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VCbacked companies generated 10.4M jobs 17.6% of the GDP $2.3T in sales Kauffman Foundation www.kauffman.org Stanford Entrepreneurship Network www.sen.stanford.edu Harvard Business School www.hbs.edu/entrepreneurship Angel groups and venture capital firms pay close attention to who brought them a deal. The source matters. Are you trying to create economic wealth? Founders? Investors? Employees?
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Venture Capital Ecosystem &
Technology Commercialization
Marco RubinExoventure Associates, LLC
March 31, 2009
TOPICS
Venture Capital Ecosystem VC as a Strategic Asset Investment Magnitude The Ecosystem Typical Prescribers Reaching Investors Impact of the Meltdown
Technology Commercialization Process Motivations The Decision Space Business Spectrum Start-up Trajectory Closing Remarks
I. VENTURE CAPITAL ECOSYSTEM
VC AS A STRATEGIC ASSET
Generates disproportionately large economic contribution to the economy: VC-backed companies generated 10.4M jobs 17.6% of the GDP $2.3T in sales
Source - National Venture Capital Association/Thomson 2006
Approximately $30B in annual U.S. deployments managed by: Stage - seed through growth Thesis - IC-T, clean tech, life sciences, materials Geographic location - local, regional, national, international
Asset class comparisons: VC - capital deployed risen from $13.1B (‘97) to $30B (present) ~ 500 firms (US) Hedge - capital under management ~ $2T in 2007 by 9000 firms (worldwide)
INVESTMENT MAGNITUDEUS venture capital market
Am
ount
Inv e
s te d
( $B
) Num
ber of Deals
Source: Dow Jones VentureOne/Ernst &Young
$13.1 $17.9
$49.5
$94.8
$36.5
$22.1 $19.7 $22.4 $24.2 $27.2 $29.9
264825772477235422262432
3321
6351
4590
25472211
$0
$25
$50
$75
$100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070
1,000
2,000
3,000
4,000
5,000
6,000
Amount Invested ($B) Number of Deals
THE ECOSYSTEM
Strategic Corporations RESOURCES
Government Agencies and NGOs
Investment Community
Incubators, Accelerators andEconomic Development Authorities
Events and Social Networking
Service Providers, Consultants and Advisors
Universities and Affiliated Laboratories
Associations and Advocacy Bodies
TYPICAL PRESCRIBERS- Research before launching capital campaign -
Associations – outreach and advocacy National Venture Capital Association www.nvca.org Angel Capital Association www.angelcapitalassociation.org National Association of Seed and Venture Funds www.nasvf.org
Advocacy & Education – information and research Kauffman Foundation www.kauffman.org Stanford Entrepreneurship Network www.sen.stanford.edu Harvard Business School www.hbs.edu/entrepreneurship
Service Providers – legal and accounting firms PWC (MoneyTree Report) Cooley Godward, Kornish (Capital Call)
Regional Investment Organizations (Investment Capital) Ben Franklin Technology Partners www.benfranklin.org Delaware Innovative Fund www.difonline.com
REACHING INVESTORS
Before approaching people for money or access, become comfortable with this – build professional relationships first.
It is human nature to understand who they are dealing.
Angel groups and venture capital firms pay close attention to who brought them a deal. The source matters.
You will need advocates on the ground to establish a local presence.
Fund raising is a universally difficult, time-consuming task.A weak economic situation makes the challenge greater.
IMPACT OF THE MELTDOWN
Venture capital had been trending to larger funds under management
Angel investors are being approached by more established prospects
Limited partners are keeping money as evidenced by VC capital calls
VCs have eliminated weaker portfolio co.s preserving cash for the strongest
An already high bar for start-ups has been raised even higher.
II. TECHNOLOGY COMMERCIALIZATION
MOTIVATION- Why are you going into business? -
Are you trying to create economic wealth? Founders? Investors? Employees?
