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How Venture Capitalists Source Great Startup Investments

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Where Are the Great Startups?! …

Where Are the Great Startups?!

Best Practices of Venture Capital Funds in Finding Growth Companies

presentation by David Teten

based on research projects completed and interviews with over 150 private equity and venture capital funds

Published in: Economy & Finance, Business
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  • dating/meeting my wife
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  • dating/meeting my wife
  • 91 PE funds and 54 VC funds.
  • 1. 2. 3. e.g., using Amazon S3 instead of your own servers
  • The funds with sophisticated non-venture center outbound origination programs have almost all have been able to raise funds equal or larger than their preceding fund in the economically challenging period 2007-2010. They are typically among the top quartile performers. These funds use a combination of cold-calling, travel, expert networks, and technology to identify investment opportunities outside of their neighborhood.   The funds with more traditional origination are primarily focused on their local venture center network, and many have had difficulty raising funds in recent years, with several unable to raise new funds since late 2005.
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  • J.H. Cohn’s Award-Winning Private Equity Deal-Flow Initiative J.H. Cohn LLP, a top 20 accounting and consulting firm, has long supported the private equity (“PE”) community through a wide-ranging series of PE service offerings, including transaction services, tax and audit services (fund level and portfolio level), and consulting services. Our first-hand knowledge of the many advantages that PE funds can bring to their portfolio companies, combined with our constant mission to bring added value to our operating clients, has led us to institute the J.H. Cohn Private Equity Deal-flow Initiative program. This unique program is designed to create a direct link between the private equity community and our clients and as a result of its ongoing success was named the “M&A Product/Service of the Year” by M&A Advisor. “ J.H. Cohn created this initiative to provide our clients with a clearer understanding of the potential benefits of private equity. Once a client decides that private equity may be an option, we provide appropriate introductions and the funds will explain how the selection and investment process works. In addition, J.H. Cohn also runs several industry-specific programs for clients, prospects, and funds that specialize in their particular industry,” explains Steven Pinsky, Principal and Private Equity Services Practice Director. In addition to providing unique value to our clients, the deal-flow initiative has created tremendous value to private equity funds, including: Reducing the time needed to identify a specific target acquisition; Identifying synergistic opportunities they may not have found without a professional advisor’s in-depth knowledge of the target company; Introducing PEGs to quality targets who may not have previously considered a private equity investment; Creating a smoother deal process by having the target’s CPA firm involved from the beginning. The J.H. Cohn Private Equity Deal-flow Initiative program consists of several components, several of which are listed below: Private Equity Weekly Spotlight. This communication tool allows the PE Practice to communicate to the partnership specific acquisition criteria for those private equity funds with whom we have a relationship. The communication often prompts Partners in the firm to consider whether any of their clients may be a good match for this PE firm. Industry Vertical-Focused Private Equity Events. From fun, interactive, game-show style events, like “Deal or No Deal—the Hospitality Edition” or industry roundtables on topical issues such as sourcing and setting up retail operations in China, J.H. Cohn includes strategic private equity relationships in a number of industry-focused events. J.H. Cohn Deal Cohnnection. This program allows clients of the firm to work with us to prepare a confidential profile of their company, which we share with a select group of private equity firms to determine if there is investment interest. Clients benefit from this no-risk opportunity to “put the feelers out” and PE firms value having a sneak-peak at these companies. Preemptive Private Equity Client Introductions. By raising awareness among our Partners, we actively identify clients who may be considering a merger or other growth or exit strategy and will arrange for them to confidentially meet with appropriate private equity funds if interested. J.H. Cohn has developed a proprietary list of 10 profiles that could predetermine if a company could benefit from having a private equity partner or investor. Intermediary Extension Program . Because J.H. Cohn does not act in the capacity of an intermediary, nor do we accept fees for the majority of our deal flow initiatives, we are a “natural extension” for the intermediary community. Smaller intermediaries may have a limited geographic or industry knowledge that may prevent them from fully canvassing the PE funds for ideal partners. These intermediaries often send their deals to us to see if we may have a strong relationship with a PE fund that would be interested in getting involved. J.H. Cohn Private Equity Initiative Named M&A Service of the Year Roseland, NJ - January 6, 2009 - M&A Advisor , a leading information publisher for middle-market mergers and acquisitions and finance, has named J.H. Cohn LLP—the largest independent accounting and consulting firm in the Northeast—the winner of the M&A Product/Service of the Year award.   J.H. Cohn’s Private Equity Services Practice was awarded for the Private Equity Deal-Flow Initiative program, which is designed to create a potential relationship between the private equity community and the Firm’s clients. The initiative has provided unique value to J.H. Cohn’s clients and fostered important, business-building relationships for the Firm.   “ J.H. Cohn created this initiative to provide our clients with a clearer understanding of the potential benefits of private equity. Once a client decides that private equity may be an option, we provide appropriate introductions and the funds will explain how the selection and investment process works. In addition, J.H. Cohn also runs several industry-specific programs for clients, prospects, and funds that specialize in their particular industry,” explains Steven Pinsky, principal and Private Equity Services Practice Director. “We are honored that M&A Advisor has recognized our program with this award.”   In addition to assisting clients, the deal-flow initiative has created tremendous value to private equity funds, including: Reducing the time needed to identify a specific target acquisition; Identifying synergistic opportunities they may not have found without a professional advisor’s in-depth knowledge of the target company; Introducing PEGs to quality businesses who may not have previously considered a private equity investment; Creating a smoother deal process by having the target’s CPA firm involved from the beginning. The M&A Advisor Middle-Market M&A Awards honors the deal teams and deal-makers that have closed M&A transactions and firms whose activities set the standard for the industry. Two-hundred-and-twenty finalists representing 66 firms were named finalists in 35 categories. An independent body of experts that span the M&A industry determined the ultimate recipients of the awards. In addition to its M&A Product/Service of the Year win, J.H. Cohn was a finalist for Accounting Due Diligence Firm of the Year.   About J.H. Cohn J.H. Cohn is one of the top 20 accounting and consulting firms in the United States and the largest independent accounting firm headquartered in the Northeast. The firm has earned a strong reputation for its industry specialization and ability to help clients drive profits and increase wealth by providing custom solutions. J.H. Cohn professionals are passionate about providing personalized and attentive service, the success of their clients and staff, and their role as community leaders. J.H. Cohn is a member of Nexia International, the world’s ninth-largest network of independent auditors, business advisors, and consultants. More information about J.H. Cohn can be found at www.jhcohn.com .     Natalie Kandik Marketing Specialist Marketing Tel: 973-364-7869 Fax: 973-364-6678 [email_address] www.jhcohn.com J.H. COHN LLP Accountants and Consultants since 1919 The information included herein is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing or recommending to another party any tax related matters. (The foregoing disclosure has been affixed pursuant to U.S. Treasury Regulations governing tax practice.) The information in this transmission is privileged and confidential and intended only for the recipient listed above. If you are not the intended recipient, please advise the sender immediately by reply e-mail and delete this message and any attachments without retaining a copy. If you are not the intended recipient, you are hereby notified that any disclosure, copying or distribution of this message, or the taking of any action based upon it, is strictly prohibited.  Thank you.
