Hack fwd startup financing 101 - 2010 12 09 - v2


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Hack fwd startup financing 101 - 2010 12 09 - v2

  1. 1. HackFwd Startup Financing 101 Didier Tranchier
  2. 2. Quizz <ul><li>Who invented Venture Capital ? </li></ul><ul><ul><li>Christopher Colombus </li></ul></ul><ul><ul><li>Laurance S. Rockefeller </li></ul></ul><ul><ul><li>Georges Doriot </li></ul></ul>
  3. 3. Christopher Colombus « For the execution of the voyage to the indies, I did not make use of intelligence, mathematics or maps » <ul><li>Born in Genoa, Italy in 1451 </li></ul><ul><li>As a sailor, he had strong beliefs and a good business plan </li></ul><ul><ul><li>Earth is spherical </li></ul></ul><ul><ul><li>India can be reached sailing westward </li></ul></ul><ul><ul><li>He estimated the Earth circumference to 25 550 km </li></ul></ul><ul><li>He looked for investors in Italy, in Portugal but nobody believed in his plans until he met with Isabela of Castille in Spain </li></ul><ul><ul><li>She believed in him and financed 3 ships </li></ul></ul><ul><li>Christopher Colombus’s plans were wrong </li></ul><ul><ul><li>His calculations were too optimistic (40 000 km) </li></ul></ul><ul><ul><li>He did not discover America </li></ul></ul><ul><ul><li>He had to cross 4 times the Atlantic Ocean before landing in America </li></ul></ul><ul><li>But he was the first to cross the Atlantic Ocean </li></ul><ul><ul><li>Spain became the first nation of the world </li></ul></ul><ul><ul><li>He became very famous and very rich </li></ul></ul>
  4. 4. Laurence S. Rockefeller <ul><li>Born in 1910 in NYC </li></ul><ul><li>After World War II, he invested in Eastern Airlines </li></ul><ul><ul><li>in 10 years, it had become the most profitable airline to emerge after World War II </li></ul></ul><ul><ul><li>He became its largest shareholder </li></ul></ul><ul><li>He also funded McDonnell Aircraft Corp.and Douglas Aircraft </li></ul><ul><li>In 1969, he funded Venrock Associates, a VC fund </li></ul><ul><ul><li>They provided important early funding for Intel and Apple, amongst many other start-up technology companies </li></ul></ul>
  5. 5. Georges Doriot « Someone, somewhere, is making a product that will make your product obsolete » <ul><li>Born in Paris in 1899 </li></ul><ul><li>Went to Harvard for a MBA and became a professor </li></ul><ul><li>In 1946, he founded ARDC « American Research and Development Corporation » as the first VC fund </li></ul><ul><ul><li>He was considered unconventional </li></ul></ul><ul><ul><li>In 1957, ARDC invested $70 000 in Digital Equipment Corporation (DEC) </li></ul></ul><ul><li>In 1968, this investment was valued $355 M after DEC’s IPO, representing a multiple of 500 or a IRR (Internal Rate of Return) of 101% </li></ul><ul><ul><li>ARDC invested in more than 150 companies </li></ul></ul><ul><li>He is considered as the father of Venture Capital </li></ul><ul><ul><li>He is also the founder of INSEAD </li></ul></ul>
  6. 6. Quizz <ul><li>What is the dream of an investor ? </li></ul><ul><ul><li>The adventure </li></ul></ul><ul><ul><li>The financial return </li></ul></ul><ul><ul><li>The Big Wave </li></ul></ul>
  7. 7. The adventure If past history was all there was to the game, the richest people would be librarians Price is what you pay. Value is what you get Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years Our favorite holding period is forever
  8. 8. The financial return <ul><li>Andy Bechtolsheim, founder of Sun Microsystems, invested $100 000 in 1998 in Google prior to its foundation </li></ul><ul><ul><li>In March 2007 this investment was worth $1.5 billion </li></ul></ul><ul><ul><li>Multiple : 15 000, IRR : almost 200% per year </li></ul></ul><ul><li>In 1996, Benchmark Capital invested $6 M in E-bay </li></ul><ul><ul><li>Ebay went public on September 1998, producing almost $6B for Benchmark Capital </li></ul></ul><ul><ul><li>Multiple : 986 in 2 year s, IRR : 3 000 % per year </li></ul></ul><ul><li>In 2002, Howard Hartenbaum, General Partner at Draper Richards, invested $250 k in Skype for a 5% stake </li></ul><ul><ul><li>In 2005, Ebay acquires Skype for €3,3 B (7 M€ revenues) </li></ul></ul><ul><ul><li>His investment is valued then at €165 M </li></ul></ul><ul><ul><li>Multiple : 660 in 3 years, IRR : 771% per year </li></ul></ul>
  9. 9. The big wave <ul><li>If lucky, an investor will see one big wave in his life </li></ul><ul><li>So his life is dedicated not to miss this big wave </li></ul><ul><li>Maybe you ? </li></ul>
  10. 10. Quizz <ul><li>What is expected from an entrepreneur ? </li></ul><ul><ul><li>To be right and follow the plan </li></ul></ul><ul><ul><li>Speed : go as fast as possible </li></ul></ul><ul><ul><li>Create a machine to multiply money </li></ul></ul><ul><ul><li>Have wild dreams and ambition </li></ul></ul>
  11. 11. Serendipity : search wrong and find right
  12. 12. Speed : it is better to be wrong quickly
  13. 13. Cash machine : each € must create more and more value
  14. 14. Wild dreams and ambition : explore new worlds
  15. 15. Dare ! Say what you think Asshole …
  16. 16. Build trust !