The Advisor Garage blog has post on what VCs are looking for when approached, no surprises but re-affirms what’s important: The team, the opportunity, uniqueness and exit strategy.
I just signed up to the Advisor Garage as an “advisor”, highlighting my Telecoms industry knowledge and company valuation and pitching experience. The site separates users between “advisors” and “advice seekers.” Advisors are those with experience and skills that are looking for new business opportunities. Advice seekers are those with the idea but who need help turning it into a business.
While at the moment I’m an advisor, I have several ideas and once I do some due diligence on them I would ultimately like to be in the advice seekers group.
CNNMoney did a piece on location based services awhile back which I think will be the mobile phone killer app we’ve all been waiting for. Currently the services are in their infancy and are limited to mapping and direction capabilities, but in the future location based services will become increasingly ubiquitous integrated in other applications.
Demand for subscription location based services is expected to explode with a forecasted 335m subscribers in North America in five years. The hardware is already here, 63% of phones sold in North America in 2007 are expected to come with integrated GPS.
“Chewing Gum” by Annie – apparently this song is actually a few years old, but I just heard it for the first time at the gym and can’t stop listening to it. Fun fact, while Annie is Norwegian, my Norwegian girlfriend can’t stand the song
“Trying to find a home” by Tindersticks
“Baby don’t forget my number” by Milli Vanilli – I’m not proud of this one… really I’m not, especially when II watch this video
A little side project of mine lately has been property investment, in the UK everyone and their brother has a little real estate action going on. It’s actually somewhat of a national past-time, with average property valuations across the country getting daily newspaper coverage, not to mention that you could spend your whole day watching property development related shows on TV. The property market here is like none other, particularly in London, when you have such limited land and continued immigration, property prices keep going up and up.
I’m more interested in the Canadian market though, specifically my hometown of Kitchener-Waterloo (“KW”), for the following reasons:
Waterloo is the Intelligent Community Forum’s (“ICF”), a nonprofit think tank that focuses on job creation and economic development, Intelligent Community of the year.
A report by Re/Max predicts that property prices will increase by 5% in 2007
Despite some predictions that population pressures from Senior selling their homes and fewer first time buyers, a recent CIBC report predicts that house prices in Canada will double in the next 20 years
While the Canadian dollar has been gaining against the Pound lately, my money still goes a longer way in Canada than it would in the UK
I found this great site, run by Realtor Mike, which lists investment properties, along with their expected rent, taxes, net operating profit and cap rate.
My parents still live in the area… which means free property managers!
While I won’t be investing until I figure out where we’ll be moving next and what I actually want to do career wise, I’ve begun creating a spreadsheet that analyzes the returns on property investments. You can download it here (password is “executive”), I welcome any comments I can add into the next version.
It’s common knowledge now that Yahoo has made several attempts to buy Facebook over the past year, valuing the company at US$750m initially but reaching US$1.6bn before negotiations apparently broke off. Techcrunch has screenshots of a leaked Yahoo presentation and their US$1.6bn valuation. Below is Yahoo’s ad revenue assumptions and a sensitivity table of valuations at various discount rates and EBITDA margins.
This presentation by Yahoo was apparently prepared in the second half of last year so is quite dated, but an equity research report by Needham in April 2007 suggests that Facebook’s value has increased substantially since then. The report says that Facebook’s 2007 YTD performance has exceeded Yahoo’s forecasts in terms of both registered users and monthly page views/user.
The Needham report doesn’t give a revised valuation so I’ve attempted to back-out Yahoo’s valuation model using the screen-shots as guidance and update them with the figures in Needham’s report. I’ve had to make a few assumptions of my own (tax, capex and in the revenue assumptions) but I was able to get my DCF within 5% of all of Yahoo’s valuations. The end result is an updated valuation of $3.4bn, but I think this could be even higher! I want to heavily caveat this analysis as I’ve had to make a number of assumptions and I’ve done it rather quickly, but I think no matter what, Yahoo screwed up by not buying it already.
High level assumptions:
- 24m registered users by the end of 2007 (vs. 22m expected by Yahoo)
- 2,255 pageviews/active subscriber (vs. 2,329 Facebook had by Q1/07)
- In the years following 2007, I’ve assumed the same trend as Yahoo
Yesterday Blizzard annouced that they are working on a second Starcraft! I absoultely loved this game, I played the hell out of it and its definitly in my top 5 games of all time. I’m quite happy to hear that Bizzard isn’t making too many radical changes, I was really worried we wouldn’t even be getting a RTS game, but rather some FPS set in the Starcraft universe.
Here is the official trailer and some in-game footage, now if you’ll excuse me I’m going to install Starcraft and play it again!
In my old life as an investment banker when we were putting together a presentation for a client (or “the pitch book” or “the book”) the most important things were that there be no mistakes, formatting was immaculate and that it was big. The bigger the better and the smarter we appeared to the client, or that was the thinking.
