Breakout Session: Optimizing Your Debt-to-Equity Ratio
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Presentation by Silicon Valley Bank at Medtech Conference 2016. Participants: Benjaman Johnson, Managing Director, Head of Life Science – Central US – Silicon Valley Bank David Springer, President & CEO – Cayenne Medical Powered by: Healthegy For more healthcare innovation Visit us at Healthegy.com
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Breakout Session: Optimizing Your Debt-to-Equity Ratio
- 1. Optimizing Your Debt to Equity Ratio: Ben Johnson Managing Director SVB Silicon Valley Bank June 1, 2016
- 2. 2 Agenda • Quick Intro/SVB Commercial • When is the Right Time? • What is the Right Formula? • CEO Dialogue – David Springer, Cayenne Medical • Q&A
- 3. 3 Where innovation can be found Global locations • SVB Financial Group’s offices • SVB Financial Group’s coverage • SVB Financial Group’s international banking network SVB Corporate Overview 3 ©2016 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB). SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. Investments include assets being held at SVB Asset Management, a registered investment advisor, and SVB Securities, member of FINRA and SIPC, which are non-bank affiliates of Silicon Valley Bank and members of SVB Financial Group. Investments also include assets held in Cash Sweep as well as Repurchase transactions, which are offered by Silicon Valley Bank. Data as of March 31, 2016. Wealth planning and investment and stock option strategies are provided through SVB Wealth Advisory, Inc., a registered investment advisor, and non-bank affiliate of Silicon Valley Bank 16-14885. Rev. 04-22-16. Investment Products and Wealth Advisory Inc. • Not FDIC Insured • No Bank Guarantee • May Lose Value Providing a range of comprehensive financial services Global commercial banking Investment solutions Valuations & research Private banking Funds management Connections & insights Our services & solutions Financial highlights Q1 2016 $44B Assets $18B Loans Period-end loan balances increased 5.9%** $81B Deposits & Investments Period-end total client funds decreased 2.6%** **Over Q4 2015
- 4. 4 Life Science and Healthcare Everything we do helps life science and healthcare companies move bold ideas forward, fast. With more than three decades of experience, SVB meets clients’ needs with tailored banking solutions and unparalleled industry insights. Medical devices Healthcare IT/ digital health Healthcare servicesFocus Areas Our Clients $1.5B Total loans outstanding Loan Portfolio $551M Biopharma and diagnostics $341M Medical devices $282M Healthcare IT/digital health $359M Healthcare services 51% of life science and healthcare companies that went public in 2014 Life Science and Healthcare Specialists Cover North America, Europe and China Biopharma and diagnostics 77% Larger companies 23% Startup companies SVB Financial Group’s Offices SVB Financial Group’s Coverage SVB Financial Group’s International Banking Network $21B in deposits and investments 62% of CNBC’s Top 50 Disruptors in 2015 MORE THAN 2,200 Life science and healthcare companies 75% Private 25% Public ©2015 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB). SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. Data as of September 30, 2015. B-15-14459 Rev. 11-02-15. Investment Products: • Not FDIC Insured • No Bank Guarantee • May Lose Value
- 5. 5 Venture Debt – When is the Right Time?
- 6. 6 Applicability of Venture Debt by Stage Clinical Stage Commercial Stage FDA Approval V.o.D.“Next Round Risk” VAC/Mkt Penetration “Venture Risk” “Business Risk”
- 7. 7 What Do Lenders Consider? Mgmt Tech.BoD Forecast
- 8. 8 What Problem Are You Trying To Solve????? •Valuation Frontier
- 9. 9 What Problem Are You Trying To Solve????? •Valuation Frontier •Runway Extension
- 10. 10 What Problem Are You Trying To Solve????? •Valuation Frontier •Runway Extension •Cap Table Conflict
- 11. 11 What Problem Are You Trying To Solve????? •Valuation Frontier •Runway Extension •Cap Table Conflict •IRR Enhancement
- 12. 12 What Problem Are You Trying To Solve????? •Valuation Frontier •Runway Extension •Cap Table Conflict •IRR Enhancement •Defending Optionality
- 13. 13 When to Raise Debt?
- 14. 14 When to Raise Debt? When You Don’t Need It.
- 15. 15 What Venture Debt is NOT: • A replacement for Equity
- 16. 16 What Venture Debt is NOT: • A replacement for Equity • Short term bridge financing
- 17. 17 Debt – What is the Right Formula?
