Cvcf2009 Senkut Keynote Final

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Keynote presentation on angel investing from the Cyberport 2009 Annual Venture Forum in Hong Kong

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Cvcf2009 Senkut Keynote Final

  1. 1. Cyberport Venture Capital Forum 2009 Keynote on Angel Investing Aydin Senkut Twitter: @asenkut aydin@felicisvc.com © 2009 Felicis Ventures LLC
  2. 2. Aydin Senkut – Felicis Ventures Bringing operational excellence & scaling experience to funding start-ups Founder & Active Angel Investor @ Felicis Ventures | 2005 – 2009   Portfolio of 50+ Companies   7 Exits including Mint (acquired by Intuit), Plusmo (acquired by AT&T), Powerset (acquired by Microsoft)   Every other portfolio company had an up round with a reputable VC Strategic Sales and Product Management @ Google | 1999 – 2005   First portal deals in: Japan, China, Korea, Taiwan, Germany, Brazil (closed portal deals of $100M+ revenues)   First site-search deal with Sony (Global Launch in 20+ countries – seeding Enterprise Search Appliance)   First Product Manager / worked for Larry Page (Launched first 10 International sites for Google along with other products) Product Manager @ SGI | 1996 – 1999   Product Manager, Data Mining &Visualization (team of 20 engineers) © 2009 Felicis Ventures LLC
  3. 3. Venture Capital Ecosystem Idea Start up Intro Rollout Growth Expansion Maturity Inv. Banks / PE $10MM - 100MM+ Grants of up to $1MM Acquisition Stage / IPO / Mergers Revenue / EBITDA Angel Investors $10k – $1MM Investment Banks & PE Funds Venture Capital Friends, Family or Funds Grants Individual Angels / Groups / Boutique VCs © 2009 Felicis Ventures LLC
  4. 4. What is an Angel Investor ? Anyone who provides private capital to a [non family] start-up   Usually the first outside investor   Invest with the expectation of a financial return   Invest usually locally and regionally   Participate actively in the investment process   Usually care about the entrepreneurs and the companies they invest in / interested in building personal relationships with companies & employees   Offer advice and guidance to founders * Source: Wall Street Journal – October 31, 2009 © 2009 Felicis Ventures LLC
  5. 5. Angel Investors in the US 225,000 U.S. Estimate Of Estimate of Active Investors In Angel Groups Millionaires Informal Angels Investors (Center For Venture Research) * Source: Angel Capital Association Presentation by Ian Sobieski, Band of Angels, Oct 2007 © 2009 Felicis Ventures LLC
  6. 6. Rising Popularity of Angel Investing 3x Growth in North American Angel Organizations in 7 yrs NUMBER OF ANGEL ORGANIZATIONS * Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data) © 2009 Felicis Ventures LLC
  7. 7. Angel Investing – Strength in Numbers Angel Groups in the US:   Have 44 members on average (38 median)   Well spread out across the country (in 43 states)   Invest close by (50% invest within a 4 hour drive, 30% invest within State or Region)   Invest around $250-500K per investment round   Leverage their groups for deal-flow, due diligence, and diversification of their investments   Expect an exit around 5-7 years and a multiple north of 10x * Source: Wall Street Journal – October 31, 2009 © 2009 Felicis Ventures LLC
  8. 8. Angel Investing – Investment Focus Internet / Software lead other segments * Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data) © 2009 Felicis Ventures LLC
  9. 9. Angel Investments in Perspective In the Context of Venture Capital Early Stage to Late Stage 3,416 Deals Average Deal Size: $7,500,000 51,000 Deals Average Deal Size: $500,000 2007 Angel Investments 2007 VC Investments * Source: University of New Hampshire Center for Venture Research, Price Waterhouse Coopers © 2009 Felicis Ventures LLC
  10. 10. Venture Capital is Highly Concentrated Silicon Valley (40%) and NY (7%) account for nearly half of venture investment * Source: NVCA Research 2009; PriceWaterhouseCoopers © 2009 Felicis Ventures LLC
  11. 11. What Makes Silicon Valley Special ? Tolerate Failure, Iterate, Elite Universities, Eco-system   There is no Success without Failure (Twitter, Zappos, Pure Digital - Flip)   The Path to Success is Not Necessarily Straight (Ideas Change, Launch Fast, Iterate Quickly) Average product release cycle of select Felicis companies like Justin.tv is 2 weeks   Elite Universities (with Global, Highly Selected Student Bodies)   Multiple Generations of Successful Entrepreneurs Act as Mentors / Angels © 2009 Felicis Ventures LLC
  12. 12. Silicon Valley Success Story “Internet is the Greatest Legal Wealth Creation in History” Last Valuation Total $Raised Last Valuation ExitType Multiple InYears Founded at IPO or Exit Facebook $716.0 $10,000 - 14 5 2004 2009 Twitter $55.0 $285 - 5 3 2006 2009 Zappos $62.8 $920 M&A 15 10 1999 2009 Adify $27.0 $300 M&A 11 2 2006 2008 Google $25.1 $23,100 IPO 920 7 1998 2005 Bebo $15.0 $850 M&A 57 3 2005 2008 Zimbra $14.5 $350 M&A 24 3 2004 2007 Photobucket $13.5 $300 M&A 22 4 2003 2007 YouTube $11.5 $1,650 M&A 143 1 2005 2006 Last.fm $5.0 $280 M&A 56 5 2002 2007 Note:
