10 Things You Should Know About VC

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Presentation made during an Event organized by ABE-BAO,
BECI and BVA

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10 Things You Should Know About VC

  1. 10 THINGS YOU SHOULD KNOW ABOUT « VC » ABE – BECI – BVA Event January 21rst, 2010
  2. Selected messages from the first Belgian Guide to VC <ul><li>Sophie Manigart </li></ul><ul><li>Olivier Witmeur </li></ul><ul><li>An initiative supported by: </li></ul>Olivier Witmeur, 21/01/2010
  3. Venture Capital / VC Capital-Risque Capital-Développement Risicokapitaal Seed Capital Start-up capital Private Equity / PE Durfkapitaal Olivier Witmeur, 21/01/2010
  4. 1. VC is typical inside entrepreneurial finance Risk level High Low Company maturity FFF BUSINESS ANGELS VENTURE CAPITAL STOCK MARKETS BANKS Low High Olivier Witmeur, 21/01/2010
  5. 2. High risks = High returns <ul><li>Typical expected yearly return: </li></ul><ul><ul><li>Seed: 60-100% </li></ul></ul><ul><ul><li>Start-up: 50-60% </li></ul></ul><ul><ul><li>Early development: 40-50% </li></ul></ul><ul><ul><li>Growth: 30-40% </li></ul></ul>RISK RETURN Olivier Witmeur, 21/01/2010
  6. 3. VCs are professionals with their own business strategy <ul><li>Multiple types of VC firms: public, private, captive… </li></ul><ul><li>They all have: </li></ul><ul><ul><li>Investment strategy </li></ul></ul><ul><ul><ul><li>Industry, region, maturity stage… </li></ul></ul></ul><ul><ul><li>Portfolio strategy (risk diversification) </li></ul></ul><ul><ul><li>Organizational structure </li></ul></ul><ul><ul><ul><li>Investment Manager </li></ul></ul></ul><ul><ul><ul><li>Investment Committee </li></ul></ul></ul>Olivier Witmeur, 21/01/2010
  7. 4. Equity for growth … not lifestyle BE AMBITIOUS. Olivier Witmeur, 21/01/2010
  8. 5. A very selective filter 1 100 80 2 Contacts Initial meetings 10 Start of Due Diligence Investment Proposal (term sheet) Investment DON’T GIVE UP AFTER A FIRST REJECTION. Olivier Witmeur, 21/01/2010
  9. 6. A systematic Due Diligence process Initial Contact In-depth analysis Negotiate Go / No go Go / No go Shareholder agreement Term sheet Pitch Initial meeting Business Plan More info items Closing From 6 to 9 months BE PREPARED. Olivier Witmeur, 21/01/2010
  10. 7. Define Exit route in advance <ul><li>Trade sales </li></ul><ul><li>IPO (Initial Public Offering) </li></ul><ul><li>Buy-back / MBO </li></ul><ul><li>DEFINE EXIT ROUTE IN ADVANCE. </li></ul>Olivier Witmeur, 21/01/2010
  11. 8. The value of a company is mainly based on its future <ul><li>Multiple valuation methods: </li></ul><ul><ul><li>Discounted Cashflow / Net Present Value </li></ul></ul><ul><ul><li>Multiple (from peer group) </li></ul></ul><ul><ul><li>Book value </li></ul></ul><ul><ul><li>Exit based value </li></ul></ul><ul><li>BE REALISTIC. </li></ul>Olivier Witmeur, 21/01/2010
  12. 9. A partnership with written rules <ul><li>Formalized in a term sheet and in a shareholder agreement </li></ul><ul><ul><li>Investment conditions and milestones </li></ul></ul><ul><ul><li>Corporate governance, incl. board composition, veto rights… </li></ul></ul><ul><ul><li>Reporting </li></ul></ul><ul><ul><li>Work agreement for the entrepreneurs, incl. good leaver/bad leaver clauses </li></ul></ul><ul><ul><li>Buying and selling shares </li></ul></ul><ul><ul><li>SOP (Stock Option Plan) </li></ul></ul><ul><ul><li>Non competition and non disclosure </li></ul></ul><ul><ul><li>Dispute litigation </li></ul></ul>ETHICS MATTERS. Olivier Witmeur, 21/01/2010
  13. 10. Smart money <ul><li>Best practices </li></ul><ul><li>Network </li></ul><ul><ul><li>Specialists </li></ul></ul><ul><ul><li>Industrial partners </li></ul></ul><ul><li>Access to more finance </li></ul><ul><li>Second opinion </li></ul><ul><li>Helicopter view </li></ul><ul><li>Exit preparation </li></ul>BETTER A SMALLER PART OF A MUCH BIGGER CAKE. Olivier Witmeur, 21/01/2010
  14. <ul><li>Q&A on www.venture-capital.be </li></ul>Olivier Witmeur, 21/01/2010

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