JUDITH IGLEHART KEIRETSU INTERNACIONAL

Donostia Enpresekin
Week of Innovation
Great Association with Quality Deal Flow”
What kinds of Companies are Investors
Looking For?
Dr. Judith Iglehart, President, International Division
October 21, 2014
A little bit about Keiretsu Forum
Keiretsu Forum
“It’s not the global distance, it’s
the knowledge and experience.”
Bridge from Silicon Valley to the
world
Exceptional deal flow from
research university technology
14 year track record of
investments through times of
booms and busts
Steady expansion globally- 34
chapters/13 years
1100 members (serial
entrepreneurs, retirees) who
work with emerging companies
Private investment, investor
education, entrepreneur
education
Lower risk for private investors
through common due diligence
practices
IBOOK published on Due
Diligence
Partnerships with other angel
groups
Nimble, adept at developing
programs of interest to
members: Clean Tech, DD book,
IIF, WISE, BizSmart
Keiretsu Forum’s Global Reach - 34 chapters, 3 continents, +170 business
plans reviewed monthly, 2040 plans annually, syndicated funding
6 Europe:
18 U.S. Locations:
CALI F O R N IA
East Bay
Orange Co.
Los Angeles
North Bay
San Diego
San Francisco
Silicon Valley
Westlake Village
NORTHWEST
Seattle
Kirkland/Eastside
Spokane/Inland
Portland
Boise
L O N D O N, England
ANDALUCIA, Spain
B A R C E L O N A, Spain
M A D R I D, Spain
DONOSTRIO/SAN SEBASTIAN, Spain
P A R I S, France
4 Asia:
2 Euro-Asia:
I S T A N B U L, Turkey
TEL AVIV, Israel
4 Canada:
VAN C O U V E R
TORONTO
WATERLOO
Vancouver Island
NEW YORK
New York City
M I D -AT LAN T I C
Philadelphia
Pittsburgh
Washington D.C.
Miami
CHENNAI, India
SINGAPORE
B E I J I N G, China
S H A N G H A I, China
Angels and VCs invest in
Biotechnology
Business Products and Services
Computers
Consumer Products and Services
Electronics/Instrumentation
Financial Services
Healthcare Services
Industrial/Energy
IT Services
Media and Entertainment
Medical Devices and Equipment
Networking and Equipment
Other Retailing/Distribution
Semiconductors
Software
Telecommunications
And more……(real estate, brand names, orchards)
How Big?
Angels vs. VCs 2011
Early
StageLate
Angel money funds 20x more companies yearly
Mostly later stage
3,752 deals
$22.5B
$29.1B
66,230 deals
Mostly
early stage
Angels
Sources: University of New Hampshire and PWC MoneyTree
Venture Capitalists
My Hometown paper –Friday, October 17, 2014
“VC funding approa
ches level
from 2001, the yea
r of the dotcom crash…So far
in 2014 VCs
have invested $33B
as
compared to $30B
in 2013.
Y Combinator will move beyond Internet
start ups in “pure software” to
“experimental, breakthrough technologies
like nuclear energy and synthetic biology. “
Huh? Going head to head with UC’s QB3,
which is now renting lab benches for $800?
QB3@953 --RENT ONE BENCH AT A TIME
In 2006 we developed a model to lower the costs of
launching a biotech startup: make expensive resources
in small quantities.
This way startups get exactly what they want when they
want it. You can rent one bench at a time and expand
when you need as you need it.
GET ACCESS TO EQUIPMENT WORTH MILLIONS OF
DOLLARS
V C investments in 2014
Investments by industry Q2-13, Q1 and Q2-14 (PWC Money Tree – Report 3)
• Software industry received the highest level of funding of all industries, rising 50% from Q1 to $6.1 B in Q2 14
Software industry counted the most deals in Q2 -- 454, a 7% increase from Q1 14 because largest deal was a software
company
$1.2 billion Expansion stage investment in a transportation software company is largest deal and single largest quarterly
investment since the Money Tree Report began reporting on venture capital investing in 1995.
