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@damiensteel
December 2015
BIO - @DAMIENSTEEL
Damien Steel, CA, CFA
1
• OMERS Ventures since 2011
• 10 years venture experience
• Previously member of the Ontario Security Commission’s
Small and Medium Enterprise Committee
• Previously member of the Ontario Center of Excellence’s CCR
Commercialization Panel
• Co-founded Novo Dental Studios (sold to DSG Canada)
• 5 years transactional and M&A experience
• Avid golfer and poker player
OMERS INVESTMENT ENTITIES
Over $100 billion in assets under management
2
• Canada’s largest tech focused venture capital fund
• Over $460M funds under management
• Focus on the technology, media and telecom sectors
• We believe in the future of Canada and lifecycle
investing
- Investment sizes $1M - $40M
- Long term patient capital
OMERS VENTURES
3
“DISCLAIMER”
4
TYPES OF INVESTORS
5
TYPICAL LIFE OF A VENTURE FUND
Example of VC Timeline
6
5 yrs 10 yrs0
Commitment Period
End of Fund Life
Three 1yr Extensions
New Investments
Follow-on Investments
Exit Investments
Fundraising 2nd Fund
VC MATH
Example of a top decile fund
7
VC raises $100M $20M in fees & exp
VC invests $80M $20M in write-offs
$60M remaining
investments
Portfolio value = $240M
Repay fees and exp
of $20M
Preferred return of $20M*Return invested capital
of $80M
$120M remains
$96M (80%) to LPs $24M (20%) to GP = Carry
That’s 3.0x!
* ignore catch up
Valuation isn’t everything
DEAL STRUCTURING
8
THE UNICORN CLUB IS GETTING INCREASINGLY CROWDED
Approximately 90 North American-based companies belong to the
“unicorn club”. The increase is driven largely by “paper unicorns” –
private companies that have not yet had a “liquidity event.”
DEVIL IS IN THE DETAILS – SQUARE EXAMPLE
In October 2015,
with >$560M in
revenues, Square
should be ready
for an IPO.
In October 2014,
Square raises a
massive round
valuing it at $6B.
But it’s what the news articles don’t tell you…
Source: Square S-1 SEC Filing
Bankers decreased the offering price to $9,
valuing Square at $4.2B (lower than its last
round).
Company name
Original
Price
Q3-15
Value
Date
Purchased
Blue Bottle (Series D) $21.1M $12.0M May-15
Snapchat (Series F) $20.3M $15.2M Mar-15
Taboola.com (Series E) $6.6M $3.5M Dec-14
YourPeople (Zenefits) $10.3M $5.4M May-15
Uber (Series D) $80.0M $204.4M Jun-14
All Others $239.0M $218.2M Since 2013
Total $377.3M $458.6M
THERE ARE EARLY SIGNS OF A SHIFT IN THE WINDS
Fidelity Investments, As at September 30, 2015
Many prominent venture capitalists believe that a correction is currently
underway, and are expecting more of it in 2016:
Preferred Shares – be aware
- Dividends
- Liquidation preference
- Participating preferred (example)
- Redemption rights
- Veto: issuance of shares; sale/merger; dividend
payment; cap ex, compensation, etc. …
DEAL STRUCTURING
12
DEAL STRUCTURING
13
• Valuation isn’t everything!
• Preferred shares – be aware
- Dividends
- Liquidation preference
- Participating preferred (example)
- Redemption rights
- Veto: issuance of shares; sale/merger; dividend
payment; cap ex, compensation, etc. …
- NDAs (don’t ask for them!)
• Term sheets
- Be very careful not to sign term sheets with funds
that have not performed sufficient diligence
WHAT A VC IS LOOKING FOR
14
• Get to the point!
• Clearly defined market need
• Clear articulation of why your company is
positioned to fill that need
• Knowledge of competitive landscape
• Multiple ways to monetization
• Strong team
• Think big (if everything goes right…)
WHAT NOT TO DO WHEN PITCHING TO A VC
15
• Ask for an NDA if you are a startup
• Show up with a 50 page deck
• Show up with no deck
• Show up with an investment banker
• Show up with prewritten terms/valuation
• Talk definitively about exits
• Get “pissy” when your assumptions are challenged
• Lie – we will find out in diligence
RAISE VENTURE CAPITAL?
16
Can you do it without
raising venture $?
QUESTIONS?
17
@damiensteel

