Mtb Italy Tour 2012

MtB Italy Tour 2012 Introduction to EntrepreneurshipFrom Startups to Venture Financing ALBERTO ONETTI Chairman, Mind the Bridge Foundation MARCO MARINUCCI Executive Director, Mind the Bridge Foundation

AGENDAEntrepreneurship in Italy: key issues & opportunities The Startup world Business Planning The Venture Capital Market The Silicon Valley Mind the Bridge 2

The Problem we have (1) Italy has grown slowly during the past decade – slower than Germany, France or the UK (0.27%/yr. since 2001) Its competitiveness – its rising unit labor costs – has slipped, as wages rose but productivity stagnated Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti & Napolitano, New York, 2011 5,0 Real GDP growth (Percent) 4,0 3,0 2,0 1,0 0,0 ITA 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 -1,0 EEA -2,0 -3,0 -4,0 -5,0 4 -6,0 Source: OECD Economic Outlook 88 database

The Problem we have (2) Unemployment is lower than the German/French experience BUT  Participation rate (58%) is the second lowest in Europe  Worst employment problem pertains to youth (28% unemployment for people between 15-24) Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti & Napolitano, New York, 2011 1,5 Average TFP growth (Percent) 1 0,5 1980-1995 1995-2005 0 ESP ITA GBR DEU EEA FRA US -0,5 -1 Source: EU KLEMS database 5

State of Entrepreneurship in Italy Lack of large companies  In Italy SMEs are 98% of the total Mostly mature business  Primarily Services (66% of GDP)  Manufacturing is only 17% (it was 21% in 2000)  Innovative industries play a minor role (2-6%) Strong family business vocation Food Textile Wood Metals Plastic&Rubber Automotive Industrial Machinery Chemical Electronics Pharma Biotech Software ITALY: INDUSTRY CONTRIBUTION TO GDP (2009) Source: CrESIT 2011

State of Venture Finance in Italy Annual VC Investments in Billion US $ US 28,425 Silico… 11,63 2011 Europe 5,69 Italy 0,108 Lack of an established venture capital community  Of the €3.66B invested yearly (avg. 2007-2011), approximately €90M went to early-stage investments, AIFI & PricewaterhouseCoopers 2007- 2011  356 startups were able to get funded in the last five years  In 2011: 106 early stage deals despite the financial crisis (+34% compared to 2009) with € 82M invested (-16% compared to 2009), AIFI & PricewaterhouseCoopers 2011 Small size of the stock market  The stock market capitalization to GDP ratio is lower than 60%, versus 140% in the US and 170% in the UK (IMF & World Federation of Exchange) 7

Italian active VCs invested over ~ 450M€ in ~ 120 deals Active Venture Capital firms Not exhaustive selected Invested Capital - M € examples# of Firms in Portfolio Venture capital created following 2008 Source: Booz & Company Analysis 8

State of Italian R&D Quality basic research  74k scientific publications in the period 1996-2010 ranking 8th in the global classification (SCImago Journal & Counrty Rank, 2010)  Italy is in the top 10 countries (4th position) for number of publications (2001-2011) in comparison to R&D expenditure in 2011 (Italian International Growth agenda, Booz&Co analysis)  Biotech: 660 clinical trials in progress during 2010, 15.7% of the overall number in Europe (Osservatorio Nazionale Sperimentazione Clinica 2011) Issues in turning research into business  Lack of efficient technology transfer offices  Universities do not offer incentives for lecturers to spin-off business initiatives  Scarcity of skilled executives with strong entrepreneurial skills  Italian scientists do not think business 9

Italy: Key Issues A few startups often lacking high-quality business plans (deal “trickle”)  Legal barriers to entry and exit (Italy is not a “corporate haven”)  Reduce labor market rigidities  Obstacles in bridging research into business  Lack of managerial skills High mortality (“crisi del primo miglio”) and “Dwarfism”  Change the mindset  Lack of seed funds Exit on the domestic market  High Tech “Leviathans” are not here  Small size of the stock market and lack of large corporations doesn’t help  Language barriers 10