While my work experience will definitely help me in putting together a pitch, I’ve begun looking for tips to fine tune my approach when pitching to VCs and other investors. Here are a few articles I’ve found:
1. “Art of the business pitch” by Mary Crane
Main take aways:
- A good pitch is a short pitch but don’t skimp on industry analysis
- Think of pitches in different stages, ie. the 30 second, 5 minute and hour long pitch
- Remember the details: Make sure your contact information is easy to find and don’t name the file something generic
- Video example of 30 second pitch
2. “The Top 5 Points A Venture Capitalist Wants To Hear” and “Top 5 Tips to Sell Yourself to Investors“
Main take aways:
- Both articles seem to based on the same info session given my Angel fund Infusion Angels
- The pitch should cover the following: Exit strategy, entry barriers, revenue model, capital allocation and competition
- “The general rule presented was that angel investors don’t require revenue to be present, but venture capitalists usually do”
3. “Art of the business pitch” by Josh Kopelman
Main take aways:
- Alot of pitches aren’t aligned to how a VC would analyze a company
- Three types of startups: 1) New market or space 2) Existing market with players succeeding 3) Existing market with players failing
- All pitches are different and understanding which type you are will help you articulate your business
I remember seeing this performance on Letterman many years ago and it gave me a new found appreciation for the banjo. I also enjoy the song “Foggy Mountain Breakdown” – does that make me a hick? Well I don’t care! Enjoy:
And yes that is Steve Martin playing the banjo, if you’re at all familiar with his early days as a stand-up comedian you’ll know he’s quite good.
Awhile back I posted some questions to VCs on the forums of the Waterloo Technology Startup (“Watstart“) website and Jacqueline Murphy of Waterloo VC Tech Capital Partners was kind enough to answer. As I think the resulting answers were pretty interesting, here they are:
Do you get alot of unsolicited proposals? How many do you get a month? How many interest you enough to contact the sender?
Yes we get a lot of unsolicited proposals — we’re currently receiving about 150 proposals a year that meet our base criteria (Waterloo region, technology focused, seed/early stage) — I’d say about 1/2 of these are unsolicited and about 1/2 are referred to us by local service providers or people who work at our current portfolio companies. We conduct light due diligence (contact the sender for more information, take a meeting etc.) on about 20% of these opportunities.
Is there a methodology you use to determine what % of a company their investment is worth?
Yes there are a number of methodologies that can be used to determine valuation of a company. At the very early stage (which is when we invest) the company doesn’t typically have a lot of value — we often invest at just the idea stage — and most of the valuation methodologies (based on revenues etc.) don’t really apply at this stage. We typically determine how much $ the company requires to get to its first significant milestone (and an increase in company value as a result) — lets say $2 million — and then value the company “pre-money” (which means before we put our money in) at $2 million in order to make sure the founders have enough of the pie to be incented moving forward.
How much more liquidity is there in California compared to tech centers in Canada like Ottawa and Waterloo?
By liquidity, do you mean is it easier to sell your company/go public in California or do you mean is it easier to raise money in California? There are definitely more VCs in California than in Ottawa or Waterloo but if the investment opportunity is compelling, you can raise money just as effectively here in Canada. The key is to find a VC that can add more value than just $. Look at the types of companies they’ve invested in the past, look at their reputation, talk to people at their current (and past) portfolio companies — these things really matter.
Is there enough VC capital in Canada for startups that require large amounts of startup money to get off the ground, > $20m (ex. FedEx)?
Yes. There is more than enough VC capital in Canada — as long as the investment opportunity is compelling
What is your preferred exit strategy? What kind of return of investment do VCs look for? After how many years?
Our preferred exit strategy involves a big $$$ amount — if we can get that by going public great, if we can get that through an acquisition great. Target returns vary depending on stage of investment — as I mentioned, we invest at a very early stage — quite risky — so we are looking for a 10x return on our money. We’re looking for companies who can hit the ball out of the park.
I don’t intend to do many restaurant reviews, only if they are exceptionally good or exceptionally bad… unfortunately Basaba Eathai was the latter. I was looking for a new Thai restaurant and checked various London restaurant websites, and this one came pretty highly rated.
The food was mediocre at our table (they were completely out of beef when we were there which was odd), but we actually did hear complaints at other tables, so be warned. My real problem came with the service, I won’t get into the details, but there were a couple of instances where they were extremely un-accommodating and on top of that cold and unfriendly. A negative in my books is their limited cocktail selection… they actually only served 1, a Bellini, which came in a glass so small that I wondered why they even bothered with it.
I’d suggest you stay away, if you’re looking for Thai food try the inexpensive Tuk Tuk in Soho.
Posted by James 
Posted by James 
Posted by James 