All
amounts
in
millions
 •  Consumer internet still offers best path to high multiple returns •  Key differentiator: capital efficiency •  Virtually all the big successes were first backed by angels © 2009 Felicis Ventures LLC
  13. 13. What Makes a Great Company ? Great People, Passion, Focus, Innovation, Fun   Focus, Critical Use Case, Clarity of Purpose Example: Google Spell Check   Ability to attract great people (team, investors, advisors) Example: Mint   Passion Example: Zappos   Innovation (thinking out of the box, even when resources are tight)   Fun + Unique Culture © 2009 Felicis Ventures LLC
  14. 14. What Does It Take… …To Be A Successful [ Angel ] Investor ?   Strong Personal Brand & Network It takes money AND time, one relationship at a time; add value, create goodwill   Proprietary Deal-flow Have a plan, create an unfair advantage; social friends do not equal to great deal-flow   Ability to Relate to Founders Examples: Mint, Imageshack   Judgment (Domain Expertise, Experience, Timing, Nose for Talent) It might take tens of deals and years [& losses] to find the winners © 2009 Felicis Ventures LLC
  15. 15. What is a Good Deal (or Valuation) ? It Depends and It’s Cyclical VALUATION OF SEED ROUNDS All amounts in millions © 2009 Felicis Ventures LLC
  16. 16. Growth is Key to Successful Investing CHINA has the Fastest Growing Internet and Mobile Markets INTERNET USER NET ADDITIONS Global 2007Users Rank Country Added(000s) 2007Y/Y Growth Penetration 1 China 73,000 53% 16% 2 US 9,800 5% 73% 3 Brazil 7,400 17% 26% 6 India 5,000 7% 7% 8 Russia 4,311 17% 21% MOBILE SUBSCRIBER NET ADDITIONS Global 2007 Net Subs Rank Country Added(000s) 2007Y/Y Growth Penetration 1 China 86,228 19% 41% 2 India 67,570 41% 21% 4 Brazil 21,062 21% 64% 5 Russia 19,326 13% 120% 7 US 13,596 6% 85% Source: Morgan Stanley Research, ITU © 2009 Felicis Ventures LLC
  17. 17. Venture Capital / China = Opportunity Venture Investment in China now ~14% of US (up from 1%) [TOTAL FUNDS INVESTED] All amounts in millions US China Source:US Data - NVCA Research 2009; PriceWaterhouseCoopers / China Data: Zero2Ipo Research 2009 © 2009 Felicis Ventures LLC
  18. 18. Venture Capital / China = Upside Funds raised last year roughly 25% of Funds raised in US [TOTAL FUNDS RAISED] All amounts in millions US China Source:US Data - NVCA Research 2009; PriceWaterhouseCoopers / China Data: Zero2Ipo Research 2009 © 2009 Felicis Ventures LLC
  19. 19. China – Local Champions QQ and Baidu winning big in China versus Google SCALE IS BASED ON THE AVERAGE CHINA TRAFFIC OF GOOGLE IN ALL YEARS. Source: Data from Google Insights for Search © 2009 Felicis Ventures LLC
  20. 20. Next Big Things Education • Online Education • Local Search Search •  Subjective Search •  Personal Genomics Health • Electronic Health Records • Data Driven Smart Web Apps Other • Crowd sourcing © 2009 Felicis Ventures LLC
  21. 21. Seeding Future Winners - Incubators LEADING EXAMPLE IN THE US •  Review 600+ companies every 6 months •  Each batch around 20+ companies (~4% acceptance rate)* •  Investment: $5K USD + $5K USD per founder •  Stake: Usually 2-10% INTERESTING FACTS •  25% of accepted companies are international •  Last batch, more than half the companies changed what they were working on •  Last Investor Day included 27 companies and 210 Investors KEY RESULTS Companies Acquired Companies with sizeable VC rounds •  Reddit (acquired by Conde Nast) •  Heyzap •  Justin.tv •  Parakey (acquired by Facebook) •  Loopt •  Xobni •  Omnisio (acquired by Youtube/Google) •  Scribd •  Posterous •  Zenter (acquired by Google) •  Anywhere.fm (acquired by iMeem) © 2009 Felicis Ventures LLC
  22. 22. How Can Incubators Succeed ? Filter, Stress, Mentor, Engage, Eco-system   Strong brand & highly selective (admission ratio of 1-5%)   Limited time (~3 months) to encourage execution and fast iteration   Heavy Mentorship in all key product areas (especially engineering, product, and fund-raising)   Community and participation (Biggest success factor cited by founders)   Active involvement of investors increases funding rate to 75%* * Techstars © 2009 Felicis Ventures LLC
  23. 23. Food For Thought To Many More Internet Leaders from China and HK TOP GLOBAL INTERNET COMPANIES Rank Company Country 2009 Market Cap 1 Google US $102B 2 Amazon US $29B 3 Yahoo US $19B 4 eBay US $15B 5 Yahoo JP Japan $14B 6 Softbank Japan $13B 7 Activision US $13B 8 Tencent China $12B 9 Baidu China $6B 10 Rakuten Japan $6B 11 Electronic Arts US $6B 12 Alibaba China $5B 13 NHN Korea $5B 14 NetEase China $3B 15 Expedia US $2B © 2009 Felicis Ventures LLC
  24. 24. Confidential – Copyright Felicis Ventures LLC © 2009 Felicis Ventures LLC

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