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Startup Pirates Bratislava
Finance & Investment
24 June 2015
Michal Nešpor
Investment manager
Launcher and Crowdberry
Presentation for Startup Pirates 2015
PREDSTAVENIE
Michal Nešpor
Investment manager at the innovation studio LAUNCHER
and the equity based crowdinvesting platform
CROWDBERRY.
10 years experience in front, next and in start-ups.
5 years with a VC investments firm in Vienna, Austria. Early-
stage investments in AT, DE, CH and HU. CFO in a VC
funded startup, Austria / USA. Fundraising support for
various startups.
LAUNCHER supports innovations, build startups and make
them into real companies with international ambitions.
2
Presentation for Startup Pirates 2015
AGENDA
The right time for an investment
Who is the right investor for me
Investors types and company stages
Investors overview PRE-SEED and
SEED
Investors overview EARLY (VC’s)
Crowdfunding platforms
3
Further funding sources
Where to find non-cash support
International investors
Final recommendations
Contact
Presentation for Startup Pirates 2015
THE RIGHT TIME FOR AN INVESTMENT
What should a startup achieve before raising funds from investors? *
Obtian market feedback (validation of primary product idea)
Develop a functional prototype
Launch / Public beta towards the target customer group
Readiness to institutionalize (company incorporation and relationships between founders)
The above should be achievable within a short time span (3-6 months), with relatively low ressource
allocation (1-2 people, even next to a day-job) and with low cash investment (usually own).
* Relates to first time fundraising, not for follow-on funding rounds.
4
Presentation for Startup Pirates 2015
THE RIGHT INVESTOR
What should a startup consider when choosing an investor
Invesor type, enterpreneurship or pure financial background
Investor focus (industry, stage focus, geography, investment size)
Investor strategy and network (strategic investors vs. financial return oriented investors)
Recommendations and track record (previous investments and investment experience)
Wrond investor can lead to an unsolvable or even fatal situation.
Look for smart money!
5
Presentation for Startup Pirates 2015
INVESTOR TYPES AND COMPANY STAGES
6
START-UP CORE PRODUCT DEVEL MARKET ENTRY MARKET EXPANSION
Typical Investors
FFF
Business Accelerators
Business Angels
Business Angels
Seed VCs
Strategic Investors
VCs
Corporate VCs
Strategic Investors
Growth VCs
Buy-Out
Strategic Investors
Investment Size 5-50k EUR 100-500k EUR 1-5m EUR 10m+ EUR
Startup Age 0-3 months 3-18 months 18-36 months 36month+
Number of Employees 2 3-10 11-50 100+
Regional Examples
HubRaum (PL)
Pioneers Ventures (AT)
Launcher
Neulogy Seed Capital
Credo Ventures
Neulogy Venture Capital
J&T
Penta
Global Examples
Y-Combinator (US)
Seed Camp (UK)
500 Startups (US)
Eden Ventures (UK)
Sequoia Capital (global)
Accel Partners (global)
Index Ventures (global)
PRE-SEED STAGE SEED STAGE EARLY STAGE GROWTH STAGE
TIME
F
U
N
D
I
N
G
Idea
Prototype
PoC
Public Beta
Launch
Traction
Profitability
Intl. Expansion
Presentation for Startup Pirates 2015
PRE-SEED A SEED INVESTORS
1. Own cash from savings or better, from revenue
2. FFF - Family & Friends & Fools
3. Business Angels + Entrepreneurs (e.g. from IT or other industries)
Anton Zajac Michal Truban Michal Štencl
4. Business Accelerators – Slovakia + CEE
7
Presentation for Startup Pirates 2015
EARLY STAGE INVESTORS (VC)
4. Seed VCs + VCs + Corporate VCs
5. Strategic Investors (Corporations)
8
Presentation for Startup Pirates 2015
CROWDFUNDING / -INVESTING PLATFORMS
6. Reward based crowdfunding
7. Equity based crowdinvesting
9
Presentation for Startup Pirates 2015
OTHER FUNDING SOURCES
8. Banks – Bakning products and loans for entrepreneurs (rather rare)
9. EU funds
10. Awards
10
Presentation for Startup Pirates 2015
NON-CASH SUPPORT
11. Co-working
12. Enterprise programs for startup support
11
Presentation for Startup Pirates 2015
NON-CASH SUPPORT II.
