early stage digital technology fund
TRANSCRIPT
Early Stage Digital Technology Fund
A discretionary EIS Fund
Important Notice
C&P Capital LLP and Prosper Captial LLP are communicating this presentation on a confidential basis only to a limited number of firms authorised by the Financial Services Authority of the United Kingdom (the "FSA") for the sole purpose of providing information about the Early Stage Digital Technology Fund (“The Fund”). Promotion of an investment in the Partnership is regulated under the Financial Services and Markets Act 2000 ("FSMA") and, in particular, under the FSMA (Financial Promotion) Order 2005 (“FPO"). Accordingly, this presentation is being communicated to persons having professional experience in matters relating to investments who are "investment professionals" within the meaning given in article 19 of the FPO and specifically firms authorised by the FSA. The distribution of this presentation to persons who are not investment professionals or are not firms authorised by the FSA is unauthorised and contravenes FSMA, and such persons should not act or rely on this presentation or any of its contents for any purpose.
This presentation is intended to be a brief summary overview of an investment in the Fund. Any recipient of this presentation must read this presentation in conjunction with the information memorandum of the Partnership, once available, which sets out the detailed terms and risks involved in investing in a business of this nature prior to any decision to invest being made. Any projections, forecasts and estimates contained in this presentation are forward-looking statements and are based upon certain assumptions considered by the Fund to be reasonable. Projections are necessarily speculative in nature and it can be expected that some or all of the assumptions underlying the projections will not materialise or will vary significantly from actual results. Accordingly, the projections are only an estimate. Actual results may vary from the projections and the variations may be material. Some important factors that could cause actual results to differ materially from those in any forward-looking statements include changes in interest rates and market, financial or legal uncertainties, among others. Consequently, the inclusion of projections herein should not be regarded as a representation by the Fund or any other person or entity of the results that will actually be achieved by the Fund.
This presentation should not be construed as a recommendation or as legal, tax or financial advice in relation to the subscription, purchase, holding or disposition of shares in the Fund. Prospective investors should accordingly consult their own professional advisers
Overview
What
Why
How
Who
Fees
Funnel extract
overview
Target fundraise: £15m
Minimum fundraise: £10m
Minimum investment: £25,000
Maximum investment: £1,000,000
Target return: 30% IRR
Investment term: 5 years (with the option of a further two, one year increments).
Closing Date: April 2013
Fund Structure: Discretionary EIS portfolio
Investor Reporting: Investors will receive a quarterly letter and full annual report.
whatA discretionary EIS fund investing in early stage internet
companies, ran & advised by successful internet entrepreneurs and experienced investment professionals.
A fund seeking to invest in the value created by disruptive internet technologies.
A fund that is using historical data to guide an investment strategy to manage downsize risk, while leaving an opportunity for substantial returns.
In fact, a target IRR of 30 over 5 years.
whatA fund that draws analogue to successful US ‘micro-VC’ models
“[This kind of fund] want to reinvigorate venture capital by taking it back to its roots, when firms were smaller, more nimble, and more likely to help startups get off the ground.” – Business Week
“The fact that start-ups today can do a lot with so much less capital will continue to put pressure on VCs to look at smaller investment opportunities.” – Greg Foster
“This ‘boom’ in seed and Micro-VC activity is not so much a boom as it is a seismic shift in how technology companies will be founded and funded for the forseeable future “– Jonathan Tower, MD, Citron Capital
whyWe believe that certain structural changes caused by internet-based technologies have presented unprecedented opportunity for growth from a relatively small capital base.
Source: Mark Suster, GRP Partners “The State of The Venture Capital Markets”
whyAnd this has led, for some, to stellar seed returns.
0 50 100 150 200 250 300 350 400 450 500
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xMultiple
Com
pany
Multiple of seed value for select tech companies <4 years old (source: C&P Research)
why
whyAnd this gap hasn’t yet been filled in UK/Euro VC
whyYet UK/Europe are fully capable of creating blockbuster start-ups
0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 3,500,000,000
Sample Euro Startups by value ($) (Source:Business Insider)
shazamminiclipMind CandyHabboOzon.ruspotifyRovioVente-privee
whyBecause angel-level investments – by investment groups – are solid performers
whyBecause angel investments exhibit non-normal distribution curves, risk can be hedged
with upside potential retained.
N = 10, y = gross fund multiple
0% 20% 40% 60% 80% 100% 120%0
5
10
15
20
25
30
35
40
40% risk of <2x return
N = 10, y = gross fund multiple
0% 20% 40% 60% 80% 100% 120%0
5
10
15
20
25
N = 40, y = gross fund multiple
<10% risk of <2x return
~40% chance of >6x return
CDF results of Monte-Carlo simulations on fund portfolios of n-companies using a probability distribution imputed from The Kauffman Foundation Angel Returns Study (Wiltbank 2007), the biggest survey of Angel returns to-date. Source: Irving Ebert (Owner, PurpleAngels) & C&P Capital Research
<20% risk of <3x return
whyAnd VC should see solid results going forward.
