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How UK/EU games studios and tech startups can raise Silicon Valley venture capital

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Digital entertainment and tech lawyer Jas Purewal uses his decade of experience in the UK, EU and Silicon Valley to explain how UK and European games studios and tech startups can access venture capital, especially from Silicon Valley: why it is so hard to do, why now is a better time than before and finally 10 top tips to help make it happen.

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  • BTW wow lot of good intel!.... Also you can send your pitchdeck to thousands of VC's and Angel's with just 1 click. Visit: Angelvisioninvestors.com
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How UK/EU games studios and tech startups can raise Silicon Valley venture capital

  1. 1. How UK/EU games and tech companies can raise Silicon Valley venture capital Jas Purewal 25 September 2014 GameHorizon Investment Summit
  2. 2. 2 A quick word about this presentation (1) Warning: this slide-deck has lots of text. It ain’t pretty, but it should be useful. (2) Feel free to share this slide-deck, but please be nice – mention our name when you share it  (3) This presentation was prepared for games companies but a lot of it applies to any EU tech startup.
  3. 3. What we’ll discuss 3 1. Tough love: raising SV venture capital is HARD 2. The opportunities… 3. 10 top tips for a UK/EU games company raising SV venture capital
  4. 4. About me 4 I’m a digital entertainment and tech lawyer. 10 years in London, Silicon Valley, then founded my digital entertainment legal and business consultancy, Purewal & Partners, in London in 2014. I also write www.gamerlaw.co.uk. Silicon Valley: UK and EU:
  5. 5. 5 Tough love: it’s very, very hard for a UK or European games company to raise Silicon Valley venture capital
  6. 6. Equity finance/venture capital isn’t right for everyone Normal equity finance route: bootstrap/F&F/seed>angel>VC…Doesn’t work for everyone. • There are plenty of alternative options to equity finance. • Do you want to give away control (15-30+% for $300k - $2m+)? • Do you want to have outsiders involved in the company? • Do you want to them to have ultimate control over your games and business? • Do you want to have your investors guiding you towards an eventual exit? • Even if you do want equity finance, it doesn’t have to be from Silicon Valley: there are EU alternatives these days. 6
  7. 7. The world according to Silicon Valley VCs What the VC thinks is important: Team Traction Product Market Exit opportunities Location Value-add ability What games developers think are 7 important: Their game Platform Genre Creative vision ????? Profit
  8. 8. It’s hard for ANY games company to raise Silicon Valley venture capital Mitch Lasky, Benchmark Capital: “For the vast majority of game companies…Most game development should be financed through other means. I frequently tell entrepreneurs who pitch me a promising game idea that they will make more money by bootstrapping, or seeking publisher financing, rather than venture financing.” (http://mitchlasky.biz/should-venture-capital-fund-games-companies/ Kristian Segerstrale, Initial Capital: “You have to be building a game company and not just a game for venture funding to make sense. And for a venture fund to consider gaming investments, you need to understand the sector.” (http://techcrunch.com/2013/06/17/gaming-venture-capital) 8
  9. 9. Example: it’s hard for UK games companies to attract Silicon Valley venture capital 9 20 18 16 14 12 10 8 6 4 2 0 $18.5m $11m (disclosed) 2012 2013 2014 Year Amount raised ($m) by UK games companies from SV VCs 10 9 8 7 6 5 4 3 2 1 0 2012 2013 2014 Year No. of SV VC deals involving UK games companies Source: Crunchbase data export, 23 Sept 2014. THESE GRAPHS DEPENDS ON THE ACCURACY OF THE CRUNCHBASE DATABASE! Available at: https://dl.dropboxusercontent.com/u/27648483/crunchbase_monthly_export%20Sept%202014%20v0.1.xlsx.
  10. 10. Compared to Silicon Valley investment in UK companies generally 10 3,020 2,520 2,020 1,520 1,020 520 20 $1.2bn $994m $2.8bn 2012 2013 2014 Millions Year Amount raised ($m) by UK companies from SV 120 100 80 60 40 20 0 117 109 105 2012 2013 2014 Year No. of SV deals involving UK companies Source: Crunchbase data export, 23 Sept 2014. THESE GRAPHS DEPENDS ON THE ACCURACY OF THE CRUNCHBASE DATABASE! Available at: https://dl.dropboxusercontent.com/u/27648483/crunchbase_monthly_export%20Sept%202014%20v0.1.xlsx.
  11. 11. 11 But there are opportunities…
  12. 12. Why there are still (some) opportunities for UK/EU games companies and Silicon Valley venture capital (ish) 1. Overall global gaming market still very buoyant 2. The Zynga ghost is departing (?) 3. Recent US/UK M&A track-record: NaturalMotion, Deepmind (?), King.com… 4. Rising profile of London as a startup hub (ish…) 5. UK costs considerably cheaper than SV costs (?) Not a slamdunk though: long history of ignorance, plus pivot to Asia… 12
  13. 13. US VCs in games: top tier (CAVEAT: there are very few VCs actually specifically interested in games investment. There are a LOT of VCs with varying levels of interest over time. Not a complete list by any means!) Benchmark (Mitch Lasky): Gaikai, Riot, NaturalMotion, Meteor Entertainment, Red Robot, Hammer & Chisel Andreessen Horowitz (Marc Andreeseen): Zynga, Minomonsters, Anki, Syntertainment, TinyCo, Oculus Rift 13
