Sven Illing is a business developer, adviser and investor working with hi-tech companies. In his lecture he gave an overview of the topic, drawing examples from his personal experiences. The talk touched upon the following topics: • Overview of the venture capital industry in Europe and the U.S.; • Early stage financing options for start-ups, including start up accelerators; • Practical steps in the capital raising process. Sven Illing is a startup adviser and investor through iCapital and startup accelerators GameFounders and Buildit. During last 10 years he has helped 100+ teams with advice & contacts and invested in 37 startups.

1. Title
Introduction to
venture capital
Sven Illing, iCapital
October 16, 2014 at Estonian Business School for JCI Tallinn BeWise

2. Background
Contacts:
sven@icapital.ee
@contactsven
angel.co/contactsven
 2001 – 2003 co-founder of software company Vision Group
 2006 – 2010 helped startups at Tartu Science Park
 Judge at Garage48.org, Brainhunt, Seed Forum
 2009 - ... founder of iCapital
 investing + advising startups on business development & raising capital
 co-founder of GameFounders startup accelerator (2012)
 investment adviser at Buildit startup accelerator (2014)

3. Topics today: broad & narrow
 Some data about VC industry in the U.S. and Europe
 Early stage financing options for start-ups
 Practical steps in the capital raising process
3

4. How much did VC-s invest in the US in 2013?
$29.4B in 3,995 venture deals
4
nvca.org

5. How many VC-s in the US?
5

6. 6
NVCA Yearbook 2014 | www.nvca.org

7. Who are the top VC-s?
7

8. 8

9. How many VC firms in Europe?
9

10. 10
Venture capital in Europe - investments

11. Topics today
11

12. 12
Venture capital in Europe - exits

13. 13
Venture capital in Europe – exits by route
2013 European Private Equity Activity, evca.eu

14. How to fund your startup?

15. How to fund your startup
 Bootstrapping
 Banks, credit cards
 FFF
 Grants and support
 Crowdsourced donations/pre-orders: Kickstarter, Indiegogo etc
 Crowdfunding: seedrs.com, crowdcube.com etc
 Meet investors online: AngelList, Gust, F6s etc
 Startup accelerators
 Business angels
 VC-s

18. Bootstrapping
 „We made 500 of each (Obama O's and Cap'n McCains). They
were a numbered edition on the top of each box, and sold for $40
each. The Obama O's sold out, netting the funds we needed to
keep Airbnb alive. The Cap'n McCains... they didn't sell quite as
well, and we ended up eating them to save money on food.“
Joe Gebbia, co-founder of Airbnb
http://www.avc.com/a_vc/2011/03/airbnb.html

19. Airbnb in 2014
500,000 listings in 33,000 cities in 192 countries

20. What website?
http://www.crunchbase.com/organization/airbnb

21. Meet investors online: AngelList
 Online service that matches early stage companies with angel
investors. Syndicated investments platform.
 36 000 startups (Oct 2014)
 800 000 people (founders, advisors etc ), inc 34 000 investors
 Thousands of startups on AngelList have gone on to raise big
rounds.

23. AngelList
 Latvia – 18 startups (2012)  127 (Oct 2014) http://angel.co/latvia
Avg valuation $2.5M
 Estonia – 50 startups (2012)  195 (Oct 2014) http://angel.co/estonia
Avg valuation $3.7M

25. Startup accelerators
 > 2000 globally (F6s.org); <200 major ones (seed-db.com); 20 top
programs
 These used to be usual terms:
 3 months program full of mentoring and pitch training
 $20 000 for 8% equity
 ends with a demo day (pitching to investors)
 Top programs:
 Y Combinator, TechStars, 500 Startups in the US
 Seedcamp, Startupbootcamp in Europe
 Vertically focused accelerators, e.g. Rockhealth, GameFounders

26. 1ST STARTUP ACCELERATOR
IN NORTHERN AND EASTERN EUROPE
FOCUSED ON HARDWARE
• Up to 20kEUR for 6-12% of equity EUR inve
• 3 months program program
• 90+ mentors high-profile
• prototyping facilities

27. Application round open
until Dec 15
for Spring 2015 batch

28. Angel investing in the US (2013)
 300 000 active angels
 385 business angel networks with 10-15 000 acredited angels
 Angels invested $24,8B into 70 730 ventures:
Software – 23% of the number of investments; Media – 16%;
Healthcare – 14%; Biotech -11%; Retail – 7%; Financial Services – 7%
 Average angel deal size - $350k (syndicated)
 Average equity received -12.5% with a deal valuation of $2.8M
 Average individual investments - $83k
28
http://paulcollege.unh.edu/research/center-venture-research