•
Biotechnology industry was the second largest sector for dollars invested: $1.8 B in 122 deals/ Rose 69% in dollars and
7% in number of deals from prior quarter. 2 large later stage funding rounds totaled $320M
•
Medical Devices and Equipment industry rose 8% in dollars and 12% in deals in Q2 to $649M in 73 deals..
•
Media & Entertainment industry captured 3rd place with $1.0B flowing into 124 deals. 40% increase in dollars and 9%
increase from prior quarter. One large deal .
9 of the 17 Money Tree industries (about half) experienced decreases in dollars in Q2: Business products and services
(69% decrease), Telecommunications (43% decrease), Semiconductors (29% decrease).
Venture capitalists invested $2.7 billion into 270 Internet-specific companies in Q2 14. 18% higher and 20% larger in
deals than Q1 ($2.3B in 225 deals)
Internet-specific is a discrete classification assigned to a company with a business model fundamentally dependent
on
the Internet, regardless of the primary industry category.
.
Halo Report 2014 Highlights
Halo Report Q2 2014 Highlights:
• Investor Syndicates Produce Bigger Rounds
• Median angel round sizes were down from $990K to $600K, which
is consistent with the second quarter a year ago.
• When angel groups co-invest with other types of investors,
however, the median round size jumped to more than $2 million, a
five-quarter high.
• Valuations Continue to Rise
• Median pre-money valuations rose to $3.0 million, from $2.7 million
in Q1 2014, and after several steady quarters at $2.5 million.
-See more at:
http://www.angelresourceinstitute.org/en/Research/Halo-Report/HaloReport.aspx#sthash.kTVCyKxb.dpuf
Where angels fit into
Deal Flow
Stage
PreSeed
Seed/
Start-Up
Funding Gap
Source
Founder
Individual
Angels
Angel
Organizations
Venture Funds
$100k to
$500k
$500k to $2m
and up
$2m to $5m and up
Friends
and
Family
Amount
Invested
$25k to
$100k
Early
Venture
Capital
Later
Venture
Capital
Where do the best deals come from?
.
1. Our Members
2. Our Chapters
3. Serial
Entrepreneurs:
4. Other Angel
Groups
2013 Keiretsu Angel Fundings in Northern
California:
29 with $8.6m
Who are ‘Typical’ Angels?
The term "angel" originally comes from Broadway where it described wealthy
individuals who provided money for theatrical productions
Successful business people
Invest their own money (net worth over $1m)
Long term investors (usually 5-7 years)
Enjoy advising/assisting entrepreneurs
Seek a return commensurate with the risk
Invest alone or in angel organizations
Individual investment amount $25,000-$100,000
Angel investing is personal
Angel investing is all about people and human
relationships.
Angel investing comes down to finding and backing
people who have the right combination of qualities
-experience, talent and character- and supporting them as
much as you can.
Angel investing is one arena where shared knowledge is
important.
Common Challenges?
Acting alone, most angels:
Do not see a consistent flow of quality deals
Have limited capability to conduct the breadth
of due diligence needed to lower risk
Post investment, lack the breadth of capabilities
and network to fully assist their entrepreneurs
Have limited capital for investing in follow-on
rounds
And above all
Investors want a CEO that they trust to
perform
They want a capable team, preferably with
experience in the sector
They want financials that make sense
They want negotiable, realistic valuations
They want an articulated Exit plan (when
will the company be acquired? by whom?
for how much?)
Myths about investing
Myth-busting Entrepreneurship," by Dane Strangler, Kauffman Foundation
Four commonly held beliefs:
a. Small business plays the most important role in growing the economy= in fact the age of
the firm is a more important variable than the size of the firm. “New and young
companies create most jobs and innovations, not necessarily small companies.” (Think
Hewlett and Packard, Mark Zuckerberg, Bill Gates, Larry and Sergei, Steve and Steve). New
and Young. Disrupters.
b. Studies refute the popular stereotype that most entrepreneurs are 23-year-olds starting
tech companies in their local coffee shop or their bedroom = "the 'peak age' for starting a
company is in the mid to late 30s, early 40s.”
c. Efforts to recreate Silicon Valley in the hopes of creating a hotbed of high-tech startups
don’t work= "Silicon Valley is a very unique place that's never going to be replicated.
