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Intro to vc funding june 2015

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This document provides an introduction to venture financing presented by Douglas Abrams. It summarizes Abrams' background working in venture capital and private equity. It then outlines key terms related to venture financing deals including business models, valuations, funding stages, and exits. The document discusses metrics that venture capitalists use to evaluate potential investments and make returns, such as internal rate of return. It also highlights elements that are typically included in venture financing agreements.

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June 2015 Introduction to Venture Financing Douglas Abrams
2 6XXXX Douglas Abrams About the facilitator Wharton MBA JP Morgan Vice President IB Technology, GM Internet Marketing Parallax Capital Mgmt Co-founder and MD Private Equity Extream Ventures Co-founder and MD S$20 million seed fund Expara Founder and MD IDM Ventures Incubator, advisory, training NUS Adjunct Associate Professor, Business School, Entrepreneurship, Sasin Visiting Professor, Venture Capital
3 6XXXX Douglas Abrams 2000 20152000 2002 2004 2006 2008 2010 2012 2014 Parallax BANSEA Expara Sasin EIDMV I Expara Thailand Expara Malaysia i4-X NUS KIMBA Extream EIDMV II EV III Expara timeline 2000-2015 3Overview of Expara
4 6XXXX Douglas Abrams VC mindset Risk and return are highly correlated You cannot increase return without taking more risk Return Risk Potential outcomes
5 6XXXX Douglas Abrams Why invest in venture capital? As of June 30, 2014. The Cambridge Associates LLC U.S. Venture Capital Index速 is an end-to-end calculation based on data compiled from 1,508 U.S. venture capital funds (963 early stage, 165 late & expansion stage, 374 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. (1)Pooled end-to-end return, net of fees, expenses, and carried interest.(2) 2007-2015 Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03
6 6XXXX Douglas Abrams Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
7 6XXXX Douglas Abrams Companies founded with venture capital www.nvca.org
8 6XXXX Douglas Abrams SEA exit markets at an inflection point Exit activity in SEA, especially in Singapore, exploded in 2013 Increased investment in startups since 2007 is beginning to yield results Number of exits increased from 6 in 2010 to 20 in 2013 Singapore alone has had 30 exits since 2007, 13 in 2013 Value of exits increased from 51 MM in 2010 to 400 MM in 2013
9 6XXXX Douglas Abrams Some recent exits Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
10 6XXXX Douglas Abrams Key elements for success Solving a painful problem for customers Value proposition Developing an innovative product Innovation Customers and competitors Market identification and analysis Reaching customers Marketing, sales and distribution strategy Competing when others enter - Sustainable competitive advantage Make money Business model and financial plan Team A team or B team
11 6XXXX Douglas Abrams Key venture finance terms Business model Financial projections Valuation Funding required and equity offered Use of Proceeds Exit Strategy and ROI Cap table
12 6XXXX Douglas Abrams Company valuation methods Price to earnings (p/e) Dividend yield Multiple of book value Comparables Discounted Cash Flow (DCF) VC method
13 6XXXX Douglas Abrams How much equity does the investor receive? Pre-money valuation Amount invested by VC 歎 (Agreed pre-money value of business + Amount invested by VC) $3MM pre + 1 MM VC = 25% VC equity Post-money valuation Amount invested by VC 歎 post-money valuation $4MM post = 25% VC equity
14 6XXXX Douglas Abrams How do VCs make money? Trade sale sell to another company IPO sell to the public through listing on an exchange
15 6XXXX Douglas Abrams Stages and sources of funds Founders Capital Seed/ Angel Series A, B, C Mezzanine Pre-IPO IPO VC hurdle rates 60-100% 40-60% 20% Why are these rates so high? OM F,F&F Incubators corporations government Customers, suppliers, strategic partners VCs, Banks for VC loans
16 6XXXX Douglas Abrams Calculate investors ROI including dilution
17 6XXXX Douglas Abrams Key elements of a venture deal Board of directors Protective provisions Drag-along agreement Conversion Control Price-per-share Valuation Amount of financing Liquidation preference Vesting Options pool Anti-dilution Pay-to-play Economics
18 6XXXX Douglas Abrams Contact us Douglas Abrams Expara, Expara IDM Ventures dka@expara.com www.expara.com Block 71 Ayer Rajah Crescent #$02-10/11 S139951 65-9780-5381

