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Introduction to Venture Capital IPIAM

Short introduction to venture capital in Southeast Asia

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Introduction to Venture Capital IPIAM

  1. 1. October 2015 Venture Capital 5X High-risk high return investing Douglas Abrams
  2. 2. 2 6XXXX Douglas Abrams About the facilitator • Wharton MBA • JP Morgan – Vice President IB Technology, GM Internet Marketing • Parallax Capital Mgmt – Co-founder and MD Private Equity • Extream Ventures – Co-founder and MD S$20 million seed fund • Expara – Founder and MD IDM Ventures Incubator, advisory, training • NUS – Adjunct Associate Professor, Business School, Entrepreneurship, Sasin – Visiting Professor, Venture Capital
  3. 3. 3 6XXXX Douglas Abrams Expara timeline 2000-2015 3Overview of Expara 2000 20152000 2002 2004 2006 2008 2010 2012 2014 NUS Expara EIDMV I Extream EIDMV II EV III Parallax BANSEA KIMBA Sasin Expara Thailand Expara Malaysia Expara Vietnam Expara Japan I4-x
  4. 4. 4 6XXXX Douglas Abrams VC mindset • Risk and return are highly correlated • You cannot increase return without taking more risk Return Risk Potential outcomes
  5. 5. 5 6XXXX Douglas Abrams Why invest in venture capital? As of 31-Dec 2014 The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,569 U.S. venture capital funds (1,002 early stage, 175 late & expansion stage, 386 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. 1Pooled end-to-end return, net of fees, expenses, and carried interest. Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc. *Capital change only Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03
  6. 6. 6 6XXXX Douglas Abrams EIDMV I Extream Ventures EIDMV II Expara Ventures III 2008 to 2013 2012 to present 20152007 to 2011 • Singapore; • Fund size: S$1M; • Investment size: S$55K; • Focus: IDM. • Singapore; • Fund size: S$20M; • Investment size: S$1-3M • Focus: IDM, software, IT. • Singapore; • Fund size: S$4.55M; • Investment size:S$255K • Focus: IDM. Series A Seed Seed - Series A • South East Asia • Fund size: S$30M; • Investment size:S$0.1-3MM • Focus: ICT, innovation. Expara’s venture capital funds Pre-seed 6Venture capital • 17 investments • 4 > S$33MM in follow-on • Exit Oct-2013 at 36x ROI • Exit May 2014 at 250x ROI • Exit Oct 2014 at 26x ROI • Overall 5.39x on TIC • 3 investments • 1 exit • Jun-2015 at 2.4x ROI • 17 investments • 1 exit • Listing on NSX • 7 investments to date
  7. 7. 7 6XXXX Douglas Abrams Most fund returns are normally distributed
  8. 8. 8 6XXXX Douglas Abrams VC returns follow a power law
  9. 9. 9 6XXXX Douglas Abrams How does a VC fund work? Fund Investors VC 8 $ 10 mm 2 $ 10 mm $ 58 mm 25% 75%
  10. 10. 10 6XXXX Douglas Abrams Case study VC returns - CoAssets
  11. 11. 11 6XXXX Douglas Abrams Expara CoAssets investment • 2014 – we invest S$105K • Current market cap = A$54MM • Our current holdings valued = A$6.9MM – 6600% increase since 2014 • Total fund ROI upon successful liquidation of our position would be = ~420% since 2012
  12. 12. 12 6XXXX Douglas Abrams Why can some VC funds outperform? • Most funds cannot outperform due to information symmetry • VC invests in small, private companies • Huge information assymitries • Performance wholly dependent on: proprietary, high quality deal flow • And effective pricing and structuring
  13. 13. 13 6XXXX Douglas Abrams Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
  14. 14. 14 6XXXX Douglas Abrams How do VCs make money? • Trade sale – sell to another company • IPO – sell to the public through listing on an exchange
  15. 15. 15 6XXXX Douglas Abrams Trade sale or IPO? www.nvca.org
  16. 16. 16 6XXXX Douglas Abrams SEA Exits 2015 Company Country Acquiror Country_Acquiror Price Value Year Adplus Indonesia Yello Mobile South Korea Undisclosed 0 2015 Bidstalk Singapore AppLift Germany Undisclosed 0 2015 BuyBitcoin.ph Philippines Satoshi Citadel Industries Philippines Undisclosed 0 2015 City Delivery Philippines Food Runner Singapore Undisclosed 0 2015 Coin Republic Singapore meXBT Mexico Undisclosed 0 2015 Computerlogy Thailand Yello Digital Marketing Group South Korea Undisclosed 0 2015 Continuum Wind Energy Singapore SunEdison USA Undisclosed 0 2015 Ctrlshift Singapore Undisclosed 0 2015 Diadiemanuong.com Vietnam Chicilon Media Vietnam Undisclosed 0 2015 eProperty Track Singapore PropertyGuru Singapore Undisclosed 0 2015 Fabula Indonesia Kreavi Indonesia Undisclosed 0 2015 Flocations Singapore Venture Republic Japan Undisclosed 0 2015 Food by Phone Thailand FoodPanda Germany Undisclosed 0 2015 FoodPanda Vietnam Vietnam Vietnammm Vietnam Undisclosed 0 2015 Gushcloud Singapore Yello Mobile Korea Undisclosed 0 2015 Hipwee Indonesia Migme Australia Undisclosed 0 2015 I Logic Solutions Malaysia Galasys Plc Malaysia 1,970,000 2.8 2015 iProperty Malaysia REA Group Australia 534,000,000 751 2015 iTwin Singapore CloudDesk Singapore Undisclosed 0 2015 JustCommodity