13. Consulting 14. Média 15. Public agencies
12
Presentation for Startup Pirates 2015
FINAL RECOMMENDATIONS
Chose wisely! Every investor has an influence on a company.
Don‘t lose focues, building the product and the company is more important than chasing after investors.
If possible, raise more money, which will give you more runway for realizing your goals.
Don‘t get hung up too much on how much ownership you give away, look at the bigger picture.
If your business model and your company stage allows it, the best source of funding is your own cash from
operations (selling your products or services).
GOOD LUCK!
13
Presentation for Startup Pirates 2015
DISCUSSION & QUESTIONS
Do I need a business plan?
What is an investors slide deck?
Do I need an excel calculation?
14
Presentation for Startup Pirates 2015
CONTACT
15
2015 © All rights reserved
Ďakujem za pozornosť
BACKUP SLIDES
Presentation for Startup Pirates 2015
BUSINESS ANGELS
Private persons – support the company building process with capital but
also entrepreneurial know-how and network
Goal: private support of company set-up and grow, where banks consider
the risk too high and for institutional investors the funding need too low is.
Business receive a share in the company.
18
Presentation for Startup Pirates 2015
BUSINESS ANGELS
Bring capital, entrepreneurial and/or industry know-how and network
Have fun creating something new
EUR 50 – 500k investments
Superangels (USA) – successful entrepreneurs that can invest multiple
millions in a company
Return expectation – various but at least 20% p.a.
19
Presentation for Startup Pirates 2015
BUSINESS ANGELS – IMPORTANT
QUESTIONS
Entrepreneur:
Am I ready to open up my company? – Insight into the company and the
perception of losing control
Growth ambitions?
Realistic valuation?
Long-term management of the company?
Need of capital vs. know-how and network?
Why should the BA go with me?
What return opportunity do I offer to the BA?
Where do I find BAs?
How much investment experience does the BA have – Value Added?
20
Presentation for Startup Pirates 2015
BUSINESS ANGELS – IMPORTANT
QUESTIONS
BizAngel:
Personal fit with the entrepreneur?
Why should the entrepreneur go with me?
„Skin in the game“ of the entrepreneur
Product / service unique and realistic?
Market share, scalability and exit realistic and achievable?
21
Presentation for Startup Pirates 2015
BUSINESS ANGELS VS. PRIVATE EQUITY
Business Angels:
- invest own money
- provide network
- add credibility (bank, suppliers)
- invest long-term
22
Private Equity Fonds:
- invest primarily 3rd party money
- Fund management service for a
fee
- provide network
- add credibility (bank, suppliers)
- invest for definite periode (Exit!!)
Presentation for Startup Pirates 2015
VENTURE CAPITAL OVERVIEW
Venture Capital is an Investment Business (Who is the VC‘s customer?)
