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Notes from Trevor Loy’s talk on Raising venture capital in today’s Market at University of Edinburgh Business School - 8th March 2011

Expertise mainly in the USA, but expanding elsewhere

Background - what’s driving VCs

- most funds come from institutions “limited partners” - pension funds, family office, funds of funds
- “general partners” / fund managers invest 2-10 % of the fund
- general partners invest in companies….sometimes with other funds (syndication)
- financial institutions have had to withdraw funds from private equity as a result of regulation over the last year….resulting into many secondary funds - especially in the USA and the UK
- emerging markets filling in the gap
- VC as an asset class only works up to $20bn or so. Case in question is USA
- VC funds was around $100bn in 2000 and 2010 was $13bn
- bubble style valuation is restricted to 6 main companies - FB, Twitter, LinkedIn, Foursquare, Groupon, Zynga
- returns on VC Funding over the long term has not been that great - it has performed very well over a 20 year period (20% +) but over 10 years period it is very low (-3.7%)
- returns are bad as the IPOs going down (500+ in 99/00 to 37 in 2010)
- median return for VC Fund is similar to US large and small cap mutual funds. There are outposts that get 75%+ return but they are more like stock pickers

How does VC fund makes money? An example

- founding fund is the worth of the company as a startup (say $30k). Number is shares is completely arbitrary (e.g. .01$ per share, 3mn shares)
- angel funding (.50 $ each share)
- VC series A funding ($1 per share)
- VC series B funding ($5 per share)
- IPO ($15 per share) - company now worth $75mn

Note: put 20% shares as empires stock pool to start with (lets employ people at a lower price)

How have VC funds faired across all deals

Almost 60% VCs lose money (total loss, partial loss or 1-2 times the money), 20% 2-5 times the money, 10% 5-9 times the money, 7% more than 10 times the money

Note - Tolerance and celebration of failure keeps the VC industry going, but companies need to develop proposition that they can get 10 times the return over 10 year period to make it a viable option for VC

Note - Clean technology, Bil tech including Pharma and Software are the three main areas for VC funding

How are VC Firms organised

- several “general partners” (GPs) - own investment decisions - entrepreneurs and financiers - typically 5-10 deals per partner
- mid level associates / analysts/ principles - drive the process - tend to become CEOs of companies….these people screen deals
- other in-house roles - finance, marketing, HR, operations

VC Firm - Typical investment process

- each deal must have an identified lead partner who will champion to the rest of the team. Others ensure due diligence
- unanimous approval from all partners for the deal to go ahead
- firm offers a term sheet to entrepreneurs once it is ready to commit - not legally binding but reputationally binding
- legal documents then completed after term sheet is signed

Pitching process

- frame the opportunity (not just ideas, but real opportunity)
- outline the vision, mission, strategy and team
- describe financial requirements and returns
- don’t cover everything - just compel action (get another date, don’t propose marriage :) )

Tips for Investor pitch

- exec summary
- slide presentation (10-15 slides, informal, dating mode)
- business plan(20 pages max, key is depth of understanding)
- financial model is key (focus on first 12-18 months, make sure 3-5 year projections reflect reality of comparable companies’ history)
- focus on describing the company you are building not the product you will sell

(Source: )

Some stats

• 100 million iPhone shipped
• $2bn paid to developers for apps
• 15 million iPads sold in 2010 (Apr-Dec) - more than any tablet PC ever sold - thats 90% market share
• 100 million books downloaded in one year
• 65000 specific apps for Ipad

On to the new stuff - iPad2

• Dual Core CPU
• 2x faster CPU
• 9x faster graphics
• 33% thinner (8.4mm, which is even thinner than iPhone4)
• Real and Front cameras (expected)
• Its lighter as well - 1.3 pounds as opposed to 1.5 pounds
• Will come in two colours (white as well from day one)
• Same 10 hour battery and low power consumption
• A gyroscope as well
• Same prices as iPad v1 (Hmmm wonder how much I can get for my current iPad to replace it with iPad2)
• HDMI out cable (1080p output, mirrored video and you can charge while using the cable, works with all apps, no configuration required)
• SMART COVERS (magnetic cover, auto aligns itself, available in Leather $69 and Polyurethane $39) - its a flap that covers the front face of the device!! Looks nice…available in many colours!!

SHIPPING DATE - 11th March for the USA and 25th March everywhere else including the UK

Also iOS 4.3

• Better performance on Safari
• iTunes home sharing o ver WiFi
• iPad switch - mute or rotation lock - as preferred
• AirPlay improvements
• Personal hotspot  - for iPhones only
• Photo Booth app to use the new camera on iPad2 (doesnt seem to have anything specific for iPad2 though)
• FaceTime on iPad2 but limited to Apple platforms only -> iPad to iPad, iPad to iPhone or iPad to Mac
• iMovie for iPad $4.99 - movie editing software
• New sharing options - Facebook, Youtube, Vimeo etc. (please make this a bloody standard and add configs so that i can choose which ones i want to use and then use the same options for all apps on my iPad? grrr!)
• GarageBand for iPad $4.99 - Touch instruments, you can plug in a guitar if you want, but it’s got touch instruments. Guitar amps and effects, 8 track recording and mixing, 250+ loops…”

My thoughts:

Looks like a lighter version of the current iPad and definitely a bit faster, but, assuming iOS 4.3 will be available on the current iPads, unless i can get a good price for my current iPad, I don’t see a huge advantage in upgrading to iPad2.

So, no USB or file sharing other than using apps. Not event a decent stylus for goodness sake!

The only other thing that will force my hand into buying an iPad2 is the cover…it does look neat! :P