Ingredients for a Start-up 12

What is an Entrepreneur 13

Average Entrepreneur’s Profile AGE 41 year old 68.8% between 35-43 SEX 79.7% men 20.3% women STUDIES 64% University student MARITAL STATUS 60% marriedFAMILY BUSINESS 60.3%COMPANY ORIGIN 76% Creation 20% Inheritance 4% Purchase FINANCE Own/Family/VC EMPLOYMENT IN 5 5 YEARS 14

MtB Entrepreneur’s Profile  He/She is 32  87% is male, only 13% is female  49% has a scientific/technological background, while 51% has a business/humanistic education  25% holds a Ph.D. or MBA and the 20% got it abroad  Only 10% does not hold a university degree  21% has prior entrepreneurial experience Source: CrESIT/Mind the Bridge 2011 15

What makes a successful entrepreneur?Education matters a lot 2.0 Startups are founded by highly educated peopleExperience matters as well Being a serial entrepreneur is a job The right startup is never the first one you foundWorking/Studying abroad does openyour mind It means more network, opportunities, ideas, experienceA successful startup is a team effort One-man bands do not go too far 16

Manager vs Entrepreneur• What resources do I control? • Where is the opportunity?• What structure determines our • How do I capitalize on it? organization’s relationship to its market? • What resources do I need?• How can I minimize the • How can I gain control impact of others on my ability over them? to perform? • What structure is best?• What opportunity is appropriate?The typical Theadministrator entrepreneurasks . . . asks . . . 17

Scientists vs Entrepreneurs 18

Business Idea THE BIG IDEA!!! … THAT MATTERS A LOT, BUT IT’S ALL ABOUT EXECUTION … 20

The question every entrepreneur must answerAre my Goals Do I have the Can I executewell defined right strategy the strategy• personal • clear definition • resources aspirations • profitability • organizational• business and growth infrastructure sustainability/ potential • the founder’s size • durability role• risk profile (sustainability) • rate of growth 21

The Business Plan“Business plans and 5 years financialprojections are a waste of time” Dave McClure Intel 1968 “They came to me with no business plan” 22

The Lean Startup 23

The Business PlanTHE OPPORTUNITY THE MARKET The problem we solve (description  The market you are addressing of your product highlighting the  Market size benefits to the users/customers)  Potential growth The competitive advantage (why your product is better)  Competition Compelling reason to buy BUSINESS PLANTHE BUSINESS MODEL  How do you make money (Revenue Model)?  How do you structure activities THE TEAM (Cost Structure)  Financials  The team  What are you looking for (capital you  Your relevant experience in are raising- use of proceeds) the domain youre addressing 24

Why a Business Plan 25

Good and Bad Business Plans • Concise • Management, management, management • Realist, logical, convincing, clearGood • Shows clearly that the opportunity exists in the market • Description of essential resources • Risk analysis • Clear funding needs and return on capital employed • When funding is required, specify the terms of agreement (deal) • Infatuation with the idea • Insufficient research • Lack of funding • No target group • Over optimistic sales forecasts not based on market analysis Bad • Too long • Badly written: does not get ideas across • Illogical • Scant explanation of opportunity • Superficial analysis of competitors • No executive summary 26

Talking $$$ 27

Financials: Key DataBookings BillingsRevenue Cash-InCash on Burn Hand (net/gross) 28

Financials: Statement of Operations P&L 2011 2012 2012 2013 2014 established anticipatory forecast forecast forecastRevenue (000) # of maincustomers users Avr rev. per cust.Gross Margin Operating Expenses Operating Margin Ebit (000) Headcount R&D Mktg & Sales Production G&ATotal Expenses Source: Mind the Bridge 2012

How to present the FinancialsSource: Alberto Onetti, Financials: Forecasting&Reporting 30

The Funding Decision Bootstrapping Equity Financing Family/friends, Founders’ capital/Early sources savings Angels, Early stage VC (Series A) VC (Series B+), Venture Debt/Loans, Corporate VC, ARs, StrategicLater sources Partners, Retained Private placement, Investment banking, earnings Public markets 32

Investment Strategy Medium Risk High Risk Medium Risk Low Risk IPO M&A Valuation M&A Investment Focus Cumulative InvestmentIDEA DEVELOPMENT BETA CUSTOMERS EXPANSION MARKET SHARE 12-24 months 3 months 3-6 months 12-18 months 12-24 months Management Focus Vision/ Product Focus Customer / Market Share Focus 33

