1. A family of global leading VC networks – IDG Ventures Korea
Global Venture Capital Market
- Trends and Implementation
November 2009
Hee-Woo Lee
CFO, IDG Ventures Korea
3. Definition of Venture Capital
Private Equity is …
an equity investment in assets that are not freely tradable on the public stock market.
Types of Private Equity
Venture Capital
Growth Capital
Mezzanine Capital
Secondaries
Leveraged Buyouts
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6. History - Overview
DOW, NASDAQ
Origin Early VCs & Growth of Silicon Valley 1st PE Boom 2nd PE Boom 3rd PE Boom
(1946) (1959 – 1981) (1982 – 1993) (1994 – 2000) (2003 – 2007)
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7. Growth of Venture Capital
Credit Crisis
(2007 ~ )
Credit Crunch
Golden Age Fundraising Issues
(2003-2007) Secondaries
Liquidities & IPOs
Low Interest rate & Mega
deals
Boom & Bubble Great Returns Emerging
(1995-2002)
- Google, Skype, Myspace
High Competition, but - Paypal
Low ROI (late 1980s)
Growth Internet Revolution &
(1959-1994)
Great Successes
1st Era: 1959-1981 - Amazon, Ebay, Sun ,
- Early VCs & Growth (Bay) Yahoo
Origin Burst of Internet Bubble
- 1st major success: DEC
(1946-1958) (2000-2003)
($0.07M→$355M, 500X)
After World War Ⅱ 2nd Era: 1982-1994
1st 2 VCs in 1946 - Expansion: 650 VCs (1980s)
- ARDC - Searching for home run
- JH Whitney & Co. - Fedex, Apple, Cisco, MS etc.
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8. Types of Venture Capital/Fund
Startup Life Cycle
Seed / Angel Growth Fund Later Stage Fund LBO
Startup Fund Mezzanine Fund MBO
Early Stage Fund Bridge Fund IPO
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9. VC Fund Structure
GP Partnership Agreement LPs
(General Partner, LLC) (Limited Partners)
Capital Contribution
1% from GP
Management Fees 99% from LPs
Distribution
Carried Interests
Fund
(Limited Partnership)
Investment
Portfolio 1 Portfolio 2 Portfolio 3
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22. Investment Focusing Area
• Real Time Web, Communications
• Gaming(Online, Web, SNS, Mobile etc.)
• App. Store
• Media Contents
• Cloud Computing
• User Interface
• Artificial Intelligence
• Energy Technology
• Water
• Happy Health, Personalized Drug
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25. IDG Philosophy
Working with
great entrepreneurs
to build
world class
companies
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26. IDG founder: Patrick J. McGovern
• IDG History
- 1964. Established IDG(International Data Group)
- 1967. Computer World Launching
- 1969. Established IDG UK
- 1980. Established IDG China
(the first US Company in China)
- 1992. Venture Capital Business in China
- 2007. Venture Capital Business in Korea
• IDG Founder & Chairman
• Yr 2008 Forbes the #89 Richest American
(Net Asset Value $4.1bn)
• IDG Ventures Korea Investment Committee Member
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27. World’s Largest IT Media Company
Publication Research Conference
(on/off)
• 750 on/offline publications • 110 countries • MacWorld, Demo, E3, etc.
• 2,000 IT journalists • 100 research areas • 750 events in 55 countries
• 1,000 analysts
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28. IDG Ventures: Perfect VC Platform
India Korea
Vietnam 2006 2007
2004
Boston
2001
San Francisco
1997
China
1992
PR & Deal Sourcing Market & Tech Analysis Marketing & Partnership
Publication Research Conference
(on/off)
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29. IDG Ventures Global Network
$3.7 billion under management,
220 companies built over the last 15 years
Asia US
$450M (1992) China SF $120M (1997)
$318M (2005) $180M (2007)
$900M (2007)
$600M (2008) Beijing
Boston $100M (2001)
$180M (2005)
San Francisco
$100M (2004) Vietnam Seoul Boston
Ho Chi Minh
$150M (2006) India Bangalore
$100M (2007) Korea
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30. Leading VC in Emerging Markets
• Thinking Globally, Acting Locally!
• Strong Support from IDG Group
• Sound Investment Philosophy
• Research Based Long Term Fund
• Global Value Up Service via IDG Platform
• Global Exposure, Global Marketing, Global Growth
• Outstanding ROI since establishment
Return IRR Remarks
Fund Ⅰ: 400% 24% Vintage 1992
China
Fund Ⅱ: 510% 34% Vintage 2005
San Francisco Fund Ⅰ: 330% 70% Vintage 1997
- IDG China: No. 1 VC in China
- IDG Vietnam, India: Top 5 VC in the regions
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31. Why IDG Ventures in Korea
Most Advanced IT Infrastructure
Ideal for New Media Technology
Broadband/Mobile Semiconductors LCD
User Experience Memory & Storage LCD Panel Display
World No.1 World No.1 World No.1
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32. What’s different, IDG Ventures Korea!
