vc 101: tame the mythical creatures

40
TAME THE MYTHICAL CREATURES KNOW YOUR INVESTORS @DawnUmlah vc 101:

Upload: dawn-umlah

Post on 05-Jul-2015

343 views

Category:

Business


3 download

DESCRIPTION

Thanks to some popular TV shows, everyone and their dog seems to have an idea of what the business of venture capital is. But can you really discern the zombies, unicorns and black swans from the lions, tigers and bears? Or are they all just a motley crew of mythological creatures and wild animals to you? VC 101: Taming the Mythical Creatures is here to take you down the yellow brick road to meet Dawn Umlah, Innovacorp’s wizard of venture capital. In VC 101, you’ll learn: · The different sources of capital for your start-up · What venture capital (“VC”) is · What the role of the venture capitalist is · What’s in it for the VC · How VC funds work · The best way to approach VCs · What to expect from the investment process · What it all means to you

TRANSCRIPT

Page 1: VC 101: Tame the Mythical Creatures

TAME THEMYTHICAL CREATURES

KNOW YOUR INVESTORS

@DawnUmlah

vc 101:

Page 2: VC 101: Tame the Mythical Creatures

@DawnUmlah

DAWNUMLAH

Entrepreneurial finance + corp dev junkee turned early-stage tech VC @Innovacorp

I love tea, hiking, kayaking and everything tech & start-up

Wife and mother of 2

@DawnUmlah

Page 3: VC 101: Tame the Mythical Creatures

WHAT ARE WETALKING ABOUT?

What is venture capital?1

Investment Process3

2

The Game is changing4

Tame the mythical creatures5

Get to know the VCFollow the money

Stalk Lightly

@DawnUmlah

Page 4: VC 101: Tame the Mythical Creatures

01

WHAT ISVENTURE CAPITAL?

@DawnUmlah

Page 5: VC 101: Tame the Mythical Creatures

SOURCES OFFINANCING

Pro

fita

bili

ty

Idea

Prototype

Early Growth

Expansion

Maturity

Time

IPO

Debt Instruments

Debt Instruments

Strategics / Corporate VC

High growth potentialLifestyle

Private Equity

Mezzanine Financing

Venture Capital

@DawnUmlah

3F’s, Angels

CUSTOMERS

Source: Adapted from Venture-Financing, 2005

Page 6: VC 101: Tame the Mythical Creatures

We get invested.

@Dawnumlah

VENTURE CAPITAL IS FINANCIAL CAPITAL

FOR MINORITY OWNERSHIP IN HIGH

POTENTIAL, HIGH GROWTH STARTUP

COMPANIES WHERE THERE IS HIGH RISK

AND OPPORTUNITY FOR A HIGH REWARD.

@DawnUmlah

Page 7: VC 101: Tame the Mythical Creatures

We get invested.

@Dawnumlah

Venture Capital vs. Private EquityVenture Capital vs. Private Equity

“ IN PRIVATE EQUITY, YOU START WITH THE

NUMBERS, AND THEN TRY TO FIT EVERYTHING

INTO THE NUMBERS. IN VENTURE CAPITAL, YOU

START WITH THE PEOPLE, AND THEN YOU TRY TO

FIGURE OUT WHAT NUMBERS YOU CAN MAKE.

--Mark Kachur - former CEO of CUNO

@DawnUmlah

Page 8: VC 101: Tame the Mythical Creatures

@DawnUmlah

Late stage VC or Private Equity

Page 9: VC 101: Tame the Mythical Creatures

We get invested.

@DawnUmlah@DawnUmlah

Early stage VC and Angels

@DawnUmlah

Page 10: VC 101: Tame the Mythical Creatures

Follow the money & Stalk lightly

02GET TO KNOW

THE VC

@DawnUmlah

Page 11: VC 101: Tame the Mythical Creatures

@DawnUmlah

Page 12: VC 101: Tame the Mythical Creatures

We get invested.

@Dawnumlah

role of venture Capitalist

MANAGE A POOL OF OTHER PEOPLE’S CAPITAL BY PROVIDING HIGH RISK FINANCING TO EARLY-STAGE, HIGH POTENTIAL, GROWTH STARTUPS IN EXCHANGE

FOR EQUITY, WITH THE HOPES OF MAKING AN OVERALL FUND RETURN OF 20% OR 3-4X

@DawnUmlah

Page 13: VC 101: Tame the Mythical Creatures

Follow the money

02

@DawnUmlah

Page 14: VC 101: Tame the Mythical Creatures

@DawnUmlah

VC returns are not normally distributed

VCs will not invest in something that doesn’t start out with the potential for 10x ROI

Most likely return is 3-4x

RETURN EXPECTATIONS

Page 15: VC 101: Tame the Mythical Creatures

@DawnUmlah

VCs Try to Capture Unicorns

Page 16: VC 101: Tame the Mythical Creatures

@DawnUmlah

VCs Open Themselves To Black Swans

Page 17: VC 101: Tame the Mythical Creatures

@DawnUmlah

General Partners (GPs)

Limited Partners (LPs) > $$

high net worth individuals, family offices, fund-of-funds, large corporations, endowments, foundations, pension funds, insurance companies, sovereign wealth

funds

Venture Capital Fund

Fund/Investment Management

Investment in a startup

Investment in a startup

Investment in a startup

99%1%Capital Calls

WHERE THE CAPITAL COMES FROM

Page 18: VC 101: Tame the Mythical Creatures

HOW THEY EARN MONEY

@DawnUmlah

General Partners (GPs)

