coverage  for  50  percent  their  investment,  while  Uncle   California  will  provide  up  to  5  times  the  private  investment   amount  using  the  grant  received  as  part  of  G2 Bridging  Silicon  Valley  angels   and  Budapest    startups  with  a   +50%  Warrant  Coverage
  10. 10. Ñ  In  addition  to  applying  to  G2,  Uncle  California  also   plans  to  explore  the  acquisition  of  one  of  the   accredited  accelerators  from  G1 Ñ  The  advantage  of  acquiring  such  a  vehicle  is  the   increased  certainty  of  access  to  the  generous   matching  grant,  while  the  downside  is  the  required   upfront  cash  outlay Ñ  We  are  in  preliminary  negotiations  with  owners  of   the  G1  Gazellas  and  expect  to  negotiate  a  purchase   price  in  the  region  of  $500,000  to  $750,000  depending   on  the  increase  in  the  non-­‐‑refundable  matching   grant  as  part  of  G2 Headstart:  buyout  of  an   existing  player  
  11. 11. Investment  structure  at  G2 Founders  (74%) Uncle   California UC   (17%) Angels  9% $250K $2.5M Angel   #1 $250K $250K Angel   #3 Angel   #2 Ñ  Uncle  California  makes  5-­‐‑10   investments  totaling  $3.25  million  of   which  it  contributes  $2.5  million Ñ  Angels  contribute  the  balance  of   $750,000 Ñ  Angels’  share  is  30%  of  California’s   investment Ñ  Angels  receive  50%  warrant   coverage  premium  at  their   investment Ñ  Angels  are  under  no  obligation  to   invest  in  each  deal,  only  the  ones   they  like Investment  portfolio
  12. 12. Investment  returns  at  G2 Founders  (74%) Uncle   California UC   (17%) Angels  9% $940K $5.3M Angel   #1 $940K $940K Angel   #3 Angel   #2 Ñ  Assuming  a  2.5  times  increase  in   the  portfolio,  Angels  receive  a   total  value  increase  of  3.75  times Investment  portfolio
  13. 13. Investment  structure  at  G1 Founders  (74%) G1  Gazella Angels  26% $400K $4M Angel   #1 $400K $400K Angel   #3 Angel   #2 Ñ  Angels  acquire  G1  Gazella  for   $700,000 Ñ  G1  Gazella  makes  10-­‐‑15  investments   in  the  amount  of  $5.2  million  of   which  it  contributes  $4  million Ñ  Angels  contribute  an  additional  $1.2   million  for  a  total  investment  of  $1.9   million  including  the  purchase  price Ñ  Uncle  California  acts  as  advisor  to   Angels  in  arranging  the  acquisition   of  a  G1  Gazella  and  originating  and   structuring  investments $700K Investment  portfolio Uncle   Cali       origination  and  deal  structuring
  14. 14. Investment  returns  at  G1 Ñ  Angels  have  two  alternatives  for  compensation: Ó  #1:  Increased  warrant  coverage  for  their  private   investments  in  particular  start-­‐‑ups Ó  Returns  from  the  whole  portfolio Ñ  The  above  structure  allows  angels  to  be  selective  if  they   prefer  increased  exposure  to  particular  start-­‐‑ups Ñ  In  this  case,  they  receive  higher  warrant  coverage,  but   their  stake  in  G1  Gazella  will  decrease Ñ  Uncle  California  will  be  compensated  by  options  in  the   start-­‐‑ups Ñ  Preliminary  terms: Ñ  8%  Preferred  returns  for  Angels  with  catch-­‐‑up  for  Uncle  California Ñ  Equal  split  of  returns  after  preferred  returns  and  catch-­‐‑up Ñ  At  2.5  times  portfolio  return,  the  above  structure  would   provide  Angels  4X  times  return  on  their  total   investment
