IVA 2009 Keynote

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David Cowan of Bessemer Venture Partners addresses the 2009 conference of the Israel Venture Association in Tel Aviv on May 19, 2009.

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  • , I’ll share one VC’s perspective on the prospects for venture capital, and how we can steer our way through difficult times. I am mindful that Israel has more at stake here than the welfare of a few hundred professionals. As a percentage of either GDP or assets, venture capital investment in Israel is the highest in the world. This economy, more than any other, depends upon technical innovation. So Israel needs us to restore the health of our asset class, to do our job as the gatekeepers of capital, and to do it well.
  • IVA 2009 Keynote

    1. 1. … on the bitter and the sweet David Cowan Bessemer Venture Partners ISRAEL VENTURE ASSOCIATION 2009 עַל הַמַר וְהַמָתוֹק
    2. 2. Bessemer Venture Partners Founded 1911 Mumbai Herzliya Boston New York Califonia
    3. 3. Bessemer Venture Partners Founded 1911 Mumbai Herzliya Boston New York Califonia P-Com A.R.T.
    4. 4. $100 Trillion Andre Perod Finance Professor Harvard Business School
    5. 6. Pre Money valuations in Israel have caught up to the US Israel United States US$ M Source: Dow Jones VentureSource US$ M
    6. 8. Are the LPs coming back? 1997 is last year with >0 median and mean return Source: Thomson/Reuters. Data as of 6/30/08.
    7. 9. Why have LPs stayed in so long? Source: Returns are based on the cumulative net IRRs of U.S. venture capital funds formed in vintage years 1998-2007 and 1988-2007, respectively. Source: Thomson Reuters VentureXpert. Public market return data based on an ending date of June 30, 2008 for both indices. Source: Thomson Reuters/NVCA
    8. 10. “ Top Quartile IRR” is a tease. Economic returns are concentrated among the top quartile performers Source: Cambridge Associates PE industry Review 2008 Average Annual Compound Return (%) 30% 25% 20% 15% 10% 5% 0% (5%) 0.46 2.47 2.57 1.73 2.25 16.31 17.24 25.55 Delta between top & bottom quartiles
    9. 11. When Great Companies Were Founded… 1980 1982 1984 1986 1988 1990 1992 1994 1996 FORE SYSTEMS
    10. 12. When Great Companies Were Founded… 2001 2002 2003 2004 2005 2006 2007
    11. 13. Big Markets <ul><li>Energy </li></ul><ul><li>Internet </li></ul><ul><li>Stem Cells </li></ul><ul><li>Security </li></ul><ul><li>Mobile </li></ul><ul><li>India </li></ul><ul><li>Web Video </li></ul><ul><li>Social Gaming </li></ul><ul><li>Virtualization </li></ul><ul><li>SaaS </li></ul>
    12. 15. Sovereign Wealth Funds
    13. 16. More Sovereign Wealth Funds
    14. 18. Since 2002, $2.8 billion invested in 325 companies Source: Dow Jones VentureSource
    15. 19. Bessemer’s Law of Internet Efficiency Cost 1995 1999 2003 2007 “ The time and money required to produce (design, develop, test, launch, scale) a basic e-commerce application drops in half every two years.” $300 $20,000 NetScape Apache Java ActiveX Flash Shockwave PHP XML Ruby on Rails service APIs Amazon S3 AJAX Web Application Development
    16. 20. Votizen
    17. 21. Stage Shifting Source: E&Y
    18. 22. Source: Lerner and Schoar [2007]
    19. 23. Bessemer’s Current Cleantech Portfolio Sector Current Investments Seeking New Investments Batteries and Energy Storage Smart Grid Solar Power Lighting Clean Transportation India <ul><li>Utility Scale </li></ul><ul><li>Electric Vehicles </li></ul><ul><li>High MPG at low cost </li></ul><ul><li>Electric Vehicles </li></ul><ul><li>Long-term opportunities to reduce cost, raise efficiency </li></ul><ul><li>Opportunities throughout LED Lighting </li></ul><ul><li>Smart Meters </li></ul><ul><li>Software Infrastructure </li></ul>
    20. 24. Israel Is A Center for Global Cleantech Activity <ul><li>Source: d&a info cleantech portal; company information </li></ul>Over 300 companies active across multiple Cleantech segments…
    21. 25. And Israel Cleantech VC Deal Pace Has Been Increasing <ul><li>Source: Cleantech Group LLC, Venture Investment Database </li></ul>
    22. 26. Venture Capitalists Need to Get Back to Venture Capital And Develop the Ecosystem of Staged Financing Opportunities Stage of Company Technical Research Productization Commercialization Revenue Ramp / Pilot Project Development Expansion / Project Equity Mature Growth / Project Finance 2005-2008 Venture Capital Hedge Funds / Private Equity Public Markets 2009- Venture Capital Partners / PE Public Labs / Entrepr.
    23. 29. … on the bitter and the sweet David Cowan Bessemer Venture Partners ISRAEL VENTURE ASSOCIATION 2009 עַל הַמַר וְהַמָתוֹק

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