Cvcf2009 Senkut Keynote Final

© 2009 Felicis Ventures LLC

Cyberport Venture Capital Forum 2009 Keynote on Angel Investing

Aydin Senkut Twitter: @asenkut [email protected]


Aydin Senkut – Felicis Ventures

Bringing operational excellence & scaling experience to funding start-ups Founder & Active Angel Investor @ Felicis Ventures | 2005 – 2009

  Portfolio of 50+ Companies

  7 Exits including Mint (acquired by Intuit), Plusmo (acquired by AT&T), Powerset (acquired by Microsoft)

  Every other portfolio company had an up round with a reputable VC

Strategic Sales and Product Management @ Google | 1999 – 2005   First portal deals in: Japan, China, Korea, Taiwan, Germany, Brazil

(closed portal deals of $100M+ revenues)   First site-search deal with Sony

(Global Launch in 20+ countries – seeding Enterprise Search Appliance)   First Product Manager / worked for Larry Page

(Launched first 10 International sites for Google along with other products)

Product Manager @ SGI | 1996 – 1999   Product Manager, Data Mining &Visualization (team of 20 engineers)


Venture Capital Ecosystem

Friends, Family or Grants

Rev

enue

/ E

BIT

DA

Individual Angels / Groups / Boutique VCs

Venture Capital Funds

Investment Banks & PE Funds

Acquisition Stage / IPO / Mergers

Idea Start up Intro Rollout Growth Expansion Maturity

Angel Investors $10k – $1MM

Grants of up to $1MM

Inv. Banks / PE $10MM - 100MM+


What is an Angel Investor ? Anyone who provides private capital to a [non family] start-up

 Usually the first outside investor

  Invest with the expectation of a financial return

  Invest usually locally and regionally

  Participate actively in the investment process

 Usually care about the entrepreneurs and the companies they invest in / interested in building personal relationships with companies & employees

 Offer advice and guidance to founders

* Source: Wall Street Journal – October 31, 2009


Angel Investors in the US

* Source: Angel Capital Association Presentation by Ian Sobieski, Band of Angels, Oct 2007

U.S. Millionaires

Estimate Of Informal Investors

225,000

Estimate of Active Angels

(Center For Venture Research)

Investors In Angel Groups


Rising Popularity of Angel Investing 3x Growth in North American Angel Organizations in 7 yrs

* Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)

NUMBER OF ANGEL ORGANIZATIONS


Angel Investing – Strength in Numbers

Angel Groups in the US:

 Have 44 members on average (38 median)

 Well spread out across the country (in 43 states)

  Invest close by (50% invest within a 4 hour drive, 30% invest within State or Region)

  Invest around $250-500K per investment round

  Leverage their groups for deal-flow, due diligence, and diversification of their investments

  Expect an exit around 5-7 years and a multiple north of 10x

* Source: Wall Street Journal – October 31, 2009


Angel Investing – Investment Focus Internet / Software lead other segments

* Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)


Angel Investments in Perspective In the Context of Venture Capital

Ear

ly S

tage

to L

ate

Sta

ge

2007 Angel Investments 2007 VC Investments

51,000 Deals

Average Deal Size: $500,000

3,416 Deals Average Deal Size:

$7,500,000

* Source: University of New Hampshire Center for Venture Research, Price Waterhouse Coopers


Venture Capital is Highly Concentrated Silicon Valley (40%) and NY (7%) account for nearly half of venture investment

* Source: NVCA Research 2009; PriceWaterhouseCoopers


  There is no Success without Failure (Twitter, Zappos, Pure Digital - Flip)

  The Path to Success is Not Necessarily Straight (Ideas Change, Launch Fast, Iterate Quickly)

Average product release cycle of select Felicis companies like Justin.tv is 2 weeks

  Elite Universities (with Global, Highly Selected Student Bodies)

 Multiple Generations of Successful Entrepreneurs Act as Mentors / Angels

What Makes Silicon Valley Special ? Tolerate Failure, Iterate, Elite Universities, Eco-system


•  Consumer internet still offers best path to high multiple returns

•  Key differentiator: capital efficiency

•  Virtually all the big successes were first backed by angels

Total $Raised Last Valuation ExitType Multiple InYears Founded Last Valuation at IPO or Exit

Facebook $716.0 $10,000 - 14 5 2004 2009

Twitter $55.0 $285 - 5 3 2006 2009

Zappos $62.8 $920 M&A 15 10 1999 2009

Adify $27.0 $300 M&A 11 2 2006 2008

Google $25.1 $23,100 IPO 920 7 1998 2005

Bebo $15.0 $850 M&A 57 3 2005 2008

Zimbra $14.5 $350 M&A 24 3 2004 2007

Photobucket $13.5 $300 M&A 22 4 2003 2007

YouTube $11.5 $1,650 M&A 143 1 2005 2006

Last.fm $5.0 $280 M&A 56 5 2002 2007

Note:Allamountsinmillions

Silicon Valley Success Story “Internet is the Greatest Legal Wealth Creation in History”