  15. 15. Investment  returns  at  G1 Ñ  Given  the  amount  of  non-­‐‑refundable  grant   money  and  the  preferred  returns,  Angels  are   protected  on  the  downside,  while  receive   highly  aaractive  returns  if  the  investment   performance  is  above  1.5  times  at  the  portfolio   level Portfolio(return(multiple 0.50((( 0.75((( 1.00((( 1.25((( 1.50((( 2.00((( 2.50((( 3.00((( 3.50((( 4.00((( Angel(return(multiple 1.39((( 1.54((( 1.89((( 2.24((( 2.59((( 3.29((( 3.98((( 4.68((( 5.38((( 6.07((( Portfolio(IRR =12.9% =5.6% 0.0% 4.6% 8.4% 14.9% 20.1% 24.6% 28.5% 32.0% Angel(IRR 6.9% 9.1% 13.6% 17.5% 21.0% 26.9% 31.8% 36.2% 40.0% 43.4%
  16. 16. Ñ  Mobile  workflow  process  management  app   developer Ñ  Cloud-­‐‑based  enterprise  software  development   company Ñ  Real-­‐‑time  virtual  reality  software  developer Ñ  Digital  personal  trainer  software  start-­‐‑up Ñ  3D  printer  developer  start-­‐‑up Ñ  Virtual  CRO  start-­‐‑up Ñ  Retail  coupon  management  company Ñ  Visual  geocaching  start-­‐‑up Ñ  Gamified  talent  screening  start-­‐‑up Our  pipeline  in   investment  theme  #1
  17. 17. Ñ  Home  inventory  management  start-­‐‑up  (Boston) Ñ  High-­‐‑tech  camera  hardware  company  (San   Francisco) Ñ  Health-­‐‑tech  start-­‐‑up  developing  a  smart   thermometer  using  the  BLE  standard  (Los   Angeles) Ñ  Embedded  advertising  start-­‐‑up  (Los  Angeles) Ñ  Camera  based  parking  app  start-­‐‑up  (San   Francisco) Our  pipeline  in   investment  theme  #2
  18. 18. Appendices
  19. 19. Ñ  Csaba  Csoma:  CTO,  HealthExpense,  focus:  enterprise   software,  healthcare  applications Ñ  Tamas  Henning:  business  development,  Skype;  focus:   enterprise  software,  communication  applications Ñ  Sandor  Nagy:  COO,  McGraw-­‐‑Hill  Education;  focus:  education   applications Ñ  Janos  Veres:    program  manager,  XEROX  PARX,  focus:   hardware,  internet  of  things Ñ  Tibor  Mozes:  SVP,  Engineering  at  InfoScout,  focus:  mobile,  big   data,  gaming,  adtech Ñ  Paul  Cheng:  founder  and  CEO,  Phigital;  focus:  mobile,  adtech Ñ  David  Varnai:  ecommerce  manager,  Zenni;  focus:  ecommerce Ñ  Gabor  Csele:  founder  and  CEO,  Namo  Media,  focus:  adtech Ñ  Laszlo  Horvath:  president,  ActiveMedia;  focus:  SEO Ñ  Aaila  Toth:  C3  Energy,  SVP  Worldwide  sales;  focus:   renewables  and  big  data Ñ  Peter  Gajdos:  portfolio  manager,  CMEA  Capital;  focus:   renewable  energy,  venture  capital Ñ  Andras  Forgacs:  CEO,  Modern  Meadow,  focus:  biotech Our  Mentor  Network
  20. 20. Ñ  Zsolt  Krajcsik:  animation  professional;  founder,  Setec;  focus:  film   and  entertainment  application,  personal  quantification  and   wearables Ñ  Viktor  Bullain:  project  manager,  virtual  application,  Turner   Construction;  focus:  enterprise  software Ñ  Tibor  Kozek:  CEO,  Imagize  LLC;  focus:  hardware/software   applications Ñ  Andras  Toth:  Associate,  Plug  &  Play  Ventures;  focus:  venture   capital  and  business  development Ñ  Zoli  Piroska,  Founder  and  CEO,  Secret  Sauce  Partners;  focus:  retail   applications Ñ  Daniel  Yoon:  finance  at  Tapingo;  focus:  hospitality,  online  travel   applications Ñ  Michael  Globits:  marketing  manager,  SF  Fitness;  focus:  personal   quantification,  ecommerce Ñ  Zoltan  Szendroi:  founder,  RealBird;  focus:  real-­‐‑estate  applications,   personal  quantification  and  wearables Ñ  Oren  Knopfmacher:  post-­‐‑doc,  Stanford;  focus:  medtech Ñ  Patrick  Vlaskovits:  founder,    Superpowered,  mentor  500startups;   focus:  lean  entrepreneurship Our  Mentor  Network
