Early Stage Digital Technology Fund A discre7onary EIS Fund
Important No+ce C&P Capital LLP and Prosper Cap7al LLP are communica7ng this presenta7on on a conﬁden7al basis only to a limited number of ﬁrms authorised by the Financial Services Authority of the United Kingdom (the "FSA") for the sole purpose of providing informa7on about the Early Stage Digital Technology Fund (“The Fund”). Promo7on of an investment in the Partnership is regulated under the Financial Services and Markets Act 2000 ("FSMA") and, in par7cular, under the FSMA (Financial Promo7on) Order 2005 (“FPO"). Accordingly, this presenta7on is being communicated to persons having professional experience in maSers rela7ng to investments who are "investment professionals" within the meaning given in ar7cle 19 of the FPO and speciﬁcally ﬁrms authorised by the FSA. The distribu7on of this presenta7on to persons who are not investment professionals or are not ﬁrms authorised by the FSA is unauthorised and contravenes FSMA, and such persons should not act or rely on this presenta7on or any of its contents for any purpose. This presenta7on is intended to be a brief summary overview of an investment in the Fund. Any recipient of this presenta7on must read this presenta7on in conjunc7on with the informa7on memorandum of the Partnership, once available, which sets out the detailed terms and risks involved in inves7ng in a business of this nature prior to any decision to invest being made. Any projec7ons, forecasts and es7mates contained in this presenta7on are forward-‐looking statements and are based upon certain assump7ons considered by the Fund to be reasonable. Projec7ons are necessarily specula7ve in nature and it can be expected that some or all of the assump7ons underlying the projec7ons will not materialise or will vary signiﬁcantly from actual results. Accordingly, the projec7ons are only an es7mate. Actual results may vary from the projec7ons and the varia7ons may be material. Some important factors that could cause actual results to diﬀer materially from those in any forward-‐looking statements include changes in interest rates and market, ﬁnancial or legal uncertain7es, among others. Consequently, the inclusion of projec7ons herein should not be regarded as a representa7on by the Fund or any other person or en7ty of the results that will actually be achieved by the Fund. This presenta7on should not be construed as a recommenda7on or as legal, tax or ﬁnancial advice in rela7on to the subscrip7on, purchase, holding or disposi7on of shares in the Fund. Prospec7ve investors should accordingly consult their own professional advisers
Overview What Why How Who Fees Funnel extract
overview Target fundraise: £15m Minimum fundraise: £10m Minimum investment: £25,000 Maximum investment: £1,000,000 Target return: 30% IRR Investment term: 5 years (with the op7on of a further two, one year increments). Closing Date: April 2013 Fund Structure: Discre7onary EIS porbolio Investor Repor7ng: Investors will receive a quarterly leSer and full annual report.
what A discre7onary EIS fund inves7ng in early stage internet companies, ran & advised by successful internet entrepreneurs and experienced investment professionals. A fund seeking to invest in the value created by disrup7ve internet technologies. A fund that is using historical data to guide an investment strategy to manage downsize risk, while leaving an opportunity for substan7al returns. In fact, a target IRR of 30 over 5 years.
what A fund that draws analogue to successful US ‘micro-‐VC’ models “[This kind of fund] want to reinvigorate venture capital by taking it back to its roots, when ﬁrms were smaller, more nimble, and more likely to help startups get oﬀ the ground.” – Business Week “The fact that start-‐ups today can do a lot with so much less capital will conCnue to put pressure on VCs to look at smaller investment opportuniCes.” – Greg Foster “This ‘boom’ in seed and Micro-‐VC acCvity is not so much a boom as it is a seismic shiI in how technology companies will be founded and funded for the forseeable future “– Jonathan Tower, MD, Citron Capital
Source: Mark Suster, GRP Partners “ The State of The Venture Capital Markets” why We believe that certain structural changes caused by internet-‐based technologies have presented unprecedented opportunity for growth from a rela7vely small capital base.
ZocDoc Company LivingSocial Zulily Tumblr AirBnB Evernote Dropbox 0 100 200 300 400 500 xMul+ple Mul+ple of seed value for select tech companies <4 years old (source: C&P Research) why And this has led, for some, to stellar seed returns.
why And this gap hasn’t yet been ﬁlled in UK/Euro VC
Sample Euro Startups by value ($) (Source:Business Insider) shazam miniclip Mind Candy Habbo Ozon.ru spo7fy Rovio Vente-‐privee 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 3,500,000,000 why Yet UK/Europe are fully capable of crea7ng blockbuster start-‐ups
why Because angel-‐level investments – by investment groups – are solid performers
40 25 N = 10, y = gross fund mul7ple 35 N = 10, y = gross fund mul7ple 20 N = 40, y = gross fund mul7ple 30 25 15 20 ~40% chance of >6x return 15 10 10 <10% risk of <2x return 5 40% risk of <2x return 5 <20% risk of <3x return 0 0 0% 20% 40% 60% 80% 100% 120% 0% 20% 40% 60% 80% 100% 120% CDF results of Monte-‐Carlo simula7ons on fund porbolios of n-‐companies using a probability distribu7on imputed from The Kauﬀman Founda7on Angel Returns Study (Wiltbank 2007), the biggest survey of Angel returns to-‐date. Source: Irving Ebert (Owner, PurpleAngels) & C&P Capital Research why Because angel investments exhibit non-‐normal distribu7on curves, risk can be hedged with upside poten7al retained.
