This document discusses investment options for startups in 2013. It begins by outlining the investment process from initial meetings through due diligence and contracting. It then notes that the investment climate has changed since late 2012, with investors and founders facing more challenges. Several graphs show declines in valuations in the US market. The rest of the document focuses on potential sources of funding for startups, including large VC funds, smaller VC funds, governmental investors, corporations, business angels, incubators, and crowdfunding. It outlines the prerequisites and typical deals for each type of investor. It concludes by noting challenges startups may face in securing follow-on funding in 2013.
2. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
InvestmentProcessinaNutshell:MindtheTimeframe!
1st Meeting
get-to-know
each other
understand:
- team
- business model
- technology
- market
Preparation
Term sheet
Evaluate:
- Market
- Customers
- Legals
- Financials
Discuss Funding
Strategy and Future
Preparation
Contracts
Due Diligence:
- Management
- Technology
- Legals
- Financials
Discuss Terms &
Deal Structure
MS MS
Investment
Management
Development:
- Management
- Technology
- Portfolio
- Markets
Prepare exit
through outstanding
performance
3 - 5 months depending
on Due Diligence and
contract negotiations
4 - 6 weeks depending on
business idea and strategic fit
3 - 5 years depending
on Exit Scenario
Term
Sheet
Contract
11. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
Incubatorsmustavoidthe“SeedGap”in2013
Sourcing/Due Diligence
Dealflow/
PrepareFunding
Fundingby
3 months
€300k Runway for Startup
6 to 9 months
ScenarioB)
Term sheet from another
Incubator and/or
Business Angels.
ScenarioC)
No Follow On Investment made:
“Put Startup in Survival mode”
FundingbynewInvestors
ScenarioA)
Term sheet from VC firm and/or
Corporation (optional support
by governmental vehicle).
NextSteps:
Preparation for new
VC/BA approach or
Evaluate Exit options.
Runway till next round
< 18 months
NextSteps:
Preparations for
Series A/B funding.
“SeedGap”
12. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
“TheSeedGap”:1000+USStartupsWillbeOrphaned
“… The process of natural selection that will happen with seed companies (and which we’d argue should
happen) will result in over 1000 recently funded seed companies being orphaned, i.e. unable to raise
follow-on financing. The eventual death of many of these companies may also help the tight labor market
for other startups who are looking for capable and driven talent. …”
Source: http://www.cbinsights.com/blog/trends/seed-investing-report
2283
Seeded Companies
Q3 2011 – Q4 2012
Companies
receiving
Follow On
Funding
102
5%
Companies
Acquired
212
10%
788
Projected to
receive Follow
On funding.
35% 1181
Projected for
No Follow On
funding
(Average 39%)
50%
14. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
ThenewfundingpyramidforStartupstoreceivecapital
Midsized
VC firms
US II EU
Corporate
Investors
Governmental
Investors
Global VC firms /
Private Equity firms
Fund >$2b
Fund <$150m
Business Angels, Incubators, Accelerators, Crowdfunding
<$500k
-- - - - The Seed Gap - - - ---
15. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
GlobalFunds/PEwith>$2bnunderManagement
Traction in Seed Stage >10m user
Profitable in Seed Stage / strong growth
After Early Stage revenue > $5-10m
Sales activity in US / US customers
Pre-requisites for engagement
‘Killer Team’ with a ‘Killer Product’
Personal network to leaders (P. Thiel)
What investors or incubators can do
Sequoia
Accel Partners
A16z (Andreessen Horrowitz)
Stripes
KPCB
Index
Sample Firms or Corporations
Ruckus (2006), Innovid (2012)
Flaregames (2012)
Cyphercloud, Aliphe, LookOut (2012)
Netbicuits (2012)
Cooliris (2008), Pinger (2011)
Cyphercloud, LookOut (2012), Number4
Sample T-Venture Portfolio Deals
16. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
VCfirms<2ynewfundingwith<$150m
Traction <10m users in B2C
1-2 signed B2B customers
Tech focused / trend area of VC firm
Part of consortium with biz dev potential
Pre-requisites for engagement
Generate traction on B2C product
Support PR work through contacts
Identify VC partner for this segment
Align possible consortium of investors
What investors or incubators can do
Atomico
Earlybird
Xange
Creathor
Capnamic
Shortcut Ventures
Sample Firms or Corporations
6Wunderkinder (2011)
6Wunderkinder (2012)
-
Netbiscuits (2011), Zimory (2010)
-
-
Sample T-Venture Portfolio Deals
17. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
Governmentalvehicleswithregionalfocus
Private VCs/CVCs act as lead investor
Prepare for very formal processes
Decisions not based on VC terms +/-
Pre-requisites for engagement
Embrace role as lead investor
Evaluate as partner for mirroring invest
Evaluate business risks caused by rules
What investors or incubators can do
IBB Bank
NRW Bank
Bayern Capital
L Bank
KFW
HTGF
Sample Firms or Corporations
Clipkit (2012), Moviepilot (2010)
-
-
-
myTaxi (2011), apprupt (2010)
Zimory (2010), 6Wunderkinder (2011)
Sample T-Venture Portfolio Deals
18. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
CorporationsinvestfromBalanceSheetorCVCs
Needs strong strategic impact for invest
May demand certain terms from VCs
Excludes potential competitors
Pre-requisites for engagement
Investigate potential corporations
Check with other investments before
Evaluate Exit potential of corporation
What investors or incubators can do
Holtzbrinck Ventures (€145m)
BDMI / Bertelsmann
eVenture / Otto
Intel Capital / Intel
Tengelmann Ventures / Tengelmann
Daimler Mobiliity Services / Daimler
Sample Firms or Corporations
Dropgifts (2012), Mindmatics (2008)
Contentfleet (2011)
KaufDA (2009)
C&B (2008), DeliveryAgent (2012)
-
myTaxi (2012)
Sample T-Venture Portfolio Deals
19. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
BAs,Crowdfunding,Incubators<$100kperdeal
Low valuation to be attractive
Less funding needed in the future to avoid
dilution of angels
Strategic fit with portfolio interest
Optional ESOP for mentors/BAs
Pre-requisites for engagement
Network with BAs on events / meet ups
Engage with their portfolio companies
Get dealflow from BAs to invest
What investors or incubators can do
Lars Hinrichs / hackfwd
Founders of Idealo
Founders of Check24
Founders of adcloud
Companisto
Sample Firms or Corporations
myTaxi (2012)
Tripodo (2012)
Gini (2012)
-
-
Sample T-Venture Portfolio Deals
20. Thomas Grota – Investment Director T-Venture Holding GmbH – @thomasgr
ChallengestoreceivenewFundingin2013
Why should they invest?
Why does Hubraum
need another co-
investor of this size?
What is the potential for
their return?
BAs / other Incubator
Does the company/
product has traction?
Can company attract
international funds?
What is the long term
investment strategy?
Series A from VC
Where is a strategic fit?
What are the deal terms
and conditions?
How is Telekom’s view
on company / product?
Corporation Deal
Who will take the lead role for this investments?
Mirror Investments with governmental vehicles
Option A
Option A & B
Option BOption C