How VC look at start-ups - TIPS project · How VC look at start-ups ? Lyon, February ... sales and business model validation of ... Recent developments in VC history demonstrate the

Venture Capital in a nutshell

How VC look at start-ups ?

Lyon, February 6th 2014

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Agenda

I. Who are we ?

II. Short history of VC

III. What is a start-up (in VC’s eyes) ?

IV. Sources of financing

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Mission

Created in 1990, starting from a région Rhône Alpes initiative, with support from French State (CDC) and private players (banks, insurances, industrial companies…)

Rhône Alpes Création is the financing partner for innovative start-ups in Rhône Alpes

240 companies financed since inception, with more than 3.000 jobs created

Between 8 to 10 new investments each year

Rhône-Alpes Création invests in equity (shares, convertible bonds), with a double mission :

Help financing early stage companies based on valorisation of technical or marketing

innovations, that will carry economic growth with qualified and sustainable jobs

Create value for our shareholders, applying know-how and expertise used in late stage financing to early stage start-ups

Who we are ?

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Who we are ?

Investment phase Monitoring and Exit phase

Governance

GIE CRE-AM

Rhône Alpes Création I 1990

Amorçage Rhône Alpes 2002

Rhône Alpes Création II 2012

• SA à Directoire et CS (statut SCR)

• Size : 17 m€

• 212 portfolio companies, 42

currently active

• All sectors of industry, innovative

services

• Start-up (< 5 years)

• Rhône-Alpes Région

• SAS à statut fiscal de SCR

• Size : 5,6 m€

• 18 portfolio companies, 5

currently active

• Technological companies

incepted on public research

• Seed stage

• Région Rhône-Alpes


• Size : 21 m€

• 10 portfolio companies

• All sectors of industry, innovative

services anf technological cies

• Start-up (< 5 years)

• Rhône-Alpes Région

• 8 à 10 new investments / year

R2V 2014


• Size : 25 m€

• No portfolio company yet

• « multi-technological »

companies

• Seed stage

• Rhône-Alpes et PACA

• 2 à 3 new investments / year

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Funds under management

69 millions Euros under management

RAC I

ARA

RAC II

R2V

Monitoring Investment phase Exit phase

Who we are ?

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Shareholders

Who we are ?

21 m€ under management Institutional structure with both private

(51%) and public (49%) investors

Rhône-Alpes Création II

25 m€ under management Partnership with Viveris Management, FNA (60%), Régions RA & PACA (24%),

banks (13,4%), family offices (2,6%)

R2V

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Equipe

Headquaters in Champagne au Mont d’Or (Lyon), France Rhône-Alpes Création’s team covers all the investment process, from identification a nd

analysis of investment opportunities, closing deals (financing & legal structuring), monitoring and exits

Sébastien TOUVRON Président

Isabelle BOU ANTOUN Directeur Général Délégué

Mathieu VIALLARD Chargé d’affaires sénior

Monique COLLE Responsable Middle & Back Office

Anne-Lise FLANDIN Assistante de gestion

Gwenaël HAMON Chargé d’affaires sénior

Flora LOGER Assistante Middle Office

Lydia VINCENTE Assistante Back Office

Who we are ?

http://www.r-a-c.fr/sebastien_touvron.html

http://www.r-a-c.fr/isabelle_bouantoun.html

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Focus

Seed Financing

From Proof of Concept to product validation before commercialization

Venture Capital

Market launch : sales and business model validation of initial the Product / Service

Early stage development

Sales Ramp-up with proven market acceptance, internationalization, but not profitable yet

Who we are ?

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Investment criteria

HQ (or main active team) located in Région Rhône-Alpes

Start-up willing to close its 1st round with 1/many institutional investors

The value proposition is based on a competitive advantage where innovation is either : Technological

In the business model, marketing, or organization (in particular for non-tech companies in industry or services)

TEAM ! The Start-up is founded by an entrepreneur (or a team) whose skills and past

experience will give credibility in all dimensions of the project

Who we are ?

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Amounts and exit timeframe

Amounts

150 k€ to 350 k€ in the 1st round, up to 500 k€ after multiple rounds

RAC is always a minority shareholder (<40%)

Size of deals between 200 k€ and 3 m€

Syndication

Most deals are co-invested with other investment funds (seed funds, VC funds, Family Offices ou Business Angels,…) => average of 3x.

Coordination et organization of the syndication

Exit timeframe

Exit timeframe between 6 to 8 ans.

Who we are ?

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I. Who are we ?