  • Targeted strategy builds reputation more effectively than generalist strategy Use industry-specific white paper as carrot to motivate information-sharing
  • Money Market Directory, Nelsons
  • Requires good relationships with other investors in your focus area Investors who are “incomplete”, e.g., lack international reach, are particularly valuable if you are synergistic to them
  • Goal: Identify companies which meet Fund’s investing criteria and which are likely to have an interest in outside capital (equity or debt) Process: Interview Fund investment team to determine profile of ideal investments (e.g., automotive companies experiencing cash flow difficulty). Build database of companies which meet given criteria, e.g.: Review global public financial filings for given financial parameters. Look in news stories for companies reporting high levels of layoffs. Look in obituaries for unexpected deaths of sitting CEOs. Review private equity databases for investments which have been held for over 6 years, which the existing investors likely wish to exit. Deliverable: Database of companies which meet Fund’s investing criteria, and appear to have immediate interest in outside capital. Includes contact information for CEO of each company. Estimated # person-minutes per lead: 60-120 minutes` http://generalatlantic.com/en/news/article/58 based on http://www.generalatlantic.com/en/news/article/57
  • Peter Rip, General Partner, Crosslink Capital : “The biggest part of your growth network are the deals you turn down. You provide value to the person even if you don’t give them a check. You’ll turn down some really good opportunities . “ Welsh Carson: Since its formation, WCAS has worked with over 600 senior executives in its two target industries. Successful executives have a long-term career path through WCAS and seek multiple professional opportunities within the Firm’s portfolio, as evidenced by approximately 40% of the Firm’s current portfolio company management teams working in their second, third or fourth WCAS portfolio company. A well-seasoned executive may begin as a senior manager at one WCAS portfolio company and develop over time into a COO or CEO at another WCAS portfolio company. Frontenac Capital sources C-level executives and works with them to identify deals. Some VCs use Entrepreneurs-in-Residence Rejected Executives Entrepreneurs in Residence Portfolio Executives Welsh, Carson, Anderson & Stowe Deal Executives Senior Advisor Networks 3i Cerberus Goldman Sachs Special Situations Group General Atlantic
  • Ernst & Young [2006, p. 5] found that ¾ of the largest PE investments in 2006 resulted from proactive deal origination strategies, including "company or sector tracking, building relationships with management, [and/or] introductions from established contacts". Only 11% of the deals resulted from PE investors starting work during the formal sale process. "Better preparation, strength of relationship with target management, and sector focus were the most important factors cited in winning a deal."
  • J.H. Cohn’s Award-Winning Private Equity Deal-Flow Initiative J.H. Cohn LLP, a top 20 accounting and consulting firm, has long supported the private equity (“PE”) community through a wide-ranging series of PE service offerings, including transaction services, tax and audit services (fund level and portfolio level), and consulting services. Our first-hand knowledge of the many advantages that PE funds can bring to their portfolio companies, combined with our constant mission to bring added value to our operating clients, has led us to institute the J.H. Cohn Private Equity Deal-flow Initiative program. This unique program is designed to create a direct link between the private equity community and our clients and as a result of its ongoing success was named the “M&A Product/Service of the Year” by M&A Advisor. “ J.H. Cohn created this initiative to provide our clients with a clearer understanding of the potential benefits of private equity. Once a client decides that private equity may be an option, we provide appropriate introductions and the funds will explain how the selection and investment process works. In addition, J.H. Cohn also runs several industry-specific programs for clients, prospects, and funds that specialize in their particular industry,” explains Steven Pinsky, Principal and Private Equity Services Practice Director. In addition to providing unique value to our clients, the deal-flow initiative has created tremendous value to private equity funds, including: Reducing the time needed to identify a specific target acquisition; Identifying synergistic opportunities they may not have found without a professional advisor’s in-depth knowledge of the target company; Introducing PEGs to quality targets who may not have previously considered a private equity investment; Creating a smoother deal process by having the target’s CPA firm involved from the beginning. The J.H. Cohn Private Equity Deal-flow Initiative program consists of several components, several of which are listed below: Private Equity Weekly Spotlight. This communication tool allows the PE Practice to communicate to the partnership specific acquisition criteria for those private equity funds with whom we have a relationship. The communication often prompts Partners in the firm to consider whether any of their clients may be a good match for this PE firm. Industry Vertical-Focused Private Equity Events. From fun, interactive, game-show style events, like “Deal or No Deal—the Hospitality Edition” or industry roundtables on topical issues such as sourcing and setting up retail operations in China, J.H. Cohn includes strategic private equity relationships in a number of industry-focused events. J.H. Cohn Deal Cohnnection. This program allows clients of the firm to work with us to prepare a confidential profile of their company, which we share with a select group of private equity firms to determine if there is investment interest. Clients benefit from this no-risk opportunity to “put the feelers out” and PE firms value having a sneak-peak at these companies. Preemptive Private Equity Client Introductions. By raising awareness among our Partners, we actively identify clients who may be considering a merger or other growth or exit strategy and will arrange for them to confidentially meet with appropriate private equity funds if interested. J.H. Cohn has developed a proprietary list of 10 profiles that could predetermine if a company could benefit from having a private equity partner or investor. Intermediary Extension Program . Because J.H. Cohn does not act in the capacity of an intermediary, nor do we accept fees for the majority of our deal flow initiatives, we are a “natural extension” for the intermediary community. Smaller intermediaries may have a limited geographic or industry knowledge that may prevent them from fully canvassing the PE funds for ideal partners. These intermediaries often send their deals to us to see if we may have a strong relationship with a PE fund that would be interested in getting involved. J.H. Cohn Private Equity Initiative Named M&A Service of the Year Roseland, NJ - January 6, 2009 - M&A Advisor , a leading information publisher for middle-market mergers and acquisitions and finance, has named J.H. Cohn LLP—the largest independent accounting and consulting firm in the Northeast—the winner of the M&A Product/Service of the Year award.   