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Lucerne, October 16, 2003

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Zug, CH. CHF 101 m. January 2001. partners. venture. incubator. Management Company ... CH-6300 Zug. Switzerland. Phone: 41 41 729 00 00. Fax: 41 41 729 00 01 ... – PowerPoint PPT presentation

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Title: Lucerne, October 16, 2003


1
Whats happening in the world of Venture Capital?
  • Lucerne, October 16, 2003

2
Purpose of this presentation
  • Background information
  • Give our view on the present market
  • Implications for entrepreneurs

3
VIs mission
  • We support the conversion of technology-based
    ideas into marketable products and services with
    significant growth potential, with the ultimate
    goal of creating first-class companies.
  • We invest in seed and early stage. We tend to
    invest chf1-2m in a first round, keeping
    aside significant reserves for following rounds
  • We have a long term commitment (evergreen
    fund)
  • We contribute with management know-how
    (entrepreneurial background) and networks
    (investors and professional contacts)

4
Strong shareholders base
Shareholders
Strategic Partners
Management Company
Zug, CH CHF 101 m January 2001
partners
ventureincubator
Start-upcompanies
5
Investment focus
Clear geographical focus
Wide sector coverage
Life Sciences MedicalTechnologies
IT Communication Technologies
Automation Micro-technologies
6
Used to be true in good old times (late 90s)
  • Company creation with 100k. Founders and FF
    are shareholders
  • lt6 months after that, business angels pay for
    some new shares for 100s of kCHF at a value
    of CHF2-5m
  • lt6months after that, first VC steps in with
    CHF1-2 for 10-20 of equity
  • etc...
  • Sometimes all the shareholders ended up being
    lucky and sold at significant premiums to
    industrial buyers or even went for IPOs
  • Sometimes industrial partners ended up
    snapping these companies for little money
  • Sometimes some other persons ended up making
    good deals

7
Horror stories of of companies created in the
early 2000s
  • Same as before for the beginning of the story,
    but
  • 24 months after creation, no cash left, only
    selected investors interested, down-round
    organized at the expense of all historical
    shareholders. Often private investors stepping
    in again.
  • In other words lots of cries. Only the best
    companies survive. Many bankruptcies and
    liquidations.
  • Conflict of interest between historical
    shareholders and management are exacerbated.
  • Only investors with long term view and deep
    pockets might end-up having healthy
    portfolios.
  • Management negotiates decent deals for
    themselves since they are essential for the
    future of the companies.

8
Back to a healthy situation?
  • Founders create their company with limited
    cash, but attract experienced talents. The
    company is ready to mature fast.
  • Once the business model is in place, the first
    round of investors come into the company.
    Ideally some smart money together with deep
    pockets to follow over time. Small investment
    to see.
  • This shareholders group is ready to support
    the company even in rough times as long as
    the end goal is still in sight and reachable
    with reasonable means.
  • New investors may be attracted at a later
    stage, depending on the actual cash needs of
    the company. Will not happen at a huge
    premium towards initial investors. Exceptions
    are always possible!
  • In case of successful trade sale / IPO,
    founders will make a lot of , since they
    will have significant options to compensate for
    dilution

9
Implications for entrepreneurs
  • Think about your company being at the center
    of a web
  • Combination of experienced management and
    technical skills
  • Value added investors (could very well be
    privates who have been successful in that
    business)
  • Deep pocket investors who can follow over time
  • In some cases, industrial partners can be very
    useful
  • Try to avoid being obsessed by valuation and
    deal conditions. You will end up making
    if you add value to the company. Also, your
    company will go through many rounds before being
    sold!
  • Plan ahead it is most likely that you will
    end up spending 2x more and will take 2 years
    more to reach break even. Will your planned
    setup allow for that?

10
Thanks and all the best for your ventures!
Alain Nicod VI Partners AG Metallstrasse
6 CH-6300 Zug Switzerland Phone 41 41 729 00
00 Fax 41 41 729 00 01 Homepage
www.vipartners.ch Contact alain_at_vipartners.ch
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