1. MtB Italy Tour
2012
Introduction to Entrepreneurship
From Startups to Venture Financing
ALBERTO ONETTI
Chairman, Mind the Bridge Foundation
MARCO MARINUCCI
Executive Director, Mind the Bridge Foundation
2. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
2
3. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
3
4. The Problem we have (1)
Italy has grown slowly during the past decade – slower than
Germany, France or the UK (0.27%/yr. since 2001)
Its competitiveness – its rising unit labor costs – has slipped, as wages
rose but productivity stagnated
Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti &
Napolitano, New York, 2011
5.0
Real GDP growth (Percent)
4.0
3.0
2.0
1.0
0.0 ITA
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-1.0 EEA
-2.0
-3.0
-4.0
-5.0
4
-6.0 Source: OECD Economic Outlook 88 database
5. The Problem we have (2)
Unemployment is lower than the German/French experience BUT
Participation rate (58%) is the second lowest in Europe
Worst employment problem pertains to youth (28% unemployment
for people between 15-24)
Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti &
Napolitano, New York, 2011
1.5
Average TFP growth (Percent)
1
0.5
1980-1995
1995-2005
0
ESP ITA GBR DEU EEA FRA US
-0.5
-1 Source: EU KLEMS database
5
6. State of Entrepreneurship in Italy
Lack of large companies
In Italy SMEs are 98% of the total
Mostly mature business
Primarily Services (66% of GDP)
Manufacturing is only 17% (it was 21% in 2000)
Innovative industries play a minor role (2-6%)
Strong family business vocation Food
Textile Wood
Metals
Plastic&Rubber
Automotive
Industrial Machinery
Chemical
Electronics
Pharma
Biotech Software ITALY: INDUSTRY CONTRIBUTION TO GDP (2009)
Source: CrESIT 2011
7. State of Venture Finance in Italy
Annual VC Investments in Billion US $
US 28.425
Silico… 11.63
2011
Europe 5.69
Italy 0.108
Lack of an established venture capital community
Of the €3.66B invested yearly (avg. 2007-2011), approximately €90M
went to early-stage investments, AIFI & PricewaterhouseCoopers 2007-
2011
356 startups were able to get funded in the last five years
In 2011: 106 early stage deals despite the financial crisis (+34%
compared to 2009) with € 82M invested (-16% compared to 2009), AIFI
& PricewaterhouseCoopers 2011
Small size of the stock market
The stock market capitalization to GDP ratio is lower than 60%, versus
140% in the US and 170% in the UK (IMF & World Federation of Exchange)
7
8. Italian active VCs invested over
~ 450M€ in ~ 120 deals
Active Venture Capital firms Not exhaustive selected
Invested Capital - M € examples
# of Firms in
Portfolio
Venture capital created following 2008
Source: Booz & Company Analysis
8
9. State of Italian R&D
Quality basic research
74k scientific publications in the period 1996-2010 ranking 8th in the global
classification (SCImago Journal & Counrty Rank, 2010)
Italy is in the top 10 countries (4th position) for number of publications
(2001-2011) in comparison to R&D expenditure in 2011 (Italian International
Growth agenda, Booz&Co analysis)
Biotech: 660 clinical trials in progress during 2010, 15.7% of the overall
number in Europe (Osservatorio Nazionale Sperimentazione Clinica 2011)
Issues in turning research into business
Lack of efficient technology transfer offices
Universities do not offer incentives for lecturers to spin-off business initiatives
Scarcity of skilled executives with strong entrepreneurial skills
Italian scientists do not think business
9
10. Italy: Key Issues
A few startups often lacking high-quality business plans (deal “trickle”)
Legal barriers to entry and exit (Italy is not a “corporate haven”)
Reduce labor market rigidities
Obstacles in bridging research into business
Lack of managerial skills
High mortality (“crisi del primo miglio”) and “Dwarfism”
Change the mindset
Lack of seed funds
Exit on the domestic market
High Tech “Leviathans” are not here
Small size of the stock market and lack of large corporations doesn’t
help
Language barriers
10
11. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
11
14. Average Entrepreneur’s Profile
AGE 41 year old 68.8% between 35-43
SEX 79.7% men 20.3% women
STUDIES 64% University student
MARITAL STATUS 60% married
FAMILY BUSINESS 60.3%
COMPANY ORIGIN 76% Creation 20% Inheritance 4% Purchase
FINANCE Own/Family/VC
EMPLOYMENT IN 5
5 YEARS 14
15. MtB Entrepreneur’s Profile
He/She is 32
87% is male, only 13% is
female
49% has a
scientific/technological
background, while 51% has a
business/humanistic
education
25% holds a Ph.D. or MBA
and the 20% got it abroad
Only 10% does not hold a
university degree
21% has prior entrepreneurial
experience
Source: CrESIT/Mind the Bridge 2011
15
16. What makes a successful
entrepreneur?