J.H. Cohn’s Private Equity Services Practice was awarded for the Private Equity Deal-Flow Initiative program, which is designed to create a potential relationship between the private equity community and the Firm’s clients. The initiative has provided unique value to J.H. Cohn’s clients and fostered important, business-building relationships for the Firm.   “ J.H. Cohn created this initiative to provide our clients with a clearer understanding of the potential benefits of private equity. Once a client decides that private equity may be an option, we provide appropriate introductions and the funds will explain how the selection and investment process works. In addition, J.H. Cohn also runs several industry-specific programs for clients, prospects, and funds that specialize in their particular industry,” explains Steven Pinsky, principal and Private Equity Services Practice Director. “We are honored that M&A Advisor has recognized our program with this award.”   In addition to assisting clients, the deal-flow initiative has created tremendous value to private equity funds, including: Reducing the time needed to identify a specific target acquisition; Identifying synergistic opportunities they may not have found without a professional advisor’s in-depth knowledge of the target company; Introducing PEGs to quality businesses who may not have previously considered a private equity investment; Creating a smoother deal process by having the target’s CPA firm involved from the beginning. The M&A Advisor Middle-Market M&A Awards honors the deal teams and deal-makers that have closed M&A transactions and firms whose activities set the standard for the industry. Two-hundred-and-twenty finalists representing 66 firms were named finalists in 35 categories. An independent body of experts that span the M&A industry determined the ultimate recipients of the awards. In addition to its M&A Product/Service of the Year win, J.H. Cohn was a finalist for Accounting Due Diligence Firm of the Year.   About J.H. Cohn J.H. Cohn is one of the top 20 accounting and consulting firms in the United States and the largest independent accounting firm headquartered in the Northeast. The firm has earned a strong reputation for its industry specialization and ability to help clients drive profits and increase wealth by providing custom solutions. J.H. Cohn professionals are passionate about providing personalized and attentive service, the success of their clients and staff, and their role as community leaders. J.H. Cohn is a member of Nexia International, the world’s ninth-largest network of independent auditors, business advisors, and consultants. More information about J.H. Cohn can be found at www.jhcohn.com .     Natalie Kandik Marketing Specialist Marketing Tel: 973-364-7869 Fax: 973-364-6678 [email_address] www.jhcohn.com J.H. COHN LLP Accountants and Consultants since 1919 The information included herein is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing or recommending to another party any tax related matters. (The foregoing disclosure has been affixed pursuant to U.S. Treasury Regulations governing tax practice.) The information in this transmission is privileged and confidential and intended only for the recipient listed above. If you are not the intended recipient, please advise the sender immediately by reply e-mail and delete this message and any attachments without retaining a copy. If you are not the intended recipient, you are hereby notified that any disclosure, copying or distribution of this message, or the taking of any action based upon it, is strictly prohibited.  Thank you.
  • Lehman Formula
  • This sent out in 3-D
  • Also: university technology licensing offices venture development organizations
  • Market mapping is the act of identifying the key players within an industry or subsector. Goal: Identify companies which meet Fund’s investing criteria and which are likely to have an interest in outside capital (equity or debt) Process: Interview Fund investment team to determine profile of ideal investments (e.g., automotive companies experiencing cash flow difficulty). Build database of companies which meet given criteria, e.g.: Review global public financial filings for given financial parameters. Look in news stories for companies reporting high levels of layoffs. Look in obituaries for unexpected deaths of sitting CEOs. Review private equity databases for investments which have been held for over 6 years, which the existing investors likely wish to exit. Deliverable: Database of companies which meet Fund’s investing criteria, and appear to have immediate interest in outside capital. Includes contact information for CEO of each company. Estimated # person-minutes per lead: 60-120 minutes` http://generalatlantic.com/en/news/article/58 based on http://www.generalatlantic.com/en/news/article/57
  • Contextual Info about each Company Management strength Product strength Client desirability ROIC
  • Contextual Info about each Company Management strength Product strength Client desirability ROIC
  • www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html
  • 39% of completed deals had a private equity seller in KPMG private equity study. Find private equity funds motivated to sell (because fully invested, or because investment has aged over 5-7 years). Review PE fund portfolios from PE firm websites and databases (VentureOne) looking for older investments Review M&A databases (SDC) and look for companies acquired by PE firm over 5 years ago with no subsequent acquisition reported Synthesize data from investment consultants Use Freedom of Information Act to acquire data from governmental investors (experimental) Seek equity owners with the right situation to benefit from the particular tax incentive More than one senior manager with the same last name News stories about familial legal battles Search for distressed corporations with non-strategic assets
  • Methods To Identify Such Companies Identify and then reach out to successful entrepreneur and offer to back him/her on the next effort Serial entrepreneurs are well-networked in their sector and will make referrals Look for CEOs over age 65 Job openings for new CEO or new COO News announcements about a new CEO hired by a company; target the CEO’s prior employer Obituaries the tax rate on an exit for a UK equity owner, under some circumstances, will go from 10 to 18% on Apr 5, 2008
  • Layoffs/ number of resumes updated on major job boards Factory/office shut downs Financial review of public companies for those that meet certain criteria Senior executives leaving News about proxy battles Companies that are targets of activist investors A business that is highly geographically concentrated is usually one with a high, defensible market share, which simultaneously has a lot of growth opportunity outside of its immediate vicinity
  • Layoffs/ number of resumes updated on major job boards Factory/office shut downs Financial review of public companies for those that meet certain criteria Senior executives leaving News about proxy battles Companies that are targets of activist investors
  • Identify areas of increased M&A activity Frequent capital-raising in sector Speak with experts globally, e.g., in alternative energy Literature search – both business literature and academic journals Use of products by growth sectors: young people, emerging markets, etc. Companies with low cash levels Layoffs New debt issued at higher rates than before Also, discuss peer pressure of other CEOs selling (cf. Fedex/Kinkos, UPS/Mailboxes Etc.)
