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Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
Entrepreneurship Chap 13
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Entrepreneurship Chap 13

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  • Build slide with base and then text as base diagram “fades”
  • Differences -Why they do VC -How they fund themselves -
  • 86-94 less volatility in VC 95-00 comes closer and closer to Nasdaq pattern Why would pension mgr allocate to illiquid VC
  • Transcript

    • 1. s Launching a High Technology Venture Patterns of Entrepreneurship Chapter 13
    • 2.         Screen Technologies for New Ideas Prepare the Strategy, Product Positioning and Alliance Plan Determine Capital and Resources Talent and Management team Implementation Framework for Launching a Technology
    • 3. Screen Technologies Identify systems and technology Investigate environment for technological and   market conditions  Plan the technology project Perform feasibility analysis Execute  market forecasts and benchmarking  Framework for Launching a Technology
    • 4. Technology Trends • Internet is changing the model of computing • Software architecture of the internet will become the software  architecture for the enterprise • Computing infrastructure (datacenter) will be the next surprise;  fueled by “ASP Services”, outsourced “compute tone”, and  internet “geoscale” • The “real-time enterprise” will drive carrier demand at  increasing rates of growth & create Oracle/SAP scale  companies • Operations systems to reduce operating cost & total cost of  ownership will be a major issue/opportunity • Evernet – everyplace, every time, every device  thru “mobile  IP” (but not a lot of money for new ventures)
    • 5. The New IP Infrastructure Network Issues & Trends  • Everything over IP • Two layer network • Value added services • Internet based SW architecture • Skills shortage • Mission critical technology • Rapid, unpredictable growth • Legacy encapsulation
    • 6. Prepare Strategy and Positioning Prepare Pilot testing of new technology product  – Beta site testing in a few selected locations Develop a marketing plan to roll out the product – Consider how the product will be positioned and determine pricing plan Use alliances for cost sharing and efficiency – Be proactive in locating companies to network  – Leverage resources.
    • 7. Determine Sources of Financial Needs Leverage Intellectual Properties Develop Exit strategy Determine Capital and Resource Requirements
    • 8. Players In Private Equity Private Equity/VC Firms  Kleiner Perkins  Oak Investment Partners  Advent International Buy-Out Firms  KKR  Hicks Muse  Forstmann Little Captive Corporate Firms  GE Capital  Intel  Nestle Venture Capital
    • 9. Capital Risk (ß) Valuation Idea is Feasible Technology Works A Customer Buys Seed Funding R&D Capital Go-to-Market Captial Expansion Captial P(success) = 30% Req’d IRR = 100% P(success) = 40% Req’d IRR = 70% P(success) = 50% Req’d IRR = 50% P(success) = 80% Req’d IRR = 30% Funding Milestones – The Right Way
    • 10. The VC “LANDSCAPE” in 2000 # of VC Firms in Existence # of Professionals # of First Time VC Funds Raised # of VC Funds Raised This Year VC Capital Raised This Year ($B) Avg VC Fund Size Raised This Year ($M) Source: NVCA Yearbook 2001; Venture Economics 1980 87 1035 24 57 2.08 36.5 1990 375 3794 14 82 3.20 39.0 2000 693 8368 164 497 105.05 211.4
    • 11. The Committed Capital Bubble 0 5 10 15 20 25 30 35 40 1995 1996 1997 1998 1999 2000 2001 0 1 2 3 4 5 6Uninvested Venture Capital Years of Uninvested Capital Years of Uninvested Capital at 1995 Investment Pace Source: VentureOne Years AccumulatedCapital Over-commitments($B)
    • 12. The Illiquid Bulge From 1995-2000: 14,463 978 1,529 1,180 10,776 Companies funded Went public Were acquired Went out of business Remaining Source: Venture Economics; Venture Source - - -