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Raising Venture Capital

  • 2. BIO - @DAMIENSTEEL Damien Steel, CA, CFA 1 • OMERS Ventures since 2011 • 10 years venture experience • Previously member of the Ontario Security Commission’s Small and Medium Enterprise Committee • Previously member of the Ontario Center of Excellence’s CCR Commercialization Panel • Co-founded Novo Dental Studios (sold to DSG Canada) • 5 years transactional and M&A experience • Avid golfer and poker player
  • 3. OMERS INVESTMENT ENTITIES Over $100 billion in assets under management 2
  • 4. • Canada’s largest tech focused venture capital fund • Over $460M funds under management • Focus on the technology, media and telecom sectors • We believe in the future of Canada and lifecycle investing - Investment sizes $1M - $40M - Long term patient capital OMERS VENTURES 3
  • 7. TYPICAL LIFE OF A VENTURE FUND Example of VC Timeline 6 5 yrs 10 yrs0 Commitment Period End of Fund Life Three 1yr Extensions New Investments Follow-on Investments Exit Investments Fundraising 2nd Fund
  • 8. VC MATH Example of a top decile fund 7 VC raises $100M $20M in fees & exp VC invests $80M $20M in write-offs $60M remaining investments Portfolio value = $240M Repay fees and exp of $20M Preferred return of $20M*Return invested capital of $80M $120M remains $96M (80%) to LPs $24M (20%) to GP = Carry That’s 3.0x! * ignore catch up
  • 10. THE UNICORN CLUB IS GETTING INCREASINGLY CROWDED Approximately 90 North American-based companies belong to the “unicorn club”. The increase is driven largely by “paper unicorns” – private companies that have not yet had a “liquidity event.”
  • 11. DEVIL IS IN THE DETAILS – SQUARE EXAMPLE In October 2015, with >$560M in revenues, Square should be ready for an IPO. In October 2014, Square raises a massive round valuing it at $6B. But it’s what the news articles don’t tell you… Source: Square S-1 SEC Filing Bankers decreased the offering price to $9, valuing Square at $4.2B (lower than its last round).
  • 12. Company name Original Price Q3-15 Value Date Purchased Blue Bottle (Series D) $21.1M $12.0M May-15 Snapchat (Series F) $20.3M $15.2M Mar-15 Taboola.com (Series E) $6.6M $3.5M Dec-14 YourPeople (Zenefits) $10.3M $5.4M May-15 Uber (Series D) $80.0M $204.4M Jun-14 All Others $239.0M $218.2M Since 2013 Total $377.3M $458.6M THERE ARE EARLY SIGNS OF A SHIFT IN THE WINDS Fidelity Investments, As at September 30, 2015 Many prominent venture capitalists believe that a correction is currently underway, and are expecting more of it in 2016:
  • 13. Preferred Shares – be aware - Dividends - Liquidation preference - Participating preferred (example) - Redemption rights - Veto: issuance of shares; sale/merger; dividend payment; cap ex, compensation, etc. … DEAL STRUCTURING 12
  • 14. DEAL STRUCTURING 13 • Valuation isn’t everything! • Preferred shares – be aware - Dividends - Liquidation preference - Participating preferred (example) - Redemption rights - Veto: issuance of shares; sale/merger; dividend payment; cap ex, compensation, etc. … - NDAs (don’t ask for them!) • Term sheets - Be very careful not to sign term sheets with funds that have not performed sufficient diligence
  • 15. WHAT A VC IS LOOKING FOR 14 • Get to the point! • Clearly defined market need • Clear articulation of why your company is positioned to fill that need • Knowledge of competitive landscape • Multiple ways to monetization • Strong team • Think big (if everything goes right…)
  • 16. WHAT NOT TO DO WHEN PITCHING TO A VC 15 • Ask for an NDA if you are a startup • Show up with a 50 page deck • Show up with no deck • Show up with an investment banker • Show up with prewritten terms/valuation • Talk definitively about exits • Get “pissy” when your assumptions are challenged • Lie – we will find out in diligence
  • 17. RAISE VENTURE CAPITAL? 16 Can you do it without raising venture $?

Editor's Notes

  1. Pension Plan – OMERS was established in 1962 to serve local government employees across Ontario. Today, we represent 947 employers and almost 420,000 members, retirees and survivors. Our commitment is two-fold: to ensure that current pensions are paid in full and on time; and to prepare for the future, when today's new employees retire. OSI - create a portfolio of investments in private companies around the world, such as airports, real estate developments and energy projects; OIM - mandate is to attract third-party capital from eligible clients by providing authorized services (as defined under the OMERS Act). Eligible clients include Canadian public and private sector pension plans, corporations, governments and their agencies, colleges, universities and their endowments and Canadian registered charities. OCM - manages the public market investments portfolio of bonds, currencies and other interest-bearing assets, as well as publicly traded equities in Canadian and global financial markets. OPE - manages a diverse portfolio of fund relationships and direct investments. Borealis - manages a global portfolio of infrastructure investments: inflation-sensitive assets that are critical to the long-term success of a modern industrial economy. OXFORD - responsible for carrying out OMERS strategy of developing a global real estate enterprise. This strategy is focused on owning and managing large-scale assets and diverse property types in varied geographic markets to achieve superior risk-adjusted returns.