  • D = D iversity = heterogeneity of people in your network C = C redibility and reliability = strength of your sales proposition in eyes of people in your network = “I trust what she says about... I can trust her to….” R = R elevance of person = credibility, reliability and seniority of the person in your network S = Strength = mutual link strength and degree of orientation to the person = “I feel comfortable with him; he cares about me.”
  • “ Email Groups” file. Master file with short email lists of friends, sorted by area of interest Chinese New Year Valuable data, but… Privacy issues
  • “ Email Groups” file. Master file with short email lists of friends, sorted by area of interest Chinese New Year Valuable data, but… Privacy issues
  • Prominent French angel investor November 1999: Sent mail to Stanford Graduate School of Business alumni list that he was seeking capital for startup March 2000: Raised $8m through referral from alum
  • http://www.scoreboard-media.com/vc-blogs /
  • Interface Software, Spoke Software, Contact Network, Visible Path, Leverage Software Build new relationships Benefits: insight, access, and influence Improve close rates, deal velocity, revenue per customer Privacy Attached is a slide that shows how the relationship data is integrated into a firm’s intranet (example from a global law firm).  Contact Networks found all relationships that the firm has with Barclays.  It shows which colleagues know someone at Barclays, and which Barclays employees they know.  And all of this is discovered by analyzing email patterns and address books – no data entry or link requests involved, so the number of relationships uncovered is very large
  • Goal: Increase efficiency of processing investment opportunities Process: Gather data from individual executives’ inboxes into Fund central database. Run analytics Deliverable: Accurate database of past and current flow.. Estimated # person-minutes per updated contact: TBD
  • rate of 2.5 to 3.5 percent a month. Within a year, one-third of the information in a database can easily become outdated. http://www.information-management.com/specialreports/20030701/7053-1.html Coordinates Category (1 through 6) Spouse Children Birthday Background Education Connections Affiliations Interests Mini-resume Holiday greeting Importance of information decay Market leaders: Salesforce, angelsoft http://insidesalesprofessional.wordpress.com/2006/08/10/data-decay-is-killing-your-lead-generation-response-rates/ http://www.information-management.com/specialreports/20030701/7053-1.html http://helpit.com/folders/case_studies/crm_management_us/ Providers: ITS Profiles , Jigsaw IRIS Business Card Scanner http://www.irislink.com/ Plustek Business Card Scanner http://www.plustek.com/product/center.asp?center_id=1 Card Scanning Solutions http://www.card-reader.com/ Neat Business Card Scanner http://www.neatco.com/
  • Pete Villhard's brother (Doug Villhard) owns a company, http:// www.secondstreetmedia.com/UpickemHome.aspx , and also built the PING database which we use to track all activity. Very unusually, they have a "NFL Picks" game on the site. That's a vehicle to drive traffic to the site. We have 800 people who play that game. Have done this for 6-7 years. We know this gets referred out to other people. Total prizes of about $1,000. And we pay Doug about $600 to run the service. So cost is trivial.
  • Rules of the Road Customize standard intro Lurk before you leap Dive in, but do not splash
  • Rules of the Road Customize standard intro Lurk before you leap Dive in, but do not splash
  • Slide for VCs: http://www.flickr.com/photos/superrabbit/319538167/
  • Transcript

    • 1. Where Are the Great Startups?!Best Practices of Venture Capital Fundsin Finding World-Class CompaniesDavid TetenPartner, ff Venture Capitalffvc.comblog: teten.com@dtetenNew York, NYinfo@teten.comJuly 12, 2011 http://flickr.com/photos/krikit/2745563123/sizes/o/
    • 2. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Selected Past Audiences for This Presentation •  Association for Corporate Growth (ACG) Intergrowth •  Alliance of Merger & Acquisition Advisors •  CFA Society of Los Angeles •  Columbia Business School Alumni Club of New York •  Financial Executives Networking Group •  Golden Seeds (US angel group) •  Harvard Business School Club of London •  Harvard Business School Association of Southern California •  Kauffman Fellows program participants •  Keiretsu Forum •  Wharton Alumni Club of Northern California •  Yale Club of Singapore •  Singapore Venture Capital and Private Equity Association •  CFA Singapore •  Women’s Association of Venture & Equity •  Leading investment banks, private equity funds, venture capitalist funds, and hedge funds© 2011 David Teten. More at ffvc.com and teten.com
    • 3. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Background David Teten recently completed the first-ever research project on “Best Practices in Private Equity and Venture Capital Deal Origination”. His coauthor for some of the research is Chris Farmer, cofounder and Managing Partner, Ventures, of Ignition Search Partners, and formerly Vice President, Bessemer Venture Partners. David and Chris have published their findings in the Journal of Private Equity (December 2010); Harvard Business Review (June 2010); and Institutional Investor (October 2010). These slides provide some of the learnings and underlying data from the research study. Evalueserve, a global research firm and the acquirer of David’s former company (Circle of Experts), provided supporting research and analytics in the initial phases of this study. We also thank Yujin Chung (Andreessen Horowitz) and Neha Kumar (Wharton 2010), our research associates who provided invaluable support, and interns Corentin Roux dit Buisson, Dan Clark, Nitin Gupta, and Nikhil Iyer .© 2011 David Teten. More at ffvc.com and teten.com
    • 4. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps David Teten Biography (teten.com) •  Partner, ff Venture Capital, early-stage technology venture capital fund •  Founder and Chairman, Harvard Business School Alumni Angels of Greater New York •  Founder and Chairman, Navon Partners, startup focused on sourcing deals for private equity funds •  Managing Director, Evalueserve, through September 2008. 2,500-person finance-focused research and analytics firm. •  Founder and CEO, Circle of Experts (investment research firm), sold to Evalueserve •  Founder and CEO, Teten Executive Recruiting, sold to Accolo, #42 on 2007 Inc. 500 •  Founder and CEO, GoldNames, domain name investment bank, based in Israel •  Technology/Defense Investment Banking, Bear Stearns (#1 group at Bear investment banking by revenues) •  Lead author, The Virtual Handshake: Opening Doors and Closing Deals Online (TheVirtualHandshake.com) •  Harvard MBA 1998, Yale BA, both with honors. •  Contact: info@teten.com© 2011 David Teten. More at ffvc.com and teten.com
