butterfly ventures early stage investment philosophy - 18.6.2013
DESCRIPTION
Butterfly Ventures early stage investment philosophy slide deck. The deck explains what kind of startups we're looking for and why.TRANSCRIPT
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How early is early?The early stage investment
philosophy of Butterfly Ventures
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Juho Risku• Involved with the web mid ‐90’s, since
then at the very front of networked technology and business innovation
• Serial entrepreneur, founder in four companies, involved in hundreds of projects, gathered millions of venture financing and helped numerous startup entrepreneurs
• Outside of work: Big mountain freeriding, ice climbing and mountaineering , friend of good literature food and wine
Email: [email protected]: http://fi.likedin.com/in/jrisku About.me: http://about.me/juho.risku
Juho Risku• Involved with the web mid ‐90’s, since
then at the very front of networked technology and business innovation
• Serial entrepreneur, founder in four companies, involved in hundreds of projects, gathered millions of venture financing and helped numerous startup entrepreneurs
• Outside of work: Big mountain freeriding, ice climbing and mountaineering , friend of good literature food and wine
Email: [email protected]: http://fi.likedin.com/in/jrisku About.me: http://about.me/juho.risku
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INTRODUCTIONWho we are, and what we do
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Board of Directors
Jukka MäkinenChairman of the Board
Jari PasanenMember of the Board
The TeamPartners
Matti Kanninenmanaging partner
Juho Riskupartner, co-founder
Antti Kosunenpartner, co-founder,
and Board member
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Northern Startup Fund
• Located in Oulu, Finland• Investors
– 5M from City of Oulu, First closing done– 5M from private investors
• Asymmetric, private investors have the preference– Will get their invested capital back first– Will get their share of the returns first
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Idea
15‐90 k€ 200‐400 k€ 1‐2 M€ xx M€
Unqualified Qualified pre‐seed/seed Qualified expansion
Accelerating
StartUp
Financing
Financed – Exit
Go fast forward or fail fastScoutingScouting
Basics Preparation Proof of concept
Scope of main interest
OperationalizationOperationalization
Scale‐up
Σ < 500 k€ Σ < 2.5 M€
Fast forward, fail fast
First time Investment
Follow up InvestmentFollow up Investment
Follow
Exit
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THE RIGHT KIND OF STARTUPWhat we’re looking for and why
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Trajectory of business
0
10
20
30
40
50
60
0 6 12 18 24 30 36 42 48
Positive black swan
Scope of realistic trajectoryMarket potential& scalability
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image by freeimageslive.co.uk ‐ Halloween
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Fragile, robust and antifragile
0
10
20
30
40
50
60
0 6 12 18 24 30 36 42 48
Pivot forced by market
Fragile trajectory
Antifragile trajectory
Robust trajectory
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Maximizing the exposure to positive black swans and avoiding fragility
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Startups where in addition to money we can add value.
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THE INVESTMENT PROCESSWhen to start and how it happens
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Decission making
Process• Quick look
– ~25% into prospect = examined in more detail
• Case selection– Heuristic analysis and scoring– Priorization: Each week, focus
on top 3• Deal scoping
– Business model and cash flow analysis
– Deal proposal• Agreement and approval
Scoring criteria• Market / market potential• Founder team• Product and business model• Long term competitive
advantage / protection fo market position
• Current situation• Exit potential• Financing requirements now
and in future
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Dealflow in numbers
>200
Seriously considered
25%
Prospect Invested
1.4%
+1kk +3kk<1kk
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Stages ‐ dealflow vs. investments
Pre‐seed; 28%
Seed; 56%
Growth; 17%
Dealflow
Pre‐seed; 33%
Seed; 67%
Investments
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We like to get involved early on, preferably well before you need the
money.
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Valuation and time
0
500
1000
1500
2000
2500
3000
3500
4000
4500
‐12 ‐6 0 6 12 18 24
Pre‐seed
Seed
Crash point
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EXAMPLESA few cases of ours
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NWG Tools (pre‐seed)• Value proposition: 200% profit increase for tiling contractors ‐ verified by proto
• Invested because– Clear and simple value proposition– Great neatly protectable and enforceable IPR– Team with strong industry experience + commitment– Lean operation mode
• Invested for– First commercial product version– Customer value proposition validation– Reference customer acquisition
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MyPose (seed)• Value proposition: Significant revenue stream for clothing
retailers and cost effective social media marketing –investment paid back in 3‐10 months
• Invested because– Industry dynamics changing value proposition– Clever business model with billion dollar market opportunity
and naturally viral product– Capable committed team– First product version tested by several customers (Marimekko,
Calvin Klein, One Piece)• Invested for
– Business model finalization and value proposition validation– Acquisition of reference customers
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FilmMe (seed)• Value proposition: Easy and cost effective filming of your self in
action without having someone else operating the camera• Invested because
– Clear value proposition for different actors– Attractive business model with billion dollar market opportunity and
naturally viral product– Demonstrated market traction with 180k€ worth of pre‐agreements– Committed balanced team with marketing and technological skill
• Invested for– Business model validation– Establishing the required metrics for follow on round
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Here’s the front line, lets rock!