IDG Platform Global Network
Media Research Conference
Diversified Team Investment Strategy
One Fund
Focus on IT & New Media
Long Term Investment
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33. IDG Ventures in Spotlight
Global Portfolio
“IDG’s Excellent Korean Venture”
“What IDG saw in China - Early”
“The five IDG VC teams to watch for
in 2008”
“How do you manage packs of
proud VCs globally? You don’t unless
you’re IDG or DFJ?”
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36. Company Selection Criteria
Categories Details
Contribution to industry value chain, Possible synergy with investees, High value-
Ecosystem
added sector
Globalization Technology / Product / Service that can be meaningful in global market
CEO & Leadership, Communication, Decision making, Management(HR, Organization,
Management Team Company) abilities, One team but Diversified
Feasible business model, Market and customer generating capacity, Quality of
Business Model
actual product and service, Distribution channel, Revenue generating capacity
Technology / Service
Value of the technology/innovation, Completeness of technology
Value
Addressable
Addressable Market Size (local and abroad), Market growth, Growth rate, Timing
Market Size
Investment / Exit Compatibility with investment philosophy, Appropriate investment and exit value
Opportunity (Possible Exit Routes)
Others Corporate Sustainability Management, Localization capacity
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37. Deal Progress
Screening
Questionnaire
Deal Manager meets company
Update Deal Flow DB, Meeting Memo, Brief Comments
Lead
Office / Onsite Visit
Deal Manager’s Review
Consider
Firm’s Presentation
Begin business due-diligence
Preliminary discussion of Terms
Pursue
In-depth business/Technology due-diligence (including Financial & Legal D-D)
Final Negotiation, Prepare Valuation Model and Milestones
Invest
Final Decision: Investment Committee
Prepare for capital injection
consider value-added services for investees
Post-Deal Agreement
Provide resources for portfolio companies in all areas
Leverage IDG Platform for strategy and market intelligence
Assist in future financing and liquidity events
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38. Investment / Exit Process
Investment Process
Business Preliminary IR Full Scale Due Investment Investment
Invest
Plan Review Meeting Review Diligence Recom. Committee
Submission of Review Business Business Feasibility Full scale Business Business Due Investment Decision to Sign Agreement
Business Plan Plan Analysis Analysis Diligence Recommendation Invest
Exit Process
Exit Exit
Monitoring Exit
Recommendation Committee
Portfolio Monitoring Exit Recommendation Exit Decision Execution in accordance
(Value/Solvency) by Deal Manager to terms
Appropriate M&A / IPO Exit Routes: M&A, Trade- Composed of Investment Constant monitoring by
timing and specifications Sale, Buy-out , etc. Committee CFO/Deal Manager
IPO, M&A terms Settle exit terms
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39. Risk Management
Risk Management System
Management Monitoring Evaluation Implementation
Evaluation Criteria Action
High Expected
Grading Criteria Performance
Focus Standard
Achieve business goals as planned or reach
excess return rate set at initial investment Prevent Standard Monitoring
A
(only if, return multiple 3~5 times, within deterioration “Normal Monitoring”
3~5 years) “Rescue”
Likely to generate profit but does not
B
reach set target return
C Likely to recover invested capital
Action Minimize
D Likely to achieve some loss in investment
Share monitoring with
F Complete depletion of investment Restructure or sell?
co-investors
“Give up”
“Share Monitoring”
Upside (+): upside potential opportunity
Risk
Stable: no favorable turns Low Expected
Modifiers Performance
Downside (-): exacerbating problems
Operational Status Operational Status
Critical Neutral
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40. Portfolio Value Up Service
What Companies Say… IDC Report Conference/Event
Global Competencies
“Local VC’s lacked information on global market
conditions. We thought that we would not be able
to fulfill our globally focused strategy. IDG VK is the
only VC that realized our global potential. IDGVK
rather provided us with deeper insights on global
markets.!”
- Portfolio company “About I&C” CEO
Strategic Advice
“IDGVK understands start ups. Deal managers at
IDGVK are exceptional industrial professionals who
know what CEO’s are thinking at each stage. IDGVK
provides us with indispensible advice in terms of
how to deal with obstacles effectively.”
- Portfolio company “ACT” CEO
Co-Marketing
VCs and investors working booths: good on you.
I’ve been impressed by the number of investors Portfolio company “Xronet Corp” in IDC Small Portfolio company “Aboutt I&C”
actually putting in real work. Henry Oh(IDGVK), for Vendor Profile, a report dedicated to Participated in TechCrunch 50 with IDGVK
example, was absolutely a machine and left me promising companies. Jan. 2009 in SF. Sep. 2009
very impressed. If you’re an investor, what better
opportunity to see your investment in action, gauge
feedback, and see how your team interacts with
people? Take the time to show up and man a booth;
the golf course will still be there tomorrow.
-Parand Tony Darugar, reporter
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