Others need to stop trying to be a Silicon fill-in-the-blank, not just in the U.S., but anywhere
around the world.”(Trillions in research dollars to universities in CA, federal matching funds for
early VCs, risk taking, etc.)
d. "Most research shows that incubators are not effective at all for actually producing
companies.”
What I’m seeing internationally
Investors worldwide want access to what they call “Silicon Valley”
deal flow (to Keiretsu Forum that means our vetted deal flow)
Investors worldwide want to balance their portfolios with investments
at home and abroad—like investors in the US they don’t want to
miss the “next big thing.”
No one knows what the “ next big thing” will be. (Nobody at Stanford
or in SV originally understood the platform for Google).
VCs are moving into “seed stage” investing and Angel Groups are
syndicating investments above $3M and starting funds to protect their
investments with additional funds as companies grow. (Keiretsu
Capital)
More SF news -- the “share
economy”
SF Airbnb charged with
violating city
zoning laws because legal
residents are away when
Airbnb clients are there,
and violating state tax laws.
As YouTube did with TV and the blogosphere
did to mainstream media, the share economy
blows up the industrial model of companies
and
people consuming, and allows everyone to be
both consumer and producer, along with the
potential for cash that the latter provides.
Shervin Pishevar, a VC at Menlo
Ventures and investor in Getaround, TaskRabbit,
Uber and other startups in this space,
believes these services will have a major impact
on the economics of cities.
“This is much bigger than any specific app,”
he says. “This is a movement as important as
when the web browser came out.”
FORBES estimates the revenue flowing
through the share economy directly into
people’s wallets will surpass $3.5 billion this year,
with growth exceeding 25%.
So what works for angel investors?
If you invest early and make non-monetary
contributions by mentoring or serving as a
company Director, the returns from early
stage investing can be very rewarding.
If you participate in an intensive Due
Diligence, you lower your risks.
Due Diligence IBook, free, online at
IBook
“The Keiretsu Forum is pleased to offer our member-designed Due
Diligence Handbook free of charge as an iBook to benefit startup
investors and entrepreneurs around the world. We hope this resource will
serve as a valuable tool in supporting your own due diligence efforts.”
Sample Fundings
Case 1a: Recent Funding
$3.12 million invested; first close May 2012
Savara is an emerging specialty pharmaceutical company.
Its lead product, AeroVanc™ (vancomycin hydrochloride
inhalation powder), addresses an unmet clinical need in
the treatment of methicillin-resistant Staphylococcus
aureus (MRSA) infections in patients with cystic fibrosis
(CF)
Members of 16 Keiretsu Forum chapters collaborated
in the due diligence and participated in the funding
Sample Fundings
Case 2a: Follow-on Funding
$2.1 million invested; milestones driven investing:
presented to Keiretsu Forum 4 times: 2006-2011
LesConcierges is the world’s premier provider of global
concierge services and solutions luxury personal services
company
More than 200 concierges, 1 million requests per year
89 cities worldwide, serving 16 languages
Premier onsite concierge service
Leading proprietary concierge technology platform, web portal and
mobile applications
Sample Fundings
Case 2b: Follow-on Funding
Sample Fundings
Case 3a: Exit
Keiretsu Forum venture capital member Claremont
Creek Ventures led a $2.0 million round in February
2006
PropertyBridge, Inc., a company that enables electronic
rent payments and other lease-related transactions over
the Internet
MoneyGram International Inc. acquired PropertyBridge for
$28 million in September 2007 providing 5X return on
the Claremont Creek Ventures’ investment
PropertyBridge is now RentPayments
Sample Fundings
Case 3a: Exit
Sample Fundings
Case 3b: 13x Exit
Sample Fundings
Case 3c: 30% IRR Exit
Thank you for your time and interest
Please contact me at judith@keiretsuforum.com,
or visit our website at www.keiretsuforum.com, or
at
http://www.keiretsuforum.com/global-chapters/do
nostia-san-sebastian
/
And, if you would like to present your company or
visit our chapters anywhere in the world, please
contact Miguel Costa at
mcosta@keiretsuforum.com