Singapore Allegro Development Corporation USA 20,000,000 30 2015 Kapanlagi Indonesia Mediacorp Singapore Undisclosed 0 2015 Lamido Indonesia Lazada Singapore Undisclosed 0 2015 Luxe Real Estate Singapore Squareyards India Undisclosed 0 2015 Luxola Singapore Sephora France Undisclosed 0 2015 MetroDeal Philippines Transcosmos USA 30,000,000 42.7 2015 MOXY Thailand WhatsNew Group Thailand Undisclosed 0 2015 MyProperty.ph Philippines Lamudi Germany Undisclosed 0 2015 Nassion Systems Malaysia Ricoh (Malaysia) Sdn Bhd Malaysia Undisclosed 0 2015 PayWhere Singapore PLDT Philippines 5,000,000 0 2015 PropertyKita Indonesia Lamudi Germany Undisclosed 0 2015 Propertytrack Singapore PropertyGuru Singapore Undisclosed 0 2015 Room Service Singapore FoodPanda Germany Undisclosed 0 2015 RumahDijual Indonesia PropertyGuru Singapore Undisclosed 0 2015 Shopdeca Indonesia Migme Australia Undisclosed 0 2015 Sieu Web Vietnam DKT (Bizweb.vn) Vietnam Undisclosed 0 2015 Signetique IT Singapore Exabytes Network Sdn Bhd Malaysia Undisclosed 0 2015 Singapore-Dine Singapore FoodPanda Germany Undisclosed 0 2015 Sold.sg Singapore Migme Singapore Undisclosed 0 2015 Spickify Singapore Helpling Germany Undisclosed 0 2015 Tab a Doctor Singapore Global Health and Travel Singapore Undisclosed 0 2015 Tappy Vietnam Weeby.co USA Undisclosed 0 2015 The Pragmatic Lab Singapore Alphacamp Hongkong Undisclosed 0 2015 ThinkOfLiving Thailand Iproperty Malaysia 4,600,000 0 2015 Triibe Singapore Mobikon India Undisclosed 0 2015 Voyagin Singapore Rakuten Japan Undisclosed 0 2015 Wala Vietnam VIVAS Vietnam Undisclosed 0 2015
  17. 17. 17 6XXXX Douglas Abrams SEA exit markets at an inflection point Exit activity in SEA increasing exponentially • Increased investment in startups since 2007 is beginning to yield results • Number of exits have doubled; value have increased by more than 15x
  18. 18. 18 6XXXX Douglas Abrams Why VC in SEA now? Historical challenges • Exits • Enterprise ecosystem • Innovation • Legal and corporate governance • Cultural attitudes Mitigation • Early stage valuations allow profitable local exits; regional focus allows larger exits • Regional bridge and expertise in building local network • Focus on innovative segments – new and traditional • Changing environment • Channeling entrepreneurial energy to scalability
  19. 19. 19 6XXXX Douglas Abrams Companies founded with venture capital www.nvca.org
  20. 20. 20 6XXXX Douglas Abrams Key elements for success • Solving a painful problem for customers – Value proposition • Developing an innovative product – Innovation • Customers and competitors – Market identification and analysis • Reaching customers – Marketing, sales and distribution strategy • Competing when others enter - Sustainable competitive advantage • Make money – Business model and financial plan • Team – A team or B team
  21. 21. 21 6XXXX Douglas Abrams Key venture finance terms  Business model  Financial projections  Valuation  Funding required and equity offered  Use of Proceeds  Exit Strategy and ROI  Cap table
  22. 22. 22 6XXXX Douglas Abrams Company valuation methods • Price to earnings (p/e) • Dividend yield • Multiple of book value • Comparables • Discounted Cash Flow (DCF) • VC method
  23. 23. 23 6XXXX Douglas Abrams Stages and sources of funds Founder’s Capital Seed/ Angel Series A, B, C Mezzanine Pre-IPO IPO VC hurdle rates 60-100% 40-60% 20% Why are these rates so high? OM F,F&F Incubators corporations government Customers, suppliers, strategic partners VCs, Banks for VC loans
  24. 24. 24 6XXXX Douglas Abrams Crowdfunding VC - Kickstarter 243,074 88,613 63,000 110 Projects launched Successfully funded Raised less than 10K Raised 1MM or more
  25. 25. 25 6XXXX Douglas Abrams Crowdfunding VC – equity crowdfunding in US 13,400 662 125 100 VC funding Equity crowdfunding Real estate Tech US$MM
  26. 26. 26 6XXXX Douglas Abrams Crowdfunding VC – equity crowdfunding in SEA • May 2015 - Equity crowdfunding launched in Thailand • Restrictions: total amount raised up to US$600K; each investment limited to US$1,500 • June 2015 - Malaysia SEC approved six equity crowdfunding sites • Singapore – equity crowdfunding regulatory review underway
  27. 27. 27 6XXXX Douglas Abrams Calculate investor’s ROI including dilution
  28. 28. 28 6XXXX Douglas Abrams Cap table
  29. 29. 29 6XXXX Douglas Abrams Key elements of a venture deal  Board of directors  Protective provisions  Drag-along agreement  Conversion Control  Price-per-share  Valuation  Amount of financing  Liquidation preference  Vesting  Options pool  Anti-dilution  Pay-to-play Economics
  30. 30. 30 6XXXX Douglas Abrams Contact us • Douglas Abrams • Expara – dka@expara.com – www.expara.com • You can also contact me on: – Facebook, Linked-In, Line, Whatsapp, WeChat • Singapore mobile: 65-9780-5381 Singapore HQ Block 71 Ayer Rajah Crescent #$02-10/11 S139951 Regional offices: Bangkok, KL, HCMC, Tokyo

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