Education matters a lot
2.0 Startups are founded by highly
educated people
Experience matters as well
Being a serial entrepreneur is a job
The right startup is never the first
one you found
Working/Studying abroad does open
your mind
It means more network,
opportunities, ideas, experience
A successful startup is a team effort
One-man bands do not go too far
16
17. Manager vs Entrepreneur
• What resources do I control? • Where is the opportunity?
• What structure determines our • How do I capitalize on it?
organization’s relationship to
its market? • What resources do I need?
• How can I minimize the • How can I gain control
impact of others on my ability over them?
to perform?
• What structure is best?
• What opportunity is
appropriate?
The typical The
administrator entrepreneur
asks . . . asks . . .
17
19. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
19
20. Business Idea
THE BIG IDEA!!!
… THAT MATTERS A
LOT, BUT IT’S ALL
ABOUT EXECUTION …
20
21. The question every entrepreneur
must answer
Are my Goals Do I have the Can I execute
well defined right strategy the strategy
• personal • clear definition • resources
aspirations • profitability • organizational
• business and growth infrastructure
sustainability/ potential • the founder’s
size • durability role
• risk profile (sustainability)
• rate of growth
21
22. The Business Plan
“Business plans and 5 years financial
projections are a waste of time”
Dave McClure
Intel 1968
“They came to me with no business plan”
22
24. The Business Plan
THE OPPORTUNITY THE MARKET
The problem we solve (description The market you are addressing
of your product highlighting the Market size
benefits to the users/customers)
Potential growth
The competitive advantage (why
your product is better) Competition
Compelling reason to buy
BUSINESS PLAN
THE BUSINESS MODEL
How do you make money
(Revenue Model)?
How do you structure activities THE TEAM
(Cost Structure)
Financials The team
What are you looking for (capital you Your relevant experience in
are raising- use of proceeds) the domain you're addressing
24
26. Good and Bad Business Plans
• Concise
• Management, management, management
• Realist, logical, convincing, clear
Good
• Shows clearly that the opportunity exists in the market
• Description of essential resources
• Risk analysis
• Clear funding needs and return on capital employed
• When funding is required, specify the terms of agreement (deal)
• Infatuation with the idea
• Insufficient research
• Lack of funding
• No target group
• Over optimistic sales forecasts not based on market analysis
Bad
• Too long
• Badly written: does not get ideas across
• Illogical
• Scant explanation of opportunity
• Superficial analysis of competitors
• No executive summary
26
29. Financials: Statement of Operations
P&L 2011 2012 2012 2013 2014
established anticipatory forecast forecast forecast
Revenue (000)
# of main
customers users
Avr rev. per
cust.
Gross Margin
Operating
Expenses
Operating
Margin
Ebit (000)
Headcount
R&D
Mktg & Sales
Production
G&A
Total Expenses
Source: Mind the Bridge 2012
30. How to present the Financials
Source: Alberto Onetti, Financials: Forecasting&Reporting 30
31. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
31
32. The Funding Decision
Bootstrapping Equity Financing
Family/friends,
Founders’ capital/
Early sources savings
Angels, Early stage
VC (Series A)
VC (Series B+),
Venture Debt/Loans,
Corporate VC,
ARs, Strategic
Later sources Partners, Retained
Private placement,
Investment banking,
earnings
Public markets
32
33. Investment Strategy
Medium Risk High Risk Medium Risk Low Risk
IPO
M&A
Valuation
M&A
Investment
Focus
Cumulative
Investment
IDEA DEVELOPMENT BETA CUSTOMERS EXPANSION MARKET SHARE
12-24 months 3 months 3-6 months 12-18 months 12-24 months
Management Focus
Vision/ Product Focus Customer / Market Share Focus
33
34. The Angel Investor
Definition
• High net worth individual ($1
million to invest) who provides
financing, advice, and
networking to early stage
companies.