    • 5. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 6. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Partner, ff Venture Capital (ffvc.com) •  Early-stage technology venture capital fund with top-decile returns •  Founded 1999, with over 100 investments in over 35 companies •  Focus on early stage web-based services companies with disruptive models, including SaaS, video gaming, digital media, social, mobile and VoIP •  First investments typically $50-$250K at valuations of <$5m pre-money •  50% of fund reserved for follow-on investments •  Prominent angel investments include: Cornerstone OnDemand (IPO); Quigo Technologies (sold to AOL for reported $340m); Klout; Hashable •  Two partners: John Frankel (21 years Goldman Sachs) and David Teten (serial entrepreneur; Chair, Harvard Business School Angels of New York); one Venture Partner (Michael Yavonditte)© 2011 David Teten. More at ffvc.com and teten.com
    • 7. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Chairman, Navon Partners (navonpartners.com) We help private equity funds to identify proprietary deals which are predictably attractive long-term investments. We obtain our data from: •  major data vendors; •  licensing from niche data vendors; •  non-traditional sources, e.g., web scraping from the ‘dark web’; and •  our data-based financial extrapolation, e.g., estimating revenues based on headcount. Our rigorous, data-driven algorithmic process is modeled on the datasets and process used by quantitative hedge funds.© 2011 David Teten. More at ffvc.com and teten.com
    • 8. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps We interviewed over 150 private equity and venture capital funds globally for this study. Analysis of Private Equity and Venture Capital Funds in Study© 2011 David Teten. More at ffvc.com and teten.com David Teten, Chris Farmer, Evalueserve, Yujin Chung, Neha Kumar
    • 9. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Firms in venture centers (Boston/NY/Silicon Valley) outperform with investments outside venture centers. Performance gap is larger for late stage (20.7% vs. 15.7%) vs. early stage (15.1% vs. 11.3%)*. Leading Late-Stage Tech Investors Portfolio by Geography, 2000-1Q2010 Minimal outbound origination programs targeted Origination programs targeted outside of outside of Venture Centers Venture Centers These funds are typically top-quartile performers; almost all have raised funds equal or larger than their preceding fund in the challenging 2007-10 period. Success rate shown is defined as % of VC portfolio which leads to IPO. Results are similar when success is defined as investment either leading to IPO or acquisition.© 2011 David Teten. More at ffvc.com and teten.com & Sequoia data is only late stage/growth equity deals. *“Buy Local? The Geography of Successful and Unsuccessful VC Expansion”, Chen,Gompers,Kovner,Lerner Only IT & related sectors. Battery
    • 10. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Ironically, despite increased monitoring of local investments, firms in venture centers outperform with investments outside venture centers (19.0% vs. 17.3%). •  Over 50% of the Venture Firms in Pratt’s Guide to Private Equity & Venture Capital are located in just 3 venture centers: San Francisco/San Jose, Boston, and NYC/NJ/CT. • Over 49% of the US companies that these VC firms have invested in are in the same 3 areas. •  Firms based in venture centers have outperformed funds in other geographies by 4.4%. • This may be driven by superior investment experience, greater connections with corporations & stronger syndication networks. • Likely driven by lower entry valuations due to lower competition & higher hurdle rates for investments with higher monitoring costs. •  This performance gap between venture centers and non-venture centers is larger for late stage (20.7% vs. 15.7%) vs. early stage investments (15.1% vs. 11.3%). • This performance applies to both probability of success and expected returns. •  However, performance drops by 2.2% if a firm invests again in the same outside geography. • #1 driver of opening branch office is the percentage of investments in the region in last 5 years. • Counter-intuitively, opening an office in a region has historically lowered the expected returns in that region. Success rate shown is defined as % of VC portfolio which leads to IPO. Results are similar when success is defined as investment either leading to IPO or acquisition.© 2011 David Teten. More at ffvc.com and teten.com “Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion” by Chen, Gompers, Kovner & Lerner 6/09
    • 11. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Closing one deal requires sourcing 80-100 deals. Investment Search Process (# Companies) Angel groups First Round Blackford Highland Acquirer/ using Angelsoft Capital Capital TA Associates Capital AlliedSignal Investor (2010)[i] (2009)[ii] (2009) (2006)[iii] (2008)[iv] (1996-97)[v] Investing focus startups startups lower-middle- growth growth synergistic market companies companies businesses Profiled initially 20,850 2,500 1,394 NA NA 550 Target Selected 1,315 500 261 8,000 10,000 [vi] 190 Met 1,047 NA 20 750 1,000 NA Negotiated with NA NA 14 NA NA 28 Detailed due 577 100 20 NA NA 17 diligence Acquired/ 541 20 3 10 to 12 10-20 10 invested Deals as % 33.5% 4.0% 1.1% 0.1%-0.2% 0.1%-0.2% 5.3% targeted (2.1% of companies submissions) [i] Available at http://angelsoft.net/a/venture-valuation , as of twelve months ending March 17, 2010. [ii] Aktihanoglu , Murat. “NYC Entrepreneur Week Events Take-aways.” May 3, 2009. http://centrl.com/blog/?p=53 . [iii] Rudd, Amber. “A Kind of Magic.” Corporate Financier, October 2006. [iv] Economist, Global Heroes: A Report on Entrepreneurship, March 14, 2009., p. 9. “Targets selected” figure indicates number of business plans received. [v] Bruner, Robert F., Applied Mergers and Acquisitions. New York: John Wiley & Sons, 2004., p. 183.© 2011 David Teten. More at ffvc.com and teten.com [vi] Number of business plans received.