  Focus, Critical Use Case, Clarity of Purpose Example: Google Spell Check

  Ability to attract great people (team, investors, advisors) Example: Mint

  Passion Example: Zappos

  Innovation (thinking out of the box, even when resources are tight)

  Fun + Unique Culture

What Makes a Great Company ? Great People, Passion, Focus, Innovation, Fun


  Strong Personal Brand & Network It takes money AND time, one relationship at a time; add value, create goodwill

  Proprietary Deal-flow Have a plan, create an unfair advantage; social friends do not equal to great deal-flow

  Ability to Relate to Founders Examples: Mint, Imageshack

  Judgment (Domain Expertise, Experience, Timing, Nose for Talent) It might take tens of deals and years [& losses] to find the winners

What Does It Take… …To Be A Successful [ Angel ] Investor ?


VALUATION OF SEED ROUNDS All amounts in millions

What is a Good Deal (or Valuation) ? It Depends and It’s Cyclical


Growth is Key to Successful Investing CHINA has the Fastest Growing Internet and Mobile Markets

Global Rank Country

2007Users Added(000s) 2007Y/Y Growth Penetration

1 China 73,000 53% 16%

2 US 9,800 5% 73%

3 Brazil 7,400 17% 26%

6 India 5,000 7% 7%

8 Russia 4,311 17% 21%

INTERNET USER NET ADDITIONS

Global Rank Country

2007 Net Subs Added(000s) 2007Y/Y Growth Penetration

1 China 86,228 19% 41%

2 India 67,570 41% 21%

4 Brazil 21,062 21% 64%

5 Russia 19,326 13% 120%

7 US 13,596 6% 85%

MOBILE SUBSCRIBER NET ADDITIONS

Source: Morgan Stanley Research, ITU


Venture Capital / China = Opportunity Venture Investment in China now ~14% of US (up from 1%)

Source:US Data - NVCA Research 2009; PriceWaterhouseCoopers / China Data: Zero2Ipo Research 2009

US

China

[TOTAL FUNDS INVESTED] All amounts in millions


Venture Capital / China = Upside Funds raised last year roughly 25% of Funds raised in US

US

China

Source:US Data - NVCA Research 2009; PriceWaterhouseCoopers / China Data: Zero2Ipo Research 2009

[TOTAL FUNDS RAISED] All amounts in millions


China – Local Champions QQ and Baidu winning big in China versus Google SCALE IS BASED ON THE AVERAGE CHINA TRAFFIC OF GOOGLE IN ALL YEARS.

Source: Data from Google Insights for Search


Next Big Things

Other • Data Driven Smart Web Apps

• Crowd sourcing

Education • Online Education

Search • Local Search

•  Subjective Search

Health •  Personal Genomics

• Electronic Health Records


Seeding Future Winners - Incubators LEADING EXAMPLE IN THE US

•  Review 600+ companies every 6 months

•  Each batch around 20+ companies (~4% acceptance rate)*

•  Investment: $5K USD + $5K USD per founder

•  Stake: Usually 2-10%

INTERESTING FACTS •  25% of accepted companies are international

•  Last batch, more than half the companies changed what they were working on

•  Last Investor Day included 27 companies and 210 Investors

KEY RESULTS Companies Acquired •  Reddit (acquired by Conde Nast) •  Parakey (acquired by Facebook) •  Omnisio (acquired by Youtube/Google) •  Zenter (acquired by Google) •  Anywhere.fm (acquired by iMeem)

Companies with sizeable VC rounds •  Heyzap •  Loopt •  Scribd

•  Justin.tv •  Xobni •  Posterous


  Strong brand & highly selective (admission ratio of 1-5%)

  Limited time (~3 months) to encourage execution and fast iteration

 Heavy Mentorship in all key product areas (especially engineering, product, and fund-raising)

 Community and participation (Biggest success factor cited by founders)

  Active involvement of investors increases funding rate to 75%*

* Techstars

How Can Incubators Succeed ? Filter, Stress, Mentor, Engage, Eco-system


Food For Thought To Many More Internet Leaders from China and HK

Rank Company Country 2009 Market Cap 1 Google US $102B 2 Amazon US $29B 3 Yahoo US $19B 4 eBay US $15B 5 Yahoo JP Japan $14B 6 Softbank Japan $13B 7 Activision US $13B 8 Tencent China $12B 9 Baidu China $6B

10 Rakuten Japan $6B 11 Electronic Arts US $6B 12 Alibaba China $5B 13 NHN Korea $5B 14 NetEase China $3B 15 Expedia US $2B

TOP GLOBAL INTERNET COMPANIES

© 2009 Felicis Ventures LLC Confidential – Copyright Felicis Ventures LLC

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Cvcf2009 Senkut Keynote Final