Venture capital funds as an alternative financing source for early stage companies

Agenda
Development phases of a company
Venture capital characteristics
Investment process
Investment criteria
Value enhancement
Exit strategies
Successful investor pitch

My bio
Investment experience
Partner and co-founder of a regional € 38 million private equity fund
Invested in innovative early stage companies ( www.gohome.hr , www.solvera-lynx.com , www.oceanorchids.si )
Operational experience
Co-founder and managing director of a boat building start-up www.seascape18.com
Founder of a nano publishing start-up www.serbiadaily.rs
Currently managing director of an M&A advisory firm

Company financing sources

Venture capital
Is provided by funds looking to invest in fast growing early stage companies
Investors in venture funds are primarily institutions (corporations, banks, insurance companies...) and high net worth individuals
VC funds invest in companies via a capital increase:
Providing fresh equity base for companies
Investment does not burden the company’s cash flows
VC funds are portfolio investors and are an alternative to sources of financing such as commercial banks

Equity vs Debt financing Bank loan Equity Risk sharing no yes Founder’s “sacrifice” cash flow ownership Ownership unchanged VC fund co-owner Investor protection standard no / deal structure Value added no yes

Target industries of regional funds IT / SW development Telecommunications Internet / e-commerce Biotech Alternative energy Services Media VC funds’ investments

From presentation to investment VC funds invest in ~2% screened companies Investment 100 50 Short review Financial analysis Business model Letter of intent Consultants Tech due diligence Investment memo Investment committee Management team First meeting Investment process usually lasts from 4 to 9 months

What VC funds look for
Founders
Willingness to work with a partner
Aligned interests
Growth potential
Company operating in an industry with a high growth potential
Competitive advantage of product or service
Consolidation play
Exit strategy
Identifiable path to exit
Joint sale after 4-6 years

Value creation Pre-investment value of the company Strategy and management, revenue growth, operational effective Capital increase New company value
Fresh equity base
New markets
Development of new products
Organic growth of the company
Taking a leading position in referential markets
Preparations for exit – trade sale
Well structured sales process
Value maximization for all stakeholders
COMPANY VALUE COMPANY VALUE CREATED VALUE VALUE Preparation for exit PRILOŽNOSTI ZA USTVARJANJE VREDNOSTI

Exit strategies Stock market listing Common strategy in CEE, in most cases the most profitable one Not very common, few SME platforms available The least favorable option for a VC fund Trade sale MBO or secondary

Pitching to investor (1)
Team
Short
Relevant accomplishements of key founders
Company overview
Value proposition
Target markets
Current status
Problem / opportunity
What problem are you solving?
Show that you can understand the market segment you are tareting

Solution
What specifically are you offering?
To whom are you offering?
Do you change the way certain business processes get executed?
Benefits / Value
State the benefits you provide
Competitive advantage
Summarize key reasons why customers prefer your solution to other solutions
Why are you better than competition?

Sales strategy
A pipeline of customers and strategic partners that have already expressed some interest in your solution
Business model
How will you be making money?
Financial projections and requirements
Show metrics that drive revenues, expenses and growth
Summary
Your value proposition in short

Further inquiries
Jan Kobler
Levana capital management
Dositejeva 22, 11000 Belgrade
Serbia
[email_address]
+ 381 61 318 55 90
+ 386 41 509 278

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Venture capital funds as an alternative financing source for early stage companies

by ITDogadjaji.com on Jun 10, 2010

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Venture capital funds as an alternative financing source for early stage companies — Presentation Transcript