    • 12. Intro Org Chart Tradition Web 2.0 Signals Network Next StepsVCs have to filter 9% more deals than PE funds to close one deal. Median Pipeline Size Necessary to Close One Deal© 2011 David Teten. More at ffvc.com and teten.com David Teten, Chris Farmer, Evalueserve, Yujin Chung, Neha Kumar
    • 13. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Three investment professionals need 1 year to close 1 deal. Median Annual Pipeline Size per One Investment Professional© 2011 David Teten. More at ffvc.com and teten.com David Teten, Chris Farmer, Evalueserve, Yujin Chung, Neha Kumar
    • 14. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 15. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Over 50% of funds plan to change/improve processes for sourcing, fundraising, and portfolio management. Percent of Private Equity Funds That Plan To Change/Improve Processes In The Next 3 Years Sourcing 55% Increased competition Fundraising 53% makes firms focus on these processes now Portfolio management 52% Due diligence 45% 80% believe these processes are important and already have 40% them in place Investment committee decisions Only 25% believe this Investment exit planning 37% process is important© 2011 David Teten. More at ffvc.com and teten.com Parthenon Group
    • 16. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Specialist originators are more common in more developed markets. % of Funds With At Least One Person Tasked Specifically and Primarily with Deal Origination David Teten, Chris Farmer, Evalueserve, Yujin Chung, Neha Kumar© 2011 David Teten. More at ffvc.com and teten.com Responses for Don’t Know/Cant say is excluded from the analysis. Percentages may not add up to 100 due to rounding off.
    • 17. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps The best originators are aggressive, indefatigable, and personable. Attributes of Top Originators (descending order of importance) •  Persistence, or "hanging around the hoop" •  Personality •  Business judgment •  Adequate financial sophistication •  Seniority and appropriate title •  Internal power •  Creativity© 2011 David Teten. More at ffvc.com and teten.com http://www.flickr.com/photos/randysonofrobert/2552298739/
    • 18. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 19. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Intermediaries refer deals to funds primarily in the hopes of future revenues. Top Reasons Intermediaries Refer Deals to Funds (descending order of importance) •  Possibility of future revenue •  Integrity •  High certainty to close •  Speed of response •  “Fair” treatment of sellers •  Experience with the industry or owner type •  Friendship •  Feedback •  Maintaining a single point of contact© 2011 David Teten. More at ffvc.com and teten.com http://www.flickr.com/photos/extranoise/3382930813/
    • 20. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Companies favor a particular investor for the same reasons as an intermediary (see prior page), plus a range of other factors. Top Reasons Companies Select a Given Investor (in descending order of importance) •  Economics •  Added Value •  Brand •  No extra costs, i.e., no portfolio company fees •  Fair treatment of employees post-transaction •  Long hold periods •  Investor location http://www.biztimes.com/news/2007/8/3/choose-the-right-private-equity-firm,© 2011 David Teten. More at ffvc.com and teten.com http://www.growthbusiness.co.uk/news/fundraising-deals/27442/part_2/private-equity-finding-a-match.thtml , http://www.flickr.com/photos/billselak/461062697/
    • 21. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice The right type of specialization boosts returns. •  The rate of return of PE funds declines with diversification across financing stages… •  but increases with diversification across industries. •  Diversification across countries has no systematic effect on performance. •  In an Ernst & Young study of the largest PE deals of 2006, US investors reported that sector focus was an advantage in 2/3 of their deals, establishing credibility with management and helping to evaluate the growth potential of the target. •  In Europe, investors reported that sector focus was an advantage in 25% of deals. •  In both regions, these sector-focused deals performed above average. Lossen, Ulrich, “The Performance of Private Equity Funds: Does Diversification Matter?” Munich School of Management, Institute for Innovation Research, Technology Management and Entrepreneurship. June, 2006.© 2011 David Teten. More at ffvc.com and teten.com Ernst & Young. "How Do Private Equity Investors Create Value? A Study of 2006 Exits in the US and Western Europe". New York, NY/London. 2006.
    • 22. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice Differentiation makes origination more efficient. Selected Highly Differentiated Investing Strategies Strategy Example Co-investments with corporates Blackstone Group, Castle Harlan, Clayton Dubilier & Rice Executive-led transactions Frontenac Company, GTCR, Housatonic Partners Intellectual property Intellectual Ventures Spinning out processes from within Fortune 500 companies and setting Exigen Capital them up as independent ventures Deep focus from early to late stage in narrow vertical Andreessen Horowitz, Healthpoint Capital Minority-owned businesses AP Capital, ICV Capital Partners Women-owned businesses Hypatia Capital Family-owned businesses Heritage Partners Film financing Relativity Media Buying Western companies and outsourcing operations to China Crimson Ventures Distressed Searchlight Capital© 2011 David Teten. More at ffvc.com and teten.com
    • 23. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice The best reason for deals to come to you is reputation. However, the bad news is: of 109 journalists surveyed, zero rated private equity firms “excellent” in communication. Journalists’ Evaluation of PE Funds’ Communication Skills Recommendations: •  Build personal relationships with journalists •  Have a clear point of view and area of expertise •  Develop and publicize quotable white papers and other thought leadership pieces© 2011 David Teten. More at ffvc.com and teten.com Haynes, Bill. “Making Media Count”. PrivateEquityOnline, April 7, 2009.
