Entrepreneurship & Innovation
Download as PPT, PDF0 likes509 views
Venture capital firms follow a process of raising funds, investing in companies, managing investments, and ultimately exiting investments. They evaluate potential investments based on the founding team, market opportunity, product, and timing. Due diligence involves assessing management, market, customers, competition, and financial projections. Common technology trends VCs follow include the transition to online/cloud services and the use of data, smartphones, clean energy, healthcare automation, and cybersecurity. Building a company involves identifying a team, creating a product/business model, seed funding, releasing version 1, scaling sales and hiring, and potentially raising a Series B round.
![Entrepreneurship & Innovation Evangelos Simoudis, Ph.D. Managing Director Trident Capital [email_address] Blog: blog.tridentcap.com Twitter: @esimoudis](https://image.slidesharecdn.com/lecutre1-100209150313-phpapp01/85/Entrepreneurship-Innovation-1-320.jpg)
Entrepreneurship & Innovation
- 1. Entrepreneurship & Innovation Evangelos Simoudis, Ph.D. Managing Director Trident Capital [email_address] Blog: blog.tridentcap.com Twitter: @esimoudis
- 2. Agenda How VCs work Creating, funding and building a company
- 3. How VCs work Create investment strategy Raise new fund Invest the fund (initial investments, follow-on investments) Manage portfolio Monitor/manage investments Keep LPs in the loop Drive to exits (maximize profits, minimize losses) The recent market problems and their impact to exits Return the investment and profits Repeat
- 4. Elements of a venture strategy Company stage at the time of investment Sectors High growth markets to warrant the risk The trends we follow Geography Sole investors vs co-investors Management style (active vs passive)
- 5. Raising a new fund Types of LPs: foundations, endowments, pension funds, funds of funds, family offices, individual qualified investors Amount of contributed by outside investors vs amount contributed by the fund’s GP General terms: carry (terms under which the carry is distributed to the GP), management fees, investment period Due diligence
- 6. Asset allocation by LPs Prototypical U.S.-based asset allocation 25% U.S. stocks 30% U.S. bonds 25% international (stocks and bonds) 20% alternatives LBOs 60% PE 30% VC 10% (of the 20%), i.e., 2% of overall allocation Liquid assets Trade daily Known value Market to trade Illiquid assets Don’t trade Higher risk Higher expected return
- 7. Deal flow Early stage deals: Entrepreneurs, EIRs University projects Smaller/feeder funds Similar funds looking for co-investors Angel investors Outbound deal-sourcing efforts (calls, social media, participating and speaking at conferences and other forums) Later stage deals: Bankers Other institutional investors Outbound deal-sourcing efforts (tracking companies, calls, conferences, forums)
- 8. We decide on an early-stage investment opportunity by trying to answer 4 questions Is this the right team to support? How has the founding team come together and how was it enhanced? How long have they been working together? Is this a feature, a product, or a business? Is the market big enough, could it become big, what will it take for the company to dominate it? Is this the right time to fund this company?
- 9. Conducting due diligence Management team Market Customers/prospects Industry and investment analysts Product/technology Financial (for companies with operating history) Legal Competition (private companies, public companies) Returns analysis Comparable companies (private, public) M&A analysis (recent acquisitions) IPO analysis (recent relevant IPOs and recent filings)
- 10. The technology trends we follow today The transition from offline to online in commerce and media consumption The transition from on-premise to on-demand/cloud software The corporate desire to use the data they generate, including big data in the cloud The increasing use of smartphones; smartphones as computing, communication and entertainment platforms The need for smarter use of energy; move to clean energy The need for IT-driven automation in healthcare Cyber security
- 11. Creating, funding and building a company Identify the founding team Create the product idea and establishing the business model Understand the market opportunity Seed (bootstrapping, angels) or Series A (institutional investor(s)) Use the first 3 customers to refine the product and the business model Release V1 of the product Series A Create a repeatable sales process and sales model (3->10->50) Hire the first 20 employees Form the board of directors and a customer advisory board Series B 12-18 months
Editor's Notes
- #7: Over the past decade, a large number of funds have substantially increased their allocation in alternative assets. In some extreme cases, these investors have taken this allocation from a conservative amount of say 15-20% to well over 50% of their fund