  14. 14. US VCs in games: mid tier IDG (Phil Sanderson; mid-stage): FreshPlanet, Funzio, Iddiction, Midverse Studios, Phoenix Guild, Playdek, Telltale Games, Plain Vanilla Mayfield Fund (Tim Chang; early-stage): Ouya, Playdom, Syntertainment, Lumosity, Badgeville, ngmoco, Signia Venture Partners (Rick Thompson/Sunny Dhillon; early-stage): Grand Cru, Rumble, Iddiction, Red Robot, Funplus Sequoia Capital (various; full-range): Unity, Stardoll, Atom, GameFly, Humble Bundle, Plain Vanilla 14
  15. 15. US VCs in games: others Bessemer Venture Partners (Ethan Kurzweil; mid-stage): OMGPOP, Playdom, Twitch Crosscut Ventures (Clinton Foy; early-stage): Super Evil Mega Corp. eVentures (Charles Yim; early-mid stage): DeNA, Fight my Monster, Plain Vanilla, Playhaven, Asian studios Google Ventures (Joe Kraus; early-stage): Disruptor Beam, Kabam, ngmoco, Rumble, tenXer Greycroft (various people; mid-stage; NYC/LA): Fight my Monster, Plain Vanilla, Game Salad, K2, Playdek 15
  16. 16. US VCs in games: others Institutional Venture Partners (various people; late stage): Ngmoco, Zynga, Supercell Kleiner Perkins (Bing Gordon; mid-late stage): Zynga, ngmoco, Ouya Lightspeed Venture Partners (Jeremy Lieuw; mid-stage): Playdom, Kongregate, Kixeye Rustic Canyon Partners (Nate Redmond; early-mid stage): Gaikai, Live Gamer, Meteor, Playfirst, Trion Worlds Triple Point Ventures (Kai Tse, early-mid stage): Riot, Rumble Entertainment, Live Gamer, Gaikai, IMVU, Playnomics 16
  17. 17. 17 10 top tips for a UK or EU games company raising venture capital
  18. 18. (1) Get your essentials right 18 Remember this? $60m VC $163m VC $36m VC
  19. 19. (2) Get the VC’s essentials right Why are you approaching this VC? What interest has he/she demonstrated in your space? Why is this VC specifically right for you? Is the VC actually making investments? 19
  20. 20. (3) Get over there To raise VC, there is simply no substitute for actually being near the VC. Besides, it can take months. Don’t believe me? Ask Remember Silicon Valley isn’t just a single place. It stretches from San Francisco to San Jose… 20
  21. 21. 21
  22. 22. (4) Put the time in Raising VC will take at least 5-6 months, if not considerably longer: identifying VCs, pitch process, post-pitch process, due diligence, legals. It will consume at least 50%+ of the CEO’s time, as well as other management time. It will be extremely stressful and a distraction from actually running the company. By the time you’ve closed one round, you probably will need to think about another. It isn’t for the faint-hearted. 22
  23. 23. (5) “VCs don’t want to meet you, they want to be introduced to you” VCs get thousands of applications every year – they need to use filters. Direct approaches seldom work. Talk to: other startups, successful startup founders, financial advisors, lawyers, EU based financiers. Remember, ‘lines not dots’ (http://www.bothsidesofthetable.com/2010/11/15/invest-in-lines-not-dots/). In the USA, make use of UK Trade & Investment! Hat-tip for the catchphrase: Jason Friedman (http://blog.42floors.com/investors-dont-want-meet-wanted-introduced/) 23
  24. 24. (6) Make life easier for VCs Be ready to move over. Reduce the perception of foreign entanglement. Clean corporate structure/cap table. Have the right advisors. 24
  25. 25. (7) Have the right slide-deck 10/20/30/Rule (http://blog.guykawasaki.com/2005/12/the_102030_rule.html) Cultural localisation: are you being too British/European? Know your stuff backwards and forwards. You won’t have as much time as you think. Remember traction is king. 25
  26. 26. (8) Hope for the best, plan for the worst You will get knocked back, a lot. Californians rarely say ‘no’. Ask for specifics/feedback. You will have much rosier expectations than is the reality. That’s ok – account for it. More: http://epaley.com/2013/11/12/vaporizing-vc-interest/. 26
  27. 27. (9) “The horse, the rabbit and the heads-up” You will need a negotiation strategy to win term sheets (hint: good lawyers are good at this). Summary: (1) Keep a competition going or choose your selection carefully. DON’T JUST NEGOTIATE WITH ONE FINANCIER UNLESS THERE IS A REALLY GOOD REASON. (2) Be prepared to walk away if the deal isn’t right. (3) Control the timeframe. (4) Be upfront and honest (up to a point). (5) Remember a VC is both an investor and long-term partner. Hat-tip for the catchphrase: Ted Wang (https://medium.com/@twang/horses-rabbits-and-poker-b00d1bd56210) 27
  28. 28. (10) Close the deal Deal terms are a whole separate topic. Top tips: • Think carefully about: amount; valuation; dilution; control; future funding; founder impact; conditions and other adverse terms. • Use a good law firm (which may take a slice of equity too). In Silicon Valley: Fenwick & West, Wilson Sonsini, Perkins Coie, Orrick, Gunderson Dettmer, Cooley… • But use ‘standard’ term sheets if possible. • Get some good accountancy advice too (especially on international side/corporate flip). • READ. Venture Hacks, CrunchBase, TechCrunch, Re/Code, VC blogs, StartupDigest, Quora…Also http://startupclass.samaltman.com/. 28
  29. 29. Summary • It is pretty tough for any company to raise venture capital – especially from Silicon Valley, especially for games companies and especially UK games companies. • On the plus side, there are opportunities and the prospects may get better in the near future. • Prepare carefully and thoroughly before you even consider starting the process. It will take months. It will be hard work. But if your company is exceptional, it’s doable. • If you do raise Silicon Valley VC, strap yourself in for the ride… 29
  30. 30. Thanks! 30 ........................................................ E: jas@purewalandpartners.com W: www.purewalandpartners.com M: +44 774 760 3449 T: @gamerlaw ........................................................

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