The Angel Investor Definition • High net worth individual ($1 million to invest) who provides financing, advice, and networking to early stage companies. Key investment Criteria • Geography (close to home) • High growth industry • Growth Potential of the venture • Personal attributes of the entrepreneur and team • Track record of entrepreneur and team 34

The Venture Capitalist DEFINITION • VC Firms are financial intermediaries that provide the following to privately held enterprises: • Equity (often coupled with debt) financing • Risk sharing • Managerial expense • Contacts • Reputation • In exchange, VC firms obtain equity TYPES OF VCs • Private Fund VC • Legal Structures: Partnership, Limited Liability Corporation, Corporation • Stakeholders in a Partnership: General Partners (GP), Special Limited Partners (SLP), Limited Partners, Advisory Board • Corporate VC • Consider impact on earning of parent • How does it further the parent’s objective? 35

VC: General Investment Process Limited PartnersDistributions Fundraising Commitments VC Firm (General Partners) Fund Fund Fund Proceeds Investment Disbursements Startup Companies Exit IPO/M&A 36

The Valuation is a two side process Size of market opportunity how big is the market segment, what market share can you gain? revenue / price model Comparables multiple of Revenue (trailing/forward) or EBITDA Financial Projections Revenue, EBITDA, DCF Ultimately Bid vs. Ask negotiation 37

The Valuation Process: Pre- e Post-Money ValuationHow much you need How much equity you(Cap Incr) want to give up ( Y%)e.g. € 1,0M e.g. 25% Post Money Valuation (V) = Cap Incr / Y = 1/0,25 = € 4,0M Pre Money Valuation = V - Cap Incr = € 4,0M - 1,0M= € 3,0M 38

VC Financing Process: Getting through the Funnel 1,000 Leads 150 Meetings Actively Pursued 70 $Less than 1% of all $ 5 – 10leads get funded $ Financed 39

VC Average Investment Portfolio DEFAULTS 60% BREAKEVEN 12% “FIRE SALES” 10% ZOMBIES 8% IPO/M&A 6% GOOD IPO/M&A 4% WILD ONES (IPO) 0% TOTAL 100% Source: ATV 40

What does an investor do with a BP? Looks to see who sent it 15 sec Analyzes key aspects sector location investment required 60 sec Reads the plan 15 min Decides whether or not to request a formal presentation 10min Total: 26 min 15 sec 41

VC Average Investment PortfolioRemember: VCs see tons of pitch every day  be short and immediate, use body language and show passion They don’t know your product  use screenshots, videos, prototypes They are positively impressed by big numbers and they look for big market opportunity  be ambitious since the beginning but have realistic objectives. They are not always expert as you are about the topic  use simple words, get straight to the point Smile  it’s ok to have fun when you pitch 42

Agreement Variables and Control MechanismsAgreement Control• Amount and timing of investment Mechanisms• Form of investment • Convertible• Terms of investment Preferred securities• Rights • Syndication of • Puts and call investment • Registration • Staging of capital • Preemptive and first infusion refusal• Vesting/buy-back provisions• Board representation 43

Why Venture Capital? 44

The History of the Valley 46

The (REAL) History of the Valley 47

The (REAL) History of the Valley INTERNET ? Today: 25 of Fortune 100 PERSONAL Adobe Systems COMPUTERS AMD Agilent Technologies Apple Inc.WAVES OF INNOVATION Applied Materials Business Objects Cisco Systems INTEGRATED ◊ Yahoo, ebay, eBay Electronic Arts CIRCUITS Google (90s) Google Hewlett-Packard Intel ◊ 3Com, Adobe, Intuit Cisco LSI Logic Maxtor DEFENSE ◊ Apple (80) National Semiconductor Network Appliance Nvidia Oracle Corporation ◊ Kleiner Perkins SanDisk (72) Seagate Technology Solectron ◊ Intel Symantec (68) Sun Microsystems Yahoo! ◊ HP (47) … ◊ ◊ NASA Lockheed 1930 1940 1950 1960 1970 1980 1990 2000 48

UNIVERSITIES highly connected with The Main Pillars biz world ENTREPRENEURS The garage culture FINANCIAL MARKET M&A, IPO dream KEY QUESTIONS◊Is that replicable / portable?◊Is it sustainable long-term?◊What is the impact of the changing 49 international outlook?

