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Building a local Ecosystem by John Sechrest @sechrest

Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

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Growing the Startup Ecosystem by growing stronger Entrepeneurs and stronger Angel Investors using the Angel Conference model

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Page 1: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Building a local Ecosystemby John Sechrest

@sechrest

Page 2: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
Page 3: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Mapping the Clusters

Page 4: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Including non-tech Clusters

Page 5: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
Page 6: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
Page 7: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Life cycle of a business

Page 8: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Outside Investment Stages

Page 9: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Angel Conference Model

20-60 companies apply 20-40 investors join LLC $5500 for each investor 10 weeks of due diligence Workshops for Angels and Entrepreneurs Large Final Event

Page 10: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

How does Angel Investing work?

Page 11: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Company Pitches

Page 12: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Due Diligence Feedback

Page 13: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Detailed Event Program

Page 14: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Select an investment

Page 15: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

-

10

20

30

40

50

60

<1X 1X to 5X 5X to 10X 10X to 30X >30X

Exit Multiple

Per

cent

of E

xits

Angel Investing Distribution of Returns

UK: Overall Multiple: 2.2X

US: Overall Multiple: 2.6X

Page 16: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

0

10

20

30

40

50

60

< 1X 1X to 5X 5X to 10X 10X to 30X > 30X

Exit Multiples

Per

cent

of T

otal

Exi

tsDistribution of Returns by Venture Investment

Overall Multiple: 2.6X

Avg. Holding Period: 3.5 years

$20M

$40M

$60M

$80M

Blue bars: % of exits in that CategoryGreen Bars: $’s returned in that Category

Hold: 3.0 yrs.

Hold: 3.3 yrs.

Hold: 4.6 yrs.

Hold: 4.9 yrs. Hold: 6.0 yrs.

Page 17: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

0

10

20

30

40

50

60

70

80

90

0

100

200

300

400

500

600

Series1 Series2Revenue in (current portfolio): $84.6M +47% from 2011

FTE’s in (current portfolio): 535 +16%

Rev/FTE (current portfolio): $158K +27%

Raised $7.1M $88M cumulative

Economic Impact of Angel Oregon Alumni

Page 18: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

As a reminder: Angel Investor Performance Project

More than half fail to return capital

Wins take longer to exit than losses

“Asset Class” return of approx 2.6X

10% of exits = 90% of cash returned

www.AngelResourceInstitute.org

Page 19: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Estimated Multiple of AO as a Portfolio

Multiple by year, if portfolio were cut off after that year

Assumes even investment in every presenting company

Underspecified Terms/Dilution as an imaginary portfolio

2006 2007 2008 2009 2010 2012 AIPP0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Series4Series3Series2Series1

Page 20: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

5 Types of Angel Groups

Angel Networks 98% Managed Angel

Funds - Founders Coop

Passive Angel Funds – Side car funds

Active Angel Funds – Oregon Angel Fund

Angel Conference

Page 21: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Cities with Angel Conferences

Portland ( Since 2003 ) Bend Corvallis/Eugene ( Since 2009 ) The Gorge Medford Seattle ( Since 2012 )

Page 22: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

WWW.SEATTLEANGEL.COM

Page 23: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Where are they now?Tracking the Angel Oregon

Alumni

Willamette University Angel Fund

Page 24: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

6/2/13

Median Early Stage Pre-Money Valuation

*

*Including all rounds with angel groups before Series A

$2.5MMedian

$1.5M1st Quartile

$3.7M3rd Quartile

$0.11M

$6.6M

Page 25: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Robert E Wiltbank, [email protected]

www.Willamette.edu/~Wiltbank

Page 26: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

-

10

20

30

40

50

60

<1X 1X to 5X 5X to 10X 10X to 30X >30X

Exit Multiple

Per

cent

of E

xits

Angel Investing Distribution of Returns

UK: Overall Multiple: 2.2X

US: Overall Multiple: 2.6X

Page 27: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

0

10

20

30

40

50

60

< 1X 1X to 5X 5X to 10X 10X to 30X > 30X

Exit Multiples

Per

cent

of T

otal

Exi

tsDistribution of Returns by Venture Investment

Overall Multiple: 2.6X

Avg. Holding Period: 3.5 years

$20M

$40M

$60M

$80M

Blue bars: % of exits in that CategoryGreen Bars: $’s returned in that Category

Hold: 3.0 yrs.

Hold: 3.3 yrs.

Hold: 4.6 yrs.

Hold: 4.9 yrs. Hold: 6.0 yrs.

Page 28: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

-

10

20

30

40

50

60

<1X 1X to 5X 5X to 10X 10X to 30X >30X

Exit Multiple

Per

cent

of E

xits

2X better multiple for 20+ due

diligence

Page 29: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

-

10

20

30

40

50

60

<1X 1X to 5X 5X to 10X 10X to 30X >30X

Exit Multiple

Per

cent

of E

xits

60% better multiple for deals related to industry

expertise

Page 30: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

-

10

20

30

40

50

60

<1X 1X to 5X 5X to 10X 10X to 30X >30X

Exit Multiple

Per

cent

of E

xits

Follow-On Investment from Same Angel Investor

3X better multiple in dealswhere the investor did not make

a follow-on investment.

30% of deals had follow on investments.

Page 31: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

6/2/13

Diminishing Marginal Returns to Raising Capital

Page 32: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

6/2/13

Diminishing Returns to Invested Capital

Private Acquisition Size from ‘96 to ‘06

Only 15%> $50M

Page 33: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

… But Trending Up at Year EndMedian Angel Round Size Reaches Five Quarter High in Q4 2012

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012$0.00

$0.50

$1.00

$1.50

Series1Series2

*

*Angel rounds include angels & angel groups only

$950K $950K $900K

$1.25M

$850K

$500K $550K $550K$620K $690K

$M

Page 34: Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

Median Early Stage Pre-Money Valuation Stays the Same in 2012

*

*Including all rounds with angel groups before Series A

$2.5MMedian

$1.5M1st Quartile

$3.7M3rd Quartile

$0.11M

$6.6M