AAL Investment Forum 2010 - Seed Fund Raising: don't forget Angels!


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Roberto de Saint-Malo, Adara Venture Partners, Spain


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AAL Investment Forum 2010 - Seed Fund Raising: don't forget Angels!

  1. 1. Seed Funding: Don't forget Angels! Roberto Saint-Malo Founder-Partner Adara Venture Partners rsaintmalo@adaravp.com
  2. 2. Current Co-Building Realities 1. Lots of money looking for quality opportunities 2. Top-tier generally large in VC World 3. More time & capital used than ever before 4. Angel capital has become very sizeable 5. Building many types of cos. requires less capital than ever (open source, cloud services, ..) KEY MESSAGES KEY MESSAGES VC Activity being re-structured in in US, still under VC Activity being re-structured US, still under consolidation in in Europe.. possible mis-match? consolidation Europe.. possible mis-match? Angels well positioned toto add valuehave become Angels well positioned add value / / have a key part ofkey part of the co-bldg eco-system become a the co-bldg eco-system
  3. 3. Realities: More Capital
  4. 4. Realities: VCs larger
  5. 5. Realities: Time to Build
  6. 6. Realities: Time to Build (2)
  7. 7. Realities: a Mismatch? "I personally believe and I think the evidence proves that the venture industry has gotten too big, the funds have gotten too big.. In order to invest their enormous amounts of capital, venture capitalists end up choosing companies that are not sufficiently disciplined or capital-efficient. Because firms have invested so much money, they depend on taking their portfolio companies public to get great enough returns, at a time when I. P.O.s are few and far between." - Alan Patricof (June '09)
  8. 8. Realities: Providers of Funds* Invested amounts '04-07** VCs: $24.4B.. 51K cos backed.. $7.5m ave Angels: $24.3B.. 3K.. < $0.5m ave Angels Today (2009)*** 225K active, 10K "organized" 100 organizations in '99 --> 300 in '09 Angel Fund size (ave. no. members): 44 $280K per financing round 60% co-invested / were followed on by VCs * US ** Kaufmann Foundation *** Angel Capital Association
  9. 9. Empirical Observations Angels Top Tier VC Angel Funds Capital Required to prove up to €2m (approx) > €3m ++ the business Target Exit Valuation €20-50m > €50m ++ Exit time horizon 2-5 yrs 5 yrs+ Pre-existing relationships for a quick round Transition / collaboration Early-stage investors (many in always an option Europe now later stage) Remarks / Exceptions Individual-driven Chances of a complete failure Lead investor critical (1/3) increase.. Potentially complex board situations
  10. 10. Angels & VCs: how similar? Are they Different? - VCs offer more capital - Angels earlier stage; VCs seek more evolved, formed ventures - VCs tend to less flexibility Are they Similar? - Individual involvement critical - Non-monetary value: expertise, credibility, rolodexes, effective sounding board - Money another key element (how much really needed?) Bottom-line - HAVE TO COMPARE SPECIFIC OPTIONS - For smaller amounts of capital (<€3m) Angels should definitely be considered.. - At earlier stages (developing frugality, focus, simplicity), Angels generally more appropriate & interested - If things turn capital intensive can always go VC route (plenty of capital) - Intense collaboration between Angels and VCs in SV..
  11. 11. Background & Investment Approach Direct Equity Experience Adara founded in 2002, €55m fund operational since '05 / focus on Spain and Spain- related IT ventures / pioneer in Spain RSM making direct equity investments since 1992 / 23 investments managed Mostly early-stage / multiple write-offs / many mistakes Sample VC investments: eDreams (Spain), Eyesquad (Israel), Cambridge Broadband (UK), OfficeNet (Brasil) Investing Views Ideas always good - PEOPLE & MARKETS critical Do a lot with a little / true POC before u scale Look for exit windows all the time, best way to get big (3 key windows) -> Try to make things go well quickly Simplicity & good execution are key.. Smaller exits can be fine (and available).. particularly with a smaller vehicle In financial backing, individuals are critical (> firms) Remember that Investors should only go "so far" rsaintmalo@adaravp.com +34 629 26 99 77 m