Soft Factors KEY TO SUCCESS ◊The importance of Dynamism, speed: continuous evolving world ◊ Approach to Risk ◊ Value of Failure (not just a downside but a must-have) ◊ Importance of the Hub: a world of opportunities ◊Think Big 50

Raising money today (@#$!) in Silicon Valley DON’T TALK TO ME IF YOU… are you not local how many exits again? don’t show me the buyer (don’t IPO me…) haven’t jumped yet 51

Investments B US$ (1998-2011) US Silicon Valley 99,2 51,3 38,1 31,9 30,8 30,5 28,4 26,6 23,3 19,8 20,8 22,4 22,9 19,7 16,7 18,6 11,8 9,6 11,3 11,2 9,2 11,6 5,4 6,9 6,4 7,8 8,0 8,1 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Deals (1998-2011) US Silicon Valley 8.032 5.590 4.582 3.827 4.124 4.1113.728 3.526 3.673 3.183 3.004 3.178 3.262 3.065 2.176 1.698 1.048 1.115 997 1.222 1.283 1.281 1.057 1.158 814 878 955 968 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: MoneyTree Report 2011, Data: Thomson Reuters 52

Why Now IT’S THE BEST OPPORTUNITY talent abounds from scarcity comes clarity innovation comes from hunger startup cost ~0 53

5 Lessons from Silicon Valley1. the team is all (almost)2. healthy disregard for the impossible3. big problems are better than small ones4. users first5. don’t pay attention to the VC bandwagon 54

Mind the Bridge Foundation Mission: to promote a new Italian entrepreneurial ecosystem that is: ETHICAL, HIGHLY PROFESSIONAL, INTERNATIONALLY FOCUSED, EXCELLENCE DRIVEN Model:CONNECTING TALENT funded by foundations/companies/private sector/donors not government partnering with the most relevant actors INDEPENDENT  bridging opportunities of the Silicon Valley with Italian talent  associating mentors and role models  professionalizing the business planning skills  using and building the network  “give back” to build a bigger pie 56

Building the Bridge: the Pillars Discovering and Nurturing the Italian Talents MtB Italy Tour 2012 Selecting the best of breed Call for Funding Providing training & education to the new generation of entrepreneurs MtB Startup School, MtB Bootcamp and MtB Coaching Showcasing the most promising startups and opening an international debate MtB Venture Camp @ Corriere della Sera Hosting & Mentoring the most promising startups in the Silicon Valley MtB Gym Pitching US investors / partners MtB Gran Finale events 57

Building the Bridge: the Timeline MtB Startup School Every1-2 months MtB US MtB GYM Roadshows Feb/March March/April MtB Venture Camp 2013 2013 November 2012 MtB Call for Funding 2012 July 31st 2012 MtB GYMMtB Italy Tour 2012 Every QuarterQ1 & Q2 - MtB Affiliates - Online Signups 58

MtB Italy Tour 2012  Education The MtB Startup Business School gives you the “nuts and bolts” regarding entrepreneurship, business planning, venture capital market and Silicon Valley eco-system Honest FeedbackThanks to the Gym session the startups selected have theopportunity to present their business idea in front of a panel ofinvestors and entrepreneurs Fine tuning the business ideaEverybody can largely benefit from the discussion of all thebusiness ideas as well as the education program in themorning 59

NEW! Early Call 2012Deadline was April 15th but.. Since you submitted your business plan for the Italy Tour in Trento you can be eligible for the Early Call too! What does it mean? You can win a seat at our Startup School for one of our Summer Edition and you will be considered for the Call for Funding 2012! Again.. What does it mean? 60

Call for Funding 2012WHO: High knowledge based companies alreadyestablished or planning to incorporate before the endof the yearWHAT: Executive Summary (online*) & BusinessPlan/Pitch PresentationWHEN: Deadline July 31st , 2012HOW: Competition Rules** Check it out at www.mindthebridge.org 61