Goal: Generate risk-adjusted returns
Success factors
The right asset, in the right hands, at the right time
Create an environment where everybody has the right incentives & adequate
resources to succeed
Focus on upside is the best downside protection
Put your money where your mouth is
Exit / Sale of the company is as important as investment
Process: Invest in potential – create & enhance value – realise value
23
Presentation for Startup Pirates 2015
VENTURE CAPITAL INDUSTRY
24
Fund Management
Company
VC Fund
Managed
Funds
Exit Scenarios Trade
Sale
IPO Secondary
Sale
Buy
Back
Write
Off
Hands On
Management
Equity %
Return
Equity %
Investors Banks
Insurance
Co‘s
Pension
Funds
HNWI
PFC 1 PFC 2 PFC 4PFC 3 PFC 5
Portfolio companies
Presentation for Startup Pirates 2015
VENTURE CAPITAL INDUSTRY
VC FUND
Entity separate from the Management Company
Lifetime: 10 years
Typical portfolio: 10 – 20 companies (depending on fund size and fund
industry focus)
Holding period: 3 – 7 years
High return expectation
20-30%+ p.a. on the fund
50%+ p.a. or 5x / 10x on invested capital in portfolio companies
Strict investment strategy (industries, stages, geographies)
Careful investment selection and pressure to sell high and fast 
25
Presentation for Startup Pirates 2015
VENTURE CAPITAL INVESTMENT PROCESS
26
Source of
Investment
Partner
Networks,
Consultants,
other VCs
Screening &
Investment
Review
Weekly
Review:
• Screen
• Reject
• Allocate to
team
Prepare
Investment
Case
Term Sheet
Due Diligence
Deep Review
Prepare Investment
Committee Paper
Living with
the
Investment
Reporting
Updates
Contacts&
Introductions
Strategy & Peer
Reviews
Board Seat
Planned Exit
Exit
Planned Exit
Approval by IC
Execute
usually 6 – 9 months usually 3 – 7 years
IC Review
Finalise
Contract
Close Deal
Close
Deal
2 - 3 m
Getting
ready
Teaser
Investors
presentation
Business Case
Data room for
DD
Presentation for Startup Pirates 2015
ENTRY OF AN INVESTOR INTO A COMPANY
MECHANICS
27
Equity
Old shares
(30%)
Debt
(70%)
Liabilities
Σ 100
Fixed Assets
Current Assets
Cash
Assets
Σ 100
Capital raise
Acquisition of
NEW SHARES
+ 30
Σ 130
Equity
Old shares
(23%)
Debt
(54%)
Liabilities
+30 equity (23%)
New Shares
Presentation for Startup Pirates 2015
VC MODEL: VALUE – CREATE & REALISE IT
28
Impact of Equity Investor on Company Value
(Illustrative)
0
Company
value
Buy
(low)
(hands-on) financial investors directly
and indirectly influence all of these
Internal sources of value
 Earnings & revenue growth (organic and through
acquisitions)
 Multiple expansion (e.g. management &
profitability improvement)
 De-leveraging
 Company positioning & strategy
 Etc.
External sources of value
 Market dynamics
 Market appreciation in exit situation
 Etc.
Sell
(high)
Add value
(loads)
Presentation for Startup Pirates 2015
VALUE CREATION CASE STUDY
INTERNET SERVICE PROVIDER
29
Post-Money
Valuation
Investors
Founders
Multiple
2004-2005
>4x
>3x
>3x
ISP value development
2004-2005 (€m)
0
Revenue
growth
Profitability
increase
Debt
decrease
Management
improvement
Additional
Equity
2004
Expansion
round
€20m
2005
Exit:
M&A transaction
€95m
10
20
30
40
50
60
70
80
90
100
€m
ILLUSTRATIVE
Win-Win for all
VC contribution
 Brought in CFO
 Restructured balance sheet
 Managed turn-around
 Increased profitability
 Focus on exit and initiation
of trade sale
 Built walk-away position
Value driver influenced by investor only
Value driver influenced by investor & other factors
Value driver influenced by external factors (e.g. market dynamic)Source: GCP
 Realised Return for investors:
365% p.a. IRR
Presentation for Startup Pirates 2015
RETURN CALCULATION (INDICATIVE)
30
