Venture Capital 101
Danny Gilligan
Twitter: @dannygililigan
[Link]
1
Start-up vs SME
Start-up SME
New and experimental business models Follows existing business models
Focused on growth Focused on sustainability
High risk Low risk
Equity financed Debt financed
2
Private Equity vs Venture Capital
Private Equity Venture Capital
Established companies with substantial revenues Early stage companies with limited revenues and profit
Established business models New and emerging business models and products
Look for under performing assets Look for high growth assets
Take controlling stake 51 – 100% Take minority stake 10-20%
2-3x return on each investment 10x return on each investment
3
What is Venture Capital?
Start-up financing cycle: Definition:
Venture Capital
Venture Capital is a form
of funding which
Bootstrapped specifically invests in
By Founder(s) new businesses with
Early Stage Later Stage high growth potential
Revenue
Exit:
IPO and super normal
Trade Sales returns.
Angel Investors Management Buyout
Accelerators Series C +
Series B Examples:
Series A 2005 - Accel Partners
Seed Capital
investing $12.7m in
Avg. Funds Raised $1m $2-$5m $10 - $20m $20m+ Facebook
2008 – Sequoia Partners
investing $8m in
Runway 12m 12-18m 24m 24m+ WhatsApp
4
The key premise of Venture Capital is convexity
2005 Accel Partners invested
$12.7m (Series A) in Facebook
for 10% equity
In 2010, Accel sold off ~2% of
their stake at
247x
Venture Capital
Possible initial investment value.
Payoff
f(x)
Upside
Possible The remaining ~8% would be
Downside worth
Time
(x)
3,302x
initial investment value today.
5
Brief History of Venture Capital
Platform VC
SPAC
First VC Accelerator Product Crowdfunding Equity Crowdfunding
1946 1972 2005 2007 2009 2010 2011 2014 2017
Sand Hill Rd Company Building Angel List ICO
VC ICO
6
Venture Capital in Australia
Australia U.S.
$1.3B $82B Australian VC Fundraising ($m)
Funding in last year Funding in last year
1320
125 5,083
Deals in the last year Deals in the last year
568
+24.37% +12.28% 325
YoY Deal growth YoY Deal growth
154 124
68 798 2013 2014 2015 2016 2017
Venture Capital firms Venture Capital firms
Sources: AVCAL, CBinsights
7
How Venture Capital is set up
Investment Team Limited Partners
Capital Interest
General Partners
Carried Interest & Venture Capital Fund
Management Fees Average Fund Lifetime: 7-10 years
Portfolio Portfolio Portfolio Portfolio
Company Company Company Company
8
Types of Venture Capital
Standard VC Corporate VC
• Financial objectives • Strategic objectives • Financial objectives
• Dedicated funding • On balance sheet • Dedicated funding
Structure • Long term • Holding period can • Long term
change
• Access to networks • Access to distribution • Distribution
• Operational expertise • Access to deep industry • Industry expertise
Value add expertise • Access to networks
• Operational expertise
9
Current Areas of Interest
Payment
Solutions
Blockchain
Fintech Data
Crypto
Cyber
P2P
Security A.I Lending
10
Decision Criteria
Metrics Business Dynamics Deal Terms
• Monthly • Disruptive or • Valuation
Recurring sustaining • %holding
Revenue • Network effects • Board seat
• Customer • Virality
Acquisition Cost
• Life time value
(of customer)
• Churn
• Total
Addressable
market
11
Decision Criteria
Team
• Co-founder dynamics
• Founder blind spots
• Repeat founders
• Experts in the subject
matter
• High amount of grit
• Hustle
• Get shit done gene
12
Reinventure’s Philosophy
Pioneering Founder-First Corporate Venture Capital
13
Get in touch with us!
[Link]/the-ouroboros-effect @ReinventureFund [Link]/company/reinventure-group/
Website: [Link] 14