    • 13. A Generic Late 90’s Model Round Type Date Amount Raised (MM) Pre-Money Valuation (MM) IRR Multiple 1 Seed Jan-97 $ 5 $ 35 79% 18.37 2 1st Jan-98 $ 10 $ 100 65% 7.35 3 2nd Jan-99 $ 25 $ 200 59% 4.04 4 3rd Jan-00 $ 60 $ 600 52% 1.52 5 IPO Jan-01 $ 1000 $ 100 Million
    • 14. A Generic Early 90’s Model Round Type Date Amount Raised (MM) Pre-Money Valuation (MM) IRR Multiple 1 Seed Jan-90 $ 0.50 $ 2 101% 32.53 2 1st Jan-91 $ 3.00 $ 10 70% 8.13 3 2nd Jan-92 $ 8.00 $ 32 50% 3.30 4 3rd Jan-94 $ 13.50 $ 100 32% 1.32 5 IPO Jan-95 $ 150 $ 25 Million
    • 15. Why It’s Great To Be An Entrepreneur - TODAYUS Venture Capital Partnership Returns Versus Public Market Returns Funds Formed 1969-1999 (quarterly returns) -30 -20 -10 0 10 20 30 40 50 60 Sep-86Jun-87M ar-88Dec-88Sep-89Jun-90M ar-91Dec-91Sep-92Jun-93M ar-94Dec-94Sep-95Jun-96M ar-97Dec-97Sep-98Jun-99M ar-00 Quarter QuarterlyReturn VC Partnerships Nasdaq Source: Venture Economics/NVCA
    • 16. The HALF-EMPTY view • Technology led slowdown • Consumer Reaction pile-on • Sept 11 • The WAR • 2002 is history! • Financings Unavailable • Stay afloat, tread water, hunker down
    • 17. The HALF-FULL view • Less competition • Time to develop technology • Focus: sustainable advantage, value-add • Better critique, Better ventures, Higher Bar • Longer Term View/Horizon • Lower Funding => Lower Risk
    • 18.  Market Exists today, high growth, addressable  Management Industry experience, operating track record, vision and guts, trust/ethics  Business Case Convincing value proposition, product vs. service, strategy (chasm!), profitability “in sight”  Technology Defensible, scalable, open, “breeder vs. broker”  Liquidity Cash management & fund raising  Clear Exit Based on market share not “raw” technology value  Self Discipline Don’t get creative; expectation pact and process Venture Investment Criteria
    • 19. Investment Process First Meeting First Meeting Initial Information Pack Sent Initial Information Pack Sent Confidentiality Agreement Confidentiality Agreement 2nd Info Pack/ More Meetings 2nd Info Pack/ More Meetings Indication Of Interest Indication Of Interest Initial Due Diligence Initial Due Diligence Early Read Early Read Proposed Termsheet Proposed Termsheet Full Due Diligence Full Due Diligence ClosingClosing
    • 20. Carry out Recruitment and Selection Build the Best Team Consider Outsourcing Attract Talent and Build the Management team
    • 21. Technology - Transfer Partnerships – A computer hardware company and software company can combine to benefit each other – Setting up joint licensing arrangements Equity Investment Partnerships Global Partnerships – A technology company received needed cash, and a European company received stock and access to cutting-edge software The New World of Partnerships - Building Strategic Alliances
    • 22. Consider Minority Equity As Strategic AlternativeConsider Minority Equity As Strategic AlternativeConsider Minority Equity As Strategic AlternativeConsider Minority Equity As Strategic Alternative AcquisitionAcquisitionAcquisitionAcquisition Joint VentureJoint VentureJoint VentureJoint Venture Minority EquityMinority EquityMinority EquityMinority Equity  Control  Synergy  Goodwill  Capital  Starting Point  Complex  Short-Term  Simple  Committed  Insider  Pre-Acquisition A+A+A+A+ CCCC AAAA AAAABBBB BBBB AAAA BBBB
    • 23. Marketing Partnerships – Combining value added services between two companies. Supplier Partnerships – Customer-vendor relationships where one can perform a specialized service more effectively than its partner. The New World of Partnerships - Building Strategic Alliances
    • 24. Evaluate potential partners carefully – Most partnerships fail – Perform due diligence – Select number 2 or 3 in the market as a partner Assess possible mutual benefits critically Strengthen the partnership through “skin in the game” Strive for open communication Partnership Criteria Evaluation

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