B2B Softwaare Days: Startups – Investment, Valuation and Exit

1. Startups – Investment,
Valuation and Exit
www.i5invest.com

2. 2 | 28/04/2015
Experience of the
founder team Product with a
Unique Selling
Proposition
Traction /
Momentum
Consistence /
completeness of
business model
Scalability of
business model
Market potential
and competition
Business Plan
and capital
required
External proof
of concept
What can Angel
contribute in
addition to
capital?
Fair valuation (for
the region) with
reasonable stake
Ability to work
together over the
investment period
Exit / liquidation
event
Issues from an Angel Investor’s perspective
28/04/2015
Traffic
Engagement
Registered users
Active users
Revenues
Profitability
Pre-seed & seed
investment

3. 3 | 28/04/2015
Issues from a VC’s perspective
28/04/2015
Venture Capital Firm
Portfolio (based on risk / return profile)
FailureIPOTrade Sale
 What is the best exit
option for the
company?
 What price can be
realized?
“Invest, Hold and Exit”
 What stage is the
company currently at?
 Does the company fit
into existing portfolio?
 How much is the
company worth now?
 How much will the
company be worth at
exit?
Main value drivers for VCs are Entry Value, Exit Value and Investment Horizon
Investment
(Series A, B, … )
Company 1 Company 2 Company ... Company n

4. 4 | 28/04/2015
An overview of valuation approaches
VC Method Asset based Valuation Scoring Method
Entry / Exit Value and
investment horizon
Bottom up valuation of
assets → sum of the parts
Benchmarking target vs.
regional market average
Entry
Exit
IRR
Investment Horizon
Tangible
Assets
NWC
Intangible
Assets
GW
TotalValue
Scoring
Categories
Weighting
Factor
Bench-
mark
Total
Value
x =
Weighting
…and of course there are the traditional approaches such as Discounted Cash Flow
Valuation and Multiple Valuation

5. 5 | 28/04/2015
Venture Capital Method
The VC approach reflects the business model of
invest, hold and exit
Pre-money
value
Post-money
value
Capital
raised
Exit Value
Discount Rate
= Expected IRR
Exit Value drivers
Revenue potential
Profitability: e.g.
EBITDA
Multiple based on
revenues / EBITDA
Competitive
bidding process
Investment horizon: 5 – 8 years
Terminal Value (EUR in m) 20,0
IRR 65%
Investment Horizon (yrs) 6
Post-money value 1,0
Capital raised 0,3
Pre-money value 0,7
Share in the Company 30%
Cash on Cash Multiple 20
Efficient exit process

6. 6 | 28/04/2015
All approaches provide a great framework…
…in the end supply and demand for investment opportunities
drive the valuation
(Startup)investment
opportunities
Investors(AngelsandVCs)
(Deals) experience and
points of reference for
valuation
Industry knowledge
Investor network
Supply Demand

7. 7 | 28/04/2015
What is happening in venture markets?
4/28/2015
Equity investment in venture-backed
companies – Europe vs US
Source: VentureSource, Capital IQ & i5invest Analysis
Development of average investment in
Internet Software
0
1
2
3
4
5
6
7
8
Europe and USA USA Europe
Private Placements per region - Internet
Software (money raised)
Q3 2014 Q4 2014
+20%
+38%
-30%
($m)
• Investments in venture-backed
companies much higher in the US than in
Europe
• Investments in venture-backed
companies in the US is up 77% compared
to 1Q12, in Europe only 57%
• 3Q14 vs 4Q14: USA → 23% increase;
Europe → 29% decrease
• The number of investment in internet
software companies decreased, whereas
the average money raised increased to
almost $8m
• Average money raised through private
placements decreased 30% in Europe,
whereas in the US it increased by 38% in
4Q14

8. 8 | 28/04/2015
+18%
+13%
+15%
+11%
+33% +12%
What is going on in the financial markets?
Development of trading multiples in
Application Software
Development of trading multiples in Data
Processing / Outsourced Services
Source: Capital IQ & i5invest Analysis
Enterprise Value / Sales
• In 2014, companies in APAC showed a
higher valuation than Europe for the
first time in the last three years
• Data Processing companies in APAC
trade at a much lower level than their
peers in Europe and North America
• Companies in North America significantly higher valued than in Europe and APAC
• EV/Sales Multiples in all three areas increased over the last three years
Enterprise Value / Sales