- 18. 18 Typical Venture Debt Structure • Interest only period 6-18 months
- 19. 19 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months
- 20. 20 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months • Potentially funded in tranches
- 21. 21 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months • Potentially funded in tranches • Typically low/no up front fees
- 22. 22 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months • Potentially funded in tranches • Typically low/no up front fees • Yield is driven from interest plus back-end fees
- 23. 23 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months • Potentially funded in tranches • Typically low/no up front fees • Yield is driven from interest plus back-end fees • IRR ranging from 5-15%+
- 24. 24 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months • Potentially funded in tranches • Typically low/no up front fees • Yield is driven from interest plus back-end fees • IRR ranging from 5-15%+ • May contain financial covenants
- 25. 25 Typical Venture Debt Structure • Interest only period 6-18 months • Paid in full within 42-48 months • Potentially funded in tranches • Typically low/no up front fees • Yield is driven from interest plus back-end fees • IRR ranging from 5-15%+ • May contain financial covenants • Collateral: lien on all business assets; sometimes IP
- 26. 26 Venture Debt: Important Considerations •Clear Pathway
- 27. 27 Venture Debt: Important Considerations •Clear Pathway •Execution confidence
- 28. 28 Venture Debt: Important Considerations •Clear Pathway •Execution confidence •Debt Repayment?
- 29. 29 Key Structural Considerations • Solve for 6 months of runway extension
- 30. 30 Key Structural Considerations • Solve for 6 months of runway extension • Plan on a refinance event
- 31. 31 Key Structural Considerations • Solve for 6 months of runway extension • Plan on a refinance event • Regulated or Non-Regulated Entity?
- 32. 32 Key Structural Considerations • Solve for 6 months of runway extension • Plan on a refinance event • Regulated or Non-Regulated Entity? • Debt Broker: To Be, or Not To Be?
- 33. 33 Debt: Potential Pitfalls • There is such thing as too much debt
- 34. 34 Debt: Potential Pitfalls • There is such thing as too much debt • Pricing/Structure: balance fear vs greed
- 35. 35 Debt: Potential Pitfalls • There is such thing as too much debt • Pricing/Structure: balance fear vs greed • Amortization creates pressure
- 36. 36 Debt: Potential Pitfalls • There is such thing as too much debt • Pricing/Structure: balance fear vs greed • Amortization creates pressure • Venture Debt vs “Dequity”
- 37. 37 CEO Dialogue – David Springer
- 38. 38 Disclaimer This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal, or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction. SVB Private Bank is a division of Silicon Valley Bank. Banking products and services are offered by Silicon Valley Bank. Loans and credit cards are subject to credit and/or collateral approval. Financing is available and varies by state. Restrictions may apply. Wealth Advisory Services are provided through SVB Wealth Advisory, Inc., a registered investment advisor and non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. ©2015 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SIVB, SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, NEXT NEXT HAPPEN NOW. and the Chevron device are trademarks of SVB Financial Group, used under license. Investments include assets being held at SVB Asset Management, a registered investment advisor, and SVB Securities, member of FINRA and SIPC, which are non-bank affiliates of Silicon Valley Bank and members of SVB Financial Group. Investments also include assets held in Cash Sweep as well as Repurchase transactions, which are offered by Silicon Valley Bank. Data as of June 30, 2015. SVB Private Bank is a division of Silicon Valley Bank. Loans are subject to credit and collateral approval. Financing available and varies by state. Restrictions may apply. Terms and conditions subject to change. Wealth planning and investment and stock option strategies are provided through SVB Wealth Advisory, Inc., a registered investment advisor, and non-bank affiliate of Silicon Valley Bank. B-15-13911 Rev. 08-21-15. Wealth Advisory Inc.: • Not FDIC Insured • No Bank Guarantee • May Lose Value
- 39. ©2014 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademarks. Silicon Valley Bank 3003 Tasman Drive Santa Clara, CA 95054 T 408 654 7400 svb.com 39
- 40. 40 • Private • Public • Angel-, VC-, Corporate-, PE-backed • Independent • Zero to multibillion in revenue Venture capital and private equity firms SVB Corporate Overview Get to know us For more than 30 years, SVB has helped innovators and their investors move bold ideas forward, fast. Today, we provide a full range of banking services to companies of all sizes in innovation centers around the world. We’re at the intersection of innovation and capital Industry expertise Hardware & infrastructure Energy & resource innovation Software & internet Life science & healthcare Private equity & venture capital Premium wine Helping high-growth companies navigate at every state 94%Larger companies SVB loan portfolio 6%Startups 47%of U.S. tech and life science companies with an IPO in 2015 50%of all venture-capital-backed tech and life science companies in the U.S. Our clients Innovative companies * * * *Approximate
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Editor's Notes
- Tracy - Picked the icon from the file you sent – SVB15325 SVB Infographic overview ICON CHANGE.