Agenda

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Ingredients for Venture Capital

Short history of VC

Venture Capital

Lot of intelligence and boldness

Skills and know-how

A leader and his Team

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Business Model of Conquistadores Entrepreneurial spirit is blooming when specific conditions are met : unsatisfied needs, techno-

cultural breaches, financial ressources, globalization

Short history of VC

Christopher Colombus Vasco de Gama

Ships, Caravelles

Galilée Copernic

Isabella de Castilla

http://www.outremer.com/guad/guadhist/guad12.htm

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Short history of VC

1995-2000 :

« Bubble times »

Nowadays Recent developments in VC history demonstrate the high cyclicity of a business

which is now reaching its maturity phase

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Short history of VC

2001 :

The year of despair…



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Short history of VC

2002-2008 :

Desert crossing…



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Short history of VC

2008-2010 :

Venture is back



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Short history of VC

Discipline



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Short history of VC

Risks assesment



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Short history of VC

Capital Efficiency



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Short history of VC

Ambition & Selectivity



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Short history of VC

And a Team !



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Short history of VC

That’s how we make

Success stories !



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I. Who are we ?




Agenda

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What is a Start-up ?

Paradox of a Start-Up A start-up is a small company with basically the same needs as a big company,

while days always have only 24h !

End-user Market

Financial Market

Industrial Market Consumer need

Shareholder satisfaction

Market anticipation

Costs/benefits

Operational profit

Internal Rate of Return

Start-up

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Milestones concept Creating value implies to reach milestones that will draw a positive equity story

0

value

time

.

idea

project

stage I creation

post-crea

stage II

T0

V0

start-up

early

stage III

T1

V1

T2

V2

advanced

potential

stage V

grandes sociétés

Mile-stones

F1

F2

F3 : IPO

early

advanced

stage IV

Vi = value

Ti = time Fi = money IPO = initial public offering

F0

Mile-stones


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Dilution mecanism is strongly limited as soon as the start-up reaches its milestones and creates value


Capital increase €10m Share Premium 0 € New share price (B) 100 € Number of new shares 100 000 (B) [/] Post-money valuation €12,5m [ x (+)]

Founders 56%

VCs 44%

Founders 20%

VCs 80%

Price of an existing share 100 € (par value) Numbers of shares created 25 000 (A) Company valuation €2,5m [x]

situation before capital increase

Capital increase €10m Share Premium 400 € New share price (B) 500 € Number of new shares 20 000 (B) [/] Post-money valuation €22,5m [ x (+)]

situ

ati

on

aft

er c

apit

al i

ncr

ease

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Agenda

I. Who are we ?




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Skills needed

0

10

20

30

40

50

60

70

80

90

100

€80k €300k €1,5m €15m

Co

ve

rag

e o

f co

re s

kil

ls (

%)

Financing needs

Management &Organization

Finance

Marketing & Sales

Technical &Product

stage I stage II stage III stage IV

Sources of financing

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Financing early stage phases

0

10

20

30

40

50

60

70

80

90

100

€80k €300k €1,5m €15m

Co

ve

rag

e o

f fi

na

ncin

g n

ee

ds (

%)

Financing Sources

Corporate Deals

Public supports

Venture Capital

Seed Capital

Business Angels

Regional funds

stage I stage II stage III stage IV


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Financing early stage phases


Time

Sales

Profits

INCUBATION Team building Business Plan

SEED Proof of concept - Technical issues

Venture Capital (FCPI...)

Growth Capital (FCPR, FIP…)

Financial Markets Or M&A… National

Seed funds

Business Angels

R2V

« 3 F »*

RHÔNE-ALPES CRÉATION

DEVELOPMENT Growth Internationalization

START-UP Proof of concept - Commercial - Managerial

* Fools, Friends & Familly

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Don’t forget public ressources available

Each EU states have financial instruments

EU has also financial instruments

- BEI / FEI - JEREMIE


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Choose the most appropriate VC

Find the one which fits your requirements depending its investment strategy and profile

Find one which has a strong business portfolio, or which know which customers you target

Write a convincing business plan

Anticipate: It takes 1 year to raise funds !

Take info on EVCA


Contacts

Sébastien TOUVRON

Rhône-Alpes Création 10, Rue du Château d’Eau

69410 Champagne au Mont d’Or

Fixe : +33 4 72 52 39 39 Mail : [email protected]

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Thank you !

Documents

How VC look at start-ups - TIPS project · How VC look at start-ups ? Lyon, February ... sales and business model validation of ... Recent developments in VC history demonstrate the