Building Success and Creating Prosperity where do we find investment opportunities

1
Building Success and Creating Prosperity -where
do we find investment opportunities

• Juha Mikkola
• Sr. Partner, Eqvitec Partners
• juha.mikkola_at_eqvitec.com

2
Eqvitec Partners At A Glance

• Leading Nordic technology venture capital firm
• Founded in 1998, 16 professionals in Helsinki and
  Stockholm
• 260m under management with 50 remaining to
  invest from 2 funds
• Equity and mezzanine instruments
• 45 investments so far in Finnish and Nordic
  technology companies

• Top quartile performance in Europe
• 8 new investments in 2004 worth 32 Million
• 5 exits in 2004. Overall 10 exits 9 trade sale,
  1 IPO
• Co-investors Most Nordic VCs Cisco, Sony,
  Intel, Motorola, Disney, GE Capital, Carlyle,
  Morgan Stanley, etc.

3
Syndication Culture
International Strategic Investors
Intel
Fortum
Motorola
Nokia
Cisco
3i
Nordea Capital
CapMan
AOL
Sony
Finnish VCs
SITRA
Holtron
TeliaSonera
Amer
Eqvitec Portfolio
Greylock
Wellington Partners
Northzone Ventures
Four Seasons Venture
Nordic VCs
Austin Ventures
Prime Tech VC
IT Provider
Morgan Stanley
Carlyle Group
GE Capital
EQT
Investor
International Financial Investors
4
Telecom and Wireless Portfolio
Mobile handset ceramic antennas (2003)
Enabling software for operators (2002)
Navigation applications for mobile phones (2004)
Virtual PBX systems for mobile and VoIP telephony
(2004)
Positioning software (2001)
Low temperature ceramic chips (2001)
Wireless software consulting (2000)
Mobile office software (2000)
Symbian OS based software for mobile phone
manufacturers (1999)
Mobile transaction validation and
authentication (2000)
Eqvitec is a pioneer in investing in wireless
technology, having wide commercial experience
from telecom vendors and operators. Through a
large number of investments both in early stage
and mature companies, we have created a unique
concept to take our portfolio companies to
international success.
5
Software Portfolio
Knowledge engineering software (2003)
Business Intelligence and GIS solutions
(1999/2003)
Energy trading and risk management solutions
(2004)
Identity and Access Management (IAM) solutions
(2004)
statistics and data management for
pharmaceutical industry (2003)
Intelligence solutions for construction industry
(2003)
Supply chain network operator (2003)
Voice-enhanced communications solutions (2002)
Enterprise application integration (EAI) software
(1999)
Back office financial software (1999)
Language e-learning software (2001)
CRM solutions (2000)
RF-design software (1998)
As the enabling medium in IT-systems, various
devices, many components and all automation
systems, software is present in almost all of
Eqvitec's investments. Eqvitec's professionals
have held leadership and expert positions
throughout the software industry.
6
Industrial Technology Portfolio
Industrial weighing and dosing systems (2004)
Armour material Components (2003)
Façade materials (2002)
Beam shaper technology for optoelectronic
Semiconductors (2003)
Catalytic converters (2004)
Flexible manufacturing systems (2001)
Electrostatic air purification (2000)
Optical components for LCD-screens (2002)
Flat panel audio speakers (2001)
Metropolitan networks supplier (2001)
Electronic component manufacturer (2000)
Conductive polymers (1999)
Mining and tunneling vehicles (1999)
Safety glass machinery and safety glass (1998)
Special metal coatings (1998)
Eqvitec's industrial technology team combines the
skills from a wide range of technology areas such
as new materials, electronic and engineering
components as well as the whole manufacturing
process.
7
Where do we find future investment opportunities
?
8
Show me the money
9
US vs. Europe
Amount Invested (B)
Overall Investment
Source VentureOne/Ernst Young
10
VC investments - US
Amount Invested (B)
Number of Deals
Source VentureOne/Ernst Young
11
Investment activity Europe
Amount Invested (B)
Number of Deals
Source VentureOne/Ernst Young
12
Investments by sector Europe
Source VentureOne / Ernst Young
13
Market situation from Eqvitec Perspective

• VINTAGE 1998-2000
• A lot of talk about advanced telecommunications
  services
• Emphasis on technology rather than services
• Not enough focus on startup leadership
• Lack of innovation from VC community

• TODAY
• From technology labs to business labs
• Identification of core competences processes
• Build on competences to add value
• Corporate co-operation

14
Example of value chain complexity
15
Where is our potential

• Huge innovation potential - Public and corporate
  efforts on research and development from 3,5 to
  4
• Co-operation between corporates - Established
  dialogue and process between Eqvitec and
  corporates
• New leadership potential available

• Converged technologies
• VOIP
• Digital connected home
• Embedded software
• Material technologies
• Virtual enterprise
• Distributed learning
• Corporate access and identity management
• Security
• 3G services (finally)

16
Investment Criteria- still the same, more focus
on building the team
17
How to add value

• Troux
• Smarttrust
• Software products in Telco sector
• Cumulative losses 150M !!
• New owners
• Completely new management and strategy
• Reduced 140 people, cut 11M expenses at a same
  time with 28 growth

• Envox
• Affecto Genimap
• Location based technologies under evaluation for
  years
• Build a GIS technology pool with investments in
  Fastrax, Navicore and Genimap
• Merged Affecto and Genimap to create a XBI
  (extended business intelligence) center and
  enough critical mass
• 48M revenue with 17 Ebit

18
The rules of Venture Capital

• Invest in new companies that traditional sources
  of money wouldnt touch ?
• Extraordinary risks ?
• business risks
• market risks
• tech risks
• legal risks
• people risks
• Invest, build value and exit ?
• VCs need a combination of judgement and luck!

19
Current VC environment

• Companies have realistic expectations
• Valuations are at a correct level
• Business concepts are stronger quality deal
  flow
• Reasonable job market
• Corporate spinn-offs
• Corporate venturing is dead, fewer VCs act
  strongly
• We still believe real breakthroughs are possible
• ALL still ?

20
What is a good VC investment?

• Strong diligent management
• Disruptive market opportunity
• Growth potential
• Realistic view of market and product development
• Unique advantage present
• Defendable IPR
• Credible and efficient production
• Right timing
• Has a clear understanding of the customer need
• Profitable exit

21
John P. Kotters 8 steps to transforming your
organization

• Establish a sense of urgency
• Form a powerful coalition
• Create a vision
• Communicate the vision
• Empower others to act on the vision
• Plan for and creating short-term wins
• Consolidate improvements and producing still more
  change
• Institutionalize new approaches

22
True value of the company ?

• BUYERS SELLERS
• Marketprice

23
Conclusions
Eqvitec strongly believes in Wireless ecosystems
to create interesting opportunities We just
need to focus more on true demands