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International Entrepreneurship & Global Fundraising

International Entrepreneurship & Global Fundraising. May 30 th 2008. Richard P Kivel CEO TheraGenetics MIT Entrepreneurship Center, Deshpande Center, MITEF, MIT $100K. Entrepreneurship. “ In America they celebrate working hard. Like, ‘Wow! Look how hard they worked,

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International Entrepreneurship & Global Fundraising

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  1. International Entrepreneurship & Global Fundraising May 30th 2008 Richard P Kivel CEO TheraGenetics MIT Entrepreneurship Center, Deshpande Center, MITEF, MIT $100K

  2. Entrepreneurship “ In America they celebrate working hard. Like, ‘Wow! Look how hard they worked, And maybe I can do that too’ It’s a beautiful thing” Rachel Weisz Actress / London

  3. The Entrepreneur: A Special Species? • What do successful entrepreneurs look like? • Integrity • Leadership • Impatient; bias toward action (with analysis). • Modest ego. Recognizes, and hires to overcome weaknesses. • Willing to be different, but knows it • Pragmatic; willing to compromise (in order to move forward). • Rejoices in others’ victories (no petty jealousy). • Driven to solve a valuable problem for customers (not driven by money or technology). • Able to attract world class talent. * With special thanks to Flagship Ventures

  4. Founding CEO vs Long-Term CEO

  5. CEO must divide time between • Raise cash • Recruiting and Building Culture • Managing the Board and Investors • Operations and Finance • Customers and Partners

  6. Critical Success Factors in Entrepreneurship • Believe that Startup Ventures can Succeed: • Parent(s) who are entrepreneurs • Early contact with successful entrepreneurs • Exposure to success stories and case studies. • Gain practical, real world experience before, during and after university studies. • Be willing to be Unusual/Unconventional. • Agree to Embrace Risk, and possibly failure. • Want to create a large Company. • Live in a society that sees the above as normal, not a strange exception. • Ambitious Entrepreneurs ask : “What do we really want to do?” • We want to make a world class product whatever it is. • We want to have fun doing it. • We want to get involved in a business area or business segment that is at its ground floor and in its infancy.

  7. The Current Climate:B2B = Back to Basics • Entrepreneurs need to have an outstanding • Team • Technology • Value Proposition • Market • Customers • Applies to VCs as well… • Europe • Canada • USA

  8. Financing “My interest in life comes from setting myself huge, apparently unachievable challenges and trying to rise above them.” Richard Branson

  9. Can you answer the tough questions? Is there a need? Have the market segments been identified and are they understood? Is the market large and will it grow rapidly? Can the company establish a defensible market position? Is there or will there be formidable competition? Is the sales cycle a serious hurdle? Organization Does the CEO have a successful track record? If necessary, can we attract a new CEO? Are the founders experienced and respected in their industries? Is the team innovative, experienced and success-oriented? What are the founder's strengths and weaknesses? Is the team capable of building a large company? Does the team have an in-depth knowledge of the market? Products/Technology

  10. If not, who will? Is the concept unique? Are the products differentiated? How does the technology address a market need? Does the company have a patent or other proprietary position? Is the engineering plan explicit and can the engineering team execute? Is the technology realistic and feasible? What are the major risks? Financing Arrangements What is the capital structure? Are the numbers realistic and achievable? Risks What are the major risks? What is the magnitude of the risks? What is the risk/reward ratio? What are comparable market caps for companies of this nature? What are the company's capital needs? What are the paths to liquidity and what is the timing? Can the company be financed in the future? Plan Is the strategy well-conceived? Can the management team articulate the strategy? Can the strategy result in a large company? Does the company have a roadmap to profitability? What business is the company in? Is its mission explicit? Economics Is the company profit-oriented? Are the company's ratios attractive? When will the company turn a profit?

