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Venture Capitalists

Venture Capitalists. The New Barbarians At The Gate (about private equity and venture capital) ‏ A presentation for the British Chamber of Commerce on April 23 rd 2010 by Mr Ties van der Laan Ties Corporate Finance 10, rue des Alouettes, L-1121 Luxembourg-Cents Luxembourg

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Venture Capitalists

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  1. Venture Capitalists • The New Barbarians At The Gate • (about private equity and venture capital)‏ • A presentation for the British Chamber of Commerce • on April 23rd 2010 • by Mr Ties van der Laan • Ties Corporate Finance • 10, rue des Alouettes, L-1121 Luxembourg-Cents • Luxembourg • m +352 691 427 566, t/f +352 427 566 • e ties@ties.lu, i www.ties.lu

  2. Who am I? After nearly ten years in Dutch private equity companies (ING Group) I have been coaching entrepreneurs since 1999 to raise finance, first through LIFT and from mid 2002 as an independent financial consultant (raising finance, MIS, bookkeeping and personal financial planner) ‏

  3. Venture capitalists (VCs) • History • Characteristics • Who are the VCs? • What do the VCs seek? • How do the VCs operate? • Some figures • VCs and hedge funds

  4. VCs: history • Started in USA in early 1900 • Rich families (e.g. Rockefeller, Ford) invested outside their own conglomerate as business angels • 1st time distinction: ownership/management • After WOII: professional VC's • Early 60s: UK • Early 80s: continental Europe (banks in NL)‏

  5. VCs: characteristics • What: professional buyers private company shares • Money: institutional investors (II)‏ NB. II = LP, fund manager = GP • Funds: € 10m – € 15bn (!)‏ • Deals: € 1m – several € 100m • Age: investment managers, 25–55 years old, deal makers with financial background

  6. Who are the VCs? • 1. Private equity vs venture capital • 2. Evergreens (mostly captives) vs revolving funds • 3a. Large VC's (<10 in EU)‏ • Funds: several € 1bn, deals: € 1m-250m • Sector and/or region specific sections/subsidiaries • Buy-outs, fund of funds • 3b. Medium sized generalists (100-200 in EU)‏ • Funds: € 50m-300m, deals: € 1m several € 10m • Private equity, venture capital and fund of funds • 3c. Niche VC's (< 100 in EU)‏ • Funds: € 10m-300m, deals: € 250k-5m • Focused on technology markets or niches • Combine investors with industry knowledge • Mostly venture capital

  7. What do the VCs seek? (I)‏ • Objective is generating cash • Driven by building profitable/saleable companies • Private equity: • 90% (!) of money yearly raised • Mature companies with turnover > € 50m • Buy-outs mostly (MBO, MBI, LBO, IBO, BIMBO etc.)‏ • No market specialisation • Return > 20%: € 10m in, 4 years later € 20m out • Financial engineering • Buy and build • Sale

  8. What do VC's seek? (II)‏ • Venture capital: • Young companies: seed, start-up, early stage • Large, global empty markets • Experienced entrepreneurs • Return > 50%: € 1m in, 4 years later € 5m out • Growth • Sale (trade or IPO)‏ Investing is trust in people • PE = balanced management teams • VC = entrepreneurs

  9. How do VC's operate? (I)‏ • Intake • Receive more plans than read • Introduction via network • Selective: invest in 1% of business plans read • Extensive due diligence: 2 to 6 months • Market(ing), technology, management, legal, financial • PE: mostly external specialists • Syndicates (so no competition between VC's)‏ • Deal-sourcing in other regions • Follow-on investments • Prevent entrapment • Control with minority share • Cross-border only with local investor

  10. How do VC's operate? (II)‏ • The deal • Sometimes complex deals • Management option scheme • Veto-rights, minority protection, anti-dilution • Board representation • Monthly or quarterly reporting • Control over exit • Investment committee decides • Typically 2 months

  11. How do VC's operate? (III)‏ • After the deal • Real work starts • Frequent contact in beginning • Support: knowledge, experience and network • Focus on growth, reporting and exit • Hands-off unless going badly • No good money for bad money • Sell healthy part of company via network

  12. Some figures NB. Figures from EVCA/Thompson/Reuters (adapted)‏ • Funds raised 1995 - 2009 • Capital invested 1995 - 2009 • Raised vs invested + divested @ cost • Returns until December 2009

  13. Figures (1): funds raised

  14. Figures (2): capital invested

  15. Raised vs invested+divested

  16. Figures (4): returns 12/2009

  17. VCs and hedge funds • NB. Only active hedge funds resemble VC’s/PE • Differences: • Quoted companies, small stake (few %)‏ • No deal with management • Short term (several months)‏ • Skill-based: invest in different asset categories • Similarities: • Wake-up call for management • High return (and high risk)‏

  18. My passion‏ Bridging the gap between entrepreneurs and investors My activities: • Raising finance caddie for entrepreneurs • Management information systems • Personal financial planning • Bookkeeping

  19. Contact details • Ties Corporate Finance • Ties van der Laan • 10, rue des Alouettes • L-1121 Luxembourg-Cents • Mobile: (+352) 691 427 566 • Fax: (+352) 427 566 • Email: ties@ties.lu • Internet: www.ties.lu

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