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DN Capital - How to build a Silicon Valley-like ecosystem

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DN Capital - How to build a Silicon Valley-like ecosystem

  1. 1. Top performance through backing leading entrepreneurs US-Poland Innovation Week 19 November 2014 1
  2. 2. DN is an early-stage and growth technology investor with top quartile performance • Established in 2000 with operations in London, Palo Alto and Berlin • 60+ years of combined investment experience • €239 million raised across 3 funds, investment in over 50 companies since 2000 • 2012 vintage Fund 3 €144m raised • 2008 vintage Fund 2 €47.5m • 2001 vintage Fund 1 €47.5m Portfolio Highlights CONFIDENTIAL 2 Exit Highlights
  3. 3. DN is a leading investor in consumer and enterprise technology across Europe and the US Seed investment DN led with CONFIDENTIAL 3 Acquired by Acquired by Acquired by Acquired by Acquired by Seed with David Sachs & Joe Lonsdale with Seed with Fabrice Grinda Seed investment with DN led with Acquired by Acquired by Acquired by Acquired by DN led with DN led with DN led with DN led with Invested with Invested with DN led Seed investment DN led with Core geographies DN led with Prospective geographies Exits DN led with DN led with DN led with Acquired by DN led with DN led with Acquired by Seed investment Seed Investment with DN led with DN led with DN led with DN led with
  4. 4. 4 How to Create a Vibrant Venture Capital Ecosystem Before starting… ALIGN OBJECTIVES Three VERY different types of Venture Capital  Scientific Discovery [example – Magnetic resonance imaging]  Capital Appreciation [use – bail out underfunded pension plans]  Cocktail Party Conversation [Snapchat, Twitter, Facebook]
  5. 5. 5 How to Create a Vibrant Venture Capital Ecosystem (1) Role of government Don’t: Provide direct funding to start-ups Do: Fund really, REALLY hard problems for Universities to solve Required Reading: Secret History of Silicon Valley by Steve Blank http://steveblank.com/secret-history/
  6. 6. 6 How to Create a Vibrant Venture Capital Ecosystem (2) Role of tax authorities Don’t: Provide tax breaks for general start up investing Do: Reduce capital gains for entrepreneurs, particularly if they do another start-up Defer capital gains tax for serial investors
  7. 7. 7 How to Create a Vibrant Venture Capital Ecosystem (3) Role of employment laws Don’t: Change the law to make it easier to be an entrepreneur Do: Change the law to make it easier to hire and fire fast
  8. 8. 8 How to Create a Vibrant Venture Capital Ecosystem (4) Role of universities Don’t: Encourage professors to leave to do start-ups Teach theory of entrepreneurship from non practitioners Do: Encourage Graduate Students to start companies Facilitate IP transfer Encourage professors to consult for start-ups Required Reading: Notes from Peter Thiel’s 2012 course at Stanford http://blakemasters.com/peter-thiels-cs183-startup
  9. 9. 9 How to Create a Vibrant Venture Capital Ecosystem (5) Role of lawyers Don’t: Focus on protecting down-side Do: Focus on finding ways to get things done fast
  10. 10. 10 How to Create a Vibrant Venture Capital Ecosystem (6) Role of first time founders Don’t: Take wild risks Consciously decide to be an entrepreneur Do: Start a business that other people think are risky but that you can make less risky Something to solve what keeps you up at night
  11. 11. 11 How to Create a Vibrant Venture Capital Ecosystem (7) Role of successful founders Don’t: Try to be an angel investor (at least not immediately) Do: Encourage your best lieutenants to set up new companies Give back to the community through teaching
  12. 12. 12 How to Create a Vibrant Venture Capital Ecosystem (8) Role of large enterprises Don’t: Change your business processes for “Intrepreneurship” or “20% time” Do: Encourage your most entrepreneurial employees to LEAVE (for now…) Acquire based on strategic importance not financial multiples
  13. 13. 13 How to Create a Vibrant Venture Capital Ecosystem (9) Role of acquirers Don’t: Acquire businesses to enter new geographies Do: Acquire businesses to enter new markets Encourage your corporate development team to work with (or eventually join) investment firms
  14. 14. 14 How to Create a Vibrant Venture Capital Ecosystem (10) Role of investors / venture capital firms Don’t: Hire people from buyout firms, accounting firms or public investors Do: Hire from industry: engineers turned product managers turned leaders
  15. 15. 15 How to Create a Vibrant Venture Capital Ecosystem Five general comments • Don’t be afraid to do a “copycat” business… but do improve on what is already there • Three part role of the Venture Capitalist, regardless of geography: • Build ties across geographies – most of the acquirers will NOT be domestic • Think like the next person up and down the food chain: Customer Entrepreneur VC • Have fun, always be learning, and like who you see in the mirror Limited Partner Capital Source Selection Anointment Governance
  16. 16. Contacts CONFIDENTIAL Authorised and Regulated by the Financial Conduct Authority DN Capital (US) Inc. 2882 Sand Hill Road, Suite 210 Menlo Park, CA 94025 United States of America Tel: +1 650 561 9300 info@dncapital.com www.dncapital.com Nenad Marovac Managing Partner Tel: +44 (0)20 7340 1602 nenad@dncapital.com Steve Schlenker Managing Partner Tel: +1 650 561 9300 steve@dncapital.com DN Capital (UK) LLP 2 Queen Anne’s Gate Buildings Dartmouth Street London SW1H 9BP United Kingdom Tel: +44 20 7340 1600 Fax: +44 20 7340 1601 The information above is issued by DN Capital (UK) LLP which is authorised and regulated in the United Kingdom by the Financial Conduct Authority. It does not constitute an offer for limited partnership interests in DN Capital – Global Venture Capital III, LP (“GVC III”). For full particulars of GVC III, prospective investors should refer to the private placement memorandum related thereto (the “PPM”). The contents above are incomplete and abbreviated, more detailed information is set out in the PPM, which may be made available to qualified investors upon request.

Editor's Notes

  • Solyndra failed because:

    Price of polysilicon fell sharply, so Solyndra’s pitch of low-cost solar panels wasn’t as strong with Chinese competitors entering market quickly
    Management made poor decisions on capital expenditures, other financing
    Energy department persuaded management to delay layoffs (until mid-term 2010 elections) despite significant challenges

    They couldn’t make their payments but DOE along with other family offices decided to invest an additional $75m (primarily loans for gov’t) but has hit bankruptcy
  • Founders of Google left their pHD to pursue their indexing / search of academic papers to build Google
    Tech transfer enables universities to retain high quality faculty and draw revenue from licensing
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