BizAngel Early-stage VC Expansion VC
Investment € 0,5m for 20% € 2m for 33% € 5m for 30%
Return Goal 20x 10x 5x
Exit Multiples 2-3x Revenue
8-10x EBITDA
Exit Valuation € 100m
Year 1 2 3 4 5 6 7 8 9
Revenue € 0,1m 0,5m 1m 2,5m 6m 10m 15m 25m 50m
EBITDA € -0,2m 0,3m -1.5m -0.5m 1m 2m 3m 5m 10m
Investment € 0,5m 2m 5m
INVESTMENT
COMPANY GROWTH
2015 © All rights reserved
Ďakujem za pozornosť

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Launcher at Conference Startup Pirates 2015

  • 1. Startup Pirates Bratislava Finance & Investment 24 June 2015 Michal Nešpor Investment manager Launcher and Crowdberry
  • 2. Presentation for Startup Pirates 2015 PREDSTAVENIE Michal Nešpor Investment manager at the innovation studio LAUNCHER and the equity based crowdinvesting platform CROWDBERRY. 10 years experience in front, next and in start-ups. 5 years with a VC investments firm in Vienna, Austria. Early- stage investments in AT, DE, CH and HU. CFO in a VC funded startup, Austria / USA. Fundraising support for various startups. LAUNCHER supports innovations, build startups and make them into real companies with international ambitions. 2
  • 3. Presentation for Startup Pirates 2015 AGENDA The right time for an investment Who is the right investor for me Investors types and company stages Investors overview PRE-SEED and SEED Investors overview EARLY (VC’s) Crowdfunding platforms 3 Further funding sources Where to find non-cash support International investors Final recommendations Contact
  • 4. Presentation for Startup Pirates 2015 THE RIGHT TIME FOR AN INVESTMENT What should a startup achieve before raising funds from investors? * Obtian market feedback (validation of primary product idea) Develop a functional prototype Launch / Public beta towards the target customer group Readiness to institutionalize (company incorporation and relationships between founders) The above should be achievable within a short time span (3-6 months), with relatively low ressource allocation (1-2 people, even next to a day-job) and with low cash investment (usually own). * Relates to first time fundraising, not for follow-on funding rounds. 4
  • 5. Presentation for Startup Pirates 2015 THE RIGHT INVESTOR What should a startup consider when choosing an investor Invesor type, enterpreneurship or pure financial background Investor focus (industry, stage focus, geography, investment size) Investor strategy and network (strategic investors vs. financial return oriented investors) Recommendations and track record (previous investments and investment experience) Wrond investor can lead to an unsolvable or even fatal situation. Look for smart money! 5
  • 6. Presentation for Startup Pirates 2015 INVESTOR TYPES AND COMPANY STAGES 6 START-UP CORE PRODUCT DEVEL MARKET ENTRY MARKET EXPANSION Typical Investors FFF Business Accelerators Business Angels Business Angels Seed VCs Strategic Investors VCs Corporate VCs Strategic Investors Growth VCs Buy-Out Strategic Investors Investment Size 5-50k EUR 100-500k EUR 1-5m EUR 10m+ EUR Startup Age 0-3 months 3-18 months 18-36 months 36month+ Number of Employees 2 3-10 11-50 100+ Regional Examples HubRaum (PL) Pioneers Ventures (AT) Launcher Neulogy Seed Capital Credo Ventures Neulogy Venture Capital J&T Penta Global Examples Y-Combinator (US) Seed Camp (UK) 500 Startups (US) Eden Ventures (UK) Sequoia Capital (global) Accel Partners (global) Index Ventures (global) PRE-SEED STAGE SEED STAGE EARLY STAGE GROWTH STAGE TIME F U N D I N G Idea Prototype PoC Public Beta Launch Traction Profitability Intl. Expansion