2012 Selected Startups 62

2012 WinnerItalian Innovation Day Elena Favilli and Francesca Cavallo Berkeley February 23rd

Venture Camp 2012Mind the Bridge VentureCamp is a 2-day event heldeach year in Milan at Corrieredella Sera (the leading Italiannewspaper) to promote ahealthier Italianentrepreneurial ecosystem.Selected entrepreneurspresent their business ideas toa large audience, includingpotential investors and November 2012partners.Selected startups will be invited to participate in the MtB Gym, atutoring program between Italy and the Silicon Valley. 64

Opportunities for good ideas Objectives MEET MtB Call for Funding Fostering a sustainable Italian 2012 finalists showing their ecosystem for entrepreneurship business pitches Boosting ideas with high potential Providing entrepreneurs with direct exposure to venture FIND successful capital investors both from links between Italy and Silicon Valley Italy and Silicon ValleyNETWORK with entrepreneurs, potential LEARN from examples of Italianinvestors, partners and mentors entrepreneurial success NETWORK with entrepreneurs, potential investors, partners and mentors

MtB GYM“Let’s build a mentorship based acceleration program” Targets Early stage startups interested in a getting plugged into Silicon Valley Italian “origin” Min 3 months, average 6 months. Starting at beginning of each quarter possibility to stay longer (as an affiliate startup) San Francisco @One Market We share the space with some of Plaza the hottest startups (50+) in Silicon Valley (Socialmedia.com, WordPress, Tweetme, etc.)

The Gym’s GoalsAccelerate the startupchances of success• Hosting: office space @One Market Plaza, Steuart Tower in San Francisco• Mentoring: assign a dedicated mentor per startup• Coaching: provide regular classes (training modules)Build critical mass of startupsA constant flow of startups hosted(10-15) to maximizethe “educational impact”Become a social hub for Italian entrepreneurship inSilicon ValleyEvents, Mind-the-Beer, etc (social Gym)AccessAffiliates ChannelIndividual Subscriptions 67

Building Success Stories April 2012 March 2011 Enters 500Startups (+$65K) Round of $500K with Angles (Piol, Magnocavallo) Feb 2012 $1.2M round with IAG, Dec 2011 Innogest, Xcapital Wins LeWeb Feb 2012 Wins Seedcamp Berlin, raises March 2011 $1.350M (Seedcamp, industrial Wins Plug&Play Intl startup partner) EXPO SV, raises $700K (Sep 2011) September 2011 Second round of $1.1M funding (IAG, ZernikeMeta Ventures) Feb 2012 April 2011 - EXIT $1M+ round with Filas Lazio Merges with Avrio RMS Group (US) and Angels InvestorsSince Gym inception (Aug 2010): winners 18 startups incubated, 8 funded ($5M+), 2 exits 68

MtB Startup Summer School Be a Silicon Valley Startups for 3 weeks!SESSIONSFive sessions are scheduled in thenext months Who can participate?1. May 7th – May 25th Students, Graduate students2. June 4th – June 22nd Engineers, Scientist3. July 9th – July 27th4. August 6th – August 24th Wannabe Entrepreneurs5. September 2nd – September 21st APPLY NOW! WHERE? One Market Plaza, Steuart Tower, San Francisco HOW TO APPLY? Check it out here! www.school.mindthebridge.org 69

MtB Startup Summer SchoolTheoretic Learning: Introduction to the Silicon Valley Ecosystem Investment Outlook and Success Drivers Value Proposition workshops Presentation Skills mentoring Business Development Marketing & PR weekly presentation Corporate Financial Reporting Corporate Operation and Legal Aspects Intellectual Property Rights + Networking Events Visa Options The Exit Strategy 70

THANK YOU FOR YOUR ATTENTION Questions & AnswersSOCIAL MEDIA: Facebook: WEBSITE Mind the Bridge - Connecting Talent WWW.MINDTHEBRIDGE.ORG Twitter: MindTheBridge WWW.SCHOOL.MINDTHEBRIDGE.ORG Google+: Mind the Bridge Foundation WWW.GYMNASIUM.MINDTHEBRIDGE.ORG http://mindthebridge.blogspot.com http://www.youtube.com/user/mindthebridgeTV http://siliconvalley.corriere.it/ CONTACTS http://www.linkedin.com/groups?gid=2142980 information@mindthebridge.org

Mtb Italy Tour 2012

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