Rise of the Micro VC


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My presentation from the BVCA (British Venture Capital Association) conference talking about why we have seen the rise of the Micro VC. It's a natural outcome from a changing startup world.

Published in: Economy & Finance

Rise of the Micro VC

  1. “Strange Case of Dr. VC and Mr. Entrepreneur”<br />
  2. What We Do<br /><ul><li>A new kind of venture fund: “for entrepreneurs, powered by entrepreneurs
  3. Investors are successful entrepreneurs who give their time and money
  4. Based in London, with European-wide focus
  5. Focus on the equity gap; investing between £0.5m and £2m per deal
  6. Targeting capital efficient, Internet/mobile companies</li></li></ul><li>VCs and Entrepreneurs …two sides of the <br /> same coin…<br />
  7. Some Perspective<br />Non Equity Finance<br />Equity Financing<br />Angel Financing<br />Self Finance / <br />Bootstrapping<br />Venture Capital<br />Debt / <br />Bank Finance<br />Private Equity<br />Customers!!!<br />Public Stock Markets<br />
  8. VC is a Marriage of Convenience…<br />
  9. VC wants<br />Entrepreneur Wants<br /><ul><li>Passionate team
  10. Large market
  11. Amazing technology
  12. Fast growing
  13. Easily monetisable
  14. A chance to make “outsized returns”
  15. Cash
  16. Strategic Advice
  17. Mentoring
  18. Recruiting
  19. Introductions / biz dev
  20. A chance to build a great company (and “outsized returns”)</li></li></ul><li>Traditional VC Model<br />
  21. Old-School Fundraising<br />$ Invested<br />Success<br />
  22. Old-School Fundraising<br />$ Invested<br />Success<br />
  23. Old-School Fundraising<br />$ Invested<br />Success<br />
  24. Old-School Fundraising<br />$ Invested<br />Success<br />
  25. Old-School Fundraising<br />Private Equity / <br />Public Markets<br />VCs<br />FF&F<br />Angels<br />$ Invested<br />Success<br />
  26. Everything has Changed<br />
  27. What has Changed for the Startup?<br /><ul><li>Product
  28. Marketing
  29. Platforms
  30. Revenue
  31. The ENTIRE Cost Structure</li></li></ul><li>Moore’s Law of Lean Startups<br /><ul><li>Lean startups are predicated on generating more output on less input; i.e., more power from a less expensive box
  32. It is miniaturization – the Moore’s Law of Lean Startups</li></li></ul><li>Capital Needs<br />$ Invested<br />Success<br />
  33. Capital Needs of Lean Startups<br />$ Invested<br />Success<br />
  34. Fit?<br />Private Equity / <br />Public Markets<br />VCs<br />FF&F<br />Angels<br />$ Invested<br />Success<br />
  35. Dilemma<br />VCs<br />FF&F<br />Angels<br />$ Invested<br />Success<br />
  36. Is the Traditional VC Model Broken?<br />
  37. In Need of an Overhaul - Symptoms<br /><ul><li>Less capital needed = hard to put large fund to work
  38. Earlier, smaller acquisitions of VC-backed companies = hard to generate required returns
  39. Active v passive investment = need fast read on company progression
  40. Great for angel and entrepreneurs, not so great for big VCs?</li></li></ul><li>
  41. Diagnosis: Misalignment of Interests?<br /><ul><li>Large funds = pressure to put more money to work
  42. Too much cash in = wrong pre-money valuation
  43. Push for larger exits above natural range = divergent view of success....
  44. All shareholders SHOULD have the same goals</li></li></ul><li>Ch-Ch-Changes?<br />
  45. Industry Response<br /><ul><li>Rise of smaller, entrepreneur funds
  46. Super-Angels / Micro-VC
  47. In Europe, we now have critical mass to make this happen:
  48. Index Seed, PROfounders Capital (Lastminute.com, Bebo), Atomico (Skype)
  49. Notion Capital (MessageLabs), WhiteBearYear (Last.fm, QXL)
  50. Kima Ventures (Iliad), ISAI, Jaina Capital (Meetic.com)
  51. European Founders Fund (Jamba, Alando), TeamEurope Ventures (Spreadshirt)
  52. HackFWD (Xing)
  53. LifeLine Ventures (Jaiku)</li></li></ul><li>Concerns about this new paradigm?<br />
  54. Aspiration?<br />“An entire generation of entrepreneurs are building dipshit companies and hoping that they sell to Google for $25 million.”<br /> Unnamed venture capitalist<br />
  55. Europe<br />
  56. Let’s Remember<br /><ul><li>Great platform
  57. Strong technical skills
  58. Great role models
  59. Good areas of expertise - (ecommerce in France, mobile in Scandinavia, digital media in London)
  60. Know how to build for multi-countries at first launch
  61. Not Silicon Valley, so what?
  62. An entrepreneur is and entrepreneur!</li></li></ul><li>Questions?<br /><ul><li>sean@profounderscapital.com
  63. twitter.com/setonrog</li>