    • 24. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice VCs should focus on co-investing with the best investors in your target vertical. • VCs that are better networked at the time a fund is raised subsequently enjoy significantly better fund performance, as measured by rate of successful portfolio exits over 10 years. • Network “centrality” may be a better predictor of future performance than experience or exits. • 1 standard deviation improvement in network centrality improves probability of successful follow-on round or exit by 5.8% and performance by ~2.5%.* • The benefits of a heterogeneous syndicate are well known: complementary industry expertise and network; local or geographic expertise and network; validation of investment; and future reciprocity. However, VCs demonstrate a clear preference for syndicate homogeneity: investing with firms of similar “social status”, high geographic proximity and prior co-investments.** • We recommend you market yourself as the go-to co-investor for target sectors by developing proprietary insights and a deep network of key partners and talent. • Sell value-add to entrepreneurs and key “peer” firms and actively drive syndicate creation. * “Whom You Know Matters: VC Networks & Investment Performance”, Yael Hochberg, Alexander Ljungquist & Yang Lu, Aug 2005. Network Centrality – (1) # of VC ties; (2) frequency of co-investment invites; (3) access to the best connected VC’s; (4) ability to syndicate its own deals (5) ability to make new co-investor connections. Performance data correlation – exit rates & follow-on rounds.© 2011 David Teten. More at ffvc.com and teten.com ** “Birds of a Feather or Celebrating Differences? The Formation and Impact of Venture Capital Syndication”, Qianqian Du, Mar 2009.
    • 25. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice Entrepreneurs-in-Residence are a powerful and underused VC model. •  An EIR is typically a serial entrepreneur or top-flight executive that a venture capital firm would like to fund in his or her next venture. •  According to many industry insiders, venture firms often get better returns from companies created by EIRs than they get by buying equity in existing startups. In the early years after Benchmark’s founding in the mid-1990s, approximately half the companies the firm funded were led by EIRs. Even without the firm’s breakout investment in eBay, its early funds would rank among the all-time best in the venture industry. Other firms with active EIR programs: Benchmark Capital, General Catalyst, Accel Partners, Bessemer Venture Partners, etc. •  The EIR typically joins the fund for 6-18 months and reviews business plans alongside the venture capitalists at the fund. •  The benefit of the program is that the entrepreneur gets an excellent window into the marketplace, access to the firm’s resources and network, and realtime feedback from the investment partners. •  The venture capital fund gains the sector expertise of the EIR and has a front row seat to invest in the entrepreneur’s next venture.© 2011 David Teten. More at ffvc.com and teten.com
    • 26. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice Private equity funds use expert networks to originate deals in three main ways: •  Facilitate top-down, “rainmaker” sourcing strategies. Connect to senior industry executives. •  Support bottom-up, “boil the ocean” sourcing strategies. An investment team can exhaustively call experts to identify all the companies in a target sector or geography. •  Enable thematic sourcing strategies. Identify experts and consultants to help develop investment themes, map target markets, and engage market-leading firms.© 2011 David Teten. More at ffvc.com and teten.com Based on interview with Michael Duran, Gerson Lehrman Group, and other sources
    • 27. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice Funds with cold-calling programs are consistently top-quartile performers. Key Steps for a Successful Cold Calling Program •  Focus on geographies/sectors that are undercovered by peer firms. •  Maintain clear criteria and metrics to ensure that the relationships being developed have a reasonable likelihood of yielding investments, and stick with them. •  Institute a formal CRM system, tied to a formal deal tracking program. •  Directly tie compensation to developing and maintaining the database; volume of flow; and quality of flow. •  Require regular follow-up with priority companies. •  Organize scheduled reviews with partners and sector teams. •  Maintain consistent dialogue with key prospects and sources. •  Use multiple outreach methods: phone, email, fax, overnight mail, etc., in order to get the attention of the person you’re targeting. http://www.flickr.com/photos/23439761@N03/3258313816/sizes/l/© 2011 David Teten. More at ffvc.com and teten.com
    • 28. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Warm – Lukewarm – Ice Market mapping is a powerful way to identify competitive white space. Sample Market Mapping Approach # Stage Example 1 Choose industries and geographies of initial interest Global growth equity fund with focus on North American and Japan. 2 Define your proprietary point of view. Thesis: Population in developed countries is aging rapidly. 3 Translate into investment theme for specific industries We expect growth of financial services providers with low-risk and/or geographies of interest. investing products. 4 List major players in target industries/geographies, Asset managers with expertise in annuities and fixed income and how each will be impacted by investment themes. products will likely benefit. 5 Iteratively improve market map based on feedback from Publish elements of the market map to key sector players industry through industry forums and mass media. 6 Determine which activities along the value chain offer Develop deep ties in the brokerage community that distribute the highest return (typically the proprietary ones). low risk financial products. 7 Identify areas of future growth. Fund researches bolt-on acquisitions while diligencing its primary target. 8 Assess fit with Fund’s strategy. Local geographic leader that would benefit from Fund’s global reach. 9 Regularly update the market map based on market Maintain internal wiki or database regularly updated with key feedback and lessons from investment prospects. market data and insights.© 2011 David Teten. More at ffvc.com and teten.com
    • 29. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 30. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Social media technologies are pertinent throughout the investing cycle. How Investors Are Using Social Media Investing Cycle Use of Social Media Raise capital •  Identify value-added potential investors & find a path to them •  Solicit past investors in both your prior and comparable funds Originate •  Identify and reach out to relevant people & companies investments •  Become a magnet for investment opportunities Due diligence •  Review professional and personal lives of management •  Talk with firm’s network: customers, competitors, suppliers Negotiate Deal •  Gain insight into counterparty’s negotiating style, motivations Improve •  Recruit “A” performers operations •  Accelerate sales and marketing Exit investment •  Identify and more effectively negotiate with strategic acquirers© 2011 David Teten. More at ffvc.com and teten.com