Limited Partners (LPs) > $$

high net worth individuals, family offices, fund-of-funds, large corporations, endowments, foundations, pension funds, insurance companies, sovereign wealth

funds

Venture Capital Fund

~2% Annual Management Fee

Investment in a startup

Investment in a startup

Investment in a startup

80%20%

Carried Interest

Page 19: VC 101: Tame the Mythical Creatures

@DawnUmlah

First 3-4 years> Seed NewCos

Next 6-7 years> Follow ons & Harvest

Fund 1 ($100M)

Fund 11 ($120M)

Fund 111 ($150M)

FUND LIFECYCLE

Page 20: VC 101: Tame the Mythical Creatures

@DawnUmlah

VCs Turn Into Pumpkins

Page 21: VC 101: Tame the Mythical Creatures

@DawnUmlah

VCs Turn Into Zombies

Page 22: VC 101: Tame the Mythical Creatures

@DawnUmlah

First 3-4 years> Seed NewCos

Next 6-7 years> Follow ons & Harvest

Fund 1 ($100M)

Fund 11 ($120M)

Fund 111 ($150M)

FUND LIFECYCLE

Page 23: VC 101: Tame the Mythical Creatures

We get invested.

@DawnUmlah

VC Economics >10x possible return

Return is relative

No safety with first cheque - you must execute

GPs answer to LPs

GPs’ upside is a large exit

GPs need to raise more than one fund - watch out for pumpkins and zombies

KEY ITEMS TOUNDERSTAND

Page 24: VC 101: Tame the Mythical Creatures

STALK LIGHTLY

02

@DawnUmlah

Page 25: VC 101: Tame the Mythical Creatures

We get invested.

PERMISSION TO STALK LIGHTLY

butSTALKING COMES WITH RULES:

1. STALK LIGHTLY, DON’T BE CREEPY2. TACTFUL PERSISTENCE, DON’T

BE ANNOYING

@DawnUmlah

Page 26: VC 101: Tame the Mythical Creatures

@DawnUmlah

STALKLIGHTLY

Page 27: VC 101: Tame the Mythical Creatures

@DawnUmlah

STALKLIGHTLY

Page 28: VC 101: Tame the Mythical Creatures

marriage without the romance

03

INVESTMENT PROCESS

@DawnUmlah

Page 29: VC 101: Tame the Mythical Creatures

INVESTMENT PROCESS =MARRIAGE WITHOUT THE ROMANCE

@DawnUmlah

First date - Deal sourcing

Courtship - Light Evaluation

Going steady - Pitch

The proposal - Term sheet

Engagement period - Deeper Evaluation

Private investigator - Due diligence

Prenup - Closing

Wedding day - Cash in hand

Honeymoon - Capital to execute plan

Married life - Board meetings, updates, relationships, management

Page 30: VC 101: Tame the Mythical Creatures

@DawnUmlah

DATING ADVICE

➔ Don’t be creepy➔ Fools rush in – take your time, get to know us➔ The best intro to a VC is through:

◆ successful exit◆ existing portfolio company◆ investor they have a relationship with

➔ Use tactful persistence➔ It’s not going to happen quickly

Page 31: VC 101: Tame the Mythical Creatures

@DawnUmlah

DATING ADVICE

➔ If it’s not a yes, it’s a no➔ Work to increase your say:do ratio➔ Be prepared and confident, but don’t be an ass➔ Be open and honest - it’s all about relationships➔ Marry for fit, not money - you can’t break up with your VC➔ Due diligence sucks for everyone

Page 32: VC 101: Tame the Mythical Creatures

TRENDS YOU SHOULD KNOW

04

THE GAME IS CHANGING

@DawnUmlah

Page 33: VC 101: Tame the Mythical Creatures

We get invested.

Dawn Umlah@Dawnumlah

BY ITS NATURE, THE INTERNET UNDERMINED ANYONE WHOSE

STATUS DEPENDED ON PRIVILEGED ACCESS TO INFORMATION--Michael Lewis - Author Moneyball: The Art of Winning an Unfair Game

@DawnUmlah

Page 34: VC 101: Tame the Mythical Creatures

We get invested.

Dawn Umlah@Dawnumlah

VENTURE CAPITAL IS A BUSINESS &

IS OPEN TO ATTACK BY STARTUPS WITH

DISRUPTED NEW BUSINESS MODELS

& TECHNOLOGY

--Naval Ravikant - CEO & Co-founder, AngelList (@naval) Recommended viewing: http://www.youtube.com/watch?v=tjzDY9Z3HF0

@DawnUmlah

Page 35: VC 101: Tame the Mythical Creatures

THE GAME IS CHANGINGTRENDS YOU SHOULD KNOW ABOUT

@DawnUmlah

AngelList - set up your profile

Transparency - access to more info

Unbundling of advice, control & money

More noise - increase in incubators & accelerators

Angel groups - inc in size and $$

Page 36: VC 101: Tame the Mythical Creatures

Unicorns, Black Swans and Zombies

05TAME THE

MYTHICAL CREATURES

@DawnUmlah

Page 37: VC 101: Tame the Mythical Creatures

Think like a unicorn

@DawnUmlah

Page 38: VC 101: Tame the Mythical Creatures

Chase Black Swans

@DawnUmlah

Page 39: VC 101: Tame the Mythical Creatures

@DawnUmlah

Think like a unicornKnow When the Magic Wears Off

Page 40: VC 101: Tame the Mythical Creatures

@DawnUmlah

Chase Black SwansRun From Zombies