1. VENTUREFEST
FUNDING FOR GROWTH
JO OLIVER
OCTOPUS VENTURES

2. VENTUREFEST – FUNDING FOR GROWTH
INTRODUCTION
 Octopus Investments - £3bn FUM
 Octopus Ventures - £300M+ FUM
 Seed, through Early Stage to Growth / Development Capital
 Portfolio of 60+ Companies
 Exits include LoveFilm to Amazon for $312m
 Portfolio Companies include Zoopla and Graze
 One of the most active VC in the UK in 2010*
* Source: Ascendant Limited 2

3. VENTUREFEST – FUNDING FOR GROWTH
GROWTH / EXPANSION CAPITAL
 Growth / Expansion Capital
 Series A - Series B++ to Exit
 No hard & fast rules, but a guide is:
 Proven Technology
 Commercial traction
 Established Business Model
 Revenues of £1m +
 EBITDA positive on an underlying basis
 £1m - £10m+ capital raise
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4. VENTUREFEST – FUNDING FOR GROWTH
THE BAD NEWS
 The Equity Gap is getting wider and deeper
 Post the Credit Crunch – Growth funding is at multi-decade lows, from
both banks and VCs
Venture Capital Fund Raising Bank Lending to SMEs
7 20.0
6
15.0
% Change YOY
5
10.0
4
£bn
3 5.0
2 0.0
1
-5.0
0
May 2008
May 2009
May 2010
Jul 2008
Sep 2008
Nov 2008
Jul 2009
Sep 2009
Nov 2009
Jul 2010
Sep 2010
Nov 2010
Mar 2008
Jan 2009
Mar 2009
Jan 2010
Mar 2010
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09
Year
Source: Nesta
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5. VENTUREFEST – FUNDING FOR GROWTH
THE GOOD NEWS
 Recessions have historically produced the best VC returns
 Paradigm technology shifts are making it cheaper and faster to start and
grow very valuable businesses, in increasingly short periods of time:
Time Taken to Reach $10bn Valuation
35
30 1976-05
25
1977-96
20
Years
15 1982-94
10
1998-03
5 2008-10
0
Apple Oracle Adobe Google Groupon
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Source: Capital IQ

6. VENTUREFEST – FUNDING FOR GROWTH
SOURCES OF CAPITAL
 Bank Finance / Debt
 Friends & Family; Angels; Seed
 Venture Capital / Private Equity
 Public Markets
 Other
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7. VENTUREFEST – FUNDING FOR GROWTH
BANK FINANCE / DEBT
Pros Cons
 Relatively cheap capital  Availability
 Financial leverage  Profitability needed
 Tax relief on interest costs  Security
 Limited ceding of control  Subordination of equity
 Flexibility  Cash costs of servicing
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8. VENTUREFEST – FUNDING FOR GROWTH
FRIENDS & FAMILY; ANGEL; SEED
Pros Cons
 Often the only option  Length of process
 Limited servicing costs  Follow on availability
 Control & Value Dilution
 Value Add investors (?)
 Avoid complexity
 Tax benefits for investors
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9. VENTUREFEST – FUNDING FOR GROWTH
VENTURE CAPITAL / (PRIVATE EQUITY)
Pros Cons
 Value Add  Process
 Cash reserves  (Partial) Loss of Control
 Credibility  Equity Value dilution
 Time & Cost of servicing shareholders
 Permanent capital
 Exit experience
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10. VENTUREFEST – FUNDING FOR GROWTH
STOCK MARKETS / AIM
Pros Cons
 Access to multiple sources / larger  Costs
amounts of capital  In the Public Eye
 Profile and credibility  Stock Market fluctuations
 Valuation transparency / reflection  Ownership not partnership
 Liquidity for shareholders  Lost in the crowd
 Acquisition currency
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11. VENTUREFEST – FUNDING FOR GROWTH
OTHER / ALTERNATIVE SOURCES
 Corporate venture arms
 Grants/ matched funding/ R&D tax credits
 Working capital optimisation
 Factoring/ finance leasing
 Crowd sourcing (though very nascent)
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12. VENTUREFEST – FUNDING FOR GROWTH
TIPS
1. Network
2. Be Open and Receptive
3. Make it Easy for Investors
4. Corporate Finance Advisor
5. We are a People Business
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13. VENTUREFEST – FUNDING FOR GROWTH
USEFUL CONTACTS
 Angels
 BBAA (http://www.bbaa.org.uk)
 Angel List (http://angel.co/)
 Seed Summit (http://seedsummit.org/)
 Venture Capital
 BVCA (http://www.bvca.co.uk/home)
 Grants
 Technology Strategy Board (http://www.innovateuk.org/)
Joliver@octopusventures.com
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