  • 7. Presentation for Startup Pirates 2015 PRE-SEED A SEED INVESTORS 1. Own cash from savings or better, from revenue 2. FFF - Family & Friends & Fools 3. Business Angels + Entrepreneurs (e.g. from IT or other industries) Anton Zajac Michal Truban Michal Štencl 4. Business Accelerators – Slovakia + CEE 7
  • 8. Presentation for Startup Pirates 2015 EARLY STAGE INVESTORS (VC) 4. Seed VCs + VCs + Corporate VCs 5. Strategic Investors (Corporations) 8
  • 9. Presentation for Startup Pirates 2015 CROWDFUNDING / -INVESTING PLATFORMS 6. Reward based crowdfunding 7. Equity based crowdinvesting 9
  • 10. Presentation for Startup Pirates 2015 OTHER FUNDING SOURCES 8. Banks – Bakning products and loans for entrepreneurs (rather rare) 9. EU funds 10. Awards 10
  • 11. Presentation for Startup Pirates 2015 NON-CASH SUPPORT 11. Co-working 12. Enterprise programs for startup support 11
  • 12. Presentation for Startup Pirates 2015 NON-CASH SUPPORT II. 13. Consulting 14. Média 15. Public agencies 12
  • 13. Presentation for Startup Pirates 2015 FINAL RECOMMENDATIONS Chose wisely! Every investor has an influence on a company. Don‘t lose focues, building the product and the company is more important than chasing after investors. If possible, raise more money, which will give you more runway for realizing your goals. Don‘t get hung up too much on how much ownership you give away, look at the bigger picture. If your business model and your company stage allows it, the best source of funding is your own cash from operations (selling your products or services). GOOD LUCK! 13
  • 14. Presentation for Startup Pirates 2015 DISCUSSION & QUESTIONS Do I need a business plan? What is an investors slide deck? Do I need an excel calculation? 14
  • 15. Presentation for Startup Pirates 2015 CONTACT 15
  • 16. 2015 © All rights reserved Ďakujem za pozornosť
  • 18. Presentation for Startup Pirates 2015 BUSINESS ANGELS Private persons – support the company building process with capital but also entrepreneurial know-how and network Goal: private support of company set-up and grow, where banks consider the risk too high and for institutional investors the funding need too low is. Business receive a share in the company. 18
  • 19. Presentation for Startup Pirates 2015 BUSINESS ANGELS Bring capital, entrepreneurial and/or industry know-how and network Have fun creating something new EUR 50 – 500k investments Superangels (USA) – successful entrepreneurs that can invest multiple millions in a company Return expectation – various but at least 20% p.a. 19
  • 20. Presentation for Startup Pirates 2015 BUSINESS ANGELS – IMPORTANT QUESTIONS Entrepreneur: Am I ready to open up my company? – Insight into the company and the perception of losing control Growth ambitions? Realistic valuation? Long-term management of the company? Need of capital vs. know-how and network? Why should the BA go with me? What return opportunity do I offer to the BA? Where do I find BAs? How much investment experience does the BA have – Value Added? 20
  • 21. Presentation for Startup Pirates 2015 BUSINESS ANGELS – IMPORTANT QUESTIONS BizAngel: Personal fit with the entrepreneur? Why should the entrepreneur go with me? „Skin in the game“ of the entrepreneur Product / service unique and realistic? Market share, scalability and exit realistic and achievable? 21
  • 22. Presentation for Startup Pirates 2015 BUSINESS ANGELS VS. PRIVATE EQUITY Business Angels: - invest own money - provide network - add credibility (bank, suppliers) - invest long-term 22 Private Equity Fonds: - invest primarily 3rd party money - Fund management service for a fee - provide network - add credibility (bank, suppliers) - invest for definite periode (Exit!!)
