Rivkin india ppt edited december 7 2011

Jack RivkinKeynote Speaker

2011

The EconomyThe Venture EnvironmentLessons LearnedOpportunities Today

A Sharper Fall and a Less Robust Recovery

A Lost and Volatile Decade

Valuation is as Important as Levels

Sensex Index 1991-Present

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199119921993199419951996199719981999200020012002200320042005200620072008200920102011

Year

Lowest P/E

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15,000

20,000

25,000

Index

Low P/E High Low Close

US Debt is No Longer Rising

Cash is Accumulating in the US

Currency Has an Impact

China’s Currency is Rising

India’s Currency is Volatile but Flat

Trade Balances Have Shifted

0%

10%

20%

30%

40%

50%

60%

70%

80%

US Germany Brazil India China

COUNTRY

GDP/Employment

Agriculture GDP Agr Employment Industry GDP Industry Emp Services GDP Services Emp Investment

Structural Differences Will Narrow

Thanks to our friends at Knightsbridge Advisers.

Innovating into Growth

UrgencyExperimentationOpportunity to FailExtended RunwayMultiple ApproachesExpansion vs. Replacement Economics

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$20

$40

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19911992

19931994

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19971998

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20012002

20032004

20052006

20072008

20092010

2011 to O

ct. 2011 Annuali

zed

US VC European VC Asian VC

Annual Venture Capital Investment

Source: Thomson Reuters, VentureXpert

Billions

Venture Investing is More Universal Today


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1. Source: NVCA 2011 Year Book.2. Source: Dow Jones VentureSource as of December 31, 2010, as reported on May 5, 2011.

Industry Contraction in the US in Contrast to Asia

706

396293

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2000 2005 2010

86

649

157

0

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1990 2000 2010

Number of VC Funds Raising Capital in a Given Year1

Number of VC Investors that Made at Least 4 Investments in

a Given Year2

Confidential/Trade Secret


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20%

40%

60%

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Vintage Year

% of ES Capital Uninvested

$0

$10

$20

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Billions$85.6

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1. Source: Dow Jones VentureSource as of September 30, 2011, as reported on October 10, 2011.2. Original concept from Steven N. Kaplan, University of Chicago Booth School of Business.3. Source: Thomson Reuters, VentureXpert as of June 30, 2011, as reported on November 3, 2011.

Right-Sizing of the Industry

0.00%

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1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

VC Commitments as % of Total Stock Market Capitalization

Industry contractions typically yield outsized returns


Cumulative Percentage of Early Stage Capital Uninvested3

Annual VC Fundraising1 VC Funding Raised as a % of Stock Market Capitalization1,2


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Source: Thomson Reuters, VentureXpert as of June 30, 2011, as reported on November 3, 2011. 1. Represents the average of the median and upper quartile thresholds per vintage year, respectively, vintages 1985 to 2009.

Significant Premium for Top Quartile Access


9.3%

24.8%

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35%

Average Median

Average Upper Quartile

IRREarly Stage Venture

1554 bps avg

UQ premium

1 1

8.4%

22.8%

0%

5%

10%

15%

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25%

30%

35%

Average Median

Average Upper Quartile

IRRAll Stages Venture

1442 bps avg

UQ premium

1 1

• Critically important to be in top funds due to large upper quartile premium and ‘persistence’ of returns

• Early stage, top quartile venture outperforms


19

Fertile Environment for Value Creation

• Opportunities abound across the sectors backed by VCs

IT Life Sciences Cleantech

• Market disruptions are occurring

– Across the global theater

– Across multiple subsectors…which are intersecting

• Venture-backed companies are redefining markets

– At a seemingly accelerating pace



20

Growth Drivers for IT


• Strong relative value in the venture-backed sectors

– Internet: penetrating daily life, globally

– Wireless bandwidth: connected always-on devices are now ubiquitous

– Social networking: allowing us to stay in touch, communicate, collaborate

– Commodity CPU, storage and bandwidth: enterprises undergoing major architectural transition – cloud computing

– Application delivery: on-demand infrastructure/services acting as enablers; technology is available “by the drink”

– Consumerization of IT: technology reaching the mainstream consumer and the rural poor


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• Healthcare systems in a state of change

– From traditional fee-for-service toward integrated delivery systems

– Value of technology shifts to improving patient outcomes, reducing cost

• “Hierarchy of innovation:”

– Treating previously untreated diseases

– New physiological insights leading to greenfield treatments

– Little innovations that improve clinical outcomes

• Changes in regulation and reimbursement

• Low cost delivery of basic health care services


Growth Drivers for Life Sciences


• Increasing energy demand and environmental concerns

‐ Aging and outmoded grid‐ Rising demand for portable

and dispatchable energy• Increasing energy security

requirements • Restructuring of global power

industry

• Increasing energy demand and environmental concerns

‐ Aging and outmoded grid‐ Rising demand for portable

and dispatchable energy• Increasing energy security

requirements • Restructuring of global power

industry

• Clean, renewable energy sources

• New meter and communication technologies

• Mobile power stations and chargeable demand shifters

• Domestic energy solutions and reduced reliance on imports

• Products that improve performance and reduce costs

• Clean, renewable energy sources

• New meter and communication technologies

• Mobile power stations and chargeable demand shifters

• Domestic energy solutions and reduced reliance on imports

• Products that improve performance and reduce costs

Growth Drivers for Cleantech

“It’s very simple; we need to cost-effectively produce usable energy with a smaller carbon footprint, and we need to use that energy far more efficiently - radical new

technology, Black Swans, can get us there.”~Vinod Khosla, Khosla Ventures

Solutions:Challenges:

Confidential/Trade Secret 22


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Cleantech Core Themes

• Broad investment universe

– Demand-side management and energy efficiency

– IT and energy communications

– Advanced power conversion

– Power electronics and semiconductors

– Electrical and fuel storage

– Clean fuel processes

– Pollution control

– Distributed power



Attractive Asset Classes

• Infrastructure– More Productive Movement of Goods, Services, People, Information– Productive Use of Water

• Fossil Fuels and Alternative Energy– Carbon Capture and/or Elimination– More Productive Plants– Transmission

– Grid– Distributed Power

• Efficiency/Productivity– Structures– Products– Transportation

Attractive Asset Classes

• Agritech• Information Technology

– Consumer– Business

• Health Care– New Products– Efficiency– Mode of Care

• Education• Financial Services• Hard Assets• Global Demand

26

Summary

• Abundant VC opportunities for major market disruptions exist across multiple sectors and on a global basis

• Innovation is occurring at an accelerating pace

• India is innovating into growth

• Experienced VCs contribute by:

– Selecting the most compelling and game-changing innovations

– Backing visionary entrepreneurs who recognize the benefits of top VC backing

– Creating powerful competitive advantages

– Using their network of talent, expertise, and investors



The EconomyThe Venture EnvironmentLessons LearnedOpportunities Today

Jack Rivkin

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Rivkin india ppt edited december 7 2011

Economy & Finance