Are you motivated to create more than just profit? Change the world? Drive social good? Validate innovation?
How much capital will you require to build your business? Where will it come from? Outside the company or organically?
Are you creating a growth firm or are you creating a lifestyle firm? How will you convince others to join you in your journey?
What business form will your idea take?
THE DECISION SPACE
APPROACH PLUSES MINUSES COMMENTS
A. Start-up?+ High reward+ Wealth creation+ Ecosystem formation+ Job creation+ Learning
- High risk- Steep learning curve- Results in years/decades - Loss of control
Ability to attract institutional capital in country? Desire to create presence abroad?
B. Licensing IP+ Inventors focus on IP+ Royalties may be large+ Least capital outlay
- Least return- IP valuation- Renter vs. owner?- Enforcement?
IP licensing process such as iBridge application – www.ibridgenetwork.org
C. Joint venture+ Risk sharing+ Deep -pockets+ Leverage brand
- Multiparty complexity- Loss of control
May be most feasible to generate and retain resources in-country
BUSINESS SPECTRUM- Where does your innovation live? -
IP/Technology-CentricDisruptive Service-Centric
• Ex. – Amazon, EBay, Salesforce.com, Skype• Focus – innovative technology enabled service• Founders – marketing, sales, product management• Orientation – market pull
• Ex. – Qualcomm, Motorola, MedImmune, Cisco, Intel• Focus – proprietary assets as the “IP fortress”• Founders – highly technical or scientific• Orientation – tech push
START-UP TRAJECTORY
TIME
VALUE
• Science• Invention
• Ideation
Early adopter
Early majority
Late majority
Mature
Chasm
Events
Key Metric &Anti Metric
InvestmentCommunity
Service Providers
Facilitators
• Bootstrap co./seed• Unfinished technology, team• Launch / products• Lifestyle-v-license-v-investment?
• Institutional investors• Launch more products• Develop core team
• Grow revenue/get anchor• Build stable products/new product research• Build professional team• Acquisition or IPO?
• Innovation, e.g., patents• Fragmented revenue, if any• Profitability
• First sales• Profitability
• Top-line revenue growth, e.g., $5M+ in trailing revenues• Product line diversification
• Friends, family & fools• Angels• Grants etc
• Seed/early stage VCs• Occasional corporate• Placement agents• Grants etc.
• Later stage VCs• Investment banks• Corporate investors
• Associations and societies• Economic development authorities• Incubators
• Legal• Financial/Accounting/ Insurance• Search firms• Public relations/media• Other - matchmakers; boot camps; online plan repositories; directories; bus. plan services
Key Motivations
• Dreams of wealth• Save the world• Both
• ROI for investors• Strategic relevance for corp.interests• R&D / new vendors
• Networking & lobbying• Jobs creation• Co. creation
• Earn fees• Gain market share
GOAL START-UP
TEAM Proven Domain
Clean StructureMARKETSizeable
Strategic
TECH Built
Protected
IP AS A STRATEGIC ASSET
U.S. UNIVERSITY IMPACT
Bayh-Dohl Act - catalytic legislation (1980) ushered in new innovation
Allows academic institutions to own IP funded by federal research
One outcome has been the tech transfer/ tech licensing offices
Established 4,100 new companies since 1980, 2/3 of which still operating
Executed 30,000 active tech transfer licenses generating $1.3B in income
Filed ~ 8,000 patents in 2003
CLOSING REMARKS
Big innovations are a great start…but seldom determine success
Your venture must become economically sustainable
Demand-based (pull) businesses tend to garner greater market adoption
Advisory boards may be valuable – use Linked In and other assets to extend your know-how and reach.
Capital markets and corporate partners are becoming even more selective
CONTACT INFORMATIONExoventure Associates, LLC
400 North Washington St. #106Falls Church, VA 22046 USA
Office 703.533.3133
Marco [email protected]
www.exoventure.com