    • 31. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 32. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Effective use of social media and other research tools allows you to filter for companies who are flashing signals that they are interested in your capital.© 2011 David Teten. More at ffvc.com and teten.com http://flickr.com/photos/krikit/2745563123/sizes/o/
    • 33. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Signals from the CEO •  Serial entrepreneur seeking new challenge •  CEO becoming tired, aged, and/or acknowledging limits of his or her competence •  Death, Disease, Divorce© 2011 David Teten. More at ffvc.com and teten.com
    • 34. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 35. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Corporate Network Valuation Formula Ch = Character Co = Your Firm’s Competence R = Relevance of the contact S = Strength of your relationship I = Information N = Number of people D = Diversity N = D * ∑ (Chn*Con *Rn* Sn*In) n=1© 2011 David Teten. More at ffvc.com and teten.com David Teten and Scott Allen, The Virtual Handshake: Opening Doors and Closing Deals Online (www.TheVirtualHandshake.com)
    • 36. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Biography analysis software allows searches by common affinity and more effective subsequent outreach. Leading Providers of Biography Analysis Data •  Boardex •  Jigsaw •  Pipl •  Tracked •  Unvarnished •  ZoomInfo© 2011 David Teten. More at ffvc.com and teten.com
    • 37. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Corporate Analysis Software provides an insider view of the org chart, compensation, and customer views of a company. Leading Providers of Corporate Analysis Data •  CogMap •  Glassdoor •  TheFunded •  TheOfficialBoard •  Tracked© 2011 David Teten. More at ffvc.com and teten.com
    • 38. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Case study: A set of angel investors sourced a transaction and invested $8m via an alumni email list. •  Daniel Zumino, founder of BCG Paris and angel investor, had made a small investment in a startup •  November 1999: He sent email to Stanford GSB alumni list seeking capital for the startup •  March 2000: Raised $8m through referral from alumni, via this listserv© 2011 David Teten. More at ffvc.com and teten.com David Teten and Scott Allen, The Virtual Handshake: Opening Doors and Closing Deals Online (www.TheVirtualHandshake.com)
    • 39. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Best Practices in VC Blogging (written humorously, but still good advice) Hi, I’m a tech VC on Twitter (by Rob Go, NextView Ventures) Hi, I’m a tech VC on Twitter. I’m @xyzvc My icon is cool. It’s a painting/cartoon/wacky photo. Shows that I’m hip and approachable. But when I meet with you, I’ll still crush your dreams. I tweet about technology, but occasionally post personal stuff. Important to show I have a sensitive side and care about more than just making tons of dough. I use # tags, sometimes as a funny form of emphasis. Kind of like a wink and a smile ;) #donttakethisposttooseriously I love Twitter because I can broadcast my blog posts. Otherwise, no one would read them! I blog at xyzvc.com! I tweet blog posts with advice on fundraising, customer acquisition, and company building. Usually, someone really smart has said it before and said it better. But I haven’t been in Hacker News for a while, so I figured there is no harm reinventing the wheel. Retweeting is fun. It’s like a virtual high-five. I retweet the posts of my partners, coinvestors, and entrepreneurs I’ve backed. Oh, I also retweet posts from guys whose butts I’m currently kissing so that they will like me. I really hope @fredwilson retweets this… I’d get so many new followers! My portfolio companies are the best. I will share so much of their good news with you it will make you want to unfollow me (unless you are a co-investor, in which case you will probably RT and add a #) If a portfolio company is doing bad, no Twitter love. It’s like going to Disneyworld and trying to find Hercules or Mulan. It’s like they never existed. I also tweet about the cool places I’ve been (via Foursquare and Gowalla), things I buy (via Swipely and Blippy), and the cool places I’m going to go (via Plancast). Wow, that’s a lot of tweeting! That’s why I also tweet about how busy I’ve been and how little I’ve slept. It’s a tough life. Full disclosure, I’ve been a tech VC and I’ve done most of these things.© 2011 David Teten. More at ffvc.com and teten.com http://www.robgo.org/post/890368565/hi-im-a-tech-vc-on-twitter
    • 40. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity 36% of PE Funds are using Microsoft applications for CRM which are not designed for CRM (primarily Excel and Outlook). CRM Applications Used by Private Equity Funds© 2011 David Teten. More at ffvc.com and teten.com EquityTouch. ACG Events Survey Analysis, 2009. Available at www.touchahead.com/news.html
    • 41. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Well managed pipelines allow for use of a wide range of analytics to track dealflow. Selected Dealflow Analytics •  Activity Measures: # Phone calls made; # Phone connects with management/board members; # Meetings; # Deals brought to Monday morning meeting; # Memos with approved budget for due diligence; # Indications of Interest; # Letters of Intent sent; #Letters of Intent signed; # closed transactions •  Deal flow by source •  Pipeline analytics: Conversion ratios (from each stage of the pipeline to the next); Proprietary vs. non-proprietary deals; Response time •  Industry benchmarking measures: Percentage of deals seen completed by any firm; % of all deals consummated across the industry that fund would have considered which the fund saw© 2011 David Teten. More at ffvc.com and teten.com
    • 42. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Effective deal originators are data hounds. Tools for Assimilating Data into Your CRM System Data source Selected technology for inserting data into CRM system Business Cardscan, IRIScan, Neatco, Plustek Cards Emails Contact Capture, eGrabber, Gwabbit Cloud Plaxo© 2011 David Teten. More at ffvc.com and teten.com
    • 43. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity PE funds should use creative ways to maintain ongoing visibility and relationships, e.g., fantasy football. •  Case study: Thompson Street Capital Partners uses an online football pool to keep in front of almost 1,000 deal sourcers at a cost of $2,000/year.© 2011 David Teten. More at ffvc.com and teten.com
    • 44. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Senior executives prefer to interact online behind barriers to lower-level personnel, just as they do within traditional networks. Sample Gated Communities for Executives •  IERGOnline.com •  Executive-Forum.org •  INMobile.org •  Some LinkedIn groups© 2011 David Teten. More at ffvc.com and teten.com
    • 45. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Agenda •  Introduction •  Organizational Structure •  Traditional Deal Origination •  Web 2.0 •  Signals of a Potential Investment •  Growing Your Corporate Network •  Next Steps© 2011 David Teten. More at ffvc.com and teten.com
    • 46. Intro Org Chart Tradition Web 2.0 Signals Network Next Steps Any questions ? More reading at ffvc.com and teten.com© 2011 David Teten. More at ffvc.com and teten.com

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