Key investment Criteria
• Geography (close to home)
• High growth industry
• Growth Potential of the venture
• Personal attributes of the
entrepreneur and team
• Track record of entrepreneur and
team
34
35. The Venture Capitalist
DEFINITION
• VC Firms are financial intermediaries that
provide the following to privately held
enterprises:
• Equity (often coupled with debt) financing
• Risk sharing
• Managerial expense
• Contacts
• Reputation
• In exchange, VC firms obtain equity
TYPES OF VCs
• Private Fund VC
• Legal Structures: Partnership, Limited Liability
Corporation, Corporation
• Stakeholders in a Partnership: General Partners
(GP), Special Limited Partners (SLP), Limited
Partners, Advisory Board
• Corporate VC
• Consider impact on earning of parent
• How does it further the parent’s objective?
35
36. VC: General Investment Process
Limited Partners
Distributions Fundraising Commitments
VC Firm (General Partners)
Fund Fund Fund
Proceeds Investment Disbursements
Startup Companies
Exit
IPO/M&A
36
37. The Valuation is a two side process
Size of market opportunity
how big is the market segment, what market
share can you gain? revenue / price model
Comparables
multiple of Revenue (trailing/forward) or
EBITDA
Financial Projections
Revenue, EBITDA, DCF
Ultimately
Bid vs. Ask negotiation
37
38. The Valuation Process:
Pre- e Post-Money Valuation
How much you need How much equity you
(Cap Incr) want to give up ( Y%)
e.g. € 1,0M e.g. 25%
Post Money Valuation (V)
= Cap Incr / Y = 1/0,25
= € 4,0M
Pre Money Valuation
= V - Cap Incr
= € 4,0M - 1,0M= € 3,0M
38
39. VC Financing Process:
Getting through the Funnel
1,000 Leads
150 Meetings
Actively
Pursued
70
$
Less than 1% of all $ 5 – 10
leads get funded $ Financed
39
40. VC Average Investment Portfolio
DEFAULTS 60%
BREAKEVEN 12%
“FIRE SALES” 10%
ZOMBIES 8%
IPO/M&A 6%
GOOD IPO/M&A 4%
WILD ONES (IPO) 0%
TOTAL 100%
Source: ATV 40
41. What does an investor do with a BP?
Looks to see who sent it
15 sec
Analyzes key aspects
sector
location
investment required
60 sec
Reads the plan
15 min
Decides whether or not
to request a formal
presentation
10min
Total: 26 min 15 sec
41
42. VC Average Investment Portfolio
Remember:
VCs see tons of pitch every day be short and
immediate, use body language and show passion
They don’t know your product use screenshots,
videos, prototypes
They are positively impressed by big numbers and
they look for big market opportunity be ambitious
since the beginning but have realistic objectives.
They are not always expert as you are about the
topic use simple words, get straight to the point
Smile it’s ok to have fun when you pitch
42
43. Agreement Variables and
Control Mechanisms
Agreement Control
• Amount and timing of
investment Mechanisms
• Form of investment
• Convertible
• Terms of investment Preferred securities
• Rights • Syndication of
• Puts and call investment
• Registration • Staging of capital
• Preemptive and first infusion
refusal
• Vesting/buy-back
provisions
• Board representation
43
45. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
45
48. The (REAL) History of the Valley
INTERNET
? Today:
25 of Fortune 100
PERSONAL Adobe Systems
COMPUTERS AMD
Agilent Technologies
Apple Inc.
WAVES OF INNOVATION
Applied Materials
Business Objects
Cisco Systems
INTEGRATED ◊ Yahoo, ebay,
eBay
Electronic Arts
CIRCUITS Google (90s) Google
Hewlett-Packard
Intel
◊ 3Com, Adobe, Intuit
Cisco LSI Logic
Maxtor
DEFENSE ◊ Apple (80) National Semiconductor
Network Appliance
Nvidia
Oracle Corporation
◊ Kleiner Perkins SanDisk
(72) Seagate Technology
Solectron
◊ Intel Symantec
(68) Sun Microsystems
Yahoo!
