Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

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Growing the Startup Ecosystem by growing stronger Entrepeneurs and stronger Angel Investors using the Angel Conference model

Growing the Startup Ecosystem by growing stronger Entrepeneurs and stronger Angel Investors using the Angel Conference model

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  • 1. Building a local Ecosystem by John Sechrest @sechrest
  • 2. Mapping the Clusters
  • 3. Including non-tech Clusters
  • 4. Life cycle of a business
  • 5. Outside Investment Stages
  • 6. Angel Conference Model 20-60 companies apply  20-40 investors join LLC  $5500 for each investor  10 weeks of due diligence  Workshops for Angels and Entrepreneurs  Large Final Event 
  • 7. How does Angel Investing work?
  • 8. Company Pitches
  • 9. Due Diligence Feedback
  • 10. Detailed Event Program
  • 11. Select an investment
  • 12. Angel Investing Distribution of Returns 60 50 40 Percent of Exits US: Overall Multiple: 2.6X UK: Overall Multiple: 2.2X 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  • 13. Distribution of Returns by Venture Investment 60 Hold: 3.0 yrs. 50 $80M Percent of Total Exits 40 Hold: 3.3 yrs. Overall Multiple: 2.6X Avg. Holding Period: 3.5 years 30 $60M 20 $40M 10 $20M Hold: 4.6 yrs. Hold: 4.9 yrs. Hold: 6.0 yrs. 0 < 1X 1X to 5X Blue bars: % of exits in that Category Green Bars: $’s returned in that Category 5X to 10X Exit Multiples 10X to 30X > 30X
  • 14. Economic Impact of Angel Oregon Alumni 90 600 80 500 70 60 400 50 300 40 30 200 20 100 10 0 0 Revenue in (current portfolio): $84.6M +47% from 2011 FTE’s in (current portfolio): +16% Rev/FTE (current portfolio): Raised $7.1M 535 $158K +27% $88M cumulative
  • 15. As a reminder: Angel Investor Performance Project More than half fail to return capital Wins take longer to exit than losses “Asset Class” return of approx 2.6X 10% of exits = 90% of cash returned www.AngelResourceInstitute.org
  • 16. Estimated Multiple of AO as a Portfolio 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 Multiple by year, if portfolio were cut off after that year Assumes even investment in every presenting company Underspecified Terms/Dilution as an imaginary portfolio 2009 2010 2012 AIPP
  • 17. 5 Types of Angel Groups      Angel Networks 98% Managed Angel Funds - Founders Coop Passive Angel Funds – Side car funds Active Angel Funds – Oregon Angel Fund Angel Conference
  • 18. Cities with Angel Conferences  Portland ( Since 2003 )  Bend  Corvallis/Eugene ( Since 2009 )  The Gorge  Medford  Seattle ( Since 2012 )
  • 19. WWW.SEATTLEANGEL.COM
  • 20. Where are they now? Tracking the Angel Oregon Alumni Willamette University Angel Fund
  • 21. Median Early Stage Pre-Money Valuation $2.5M $1.5M Median $3.7M 3rd Quartile $6.6M 1st Quartile $0.11M *Including all rounds with angel groups before Series A 6/2/13 *
  • 22. Robert E Wiltbank, Ph.D. wiltbank@willamette.edu www.Willamette.edu/~Wiltbank
  • 23. Angel Investing Distribution of Returns 60 50 40 Percent of Exits US: Overall Multiple: 2.6X UK: Overall Multiple: 2.2X 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  • 24. Distribution of Returns by Venture Investment 60 Hold: 3.0 yrs. 50 $80M Percent of Total Exits 40 Hold: 3.3 yrs. Overall Multiple: 2.6X Avg. Holding Period: 3.5 years 30 $60M 20 $40M 10 $20M Hold: 4.6 yrs. Hold: 4.9 yrs. Hold: 6.0 yrs. 0 < 1X 1X to 5X Blue bars: % of exits in that Category Green Bars: $’s returned in that Category 5X to 10X Exit Multiples 10X to 30X > 30X
  • 25. 60 50 Percent of Exits 40 2X better multiple for 20+ due diligence 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  • 26. 60 50 60% better multiple for deals related to industry expertise Percent of Exits 40 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  • 27. Follow-On Investment from Same Angel Investor 60 50 30% of deals had follow on investments. Percent of Exits 40 3X better multiple in deals where the investor did not make a follow-on investment. 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  • 28. Diminishing Marginal Returns to Raising Capital 6/2/13
  • 29. Diminishing Returns to Invested Capital Private Acquisition Size from ‘96 to ‘06 Only 15%> $50M 6/2/13
  • 30. … But Trending Up at Year End Median Angel Round Size Reaches Five Quarter High in Q4 2012 $M $1.50 $1.25M $950K $950K $900K $850K $1.00 $500K $550K $550K $620K $690K $0.50 $0.00 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 *Angel rounds include angels & angel groups only *
  • 31. Median Early Stage Pre-Money Valuation Stays the Same in 2012 $2.5M $1.5M Median $3.7M 3rd Quartile $6.6M 1st Quartile $0.11M *Including all rounds with angel groups before Series A *