An introduction to the Basics of Early-Stage-Venture Capital The economics of an early-stage VC-Fund PointNineCap @ Pirates on Shore Poznan June 11th, 2014 

1. The Basics of VC
The economics of an early-stage VC-fund
PointNineCap @ Pirates on Shore Poznan - June 2014
early stageAn intro to

2. Agenda
cześć
About Us
Intro to Venture Capital

3. About us
@PointNineCap
● Berlin-based, 2011
● 45mEur, 2 funds
● Seed & Series A (500k-1m €)
● Europe & North America
@Mathias
● Made @ Wuppertal (DE)
● Business/Finance Studies @
ESB (DE) & Neoma (FR)
● Ecommerce @ OTTO (DE)
● Consulting @ Deloitte (SA)
● VC @ Mountain Partners (CH)
● M&A @ Naspers (CH/CEE)
● VC @ PointNineCap
● Mentor/Supporter @ Seedcamp,
LauncHub and Kisura

4. Sources of Startup financing
Intro to the basics of early stage VC
Idea Startup Early Maturity Growth
Equity
Clients
Crowdfunding
F&F
Accelerators
Angels
VC
Private equity
IPO
Debt
External
✓ Validate opportunity✓ Sustainable✓ “Easy”
✓ Feedback
x Requires productx Risk of fundedcompetitors

5. Clients: 4 Business Models
Supply Demand
%
Software Users
$
Product Customers
$$
SaaS
Marketplace
eCommerce
Intro to the basics of early stage VC

6. Venture Capital: Stages
Pros:
✓Less maturity
✓Quick growth
✓Knowledge
Cons:
x Distraction, Effort, slow and
hard
x Less control
x Addictive
Intro to the basics of early stage VC

7. How does it work
1Closed fund
(+) 40mEur
0Institutional investors
Pension funds
2Focus
Stage, Geography, Segment etc.
Seed, West, Internet
3 Investments
(ie. seed, 500k for 15%)
4Support growth
Strategy, hiring, etc.
5Exits
100mEur
6Allocation
40mEur + 80%
85mEur -> founders
15mEur -> fund
First 40mEur to
investors.
Next: 20% to fund
(carry), 80% a
investors
Intro to the basics of early stage VC

8. How does it work (ii)
Maths
Fund size 40mEur
Goal x3 cash-on-cash
Exits proceeds 120mEur
Avg Ownership 15%
Exits req. 800mEur
● Investments 40
● Hit rate 33% hits
Requirements
● Big market = international!
● Great team and ambition= full-
time & main occupation!
● Fast growth = scalable!
● Sustainable position =
Sustainable comp advantage!
Exit requirement (rule of thumb): x5 fund size
Intro to the basics of early stage VC

9. Fund Duration
time to build & sell a company: roughly 7 years
→ average fund duration 7-10 years
How does it work (iii)
3y 5y 7y 10y
Investment Period Divestment Period
Extension Extension
Intro to the basics of early stage VC

10. How does it work (iv)
Intro to the basics of early stage VC
→ Every investment needs to have “fund-maker” potential
Out of a hypothetical portfolio
that consists of 10 companies...

11. Intro to the basics of early stage VC

12. Relevant players (incomplete excerpt)
Intro to the basics of early stage VC

13. Questions? Feedback?

14. If you want to stay in touch
www.pointninecap.com
+ Some say we have a pretty cool newsletter! ;)
Follow us on Twitter and facebook
@PointNineCap | /PointNineCap
mathias@pointninecap.com
LinkedIn | XING | facebook | Angel.co
Thanks!

15. Further Reading
● www.pointninecap.com
● Christoph’s Blog - The Angel VC (Partner at .9$)
● Pawel’s Blog (Partner at .9$)
● CB Insights on Berlin’s Startup Ecosystem
● European Tech Exits
● VentureLoop-Jobs @ Point Nine Family & Berlin Startup Jobs
● The Economist about Tech Startups (in Europe)
● The Economist - Comeback Capital: Venture Investing in Europe
● VentureBeat about Point Nine Capital
● WSJ about Michael Wolfe & Point Nine
● TechCrunch - Vend raises from Peter Thiel
● WSJ - Clio raises from Bessemer Ventures
● TechCrunch - Zendesk’s stellar IPO
Intro to the basics of early stage VC