Investment Analyst Guy Wallace explores the fundamental principles of venture capital and the different pathways into the industry for Textbook Ventures.

1. 1
Breaking into Venture Capital
Guy Wallace
Investment Analyst
September 2019
Reinventure & Textbook Ventures

2. 2
1. Intro to
Venture Capital
2. Valuations &
Funding Rounds
3. Due Diligence
Snapshot
4. Pathways into
Venture Capital
Agenda

3. 3
Start-up vs. SME
Start-up
New and experimental business models
Focused on growth
High risk
Equity financed
SME
Follows existing business models
Focused on sustainability
Low risk
Debt financed

4. 4
Private Equity vs. Venture Capital
Private Equity
Established companies with substantial revenues
Established business models
Look for under performing assets
Take controlling stake 51 – 100%
2-3x return on each investment
Venture Capital
Early stage companies with limited revenues and profit
New and emerging business models and products
Look for high growth assets
Take minority stake 10-20%
10x return on each investment, long-term investments

5. 5
What is Venture Capital?
Start-up financing cycle:
Series C +
Series B
Revenue
Avg. Funds Raised
Bootstrapped
By Founder(s)
Angel Investors
Accelerators
Exit:
IPO
Trade Sales
Management Buyout
Venture Capital
Early Stage Later Stage
Series A
Seed Capital
Runway
$1m $2-$5m $10 - $20m $20m+
12m 12-18m 24m 24m+
Definition:
Venture Capital is a form
of funding which
specifically invests in
new businesses with
high growth potential
and super normal
returns.
Examples:
2005 - Accel Partners
investing $12.7m in
Facebook
2008 – Sequoia Partners
investing $8m in
WhatsApp

6. 6
The Key Premise of VC is Convexity
Possible
Upside
Possible
Downside
VentureCapitalPayoff
f(x)
Time
(x)
2005 Accel Partners invested
$12.7m (Series A) in Facebook
for 10% equity
In 2010, Accel sold off ~2% of
their stake at
247x
initial investment value.
The remaining ~8% would be
worth
3,302x
initial investment value today.

7. 7
A Brief History of Venture Capital
Company Building
1946 1972 20102007 2009 2011 2014 2017
First VC Accelerator Equity Crowdfunding
SPAC
Sand Hill Rd
Platform VC
ICO
Product Crowdfunding
VC ICO
2005
Angel List
1946 1972 20102007 2009 2011 2014 20172005

8. 8
Venture Capital in Australia
Sources: AVCAL, Cbinsights, PitchBook, KPMG
154 124
325
568
1320
2013 2014 2015 2016 2017
Australian VC Fundraising ($m)$1.3B
Funding in 2018
160
Deals in 2018
+24.37%
YoY Deal growth
~68
Venture Capital firms
$131B
Funding in 2018
8,948
Deals in 2018
+12.28%
YoY Deal growth
~798
Venture Capital firms
Australia U.S.

9. 9
The Structure of a VC Fund
Venture Capital Fund
Limited PartnersInvestment Team
General Partners
Portfolio
Company
Portfolio
Company
Portfolio
Company
Portfolio
Company
Capital Interest
Carried Interest &
Management Fees Average Fund Lifetime: 7-10 years

10. 10
Types of Venture Capital
Standard VC Corporate VC
• Financial objectives
• Dedicated funding
• Long term
• Strategic objectives
• On balance sheet
• Holding period can
change
• Access to networks
• Operational expertise
• Access to distribution
• Access to deep industry
expertise
Structure
Value add
• Financial objectives
• Dedicated funding
• Long term
• Distribution
• Industry expertise
• Access to networks
• Operational expertise

11. 11
Current Areas of Interest
Fintech
A.I
Blockchain
Cyber
Security
Data
Payment
Solutions
Crypto
P2P
Lending

12. 12
1. Intro to
Venture Capital
2. Valuations &
Funding Rounds
3. Due Diligence
Snapshot
4. Pathways into
Venture Capital
Agenda

13. 13
Valuing a Start-up

14. 14
Valuing a Start-up
Series C +
Series B
Revenue
Avg. Funds Raised
Exit:
IPO
Trade Sales
Management Buyout
Early Stage Later Stage
Series A
Seed Capital
Valuation
$1m $2-$5m $10 - $20m $20m+
~$4m ~$10-25m ~$50-100m ~$100m+
Key Principles:
No more than 20-25%
dilution in any given
round
Valuations are usually
based off revenue
multiples
A balancing act between
the entrepreneur, the
investors, deal tension,
team, opportunity etc
etc….

15. 15
Example: Facebook

16. 16
1. Intro to
Venture Capital
2. Valuations &
Funding Rounds
3. Due Diligence
Snapshot
4. Pathways into
Venture Capital
Agenda

17. 17
Reinventure Investment Process
Inbound To Be Assessed
Commercial
Review
Due Diligence Closed
Potential investments comes from a number of sources. The most credible generally come via a warm introduction from a
third party. Other sources include meeting founders at various events, cold emails into info@reinventure.com.au and
general word of mouth. Deals can be passed on at any point, however the complete deal process is as follows:
Fresh deals that
have come in
from one of the
sources above
Deals that are
being looked at
more closely
determine
whether more
through DD
should take place
Deeper analysis of
the company to
determine
whether a term
sheet should be
issued
Term sheet to be
agreed with
legal and
technical DD to
begin
Once all parties
are satisfied deal
closes and
company joins
the Reinventure
portfolio

18. 18
Core Fintech Adjacencies
Embedded
Financial
Services
Blockchain
Investment Thesis

19. 19
Decision Criteria
Founding Team
Total Addressable
Market
Deal Terms
Competitive Landscape
Metrics / Unit Economics
Defensibility / MOAT
Nature of Disruption
Problem & Solution

20. 20
30 Investments
over 5 years
* Above excludes exits & unannounced
$150m under management

21. 21
1. Intro to
Venture Capital
2. Valuations &
Funding Rounds
3. Due Diligence
Snapshot
4. Pathways into
Venture Capital
Agenda

22. 22
Pathways into VC: There is no specific pathway!!
University
Student
Venture
Capital
Corporate
IB, MC etc.
Start-up
Operational role
Founder
VC/PE Internship

23. 23
It Comes Down to Having Fundamental Skills
Are you highly analytical? But also creative?
Do you have a passion for new technology?
Are you comfortable with ambiguity?
Do you possess strong intellectual curiosity?
Do you act with high conviction?
Can you spot trends?
Are you a quick learner?