Last Year презентация

Partner, SoftTech VC

Pre-Money Conference - Jun '14

Last Year

The Series A Crunch

Pre-Money Conference - Jun '15

Services startup in 1989
Acquired by Reuters in 1993
“Traditional” VC in the Valley since 2000
Angel/Seed Investing since 2004

SoftTech VC (@softtechvc)
11 years old
165 investments
40+ exits
$2.5B in follow-ons

Pre-Money Conference - Jun '15

$1M+ per initial investments
$35M = 45 deals @ $750K
$50M for Series As/Bs
Heavy recycling (120%)
Geos: SF/SV, NY, SoCal, Can
Target ownership: 7 to 10%
Always syndicating with peer micro-VCs and angels

Sectors








New Areas: VR/AR, drones, AI/robots,…

Pre-Money Conference - Jun '15

= founders, Stage = Concept, Runway = 12 months+
Size = $500/750K, Investors = Angels, Pre-Seed Funds
Seed: the first Institutional Round
Team = founders + few engineers, Runway = 18/24 months
Stage = early data: usage, acquisition, (some) revenues
Size = $1.5/$3M, Investors = Syndicate of Seed VCs + others
Seed Prime/Extension: backup to a failed Series A
Stage = some data/validation, not enough to raise a Series A
Investors = Seed Prime Funds + insiders

Pre-Money Conference - Jun '15

Costs have increased 2/3X (in Silicon Valley)
Traction proof needed to raise Series A trending higher as # of candidates is increasing
10X increase in capital available at Seed stage forced larger rounds to make room for investors
Branded firms, and some new ones, have ownership targets due to portfolio concentration and fund size
Way too much capital chasing seed deals = sellers market (good) but support is not uniformly good

Pre-Money Conference - Jun '15

typical Series A hurdles in your sector
Typical runway is 18 to 24 months
Research via your network and CrunchBase/AngelList which funds are potential leads
Build a strong round foundation with Seed funds as leads, based on value add and expertise – and complement with useful angels/other sources
Avoid “party rounds” at all cost – no one cares

Pre-Money Conference - Jun '15

strategy:
How many deals, of which size over which period?
Do you plan to follow on in Series A? Series B?
Only Major investors are typically given these rights
Have a clear appeal for entrepreneurs:
Experience, expertise, network, track record
Area(s) where you can add value
Will you lead/co-lead? Take a board seat?
Figure out how much ownership “you’re worth”

Pre-Money Conference - Jun '15

your portfolio construction will dictate your ownership needs
A $1B exit should return at least half of your fund
Capital being a commodity, round construction would ideally be built based on “value add”
Entrepreneurs will reference you, better have delivered on the goods with your existing portfolio
If you claim the lead position, and aren’t prepared or fit to take the board seat = BFP
Committing involvement, time, advice, additional capital, etc.

Pre-Money Conference - Jun '15

for sectors you invest in, and understand runway implications for the Not’s
Early on establish and validate hurdles to clear in order to get the next round
Pre-market early with the “most likely/best fit” group of investors
Understand that the Seed round unlocks the A, and the A unlocks the B

Pre-Money Conference - Jun '15

across Fund II, III and IV
Average Series A: $9M
Average Series B: $19M

Fund IV closed 24 rounds for a total of $20M
Average $800K ($500K to $1.2M)
Average ownership: 7.5%.
10 board seats

Pre-Money Conference - Jun '15

at low valuation
“Double down on winners” and increase dollars invested to maximize returns
Planning to follow-on in one round? Reserve 50%. Two? Reserve 75% - but take into account your expected loss rate
SoftTech’s model is 20% failure before A, 10% post A
Of Fund IV’s $85M, $50M and recycled capital will go to reserves

Pre-Money Conference - Jun '15

you need to deliver a 4X gross return. About 25% will go to management fees and costs.
To produce a $200M total return, you’d need a 5.5X performance if you don’t put “fees in the ground”
200 / (50 * (1 – 25%)) = 5.5
Recycling means that you don’t distribute all proceeds back to LPs
Standard 120% recycling clause means 50% of proceeds are re-invested
Cashflow/distribution optimization is tricky since early exits are impossible to plan for

Pre-Money Conference - Jun '15