◊ HP (47) …
◊
◊ NASA Lockheed
1930 1940 1950 1960 1970 1980 1990 2000
48
49. UNIVERSITIES
highly
connected with
The Main Pillars
biz world
ENTREPRENEURS
The garage
culture
FINANCIAL MARKET
M&A, IPO dream
KEY QUESTIONS
◊Is that replicable / portable?
◊Is it sustainable long-term?
◊What is the impact of the changing
49
international outlook?
50. Soft Factors
KEY TO SUCCESS
◊The importance of Dynamism,
speed: continuous evolving world
◊ Approach to Risk
◊ Value of Failure (not just a
downside but a must-have)
◊ Importance of the Hub: a world of
opportunities
◊Think Big
50
51. Raising money today (@#$!)
in Silicon Valley
DON’T TALK TO ME IF YOU…
are you not local
how many exits again?
don’t show me the buyer (don’t
IPO me…)
haven’t jumped yet
51
53. Why Now
IT’S THE BEST OPPORTUNITY
talent abounds
from scarcity comes clarity
innovation comes from hunger
startup cost ~0
53
54. 5 Lessons from Silicon Valley
1. the team is all (almost)
2. healthy disregard for the
impossible
3. big problems are better than
small ones
4. users first
5. don’t pay attention to the
VC bandwagon
54
55. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
55
56. Mind the Bridge Foundation
Mission:
to promote a new Italian entrepreneurial ecosystem that is:
ETHICAL, HIGHLY PROFESSIONAL, INTERNATIONALLY FOCUSED,
EXCELLENCE DRIVEN
Model:
CONNECTING TALENT
funded by foundations/companies/private sector/donors
not government
partnering with the most relevant actors
INDEPENDENT
bridging opportunities of the Silicon Valley with Italian
talent
associating mentors and role models
professionalizing the business planning skills
using and building the network
“give back” to build a bigger pie
56
57. Building the Bridge: the Pillars
Discovering and Nurturing the Italian Talents
MtB Italy Tour 2012
Selecting the best of breed
Seed Quest
Providing training & education to the new generation of
entrepreneurs
MtB Startup School, MtB Bootcamp and MtB Coaching
Showcasing the most promising startups and opening an
international debate
MtB Venture Camp @ Corriere della Sera
Hosting & Mentoring the most promising startups in the Silicon Valley
MtB Gym
Pitching US investors / partners
MtB Gran Finale events
57
58. Building the Bridge: the Timeline
MtB Startup
School
Every1-2 months
MtB US
MtB GYM Roadshows
Feb/March March/April
MtB Venture Camp 2013 2013
Oct/Nov 2012
MtB Seed Quest 2012
July 31st 2012
MtB GYM
MtB Italy Tour 2012 Every Quarter
Q1 & Q2
- MtB Affiliates
- Online Signups 58
59. MtB Italy Tour 2012
Education
The MtB Startup Business School gives you
the “nuts and bolts” regarding
entrepreneurship, business planning,
venture capital market and Silicon Valley
eco-system
Honest Feedback
Thanks to the Gym session the startups selected have
the opportunity to present their business idea in front of
a panel of investors and entrepreneurs
Fine tuning the business idea
Everybody can largely benefit from the discussion of
all the business ideas as well as the education
program in the morning
59
60. Seed Quest 2012
WHO: High knowledge based companies already
established or planning to incorporate before the end
of the year
WHAT: Executive Summary (online*) & Business
Plan/Pitch Presentation
WHEN: Deadline July 31st , 2012
HOW: Competition Rules*
* Check it out at www.seedquest.mindthebridge.org
60
63. Venture Camp 2012
Mind the Bridge Venture
Camp is a 2-day event held
each year in Milan at Corriere
della Sera (the leading Italian
newspaper) to promote a
healthier Italian
entrepreneurial ecosystem.
Selected entrepreneurs
present their business ideas to
a large audience, including
potential investors and November 2012
partners.
