The Architecture of an Innovative Company

MARCH 2015 | LONDON
Richard Marsh
Partner, DFJ Esprit
Venture Capital … overview
Objective
• Capital gains over a 3-5 yr investment holding period
Diversification
• Portfolio of hands-on, actively managed investments
in high potential, high growth unlisted companies
Liquidity
• IPO or M&A of individual companies
Scale is important
• Institutional VC funds have the scale and deal flow to
invest in exceptional companies and back their
winners
Experience
matters
• Successful VCs have an established track record of
exits
My background
• Engineering MA + PhD, Cambridge
• First job -> 7 person start up
– Next door to Autonomy (acquired by HP $10bn) ... then also a 7 person start up
• Left to set up software company
– Raised £130k angel seed funding
– Timing difficult: 2001-> dotcom crash, 9/11 -> had to get good at sales (fast)
– Raised first VC funding in 2003; exit to Oracle 2011
• Entrepreneur -> MBA -> VC (Partner DFJ Esprit)
DFJ Esprit
One of Europe’s leading venture capital managers
•
Established track record
>$3bn combined enterprise value of portfolio company M&A and IPOs in past 5 years (2010-14)1
Examples (all shown as dollar equivalents):
$330m
Baxter
Healthcare
$367m
Nvidia
(NASDAQ: NVDA)
$ undisclosed
Amazon
(NASDAQ: AMZN)
$514m
Verint
Systems Inc.
$229m
IPO
NASDAQ
$140m
Riverbed
$ undisclosed
Synopsys
(NASDAQ: RVBD) (NASDAQ: SNPS)
Important Notice: The figures above relate to past performance and as such are not necessarily an indicator of future results.
Returns many vary as a result of currency fluctuations.
•
One of the most active VCs in Europe (#3 in 2013)2 in investments >$5m
•
US and global connections attract and support portfolio companies
Exclusive European member of Silicon Valley based DFJ Global Network
$7bn raised by member funds on 4 continents. Portfolio companies of member funds include:
1
2
Sources: Deal press releases; financial statements of publically listed acquirers; IPO data; DFJ Esprit internal records
Sources: DowJones VentureSouce database (subscription required); DFJ Esprit internal records
The Opportunity in Europe…
Number of Small (< $ 5M) vs. Mid/late stage (> $ 5M) VC Deals – USA and Europe
Europe
Seed / small
1,598
2003 2004 2005 2006 2007 2008 2009 2010
1,082
221
701
191
261
808
829
304
245
244
938
1,020
232
192
988
1,038
1,279
1,092
1,146
1,340
1,464
Mid/late stage
1,201
1,216
1,430
1,160
1,069
1,328
952
1,169
959
1,345
USA
2003 2004 2005 2006 2007 2008 2009 2010
Source: EVCA, VentureSource
UK’s £2bn p.a. funding gap
•
USA, GDP $14.7tn
 European Union, GDP $14.8tn
•
Silicon Valley accounts for
~40% of USA VC investment
 United Kingdom accounts for ~40%
of EU VC investment
•
SV investment activity*
– 327 deals p.a. < $5m/£3m
– 491 deals p.a. > $5m/£3m
 UK investment activity*
– 265 deals p.a. < $5m/£3m (=80% SV)
– 85 deals p.a. > $5m / £3m (=20% SV)
£2bn p.a. funding gap
(UK vs Silicon Valley)
*Source: DowJones VentureSource database
2006-H1 2011 deals, August 2011
Two ‘Must Read’ recommendations
Innovation …. Changing the World ? Twice ?
Audience whoops, cheers and generally goes wild …..
Greenpeak Technologies
• Ultra-low power RF
• 802.15.4 (Zigbee / Thread)
• 600m+ connected homes
10-100x devices / home
• Market opportunity
10-100x larger than Wi-Fi
Where are typical (leading) VC thresholds ?
80-90%+
Improvement in cost / power / price-performance
and / or
Enabling what is not possible today
Characteristics of Innovative Companies
Do-ers
On the pitch making it happen?
Or …. Watching ? Commentating ?
Characteristics of Innovative Companies
‘Smoking bearings’
Software – Development / Release Variables
Resource
Content
Quality
Time
Meeting delivery date commitments
Resouce Planning
Late
Breaking
15%
Public
30%
Bug Fix
15%
Maintenance
20%
Private
20%
Displaydata – zero power displays
Sainsbury’s, Shoreditch
www.dfjesprit.com
Encore Ventures LLP
For further information please contact:
14 Buckingham Gate
Richard Marsh, Partner
richard.marsh@dfjesprit.com
London, SW1E 6LB
David Cummings, Venture Partner
david.cummings@dfjesprit.com
United Kingdom
Tel: +44 (0) 207 931 8800
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