10 non textbook lessons for European Entrepreneurs

x.Million Capital Ventures 1

Maria Dramalioti-Taylor

Managing Partner

x.Million Capital Ventures SA

07.11.2012

Fundraising in Europe

10 non-textbook lessons for

entrepreneurs

2

Agenda

• Venture/Angel Capital:

– How to decide if you need it

– How to navigate Angels & VCs

• On raising Capital in UK/EU

UK Entrepreneur: “Why bother? I am off to the US”

UK Investor: ”Go, but not before you see this…”


Large potential

market

Original

idea

Best-in-market

founding team

ENTREPRENEUR HAS…

…money to move

*FASTER* than OWN

capital allows

Hiring

Faster product

development

Infrastructure

Commercialisation

Geographical expansion

#1 - Sell shares only when you need SPEED

1

2

3

…intensifying

competition

THEREFORE FACES…

…AND NEEDS…

…SO SELLS shares to

to pay for..


#2- Know your place in the FUNDING SPECTRUM

+

NET CASH

POSITION

Closed

ALPHA

Public

BETA

SCALE - STAGE

1st Revenue

Venture

Debt

Grants

Bootstrapping

Family

Angel Capital

Venture Capital

Series A

(€2m-€20m)

Venture Capital

Series B,C,D

(€5m-€20m)

5

DO IT LIKE A JACANA

6

#3 – Decode the Business Angels

• Angels invests own money

• Small amounts, early, at

low valuation

– €10k-€250k at

valuation €0.5-€2m

• Exit:

– sell at €5-10m

valuation & make 1.5-

3x

– bring VCs, get diluted

(may) make 5-10x

• AIM: 2x capital (but

mostly get capital back)

Angels are

like women:

temperamental

& (mostly)

irreplaceable

7

#4 – Decode the Venture Capital business

• VCs raise a fund every 2-4

years

– Invest other people’s money

• Invest the funds over 5 years

• Exit (sell) via M&A or IPO

• They take:

– 2.5% pa management fee on

funds managed

– Carry = 20% x [Total Return at

Exit] – [Total Amount

Invested]

• AIM: ONE 10x home run

VCs run a

business.

They make it

sound like

Black Magic.

IT IS NOT.


#5 – γνῶθι…τω επινδυτή

SOURCE: www. http://www.instigatorblog.com

Angels may

not let

you fail,

VCs may

give you a

big

success


VC ANGEL CAPITAL A

NG

EL

/V

C

DIS

CO

NN

EC

T

€ 500k € 2m

+

Closed

ALPHA

Public

BETA

SCALE - STAGE

1st Revenue

NE

T C

AS

H P

OS

ITIO

N

#6 - Series “A” Crunch: MIND THE GAP


Germany & UK are more affected by the VC/AC disconnect

US , 4,705 US , 5,585

US , 14,339

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

< $ 0.5M $0.5M - $2M >$2M

Deal

Vo

lum

je (

no

n U

S)

-

100

200

300

400

500

600

700

800

900

Deal

Vo

lum

e (

US

)

UK

Germany

Russia

Source: Data from ThomsonOne, Period: 10 years

ICT Deal volume per deal size bracket

#6 - Series “A” Crunch in NUMBERS


NOTE: The blurring of AC/VC in the US is coming

to Europe (maybe)

www.dramalioti-taylor.org


#7 – A new taxonomy of investors

#Venture Accelerators

Astia (for female geeks)

Seedcamp

Springboard

Accelerator Academy

500 stratups

Y-Combinator

….

# Super Angels

AngelLab

AngelList

# The NEW lean VC

They treat every entrepreneur as an individual

x.Million, EC1 CAPITAL et al.

Aim for the one that suits

your needs best

Interesting blog:

http://disruptivegrowth.wo

rdpress.com/2010/10/14/do-

accelerators-help-raise-

funds/

http://disruptivegrowth.wordpress.com/2010/10/14/do-accelerators-help-raise-funds/











#8- Connect the fundraising dots

Fight the

information

asymmetry

Sources www.thefunded.com

www.fredestin.com

venturehacks.com

earlystageadventures.com

www.adventurista.com

“what they offer”

vs.

“what you need”

– Initial capital per idea

– Sector focus: do they

understand it?

– Risk tolerance: can they

deal with uncertainty?

– Compatibility: will their

pride suffer if you fail?

– Terms (& strings attached)

http://www.thefunded.com/

http://www.thefunded.com/

http://www.fredestin.com/






14

Agenda

• Venture/Angel Capital:

– How to decide if you need it

– How to navigate the VC scene

• On raising Capital in UK/EU…

UK Entrepreneur: “Why bother? I am off to the US”

UK Investor: ”Go, but not before you see this…”

15

#9 - The US VC is prone to “bubbles”, when they

burst startups become orphaned

US

0.15%

GDP

EU

5.8x 0.026%

GDP

Investments per

capital in US is

5.8x higher than EU

US VC is big &… … some say already in a “bubble”

16

#9 – US VCs face an IPO crunch

IF Index >30

THEN

IPOs drop

dramatically

CBOE @ 06.11.12:

17

#9 – Startups in the US need 2x avg. capital to

build £100m business

EU = 1/2 x USA

Source: Early Bird Ventures, 2012

18

#9 – US tech acquisition of EU

companies is a well travelled road to exit

#US tech companies hold record offshore cash

Source: Zephyr M&A, 2012

0%

20%

40%

60%

80%

100%

20122011201020092008200720062005200420032002

EU acquisitions by US companies non EU acqusitions by US companies

Go. See. Come back.



# 10 - EU Growth drivers to ride on

EU-5

$292

EU-5

$172

2010 2015

eCommerce ($bn)

The $172bn eCommerce market in Europe will grow 1.7x

between 2010-15

EU5: 1.7x in 5 Yrs

$172 bn <

10% of EU-5 retail



$ 1,299

$ 122

2011 2015

EU-5 Mobile Ad spending will grow 10x between 2011-2012

(2x as fast as in the US)

EU5 growth: 10x in 4 Yrs

Mobile Ad Spending (mn)



0.62

6.52

1.730.1 0.88

11.8610.71

1

Fixed ( excl POTS) Mobile Short Range Other ( MAN, Satellite)

2011:

8.99bn connected devices

1.8 connected devices

per person

2020:

24bn connected devices 6.6 connected devices per person

Internet of Things: The ratio of Devices /Humans is expected to grow 3x by 2020

23

85% of worlds population

covered by wireless signals

vs

80% of world population

connected to the electrical

grid

Wireless connectivity flattened our world

Source: Mary Meeker, KPCB, 2012

Your turn

to talk x.Million Capital Ventures

24

25

European consumers are shifting online…

United States

East & West Europe

Internet Users

90M

150M

26

European consumers are going mobile fast …

United States

East & West Europe

Mobile Subscriptions

2004, Mobile subscriptions

EU > US

27

2x

…and are more social than most