Selected startups will be invited to participate in the MtB Gym, a
tutoring program between Italy and the Silicon Valley.
63
64. Opportunities for good ideas
Objectives
MEET MtB Seed Quest 2012
Fostering a sustainable Italian finalists showing their
ecosystem for entrepreneurship business pitches
Boosting ideas with high potential
Providing entrepreneurs with
direct exposure to venture FIND successful
capital investors both from links between
Italy and Silicon Valley Italy and Silicon
Valley
NETWORK with entrepreneurs, potential LEARN from examples of Italian
investors, partners and mentors entrepreneurial success
NETWORK with
entrepreneurs, potential
investors, partners and
mentors
65. MtB GYM
“Let’s build a mentorship based acceleration program”
Targets
Early stage startups interested in a
getting plugged into Silicon Valley
Italian “origin”
Min 3 months, average 6 months.
Starting at beginning of each
quarter possibility to stay longer
(as an affiliate startup)
San Francisco
@One Market We share the space with some of
Plaza the hottest startups (50+) in Silicon
Valley (Socialmedia.com,
WordPress, Tweetme, etc.)
66. The Gym’s Goals
Accelerate the startup
chances of success
• Hosting: office space
@One Market Plaza, Steuart
Tower in San Francisco
• Mentoring: assign a
dedicated mentor per
startup
• Coaching: provide regular
classes (training modules)
Build critical mass of startups
A constant flow of startups hosted(10-15) to maximize
the “educational impact”
Become a social hub for Italian entrepreneurship in
Silicon Valley
Events, Mind-the-Beer, etc (social Gym)
Access
Affiliates Channel
Individual Subscriptions 66
67. Building Success Stories
April 2012 March 2011
Enters 500Startups (+$65K) Round of $500K with Angles
(Piol, Magnocavallo)
Feb 2012
$1.2M round with IAG, Dec 2011
Innogest, Xcapital Wins LeWeb
Feb 2012
Wins Seedcamp Berlin, raises March 2011
$1.350M (Seedcamp, industrial Wins Plug&Play Intl startup
partner) EXPO SV, raises $700K (Sep
2011)
September 2011
Second round of $1.1M funding
(IAG, ZernikeMeta Ventures)
Feb 2012
April 2011 - EXIT $1M+ round with Filas Lazio
Merges with Avrio RMS Group (US) and Angels Investors
Since Gym inception (Aug 2010):
winners
18 startups incubated,
8 funded ($5M+), 2 exits 67
68. MtB Startup Summer School
Be a Silicon Valley Startups for 3 weeks!
SESSIONS
Three sessions are scheduled in the
next months
Who can participate?
1. July 9th – July 27th Students, Graduate students
2. August 6th – August 24th
Engineers, Scientist
3. September 2nd – September 21st
Wannabe Entrepreneurs
APPLY NOW!
WHERE?
One Market Plaza, Steuart Tower,
San Francisco
HOW TO APPLY?
Check it out here!
www.school.mindthebridge.org
68
69. MtB Startup Summer School
Theoretic Learning:
Introduction to the Silicon Valley
Ecosystem
Investment Outlook and Success
Drivers
Value Proposition workshops
Presentation Skills
mentoring
Business Development
Marketing & PR weekly presentation
Corporate Financial Reporting
Corporate Operation and Legal
Aspects
Intellectual Property Rights
+ Networking Events
Visa Options
The Exit Strategy
69
70. THANK YOU FOR YOUR
ATTENTION
Questions & Answers
SOCIAL MEDIA:
Facebook: WEBSITE
Mind the Bridge - Connecting Talent
WWW.MINDTHEBRIDGE.ORG
Twitter: MindTheBridge
WWW.SEEDQUEST.MINDTHEBRIDGE.ORG
Google+: Mind the Bridge Foundation
WWW.SCHOOL.MINDTHEBRIDGE.ORG
http://mindthebridge.blogspot.com WWW.GYMNASIUM.MINDTHEBRIDGE.ORG
http://www.youtube.com/user/mindthebridgeTV
http://siliconvalley.corriere.it/ CONTACTS
http://www.linkedin.com/groups?gid=2142980 information@mindthebridge.org