  11. Gifts and Grants Federal Government – NIH, SBIR, DARPA, other State Government - Various Foreign Governments Philanthropists Bloomberg donation to John Hopkins Gates Foundation Wellcome Trust Celebrity Charitable Organizations Michael J. Fox Foundation Reeve Foundation Debt Capital Secured Unsecured Private Equity Investors (principally VCs) Public Equity Investors Sources of Capital

  12. U.S. Venture Capital Investment Reaches Highest Level Since Q1 2001, Rises 8% to $8.07 Billion in Third Quarter of 2007 Venture capitalists invested $7.1 billion in 922 deals in the first quarter of 2008 “You have to pretend you're 100 percent sure. You have to take action; you can't hesitate or hedge your bets. Anything less will condemn your efforts to failure. “ Andy Grove / Intel

  13. What is Venture Capital? Venture Capital Is... … Investing in high potential, high growth private companies … Identifying and assisting talented entrepreneurs as they build successful companies … Helping to drive growth, productivity, and technological innovation

  14. VC Value Chain (1) Raise Capital (7) Liquidate / Sell Portfolio Companies (6) Nurture Portfolio Companies (2) Evaluate Market Segments (5) Negotiate and Structure Investments (3) Generate Deal Flow (4) Select Investment Candidates

  15. Venture Capital Investment Path Ongoing • Venture Research • Identification of attractive sectors and investment opportunities • Source deals and initially screen opportunities • Meet with management team of potential investment • Partner meeting and further screening • Due diligence begins • Prepare formal Investment Opportunity Summary (IOS) memorandum • IOS partners meeting and investment decision • Term Sheet submission • Legal negotiations • Co-investor syndicate selection • Due diligence checklist completed • Investment closing • Active investment management Week 1 Months 2-4

  16. US Venture First-Time Financings • The dollar value of first-time deals was $1.6 billion going into 294 first-time deals. • First time financings accounted for 23 percent of all dollars and 32 percent of all deals in the first quarter. • Companies in Software, Medical Devices, Biotechnology, and Media/Entertainment received the highest level of first-time dollars. • Financial Services, Computers &Peripherals, and IT Services also saw more dollars invested into their industries for thefirst-time this quarter as compared to last. • Only the Media/Entertainment industry experienced an increase in both dollars and deals with 45 companies receiving $210 million in funding. • The average first-time deal in the first quarter was $5.6 million compared to $6.2 millionone quarter ago. • Seed/Early stage companies received the bulk of first-time investmentsgarnering 57 percent of the dollars and 66 percent of the deals.

  17. US Venture Industry Analysis • The Biotechnology industry narrowly edged out Software as the number one industrysector for the quarter with $1.27 billion going into 126 deals. • Investments in Life Sciences companies represented 32 percent of all investment dollarsand 24 percent of all deals in the first quarter. • Internet-specific companies garnered $1.3 billion going into 195 deals in the first quarter, • Four of the last five quarters have seen Internet-specific investment ofmore than $1 billion. • ‘Internet-Specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.

  18. US NYSE/NASDAQ Pan-European Euronext SWX Other regional exchanges UK LSE/AIM Germany FSE Dubai DIFX International Stock Exchanges • Japan • TSE/Mothers • Hong Kong • HKE • Mainland China • SSE • India • BSE • Singapore • SGX

  19. US: NASDAQ & NYSE 2007 Life Science Financing Overview US Biotech Industry Financings 2007 Initial Public Offerings: • 27 offerings with proceeds of at least $20.0m • $2b total proceeds raised • $70m average deal size • $162.3m median pre-money valuation • The share price of issuing companies increased 2% on average 5 days post pricing • The share price since time of offering has increased 2% on average

  20. US Biotech Industry Financings 2007 US: NASDAQ & NYSE

  21. US: NASDAQ & NYSE Capital Raised 1980-2007

  22. IPOs – Not What They Used to Be

  23. IPOs – Not What They Used to Be IPO WINDOW SUMMARY 2003 TO 2007 Amount Raised* Number of IPOs ($ Million) 2003 7 $438 2004 29 $1,628 2005 17 $819 2006 19 $920 2007 28 $2,041 Total 100 $5,846 *Includes over-allotments Source: Burrill & Company