  21. 21. Ñ  The  Gazella  program  was  established  by  Hungary’s  National  innovation   Agency  in  2013 Ñ  The  objective  of  the  program  is  to  support  the  development  of  the  Hungarian   start-­‐‑up  ecosystem  and  promote  Budapest  to  become  the  start-­‐‑up  center  of   Central  Europe Ñ  In  the  first  round  of  the  program  (“G1”)  four  accredited  accelerators  (the   “Gazellas”)  were  selected   Ñ  The  Gazellas  invest  private  funds  along  a  generous  non-­‐‑refundable  matching   grant  in  promising  start-­‐‑ups  and  seek  to  accelerate  them  toward   international  prominence Ñ  In  exchange  for  their  role  as  accelerators  and  gatekeepers  to  public  funds,   Gazellas  are  allowed  to  acquire  ownership  stakes  in  the  start-­‐‑ups Ñ  The  goal  of  the  program  is  to  seed  start-­‐‑ups  that  could  be  successful   internationally,  while  keeping  technical  operations  in  Hungary Ñ  The  accredited  accelerators  of  G1  are  currently  finalizing  the  funding   contract  with  the  Hungarian  government Ñ  2nd  round  of  the  Gazella  program  (“G2”)  is  expected  to  be  announced  shortly   with  submission  deadline  in  early  summer  and  final  selection  during  the   summer Ñ  Four  new  Gazellas  are  expected  to  be  selected  in  G2,  while  matching  grants   are  expected  to  be  increased  for  the  G1  winners The  Gazella  Program
  22. 22. Ñ  The  amount  of  matching  grant  allocated  to  each  Gazella  in  G1  is   approximately  $2.5  million,  while  $0.5  million  of  private  capital  is  required  to   trigger  disbursement  of  the  above  matching  grant   Ñ  Gazellas  also  receive  a  non-­‐‑refundable  grant  for  operating  expenses  in  the   amount  of  $250,000  which  requires  $150,000  in  matching  private  funds  to  be   triggered Ñ  At  the  same  time,  due    to  the  rigid  disbursement  of  the  matching  grants,  up   to  $0.5  million  in  private  funds  will  be  required  to  provide  the  necessary   liquidity  to  allow  for  smooth  operations Ñ  Four  new  Gazellas  are  expected  to  be  selected  in  the  upcoming  G2,  while   matching  grants  are  expected  to  be  increased  for  the  G1  round  winners  to  ~ $4  to  $5  million Ñ  In  case  of  each  start-­‐‑up,  the  maximum  amount  of  non-­‐‑refundable  public   grant  is  ~$500,000,  thus  requiring  ~$100,000  in  private  funds  and  up  to  an   additional  $100,000  in  necessary  liquidity Ñ  Although  the  non-­‐‑refundable  matching  grants  are  disbursed  directly  to  start-­‐‑ ups,  Gazellas  have  complete  discretion  in  their  selection  of  recipients  and   will  act  as  private  investors,  using  customary  private  investment  processes   and  corporate  control  techniques Ñ  Finally,  Gazellas  are  allowed  to  acquire  up  to  20%  stakes  in  the  start-­‐‑ups    in   exchange  for  the  above  services The  Gazella  program  (cont.)
  23. 23. Ñ  Do or do not. Don’t try. Ñ  Continuous presence, no ‘pop-up stores’ Ñ  Local companies, American leaders Ñ  Local business propositions Ñ  THROW A BETTER PARTY* Ñ  Success The way to get traction in the Valley *  The answer to the question: What is the best way to get access to best young business leaders and the most connected VCs and business angels in the Valley?
  24. 24. Ñ  “Uncle Cali - Your portal to The Valley” Ñ  B. Laszlo Karafiath Ñ  Barnabas Gero Ñ  hello@unclecalifornia.com Join us in Cali!