9. 9 | 28/04/2015
What is happening in transaction markets?
4/28/2015
Development of transaction multiples in
Application Software*
Development of transaction multiples in
Data Processing & Systems Software*
Enterprise Value / Sales Enterprise Value / Sales
* Adjusted for outliers
Source: Capital IQ & i5invest Analysis
• Transaction multiples in North America
and Europe increased (slightly)
• The EV/Sales multiple in APAC increased
significantly in 2014
• This was driven by the 1.5bn USD
acquisition of AutoNavi Holdings by
Alibaba (EV/Sales 8.2x)
• Transaction multiples in Europe moved
sideways
• The EV/Sales multiples in North America
and APAC increased significantly
(especially in 2014)
• One of the highest valued US transactions
in 2014 was the acquisition of Mandiant
by FireEye (EV/Sales 8.1x)

10. 10 | 28/04/2015
COMPANY
Partners
Customers
Competitors
Suppliers
Outside current
product focus
Outside current
industry focus
Outside current
geography
New business?
Business and Corporate Development – an integrated process
Strategic Preparation
Strategic Business /
Corporate Development
Corporate Development /
M&A
COMPANY
Potential
Leads
Long list
Short list
3 months 3 - 6 months 6 months
Define current
positioning
Establish right
first point of contact
Assure efficient and
competitive process
Phase 1
Preparation
Phase 3
Due Diligence
Phase 2
Reach Out
Phase 4
Negotiation Exit

11. 11 | 28/04/2015
Exit Process is the final stage
 Deepen company and
market analysis
 Financial model and
business plan
 Preparation of
transaction
documents
 Indicative valuation
 Long- and shortlisting
of potential buyers
 Contacting short list with
teaser and NDA
 Distribution of
transaction documents
after receipt of signed
NDAs
 Preparation of
management
presentation
 Setup of data room
 Selection of bidders
 SPA negotiation with
preferred buyer(s)
 Development of final
transaction structure
(share/asset deal)
 Signing of SPA
 Receipt of approvals
 Closing
 Management
presentations and site
visits
 Coordinating due
diligence, expert
meetings and Q&A
session
 Assessment of binding
offers / term sheets
 Selection of preferred
buyer(s)
Phase 1
Preparation
Phase 2
Reach Out
Phase 3
Due Diligence
Phase 4
Negotiation
Key steps
Key success factors
 Understanding the
dynamics of
transaction
environment
 Business development
to assure Fit for Exit
 Establishing the right
first point of contact (be
it business or corporate
development)
 Creating competitive
process with several
potential bidders
 Negotiation tactics and
mitigating reps &
warranties
 Leverage different
stakeholders
 Bridging the value gap
 Comprehensive
preparation of company
documents and data
 Fast, streamlined and
efficient due diligence
with several bidders
Efficient sell side process to maximize returns

12. Thank you!
OUR EUROPE OFFICE
i5invest Beratungs GmbH
(CEO Herwig Springer)
Spengergasse 37-39
A-1050 Vienna
Austria/Europe
OUR US OFFICE
i5growth Inc.
(CEO Markus Wagner)
460 S California Ave, #304
Palo Alto, California 94306
United States
Herwig Springer
CEO Corp. Dev.,
M&A
h.springer@i5invest.com
+43 650 530 8976

13. 13 | 28/04/2015
What we do – Our Services
WE ARE LONG TERM PARTNERS (through all stages)
START-UP MENTORING
SEED FUNDING
CORPORATE DEVELOPMENT / M&A ADVISORY
We focus on max 2 new companies per year – we aren’t
spray & pray investors. We focus on sector expertise, mostly
strong IP/technology, international/US markets, rarely
copycat business models

14. 14 | 28/04/2015
Who we are – Our Team
Founded 2007, Vienna - partner i5growth Inc. in Palo Alto
28/04/2015
- PARTNERS & FRIENDS – OUR ECOSYSTEM-
Herwig Springer
CEO Corp. Dev.,
M&A
h.springer@i5invest.com
+43 650 530 8976
Patrick Prokesch
Director Corp. Dev.,
M&A
p.prokesch@i5invest.com
+43 676 303 4854
Paul
Weinberger
Partner
Markus Wagner
Chairman of
Advisory Board,
CEO - i5growth
Inc./ USA
Alexander
Igelsboeck
Partner
Martin
Brunthaler
Partner
Bernhard
Lehner
Partner
Vlad
Gozman
Partner
AdvisoryBoard/
Partner
Partner
Johannes Raidl
Director Corp. Dev.,
M&A
j.raidl@i5invest.com
+43 664 167 7577
Georg Novak
Executive
Assistant
g.novak@i5invest.com
+43 676 841 282 150

15. 15 | 28/04/2015
Portfolio Overview
#inspire, #innovate, #incubate, #invest, #internationalize