  24. AIM is the London Stock Exchange’s internationalmarket specifically designed for smaller, growing companies, combining the benefits of a public flotation with appropriate levels of regulation. • AIM gives companies from all countries and sectors access to the market at an earlier stage of their development, allowing them to experience life as a public company. • Since AIM opened in 1995, more than 2,000 companies have been admitted and more than $42 billion has been raised collectively. • An AIM quotation offers companies: • A flexible regulatory regime • Access to a unique, globally respected market • Access to a wide pool of capital • Enhanced profile – heightened interest in your company • Increased status and credibility • Currency for and easier rules on acquisition • Lower cost of administration London Stock Exchange / AiM

  25. Number of and percentage of international AIM companies December 2004 to December 2005 220 16.0% Number of international AIM companies 200 15.0% International percentage of AIM companies 180 14.0% 160 13.0% 140 12.0% No of international AIM companies International percentage of AIM companies 120 11.0% 100 10.0% 80 9.0% 60 8.0% 40 7.0% 20 6.0% Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 London Stock Exchange / AiM • 220 international companies Dec 2005 (16% of market) • Increased of 90% over 2005 (37% whole market) • Market value of overseas companies increased 98% over 2005 (78% for market)

  26. Regulated by the London Stock Exchange, giving a more flexible regulatory environment • No trading record required • No minimum amount of shares to be in public hands • In most cases, no prior shareholder approval required for transactions • Admission documents not pre-vetted by Exchange or UKLA but by nominated adviser • Nominated adviser required at all times London Stock Exchange / AiM

  27. AIM companies are subject to the AIM Rules which outline the continuing obligations of being on a public market. Some of the key continuing obligations are: Must have a Nomad at all times, otherwise they will be suspended from the market AIM companies must disclose all price sensitive information in a timely manner including substantial transactions, related party transaction, reverse takeovers and other miscellaneous transactions Half yearly and annual report and accounts required in adherence with deadlines All directors accept full responsibilityfor the AIM Rules Restrictions on deals for directors and applicable employees on AIM securities during close periods UK Corporate Governance standards London Stock Exchange / AiM

  28. London Stock Exchange / AiM

  29. NYSE / Euronext / Alternext The European regulated market of the NYSE Euronext groupThe leading equities marketplace in the worldCompanies include a cross-section of large, midsize and small capitalization companies

  30. NYSE / Euronext • NYSE Euronext's nearly 4,000 listed companies • Representing a combined $27.3 / €17.3 trillion in total global market capitalization (as of March 31, 2008). • Four times that of any other exchange group. • NYSE Euronext's equity exchanges transact an average daily trading value of approximately $169.6 / €113.2 billion (as of March 31, 2008), which represents more than one-third of the world's cash equities trading. Belgium France The Netherlands Portugal

  31. Now is the time! • Inexperienced gamblers are dying or dead. • A line of bull + .ppt is not enough. • Serious entrepreneurs, business angels, and VCs are quietly and carefully moving forward. • Expectations and time horizons are realistic. • Recruiting top talent is easier. • Unprofessional competition and their VCs have retreated to the sidelines. “Creative destruction” is a good thing. “Go to bed early and wake up early. The morning hours are good.” Jeff Bezos

  32. Summary / Review • Trends • Know the past and search for the future • Looks at trends and find leaders • Identify Convergence • 2. Entrepreneurship • Take the risks, life is short • Work with the best people • Manage your Board • Communicate with your Investors • 3.Financing • Raise more then you need • Investigate all sources of capital • Raise smart money • 4. Leadership & Rules of Engagement • Hire slow, Fire Fast • Create a culture not a work place • Passion is contagious , top down

  33. Anybody can jump a motorcycle. The trouble begins when you try to land it. EvelKnievel 1938-2007 33

  34. Special Thanks to: MIT Ken Morse NVCA Burrill and Co UKTI

  35. Richard P. Kivel CEO TheraGenetics Limited rich@theragenetics.com www.theragenetics.com

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