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Intro to vc funding june 2015

  • 1. June 2015 Introduction to Venture Financing Douglas Abrams
  • 2. 2 6XXXX Douglas Abrams About the facilitator Wharton MBA JP Morgan Vice President IB Technology, GM Internet Marketing Parallax Capital Mgmt Co-founder and MD Private Equity Extream Ventures Co-founder and MD S$20 million seed fund Expara Founder and MD IDM Ventures Incubator, advisory, training NUS Adjunct Associate Professor, Business School, Entrepreneurship, Sasin Visiting Professor, Venture Capital
  • 3. 3 6XXXX Douglas Abrams 2000 20152000 2002 2004 2006 2008 2010 2012 2014 Parallax BANSEA Expara Sasin EIDMV I Expara Thailand Expara Malaysia i4-X NUS KIMBA Extream EIDMV II EV III Expara timeline 2000-2015 3Overview of Expara
  • 4. 4 6XXXX Douglas Abrams VC mindset Risk and return are highly correlated You cannot increase return without taking more risk Return Risk Potential outcomes
  • 5. 5 6XXXX Douglas Abrams Why invest in venture capital? As of June 30, 2014. The Cambridge Associates LLC U.S. Venture Capital Index速 is an end-to-end calculation based on data compiled from 1,508 U.S. venture capital funds (963 early stage, 165 late & expansion stage, 374 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. (1)Pooled end-to-end return, net of fees, expenses, and carried interest.(2) 2007-2015 Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03
  • 6. 6 6XXXX Douglas Abrams Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
  • 7. 7 6XXXX Douglas Abrams Companies founded with venture capital www.nvca.org
  • 8. 8 6XXXX Douglas Abrams SEA exit markets at an inflection point Exit activity in SEA, especially in Singapore, exploded in 2013 Increased investment in startups since 2007 is beginning to yield results Number of exits increased from 6 in 2010 to 20 in 2013 Singapore alone has had 30 exits since 2007, 13 in 2013 Value of exits increased from 51 MM in 2010 to 400 MM in 2013
  • 9. 9 6XXXX Douglas Abrams Some recent exits Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
  • 10. 10 6XXXX Douglas Abrams Key elements for success Solving a painful problem for customers Value proposition Developing an innovative product Innovation Customers and competitors Market identification and analysis Reaching customers Marketing, sales and distribution strategy Competing when others enter - Sustainable competitive advantage Make money Business model and financial plan Team A team or B team
  • 11. 11 6XXXX Douglas Abrams Key venture finance terms Business model Financial projections Valuation Funding required and equity offered Use of Proceeds Exit Strategy and ROI Cap table
  • 12. 12 6XXXX Douglas Abrams Company valuation methods Price to earnings (p/e) Dividend yield Multiple of book value Comparables Discounted Cash Flow (DCF) VC method
  • 13. 13 6XXXX Douglas Abrams How much equity does the investor receive? Pre-money valuation Amount invested by VC 歎 (Agreed pre-money value of business + Amount invested by VC) $3MM pre + 1 MM VC = 25% VC equity Post-money valuation Amount invested by VC 歎 post-money valuation $4MM post = 25% VC equity
  • 14. 14 6XXXX Douglas Abrams How do VCs make money? Trade sale sell to another company IPO sell to the public through listing on an exchange
  • 15. 15 6XXXX Douglas Abrams Stages and sources of funds Founders Capital Seed/ Angel Series A, B, C Mezzanine Pre-IPO IPO VC hurdle rates 60-100% 40-60% 20% Why are these rates so high? OM F,F&F Incubators corporations government Customers, suppliers, strategic partners VCs, Banks for VC loans
  • 17. 17 6XXXX Douglas Abrams Key elements of a venture deal Board of directors Protective provisions Drag-along agreement Conversion Control Price-per-share Valuation Amount of financing Liquidation preference Vesting Options pool Anti-dilution Pay-to-play Economics
  • 18. 18 6XXXX Douglas Abrams Contact us Douglas Abrams Expara, Expara IDM Ventures dka@expara.com www.expara.com Block 71 Ayer Rajah Crescent #$02-10/11 S139951 65-9780-5381