  • 23. Presentation for Startup Pirates 2015 VENTURE CAPITAL OVERVIEW Venture Capital is an Investment Business (Who is the VC‘s customer?) Goal: Generate risk-adjusted returns Success factors The right asset, in the right hands, at the right time Create an environment where everybody has the right incentives & adequate resources to succeed Focus on upside is the best downside protection Put your money where your mouth is Exit / Sale of the company is as important as investment Process: Invest in potential – create & enhance value – realise value 23
  • 24. Presentation for Startup Pirates 2015 VENTURE CAPITAL INDUSTRY 24 Fund Management Company VC Fund Managed Funds Exit Scenarios Trade Sale IPO Secondary Sale Buy Back Write Off Hands On Management Equity % Return Equity % Investors Banks Insurance Co‘s Pension Funds HNWI PFC 1 PFC 2 PFC 4PFC 3 PFC 5 Portfolio companies
  • 25. Presentation for Startup Pirates 2015 VENTURE CAPITAL INDUSTRY VC FUND Entity separate from the Management Company Lifetime: 10 years Typical portfolio: 10 – 20 companies (depending on fund size and fund industry focus) Holding period: 3 – 7 years High return expectation 20-30%+ p.a. on the fund 50%+ p.a. or 5x / 10x on invested capital in portfolio companies Strict investment strategy (industries, stages, geographies) Careful investment selection and pressure to sell high and fast  25
  • 26. Presentation for Startup Pirates 2015 VENTURE CAPITAL INVESTMENT PROCESS 26 Source of Investment Partner Networks, Consultants, other VCs Screening & Investment Review Weekly Review: • Screen • Reject • Allocate to team Prepare Investment Case Term Sheet Due Diligence Deep Review Prepare Investment Committee Paper Living with the Investment Reporting Updates Contacts& Introductions Strategy & Peer Reviews Board Seat Planned Exit Exit Planned Exit Approval by IC Execute usually 6 – 9 months usually 3 – 7 years IC Review Finalise Contract Close Deal Close Deal 2 - 3 m Getting ready Teaser Investors presentation Business Case Data room for DD
  • 27. Presentation for Startup Pirates 2015 ENTRY OF AN INVESTOR INTO A COMPANY MECHANICS 27 Equity Old shares (30%) Debt (70%) Liabilities Σ 100 Fixed Assets Current Assets Cash Assets Σ 100 Capital raise Acquisition of NEW SHARES + 30 Σ 130 Equity Old shares (23%) Debt (54%) Liabilities +30 equity (23%) New Shares
  • 28. Presentation for Startup Pirates 2015 VC MODEL: VALUE – CREATE & REALISE IT 28 Impact of Equity Investor on Company Value (Illustrative) 0 Company value Buy (low) (hands-on) financial investors directly and indirectly influence all of these Internal sources of value  Earnings & revenue growth (organic and through acquisitions)  Multiple expansion (e.g. management & profitability improvement)  De-leveraging  Company positioning & strategy  Etc. External sources of value  Market dynamics  Market appreciation in exit situation  Etc. Sell (high) Add value (loads)
  • 29. Presentation for Startup Pirates 2015 VALUE CREATION CASE STUDY INTERNET SERVICE PROVIDER 29 Post-Money Valuation Investors Founders Multiple 2004-2005 >4x >3x >3x ISP value development 2004-2005 (€m) 0 Revenue growth Profitability increase Debt decrease Management improvement Additional Equity 2004 Expansion round €20m 2005 Exit: M&A transaction €95m 10 20 30 40 50 60 70 80 90 100 €m ILLUSTRATIVE Win-Win for all VC contribution  Brought in CFO  Restructured balance sheet  Managed turn-around  Increased profitability  Focus on exit and initiation of trade sale  Built walk-away position Value driver influenced by investor only Value driver influenced by investor & other factors Value driver influenced by external factors (e.g. market dynamic)Source: GCP  Realised Return for investors: 365% p.a. IRR
  • 30. Presentation for Startup Pirates 2015 RETURN CALCULATION (INDICATIVE) 30 BizAngel Early-stage VC Expansion VC Investment € 0,5m for 20% € 2m for 33% € 5m for 30% Return Goal 20x 10x 5x Exit Multiples 2-3x Revenue 8-10x EBITDA Exit Valuation € 100m Year 1 2 3 4 5 6 7 8 9 Revenue € 0,1m 0,5m 1m 2,5m 6m 10m 15m 25m 50m EBITDA € -0,2m 0,3m -1.5m -0.5m 1m 2m 3m 5m 10m Investment € 0,5m 2m 5m INVESTMENT COMPANY GROWTH
  • 31. 2015 © All rights reserved Ďakujem za pozornosť