Kauffman fellows 2010-ssp


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Harvesting Case Studies presented by Sanjay Subhedar at the 2010 Kauffman Fellows Program.

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Kauffman fellows 2010-ssp

  1. 1. Kauffman Fellows ProgramHarvesting Case Studies Sanjay Subhedar- Storm Venture
  2. 2. when asked to write the alphabet by his kindergarten teacher Sanjay Subhedar- Storm Venture
  3. 3. Key ElementsThree most important decisions for VC’s are When to Invest Follow on Investments When to Exit Sanjay Subhedar- Storm Venture
  4. 4. Evolutions of MarketsValuations Market Size Don’t invest just because it is “in” Enterprise Value Don’t exit just because it is “out” Time Technology Peak of Inflated Trough of Slope of Plateau of Trigger Expectations Disillusionment Enlightenment Productivity Sanjay Subhedar- Storm Venture
  5. 5. Jumping the gunMost of us make the mistake of Investing too early Harvesting earlyInvesting decisions are very much based on the firmHarvesting decisions influenced by Management team Syndicate Competitive Environment IPO environment Sanjay Subhedar- Storm Venture
  6. 6. Distribution ChoicesCash or StockTiming of Stock Sale or Distribution Sanjay Subhedar- Storm Venture
  7. 7. Harvesting Case StudiesStratacom, Inc (NASDAQ-STRM) Passion, Persistence and Patience RewardedLightera (CIENA) Early to market, early exitEtek Dynamics (NASDAQ-ETEK) Good Timing, Superb Execution, Great Market=Super ReturnsAirespace (Cisco) Early Market leadership creates early exit opportunityKidaro (Microsoft) Company helped define the market, early exitSierra Monolithics (Semtech) Sanjay Subhedar- Storm Venture
  8. 8. Incorporated Feb 1986VC Funding of $4.3 million in two tranchesAnother VC round of $10 millionCorporate Rounds Motorola $10 million DEC $10 millionIPO 1992 with a market Cap of $100 millionMerger with Cisco in 1996 at $4.7 Billion Sanjay Subhedar- Storm Venture
  9. 9. Sold to Cisco ($ Million) $5B $6,000 $350 $5,000 $300Market Capitalization $250 $4,000 Frame Relay Revenue $200 $3,000 Takes off $150 $2,000 IPO $100 Slow growth for $1,000 many years $50 $0 $0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Market Cap Revenue Sanjay Subhedar- Storm Venture
  10. 10. Sanjay Subhedar- Storm Venture
  11. 11. 300x return$160 Sold to Ciena$140 for $550M; Product FCS$120 Lightera’s product$100 represent 30%-35% $80 Raised of Ciena’s revenues $10M $60 $40 Start $20 $0 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Oct-97 Jun-98 Oct-98 Jun-99 Oct-99 Jun-00 Oct-00 Jun-01 Oct-01 Jun-02 Oct-02 Jun-03 Sanjay Subhedar- Storm Venture
  12. 12. Acquisition a huge success for the buyer Same customer base Synergistic product line Did not have the product Seller’s product was a world leaderIs it repeatable? Yes Luck – guess right on new technology, new market, competition and timing Major lead over the competition Right buyer – currency and desire Sanjay Subhedar- Storm Venture
  13. 13. Optical Add Drop Circulators Optomechanical Switches Modules Variable Attenuators Wavelength LockersOptical Performance Dispersion Equalization Monitors Modules Sanjay Subhedar- Storm Venture
  14. 14. Phase I Founders create valuePhase II Summit Buys 60% from Founders- Jun1997 Valuation was $200 million Brings new Management teamPhase III Recast business for public ownership IPO in Dec 1998Phase IV: Merger with JDS Uniphase in June 2000 Sanjay Subhedar- Storm Venture
  15. 15. Sale to JDSU 172.7 $19B IPO $1.5B 106.9 Recap $120M 73.1 40.4(in $ millions) 31.7 14.6 6.5 1993 1994 1995 1996 1997 1998 1999 Fiscal years ended June 30 Sanjay Subhedar- Storm Venture
  16. 16. Price Performance – E-Tek IPO – Close of Sale 350.0 Transaction closes (6/30/2000) 14,000 Market cap: $17.9bn 300.0 12,000 250.0 10,000 Sale to JDSU announced on 1/17/2000JDSU announced Sale toClosing Price (USD) on 1/17/2000 Market cap: $15.4bn Market cap: $15,394mm Volume (000) 200.0 8,000 150.0 6,000 IPO (12/2/1998) price: $12.00 Price at end of day 1 trading: $26.75 Market cap at IPO price: $0.7bn 100.0 4,000 Market cap at end of day 1: $1.6bn 50.0 2,000 0.0 0 Dec-1998 Feb-1999 Apr-1999 Jul-1999 Sep-1999 Nov-1999 Feb-2000 Apr-2000 Daily from 02-Dec-1998 to 30-Jun-2000 Volume E-TEK DYNAMICS INC COM Sanjay Subhedar- Storm Venture
  17. 17. Market exploded for optical components Bandwidth demand from internet Huge telecom build out Component shortagesGreat Execution forces acquisition Sanjay Subhedar- Storm Venture
  18. 18. Founded by Storm in 2001 Incubated with $500k Storm wrote plan and hired teamSeries B led by Norwest with BatterySeries C led by FidelityKey OEM Relationships Nortel, Alcatel and NECCisco acquires for $450 million , Jan 2005 Total raised $58 million Sanjay Subhedar- Storm Venture
  19. 19. KidaroSanjay Subhedar- Storm Venture
  20. 20. Founded in 2005, Israeli R&D center Ex-military IT security, Israel-based team$4M Series A co-led by Storm and Genesis, 8/05$10M Series B led by Opus, 12/06 HQ moved to Silicon Valley Received & declined unsolicited acquisition offer.Microsoft acquires, March 2008 Sanjay Subhedar- Storm Venture
  21. 21. Kidaro Managed Workspace At a GlanceLeverage machine virtualization technology to create, deploy and centrally manage end-user workspaces Sanjay Subhedar- Storm Venture
  22. 22. Lessons LearnedThesis: Storm thesis in desktop virtualization hasmaterialized.Team: Strong teams will find the right market insertionpoint Kidaro helped the analysts define the space...and they kept mentioning KidaroTiming: Exit was well timed on the curve Cash in the bank allows investors to time the exit. Sanjay Subhedar- Storm Venture
  23. 23. Evolutions of MarketsValuations Market Size Enterprise Value Time Technology Peak of Inflated Trough of Slope of Plateau of Trigger Expectations Disillusionment Enlightenment Productivity Sanjay Subhedar- Storm Venture
  24. 24. Top 10 Rules For IPO’s or Exits1. Build for an independent destiny, don’t eliminate options2. Tactical Value makes an Acquisition/IPO interesting3. Strategic Value makes an Acquisition/IPO compelling4. Know and work the ecosystem…don’t create VETO pockets5. Know the landscape, have realistic expectations6. Leave money on the table7. Deliver value to acquirers or stockholders8. Transactions are forgotten, relationships can endure9. No surprises!!10. Companies are “Bought” not “Sold” Sanjay Subhedar- Storm Venture
  25. 25. A venture capital firm dedicated to building and creating enduring value. Thank You Sanjay Subhedar Storm Venture