My personal perspective Perspective on "How VC really works" from an entrepreneurial point of view Concordia University – MBA Finance class 29 November 2014

1. My Entrepreneurial
Perspective on
“How VC really works”
Concordia – MBA Finance class
Chris Arsenault
November 29th, 2014

2. I AM an ENTREPRENEUR!
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3. I AM an ENTREPRENEUR!
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• I constantly re-question myself
while thinking I’m always right…
• I out-perform, mostly when under
pressure...
• I see opportunity where most see
chaos...
• And I don’t see any valid reason
why I can’t do better than the other
guy…

4. A background in building tech companies
1993 1998
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5. Launched 2 spins-off
Lead my first 2 investments
1998 2001
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Entered in the venture world

6. FUND 2 FUND 3 …FUND 4
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Then came building VC funds…
FUND 1
2002 2004
2007 2011 2015

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Only possible because of the team

8. I BACK and invest in
ENTREPRENEURS
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9. • They have ADD (to certain degree)…
• Are paranoid, have a fear of failure…
• Need to change the world…
• Have an unquenchable thirst or desire
to succeed…
I BACK and invest in
ENTREPRENEURS
• A strong un-satisfaction with status
quo…
• Have the ability to feel comfortable in
an ever-changing and constantly un-comfortable
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world…

10. Raising
money
is
F@*&#!g
hard
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11. $
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12. “Not every
business
Is fundable at
every moment
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in time”

13. What do VCs look for ?
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Bright
Couragous A great idea

14. Idea’s that change the world…
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15. Examples closer to home….
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16. VCs are attracted by the 3 Ts
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1- Team
2- Traction
3- Technology
…the rest is a given
ü a massive market
ü Familiar market
ü Solid business model
ü Complimentary to
portfolio

17. VCs trust metrics
Know your #’s by heart !
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3 things to remember
1. It’s F@#$ hard to raise money
2. Great businesses get funded
3. Team, traction, execution

19. What do we expect from our
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Entrepreneurs?

20. Results In Aggregate, Fund II & Fund III
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As of June 30, 2014
$1/2B
In aggregate !
revenues !
in 2013
50%
of our investment
were done at the
Seed stage
$780M
capital raised
46%
of our Seed
investments got
follow-on funding
from us
43
Active
Portfolio!
Companies
2,341
employees
@iNovia 2014 Confidential and not for distribution
28%
IRR

21. 7X sales increase after 3 years
Year 1
Year 2Year 3
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Median Multiple in Sales After iNovia’s First Investment
Multiple of initial sales
1.0x
1.0x
1.3x
1.7x
1.7x
2.4x
2.8x
3.5x
3.4x
3.4x
5.6x
6.5x
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
Portfolio Growth Momentum!

22. Our portfolio today… is valued @ > US$3B
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AdTech Consumer
Now a Disney company
Now a Airbnb company
Now a Nielsen company
Now a Collective company
Now a 33Accross company
eCommerce
Now a Yahoo! company
Digital Media
Enterprise Infrastructure
Now a Google company

23. To be successful we need
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BIG wins

24. 0 5 10 15 20 25 30 Investment Return
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iNovia Fund II
5.0
4.0
3.0
2.0
1.0
0.0
Company Rank
10
8
6
4
2
0

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26. 69,800% Revenue growth
over past 5 years
*Deloitte Fast 50, 2014
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More?

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Our 6 beliefs

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Belief #1:
Smaller funds result in higher returns.

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Harsh reality in our industry:
Most VC Funds Are Not Successful…
Source: Kauffman Foundation VC portfolio, ninety-nine funds, 1989-2011. Net multiple values as of 12/31/2011

33. …Larger Funds Are Even Less Successful!
<1x
1x - 1.5x
1.5x - 2x
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51%
34%
32%
20%
10%
12% 12% 12% 10%
100%
100%
100%
Large Funds
(>$250M)
Small Funds
($50M - $250M)
Source: Silicon Valley Bank, Dialing Down: Venture Capital Returns to Smaller Fund Sizes, 2009
2x - 3x
3x - 5x
>5x
Returns by Fund Size
% of funds

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Distribution of Investment Returns

35. 0 5 10 15 20 25 30 Investment Return
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iNovia Fund II
5.0
4.0
3.0
2.0
1.0
0.0
Company Rank
10
8
6
4
2
0

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Belief #2:
To be successful you need BIG wins.

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What Does a Big Win Look Like?
Invest in the right entrepreneur
With the right idea
Who has the right resources
Currently in the right position
In the right market
At the right time

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Two Ways to Find a Big Win
1. You have to be right when everyone else is wrong.
2. You have to get access to the right deals.

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Belief #3:
In a portfolio company we are a member of the team.

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Belief #4:
Outliers result from a strong thesis and conviction.

41. So it’s All About Access to the most promising
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Ø Proprietary deal flow doesn’t exist without a strong brand
Ø Entrepreneurs have increasingly more options for capital
Ø Top tier funds have increasingly more capital to deploy
Ø Money doesn’t know borders
Ø Top companies will attract multiple offers

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Belief #5:
Access is earned not given.

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How Do You Gain Access?
Ø It starts with the Entrepreneur
Ø Building a community (CEO, CMO and CTO Summits)
Ø Build the network – Venture Partners, EiRs, angels, eco-system
Ø Partner with the best funds
Ø Thought leadership / Domain expertise
Ø Brand = Success

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Belief #6:
Venture capital is not immune from innovation.