Internet e-business
Internet ecommerce
Software/Services
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00
IRRs for VC-Backed Companies in Selected Industries, 2008-11
Source: Cambridge Associates LLC US Venture Capital Index and Selected Benchmark Statistics
howTapping into our mature and expansive networks to generate dealflow. We already have a strong funnel.
Using published term sheets & standardised legal documents
By being ‘public’: blogging, tweeting and attending the myriad of conferences and meetups.
We too will seek to be nimble, hard working & disruptive, just like our startups.
Paul Singh, 500Ventures: “Moneyball: A Quantitative Approach to Angel Investing”
howBy leading ~15-20 of the best investments.
By giving that ~15-20 direct operational and board level support.
And ‘following’ or ‘silent partner’ investing for the rest.
whoFund manager: Prosper Capital LLP
Technology Adviser: C&P Capital LLP
Custodian: Woodside Securities
Audit and accounts: Nyman Libson Paul
Solicitors to offer: Davenport Lyons
whoDavid Hickson – Chief
Investment Officer
David Hickson is a seasoned digital media/Internet veteran and entrepreneur.
He was commercial & legal director at lastminute.com PLC, where he was a key part of its £577m exit to Travelocity Europe Limited.
Head of Corporate Development at mydeco.com where he raised over £12.5m of venture capital,.
Co-founder and Chief Strategy Officer at Tribesports.com that has recently announced over £2m worth of venture capital and has seen 1200% user growth since January ‘12.
He is a partner at C&P Capital LLP
He sat on the Jury Panel at the Tech Entrepreneurs Week with Jimmy Wales, founder of Wikipedia.
Dylan Collins – Chairman Investment Committee
Dylan Collins is one of the most experienced online gaming entrepreneurs in Europe, building three companies with three successful exits over the last decade.
He is Executive Chairman of Fight My Monster the leading online game for boys in the UK.
Dylan is also an angel investor in several Internet and technology companies in the UK and Ireland.
He serves as Ambassador to the Irish Government’s International Startup Fund.
Accolades:
Finalist in last year’s Ernst & Young Entrepreneur of the Year
Winner Irish Internet Association ‘Internet Hero’ award
whoPaul Thompson – Fund
ManagerIn 2006 Paul founded Prosper Capital to provide regulated status and authorisation to companies in the media and technology sector, also aiding in capital raising under EIS regulation.
Prior to this he worked at Dover Street Capital, which specialised in tax based products.
In1993 Paul founded the Capital Exchange, a web based business portal for entrepreneurs and investors, which exited to Evolution Capital in 1999.
From 1987 to 1992 Paul was a partner at Cygnus Venture Partners, a venture capital firm which invested in biotech and technology start-ups including Axis Shield, Bio Compatibles and Deltex.
Paul received his MBA from Bradford University in 1980 having already qualified as a member of the Institute of Chartered Accountants.
James Cox – Investment Director
James is a Founding Partner of C&P Capital. James started his career working for an institutional equity trading company and was then headhunted to set up an equity derivatives desk at Cornhill Capital. Having successfully set up the equity desk, James then set up their Managed FX trading desk. James was then in turn solely responsible for raising capital for both the Equity and FX Desks; during James’ time at Cornhill Capital he raised in excess of £30m.
James then co-founded Xenfin FX, part of the Xenfin Group, a Foreign Exchange brokerage that currently trades in excess of $25bn of Foreign Exchange per month. Xenfin FX was an FX advisory business covering a range of clients including Asset Managers, Family Offices and Hedge Funds.
whoDavid Cotterell – Investment
Committee
David Cotterell has successfully built up a number of IT software and services businesses from early stages through to mature and successful business models.
ACT Financial Systems (became a subsidiary of Misys) , DST International, Advent, Cresta, and SQS .
Peter Rose – Investment Committee
Partner at C-View, C-View currently manages in excess of $250m.
Ex-CIO of a quoted hedge fund (In managing approximately $2.5bn.
Ex-Director of Research at Ivy Asset Management,controlled $15bn of investments.
Trading experience - multi strategy hedge fund (MBS Ltd.) and long/short for Close Bros
Risk management experience –Bear Stearns
whoDavid Kelly – Special Advisor
COO/VP Operations at ebay
COO of lasminute.com
Director at Amazon,
Founder/CEO of mydeco.com
SVP/Managing Director of Rackspace – the US hosting and cloud platform – during a time it put on $5 billion of market cap.
feesEstablishment costs
5% of aggregate Subscriptions to the Fund, from which will be settled all establishment costs (including professional fees and printing costs) and commissions due to independent third party intermediaries), including a fee to the Manager and Technology Adviser.
Annual costs
2.5% of aggregate Subscriptions to the Fund, from which will be paid a fee of 0.25% of aggregate Subscriptions to the Manager, a fee of 0.2% of aggregate Subscriptions to the Custodian, with the balance to the Technology Adviser. The transaction costs in relation to each investment will be met out of the annual fee, although in some cases may be met by the Investee Companies.
feesPerformance fee
A performance fee shall be payable to the Technology Adviser on realisation of the assets of the Fund. The performance fee shall be calculated as percentage of the surplus available for distribution to Investors after realisation of Fund assets, calculated after the return to the Investors of their aggregate Subscriptions, (“Surplus”) as follows:
funnel extract
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