10 non textbook lessons for European Entrepreneurs

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What I have learned from working with entrepreneurs (and being one), with VCs and angels in Europe, why we are different to our US counterparts and why this *may* matter.

What I have learned from working with entrepreneurs (and being one), with VCs and angels in Europe, why we are different to our US counterparts and why this *may* matter.

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  • 1. Fundraising in Europe 10 non-textbook lessons for entrepreneurs Maria Dramalioti-Taylor Managing Partner x.Million Capital Ventures SA 07.11.2012x.Million Capital Ventures 1
  • 2. Agenda• Venture/Angel Capital: – How to decide if you need it – How to navigate Angels & VCs• On raising Capital in UK/EU UK Entrepreneur: “Why bother? I am off to the US” UK Investor: ”Go, but not before you see this…” 2
  • 3. #1 - Sell shares only when you need SPEEDENTREPRENEUR HAS… …AND NEEDS… …money to move 1 *FASTER* than OWN Original THEREFORE FACES… capital allows idea …intensifying competition2 …SO SELLS shares to Best-in-market to pay for.. founding team Hiring3 Faster product development Large potential Infrastructure market Commercialisation Geographical expansion x.Million Capital Ventures 3
  • 4. #2- Know your place in the FUNDING SPECTRUMNET CASHPOSITION Grants Venture Capital Venture Capital Bootstrapping Angel Capital Series A Series B,C,D Family (€2m-€20m) (€5m-€20m) Venture Debt + - Closed Public SCALE STAGE ALPHA BETA 1st Revenue x.Million Capital Ventures 4
  • 5. DO IT LIKE A JACANA 5
  • 6. #3 – Decode the Business Angels • Angels invests own moneyAngels are • Small amounts, early, at low valuationlike women: – €10k-€250k attemperamental valuation €0.5-€2m& (mostly) • Exit: – sell at €5-10mirreplaceable valuation & make 1.5- 3x – bring VCs, get diluted (may) make 5-10x • AIM: 2x capital (but mostly get capital back) 6
  • 7. #4 – Decode the Venture Capital business • VCs raise a fund every 2-4 yearsVCs run a – Invest other people’s moneybusiness. • Invest the funds over 5 yearsThey make it • Exit (sell) via M&A or IPO • They take:sound like – 2.5% pa management fee on funds managedBlack Magic. – Carry = 20% x [Total Return at Exit] – [Total AmountIT IS NOT. Invested] • AIM: ONE 10x home run 7
  • 8. #5 – γνῶθι…τω επινδυτήAngels maynot letyou fail,VCs maygive you abigsuccessSOURCE: www. http://www.instigatorblog.comx.Million Capital Ventures 8
  • 9. #6 - Series “A” Crunch: MIND THE GAP +NET CASH POSITION Closed Public SCALE - ALPHA BETA STAGE 1st Revenue DISCONNECT ANGEL /VC VC ANGEL CAPITAL € 500k € 2m x.Million Capital Ventures 9
  • 10. #6 - Series “A” Crunch in NUMBERS Germany & UK are more affected by the VC/AC disconnect ICT Deal volume per deal size bracket 16,000 900 US , 14,339 800 Deal Volumje ( non US) 14,000 Deal Volume (US) 12,000 700 UK 600 10,000 500 8,000 US , 5,585 400 6,000 US , 4,705 300 4,000 Germany 200 2,000 100 - Russia - < $ 0.5M $0.5M - $2M >$2MSource: Data from ThomsonOne, Period: 10 yearsx.Million Capital Ventures 10
  • 11. NOTE: The blurring of AC/VC in the US is comingto Europe (maybe) www.dramalioti-taylor.org x.Million Capital Ventures 11
  • 12. #7 – A new taxonomy of investors #Venture Accelerators Astia (for female geeks) Aim for the one that suits Seedcamp your needs best Interesting blog: Springboard http://disruptivegrowth.wo Accelerator Academy rdpress.com/2010/10/14/do- 500 stratups accelerators-help-raise- Y-Combinator funds/ …. # Super Angels AngelLab AngelList # The NEW lean VC They treat every entrepreneur as an individual x.Million, EC1 CAPITAL et al.x.Million Capital Ventures 12
  • 13. #8- Connect the fundraising dots “what they offer” Fight the vs. information “what you need” asymmetry – Initial capital per idea Sources – Sector focus: do they www.thefunded.com understand it? www.fredestin.com – Risk tolerance: can they venturehacks.com deal with uncertainty? earlystageadventures.com – Compatibility: will their www.adventurista.com pride suffer if you fail? – Terms (& strings attached)x.Million Capital Ventures 13
  • 14. Agenda• Venture/Angel Capital: – How to decide if you need it – How to navigate the VC scene• On raising Capital in UK/EU… UK Entrepreneur: “Why bother? I am off to the US” UK Investor: ”Go, but not before you see this…” 14
  • 15. #9 - The US VC is prone to “bubbles”, when they burst startups become orphanedUS VC is big &… … some say already in a “bubble”Investments percapital in US is5.8x higher than EU US EU 0.15% 0.026% 5.8x GDP GDP 15
  • 16. #9 – US VCs face an IPO crunch CBOE @ 06.11.12: IF Index >30 THEN IPOs drop dramatically 16
  • 17. #9 – Startups in the US need 2x avg. capital to build £100m business EU = 1/2 x USA Source: Early Bird Ventures, 2012 17
  • 18. #9 – US tech acquisition of EU companies is a well travelled road to exit #US tech companies hold record offshore cash 100% 80% 60% 40% 20% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EU acquisitions by US companies non EU acqusitions by US companies 18Source: Zephyr M&A, 2012
  • 19. Go. See. Come back.x.Million Capital Ventures 19
  • 20. # 10 - EU Growth drivers to ride on The $172bn eCommerce market in Europe will grow 1.7x between 2010-15 eCommerce ($bn) EU5: 1.7x in 5 Yrs $172 bn < 10% of EU-5 retail EU-5 EU-5 $172 $292 2010 2015x.Million Capital Ventures 20
  • 21. # 10 - EU Growth drivers to ride on EU-5 Mobile Ad spending will grow 10x between 2011-2012 (2x as fast as in the US) Mobile Ad Spending (mn) $ 1,2 9 9 EU5 growth: 10x in 4 Yrs $ 12 2 2011 2015x.Million Capital Ventures 21
  • 22. # 10 - EU Growth drivers to ride on Internet of Things: The ratio of Devices /Humans is expected to grow 3x by 2020 2011: 2020: 8.99bn connected devices 1.8 connected devices 24bn connected devices per person 6.6 connected devices per person 0.1 0.62 1.73 1 0.88 6.52 10.71 11.86 Fixed ( excl POTS) Mobile Short Range Other ( MAN, Satellite) x.Million Capital Ventures 22
  • 23. Wireless connectivity flattened our world 85% of worlds population covered by wireless signals vs 80% of world population connected to the electrical gridSource: Mary Meeker, KPCB, 2012 23
  • 24. Your turn to talkx.Million Capital Ventures 24
  • 25. European consumers are shifting online… United States Internet Users 90M 150M East & West Europe 25
  • 26. European consumers are going mobile fast … East & West EuropeMobile Subscriptions United States 2004, Mobile subscriptions EU > US 26
  • 27. …and are more social than most 2x 27