29. Angel investing in Europe (2013)
 468 business angel networks
 271 000 business angels
 33 430 investments, 5.5B EUR in total
 Average investment per startup 165kEUR
 Average investment per business angel 20kEUR
29
www.eban.org

30. Angels & FFF invest most
In the US:
 VC-s invest <$1B in seed stage and <$10B in early stage
 Business angels invested $20B into 62 000 companies in 2010
 FFF-s invested $60B (mostly into non-tech)
 462 active firms (2010)
 300 000 angels
 millions on FFF
nvca.org

31. Fundraising process

32. Fundraising
 Why fundraise?
 How much?
 When?
32

33. Fundraising
 From whom?
 How to get a meeting with an investor?
 Who can make the best intros?
Ranking from „Pitching Hacks“:
• Entrepreneurs
• Fellow-investor
• Tech gurus, professors
• Lawyers, accountants etc
• Communists
• Someone the investor met at a party once
33
http://venturehacks.com/pitching

34. Introducing Airbnb
from: Paul Graham
to: Fred Wilson, AirBedAndBreakfast Founders
date: Fri, Jan 23, 2009 at 11:42 AM
subject: meet the airbeds
One of the startups from the batch that just started, AirbedAndBreakfast,
is in NYC right now meeting their users. (NYC is their biggest
market.) I'd recommend meeting them if your schedule allows.
I'd been thinking to myself that though these guys were going to
do really well, I should introduce them to angels, because VCs would
never go for it. But then I thought maybe I should give you more
credit. You'll certainly like meeting them. Be sure to ask about
how they funded themselves with breakfast cereal.
There's no reason this couldn't be as big as Ebay. And this team
is the right one to do it.
--pg http://www.paulgraham.com/airbnb.html
34

35. Fundraising
 How to prepare?
• research the angel / the firm and partner
• elevator pitch, 1-pager, deck
35

36. Where to look up investors?
 www.angellist.com
 www.crunchbase.com
 www.forbes.com/midas/list/
 www.evca.eu/about-private-equity/for-entrepreneurs/find-an-investor/#
csearch
 www.gust.com
 www.angelcapitalassociation.org/directory/
 www.eban.org/members/
36

37. What do investors look for?
• Team
• Team
• Team
• Traction
• Market size
• Disruptive technology, patented/protected
37

38. Team
Nieh * says that though he was excited to work with Fadell
again when it came time to invest in Nest, “…our excitement
went off the charts when we met Matt Rogers, Tony’s co-founder,
who was responsible at Apple for iPod software
38
development and one of the first engineers on the original
iPhone team. We would have invested had they been looking
to start a food truck.”
http://techcrunch.com/2014/01/13/google-just-bought-connected-device-company-nest-for-3-2b-in-cash/
* Peter Nieh is a partner at Light Speed Venture Partners and investor in Nest
Labs

39. Size matters
from: Fred Wilson to: Paul Graham date: Fri, Feb 13, 2009 at
5:29 PM subject: Re: airbnb
I met them today
They have an interesting business
I'm just not sure how big it's going to be
fred
39
http://www.paulgraham.com/airbnb.html

40. Fundraising
 Valuation
 Lead-investor
 Termsheet
 Due diligence
 Closing
40

41. Early stage investors in Estonia
 Smartcap.ee (Early Fund II, 25M EUR)
 estvca.ee – Estonian Venture Capital Association has 16 full
members
 new funds coming
 estban.ee – 70+ business angels
 invested >3M EUR in 2013
 average investment 68k EUR in 2013
 9 pitching events annually; uses Gust.com
 syndication

42. Estonian startups with most capital raised
(as of Oct 2014)
EUR
1. Transferwise.com 24 100 000
2. AdCash.com 20 000 000
3. GrabCAD.com 11 299 000
4. Fits.me 11 000 000
5. Fortumo.com 5 150 000
6. Realeyes.com 4 705 000
7. Zeroturnaround.com 4 360 000
8. Clifton.ee 3 925 000
9. Modesat 3 750 000
10. Erply.com 3 243 846
11. Pipedrive.com 2 383 000
12. Defendec.com 1 850 000
Source: As reported by media or people familiar with the matter. Crowdsourced by Estonian startup community

43. Finding capital
 „Someone once told me that the probability of an
entrepreneur getting venture capital is the same as getting
struck by lightning while standing at the bottom of a
swimming pool on a sunny day. This may be too optimistic.“
 Guy Kawasaki, partner at Garage Technology Ventures

44. Thank you!
Red Bull Stratos jump by Felix Baumgartner