- Pierre Hanness has worked in investment banking and now runs three venture capital funds - Upstream Angel Fund, Upstream Pioneer Fund, and Extreme Ventures Fund. - Venture capitalists invest in companies seeking funding that already have an established business model. Risk and return are correlated, and building an ecosystem of support is important. - Venture capitalists are more hands-on than investment bankers, dealing with the human aspects of running a business and providing long-term support. Successful investments have a 10-20-30-40% ratio of future big businesses, failures, average earners, and those that are still uncertain. - The screening process for potential investments takes 4-6 months and involves

1. VENTURE CAPITALISTS LECTURED BY MR. PIERRE HANNES

2. SEQUENCE PIERRE HANESS: PROFILE PRINCIPLES OF VC INVESTMENT INVESTMENT BANKER VS. VC VC INVESTMENT SCHEME SCALABLE BUSINESS HOW TO FIND AN INVESTMENT?? PROPOSALS FOR VCS WHAT DOES AN INVESTOR LOOK AT, WHILE INVESTING????? TEAM IMPORTANCE THE BIG 5 QS GAINS FOR VC VCS IN CHINA AND INDIA SCREENING MECHANISM RECESSION AND ITS IMPACTS ON VCS

3. PIERRE HANESS: PROFILE Worked as an IT consultant for investment portfolio’s. Working through the “dot com” boom and subsequent crisis Set up an enterprise by the name of “Upstream Venture”, a fund management company. Various types of funds working in its association. Upstream Angel Fund. Angel investments. Investment of 50 – 200 thousand USD per company. Investment based on geographical territories. Opportunistic sector investment only. Cont’d….

4. Upstream Pioneer Fund Venture capital investments. 500 thousand to 2 Million USD per company. A seat on the Board of Directors. Hands on management of firm. Extreme Ventures Fund: Setup by the Govt. 20 Mil USD early stage venture fund targeting Singapore based tech. companies. Six early stage companies, each with 20M USD.

5. PRINCIPLES OF VC INVESTMENT VC invests in Established firms requiring finances, already having a business model. Risk and Return are co-related. One can not increase the return without embarking on a more risky path. Ecosystem: investors, lawyers, service providers; all working in unison to create an environment to launch a new enterprise. Invention  turning money into knowledge. Innovation  turning that very knowledge into money. Cont’d….

6. INVESTMENT BANKER VS. VC Investment bankers Financial engineers Dealing with numbers and finances only. Not involved in actual business execution. VCs Human engineers Deals with the human aspect. Involved in actual running of a business. Requires long term commitment with the company he has invested in.

7. Investment in about 10 to 12 companies at one time. 2.5% of all the proposals being considered, end up being signed. Of the ten companies invested in, the general ratio of success is 10% turn out to be future big businesses 20 % broke, 30% avg. earners, 40% hang in a balance. Cont’d…. VC INVESTMENT SCHEME

8. A typical fund life cycle last 10 years. To establish a full-scale corporation, it takes 6-8 years. First four years is the investment period and the following 4-6 yrs are harvest period By the 6th year of harvest period, A company is all set to be liquidated, it has grown to its maximum potential. Bottom line; it is the people who make a company successful despite all the money influx on part of investor’s.

9. SCALABLE BUSINESS A scalable business is Dynamic Risky with a very fast growing rate. How to build a scalable business? Innovation rather than invention. Think product-based rather than service-oriented. Attracts more investor. Service-based business usually funds itself. Total life span for a service based industry is about 8-10 yrs. Real-estate sector is non-scalable. VC’s don’t tend to invest in manufacturing sector Capital expenditure of the company runs too high. Rate of return is slow and small.

10. HOW TO FIND AN INVESTMENT?? Form a start up team  identify ideas and write business plan  Present to investor to raise capital. The capital life tree of a company runs such that; Friends and Family, Founder’s Capital (F.F.&F) Incubators, government corporations, Seed angels Strategic partner, customers, suppliers, services Mezzanine Pre-IPO IPO.

11. PROPOSALS FOR VCS VCs in Singapore get investment ideas from; Yet2.com Exploiting NTU’s Innovative and Technological Transfer Office. VCs, very conscious about Intellectual Property. Best time to start a company Recession 16 out of 30 Dow Jones-listed companies launched during recession. Star names include Micro Soft, MTV, HP, IBM, P&G. Cont’d…

12. Be critical but not pessimistic. Business plan is of utmost importance. Initial revenue benchmark of 5 mil USD. Emphasis sustainable growth of business. 25-35% share holding by VC. During initial phase of investment. Later on gradually decreases culminating in liquidation.

13. WHAT DOES AN INVESTOR LOOK AT, WHILE INVESTING????? How has an investor been approached by the prospective entrepreneur? Must possesses strong referrals. “ Never approach an investor directly”. Something unique about the model. Executive Summary Plays a pivotal role in securing VCs interest in a business proposal. Concise but comprehensive Convincing Strong Team The 5 Questions.

14. TEAM IMPORTANCE Open minded-thinker and a liberal businessman come up with a successful business plan more often. Team, the focal centre. Leadership qualities. Group cohesion. Team working capabilities. Past working experiences. Past business experiences. Everything that one needs to know about any person. Cont’d…

15. Team forms the nuclei for all the other variables such as; Technology and IP. Fund objectives. Innovations and Value Proposition. Finances and Returns. Revenue Model. Growth market and Channel Strategy. Competitive Advantage. Innovations and Value propositions.

16. THE BIG 5 QS Is market craving to solve the problem, whose solution is being proposed by you? How is market solving the problem currently? How different and unique is your solution? What are the required resources? What are the profitability prospects?

17. GAINS FOR VC Investors and VCs get preferential shares. 2.5% of the total investment forms annual fee for the VC. After payback of initial investment, the profit is split on 80:20 ratio between the investors and the VCs. 10% of the total investment is from VC manager. A guarantee to ensure that VC too has something at stake.

18. VCS IN CHINA AND INDIA In last four years VC invested; 2.5 billion USD in India. 3 billion USD in China. Investment in India owed to economic boom hype. Actual worth of deals signed with a company ranges between 0.5 to 1 million dollars. Not withstanding above, investment to the tune of 10 million dollars per company has been made. Investor’s have started pulling out of India. Super-saturation level reached.

19. SCREENING MECHANISM Entire process takes about 4-6 months. Abnormality found at any stage leads to process being called off. Divided into three distinct phases; Look up phase Discovery Phase Due-Diligence Phase. Cont’d…

20. Look-up phase Summarily look up. Takes about one and a half week. If interested, a meeting is setup. Discovery phase Full business plan, discussed in detail. Finances involved, evaluated. An analyst deputed by the VC prepares a summary report. Summary report brought to the investment committee A third party overseeing the investment being made is being done at the right place with no foul play involved. The phase lasts about 2 weeks. Cont’d…

21. Due-Diligence Phase Takes about 4-12 weeks. Minute attention is paid to all the field areas from technology being employed and Intellectual Property rights to administrative model’s being used to run the organization. Regulatory laws and legal issues related to governance. Market Research to evaluate competition. While looking at the competitor’s, VC looks at Their revenues. Feasibility of their working models. How well are they doing.

22. RECESSION AND ITS IMPACTS ON VCS VC’s tend to liquidate their investment in 10 years time. Recession has affected the VCs pan of liquidation. Pushed back by a couple of years. Projects already being invested in, facing the bean of financial crunch. Increased investment in VC funds being witnessed. Recession comes as an opportunity for new businesses.