IRRs for VC-‐Backed Companies in Selected Industries, 2008-‐11 Sovware/Services Internet ecommerce Internet e-‐business 0.00 20.00 40.00 60.00 80.00 Source: Cambridge Associates LLC US Venture Capital Index and Selected Benchmark Sta+s+cs why And VC should see solid results going forward.
how Tapping into our mature and expansive networks to generate dealﬂow. We already have a strong funnel. Using published term sheets & standardised legal documents By being ‘public’: blogging, twee7ng and aSending the myriad of conferences and meetups. We too will seek to be nimble, hard Paul Singh, 500Ventures: working & disrup7ve, just like our “Moneyball: A Quan7ta7ve Approach to Angel Inves7ng” startups.
how By leading ~15-‐20 of the best investments. By giving that ~15-‐20 direct opera7onal and board level support. And ‘following’ or ‘silent partner’ inves7ng for the rest.
who Fund manager: Prosper Capital LLP Technology Adviser: C&P Capital LLP Custodian: Woodside Securi7es Audit and accounts: Nyman Libson Paul Solicitors to oﬀer: Davenport Lyons
who David Hickson – Chief Dylan Collins – Chairman Investment Oﬃcer Investment CommiSee David Hickson is a seasoned digital media/Internet Dylan Collins is one of the most experienced online veteran and entrepreneur. gaming entrepreneurs in Europe, building three companies with three successful exits over the last decade. He was commercial & legal director at lastminute.com PLC, where he was a key part of its He is Execu7ve Chairman of Fight My Monster the leading £577m exit to Travelocity Europe Limited. online game for boys in the UK. Head of Corporate Development at mydeco.com Dylan is also an angel investor in several Internet and where he raised over £12.5m of venture capital,. technology companies in the UK and Ireland. Co-‐founder and Chief Strategy Oﬃcer at He serves as Ambassador to the Irish Government’s Tribesports.com that has recently announced over Interna7onal Startup Fund. £2m worth of venture capital and has seen 1200% user growth since January ‘12. Accolades: He is a partner at C&P Capital LLP Finalist in last year’s Ernst & Young Entrepreneur of the Year He sat on the Jury Panel at the Tech Entrepreneurs Winner Irish Internet Associa7on ‘Internet Hero’ Week with Jimmy Wales, founder of Wikipedia. award
who Paul Thompson – Fund James Cox – Investment Manager Director In 2006 Paul founded Prosper Capital to provide regulated status James is a Founding Partner of C&P Capital. James and authorisa7on to companies in the media and technology started his career working for an ins7tu7onal sector, also aiding in capital raising under EIS regula7on. equity trading company and was then headhunted Prior to this he worked at Dover Street Capital, which to set up an equity deriva7ves desk at Cornhill specialised in tax based products. Capital. Having successfully set up the equity desk, James then set up their Managed FX trading In1993 Paul founded the Capital Exchange, a web based desk. James was then in turn solely responsible for business portal for entrepreneurs and investors, which exited to raising capital for both the Equity and FX Desks; Evolu7on Capital in 1999. during James’ 7me at Cornhill Capital he raised in excess of £30m. From 1987 to 1992 Paul was a partner at Cygnus Venture Partners, a venture capital ﬁrm which invested in biotech and James then co-‐founded Xenﬁn FX, part of the technology start-‐ups including Axis Shield, Bio Compa7bles and Deltex. Xenﬁn Group, a Foreign Exchange brokerage that currently trades in excess of $25bn of Foreign Paul received his MBA from Bradford University in 1980 having Exchange per month. Xenﬁn FX was an FX already qualiﬁed as a member of the Ins7tute of Chartered advisory business covering a range of clients Accountants. including Asset Managers, Family Oﬃces and Hedge Funds.
who David CoSerell – Investment Peter Rose – Investment CommiSee CommiSee David CoSerell has successfully Partner at C-‐View, C-‐View currently built up a number of IT sovware manages in excess of $250m. and services businesses from early Ex-‐CIO of a quoted hedge fund (In stages through to mature and managing approximately $2.5bn. successful business models. Ex-‐Director of Research at Ivy Asset ACT Financial Systems (became a Management,controlled $15bn of subsidiary of Misys) , DST investments. InternaConal, Advent, Cresta, and Trading experience -‐ mul7 strategy SQS . hedge fund (MBS Ltd.) and long/ short for Close Bros Risk management experience –Bear Stearns
who David Kelly – Special Advisor COO/VP Opera7ons at ebay COO of lasminute.com Director at Amazon, Founder/CEO of mydeco.com SVP/Managing Director of Rackspace – the US hos7ng and cloud plaborm – during a 7me it put on $5 billion of market cap.
fees Establishment costs 5% of aggregate Subscrip7ons to the Fund, from which will be seSled all establishment costs (including professional fees and prin7ng costs) and commissions due to independent third party intermediaries), including a fee to the Manager and Technology Adviser. Annual costs 2.5% of aggregate Subscrip7ons to the Fund, from which will be paid a fee of 0.25% of aggregate Subscrip7ons to the Manager, a fee of 0.2% of aggregate Subscrip7ons to the Custodian, with the balance to the Technology Adviser. The transac7on costs in rela7on to each investment will be met out of the annual fee, although in some cases may be met by the Investee Companies.
fees Performance fee A performance fee shall be payable to the Technology Adviser on realisa7on of the assets of the Fund. The performance fee shall be calculated as percentage of the surplus available for distribu7on to Investors aver realisa7on of Fund assets, calculated aver the return to the Investors of their aggregate Subscrip7ons, (“Surplus”) as follows: