Introduction to Venture Capital IPIAM
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Short introduction to venture capital in Southeast Asia
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Introduction to Venture Capital IPIAM
- 1. October 2015 Venture Capital 5X High-risk high return investing Douglas Abrams
- 2. 2 6XXXX Douglas Abrams About the facilitator • Wharton MBA • JP Morgan – Vice President IB Technology, GM Internet Marketing • Parallax Capital Mgmt – Co-founder and MD Private Equity • Extream Ventures – Co-founder and MD S$20 million seed fund • Expara – Founder and MD IDM Ventures Incubator, advisory, training • NUS – Adjunct Associate Professor, Business School, Entrepreneurship, Sasin – Visiting Professor, Venture Capital
- 3. 3 6XXXX Douglas Abrams Expara timeline 2000-2015 3Overview of Expara 2000 20152000 2002 2004 2006 2008 2010 2012 2014 NUS Expara EIDMV I Extream EIDMV II EV III Parallax BANSEA KIMBA Sasin Expara Thailand Expara Malaysia Expara Vietnam Expara Japan I4-x
- 4. 4 6XXXX Douglas Abrams VC mindset • Risk and return are highly correlated • You cannot increase return without taking more risk Return Risk Potential outcomes
- 5. 5 6XXXX Douglas Abrams Why invest in venture capital? As of 31-Dec 2014 The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,569 U.S. venture capital funds (1,002 early stage, 175 late & expansion stage, 386 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. 1Pooled end-to-end return, net of fees, expenses, and carried interest. Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc. *Capital change only Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03
- 6. 6 6XXXX Douglas Abrams EIDMV I Extream Ventures EIDMV II Expara Ventures III 2008 to 2013 2012 to present 20152007 to 2011 • Singapore; • Fund size: S$1M; • Investment size: S$55K; • Focus: IDM. • Singapore; • Fund size: S$20M; • Investment size: S$1-3M • Focus: IDM, software, IT. • Singapore; • Fund size: S$4.55M; • Investment size:S$255K • Focus: IDM. Series A Seed Seed - Series A • South East Asia • Fund size: S$30M; • Investment size:S$0.1-3MM • Focus: ICT, innovation. Expara’s venture capital funds Pre-seed 6Venture capital • 17 investments • 4 > S$33MM in follow-on • Exit Oct-2013 at 36x ROI • Exit May 2014 at 250x ROI • Exit Oct 2014 at 26x ROI • Overall 5.39x on TIC • 3 investments • 1 exit • Jun-2015 at 2.4x ROI • 17 investments • 1 exit • Listing on NSX • 7 investments to date
- 7. 7 6XXXX Douglas Abrams Most fund returns are normally distributed
- 8. 8 6XXXX Douglas Abrams VC returns follow a power law
- 9. 9 6XXXX Douglas Abrams How does a VC fund work? Fund Investors VC 8 $ 10 mm 2 $ 10 mm $ 58 mm 25% 75%
- 10. 10 6XXXX Douglas Abrams Case study VC returns - CoAssets
- 11. 11 6XXXX Douglas Abrams Expara CoAssets investment • 2014 – we invest S$105K • Current market cap = A$54MM • Our current holdings valued = A$6.9MM – 6600% increase since 2014 • Total fund ROI upon successful liquidation of our position would be = ~420% since 2012
- 12. 12 6XXXX Douglas Abrams Why can some VC funds outperform? • Most funds cannot outperform due to information symmetry • VC invests in small, private companies • Huge information assymitries • Performance wholly dependent on: proprietary, high quality deal flow • And effective pricing and structuring
- 13. 13 6XXXX Douglas Abrams Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
- 14. 14 6XXXX Douglas Abrams How do VCs make money? • Trade sale – sell to another company • IPO – sell to the public through listing on an exchange
- 15. 15 6XXXX Douglas Abrams Trade sale or IPO? www.nvca.org
- 16. 16 6XXXX Douglas Abrams SEA Exits 2015 Company Country Acquiror Country_Acquiror Price Value Year Adplus Indonesia Yello Mobile South Korea Undisclosed 0 2015 Bidstalk Singapore AppLift Germany Undisclosed 0 2015 BuyBitcoin.ph Philippines Satoshi Citadel Industries Philippines Undisclosed 0 2015 City Delivery Philippines Food Runner Singapore Undisclosed 0 2015 Coin Republic Singapore meXBT Mexico Undisclosed 0 2015 Computerlogy Thailand Yello Digital Marketing Group South Korea Undisclosed 0 2015 Continuum Wind Energy Singapore SunEdison USA Undisclosed 0 2015 Ctrlshift Singapore Undisclosed 0 2015 Diadiemanuong.com Vietnam Chicilon Media Vietnam Undisclosed 0 2015 eProperty Track Singapore PropertyGuru Singapore Undisclosed 0 2015 Fabula Indonesia Kreavi Indonesia Undisclosed 0 2015 Flocations Singapore Venture Republic Japan Undisclosed 0 2015 Food by Phone Thailand FoodPanda Germany Undisclosed 0 2015 FoodPanda Vietnam Vietnam Vietnammm Vietnam Undisclosed 0 2015 Gushcloud Singapore Yello Mobile Korea Undisclosed 0 2015 Hipwee Indonesia Migme Australia Undisclosed 0 2015 I Logic Solutions Malaysia Galasys Plc Malaysia 1,970,000 2.8 2015 iProperty Malaysia REA Group Australia 534,000,000 751 2015 iTwin Singapore CloudDesk Singapore Undisclosed 0 2015 JustCommodity Singapore Allegro Development Corporation USA 20,000,000 30 2015 Kapanlagi Indonesia Mediacorp Singapore Undisclosed 0 2015 Lamido Indonesia Lazada Singapore Undisclosed 0 2015 Luxe Real Estate Singapore Squareyards India Undisclosed 0 2015 Luxola Singapore Sephora France Undisclosed 0 2015 MetroDeal Philippines Transcosmos USA 30,000,000 42.7 2015 MOXY Thailand WhatsNew Group Thailand Undisclosed 0 2015 MyProperty.ph Philippines Lamudi Germany Undisclosed 0 2015 Nassion Systems Malaysia Ricoh (Malaysia) Sdn Bhd Malaysia Undisclosed 0 2015 PayWhere Singapore PLDT Philippines 5,000,000 0 2015 PropertyKita Indonesia Lamudi Germany Undisclosed 0 2015 Propertytrack Singapore PropertyGuru Singapore Undisclosed 0 2015 Room Service Singapore FoodPanda Germany Undisclosed 0 2015 RumahDijual Indonesia PropertyGuru Singapore Undisclosed 0 2015 Shopdeca Indonesia Migme Australia Undisclosed 0 2015 Sieu Web Vietnam DKT (Bizweb.vn) Vietnam Undisclosed 0 2015 Signetique IT Singapore Exabytes Network Sdn Bhd Malaysia Undisclosed 0 2015 Singapore-Dine Singapore FoodPanda Germany Undisclosed 0 2015 Sold.sg Singapore Migme Singapore Undisclosed 0 2015 Spickify Singapore Helpling Germany Undisclosed 0 2015 Tab a Doctor Singapore Global Health and Travel Singapore Undisclosed 0 2015 Tappy Vietnam Weeby.co USA Undisclosed 0 2015 The Pragmatic Lab Singapore Alphacamp Hongkong Undisclosed 0 2015 ThinkOfLiving Thailand Iproperty Malaysia 4,600,000 0 2015 Triibe Singapore Mobikon India Undisclosed 0 2015 Voyagin Singapore Rakuten Japan Undisclosed 0 2015 Wala Vietnam VIVAS Vietnam Undisclosed 0 2015
- 17. 17 6XXXX Douglas Abrams SEA exit markets at an inflection point Exit activity in SEA increasing exponentially • Increased investment in startups since 2007 is beginning to yield results • Number of exits have doubled; value have increased by more than 15x
- 18. 18 6XXXX Douglas Abrams Why VC in SEA now? Historical challenges • Exits • Enterprise ecosystem • Innovation • Legal and corporate governance • Cultural attitudes Mitigation • Early stage valuations allow profitable local exits; regional focus allows larger exits • Regional bridge and expertise in building local network • Focus on innovative segments – new and traditional • Changing environment • Channeling entrepreneurial energy to scalability
- 19. 19 6XXXX Douglas Abrams Companies founded with venture capital www.nvca.org
- 20. 20 6XXXX Douglas Abrams Key elements for success • Solving a painful problem for customers – Value proposition • Developing an innovative product – Innovation • Customers and competitors – Market identification and analysis • Reaching customers – Marketing, sales and distribution strategy • Competing when others enter - Sustainable competitive advantage • Make money – Business model and financial plan • Team – A team or B team
- 21. 21 6XXXX Douglas Abrams Key venture finance terms Business model Financial projections Valuation Funding required and equity offered Use of Proceeds Exit Strategy and ROI Cap table
- 22. 22 6XXXX Douglas Abrams Company valuation methods • Price to earnings (p/e) • Dividend yield • Multiple of book value • Comparables • Discounted Cash Flow (DCF) • VC method
- 23. 23 6XXXX Douglas Abrams Stages and sources of funds Founder’s Capital Seed/ Angel Series A, B, C Mezzanine Pre-IPO IPO VC hurdle rates 60-100% 40-60% 20% Why are these rates so high? OM F,F&F Incubators corporations government Customers, suppliers, strategic partners VCs, Banks for VC loans
- 24. 24 6XXXX Douglas Abrams Crowdfunding VC - Kickstarter 243,074 88,613 63,000 110 Projects launched Successfully funded Raised less than 10K Raised 1MM or more
- 25. 25 6XXXX Douglas Abrams Crowdfunding VC – equity crowdfunding in US 13,400 662 125 100 VC funding Equity crowdfunding Real estate Tech US$MM
- 26. 26 6XXXX Douglas Abrams Crowdfunding VC – equity crowdfunding in SEA • May 2015 - Equity crowdfunding launched in Thailand • Restrictions: total amount raised up to US$600K; each investment limited to US$1,500 • June 2015 - Malaysia SEC approved six equity crowdfunding sites • Singapore – equity crowdfunding regulatory review underway
- 27. 27 6XXXX Douglas Abrams Calculate investor’s ROI including dilution
- 29. 29 6XXXX Douglas Abrams Key elements of a venture deal Board of directors Protective provisions Drag-along agreement Conversion Control Price-per-share Valuation Amount of financing Liquidation preference Vesting Options pool Anti-dilution Pay-to-play Economics
- 30. 30 6XXXX Douglas Abrams Contact us • Douglas Abrams • Expara – dka@expara.com – www.expara.com • You can also contact me on: – Facebook, Linked-In, Line, Whatsapp, WeChat • Singapore mobile: 65-9780-5381 Singapore HQ Block 71 Ayer Rajah Crescent #$02-10/11 S139951 Regional offices: Bangkok, KL, HCMC, Tokyo