InnoTech.My 2007
Colin WongPresident of Prosperati
Bio
Bio
President CEO
U.S. VC Landscape
2006 $25.7B invested
Q3 2007 $7.1B invested Seed /
Early Stage$1.4B (20%)
VC Activity By Category
VC Activity By CategorySoftware represents $1.11B (Q3Y07) BioTech represents $1.1B
(Q3Y07)
Emergence of CleanTech-Alt Energy, Recycling, Power Conservation- $844M (Q3Y07)- 80% increase from Q2 Y07
ICT Investment Trends
Consumer oriented Technologies
Enterprise oriented Technologies
ICT Investment Trends
Consumer oriented Technologies
Enterprise oriented Technologies
Web-based Business Models•Software-as-a-Service (SaaS)•Web 2.0
Wireless/Mobility•Mobile navigation•TV•Advertising
Video Technologies
VC Activity By Location
VC Activity By Location
Silicon Valley represents 35% of all U.S. VC activity
Q3 Y07Silicon Valley – 287 dealsNew England – 119 dealsLA/Orange County – 56 deals
USA
San Francisco Bay Area
San Francisco Bay Area
Silicon Valley•20km radius• University Research• Venture Capital• Technology Entrepreneurs•35% of U.S. venture activity
Silicon Valley
Stanford University
Sequoia Capital
Apple
Oracle
Cisco
Yahoo
NVIDIA
Network Appliance
Ebay
Intel
Adobe
Electronic Arts
Sun Microsyste
ms
NASA Research
Hewlett-Packard
Kleiner Perkins
Benchmark Capital
Draper Fisher Jurvetson
BlueRun Capital
Accel Partners
The U.S. Innovation Ecosystem
Stanford University
Sequoia Capital
Apple
Oracle
Cisco
Yahoo
NVIDIA
Network Appliance
Ebay
Intel
Adobe
Electronic Arts
Sun Microsyste
ms
NASA Research
Hewlett-Packard
Kleiner Perkins
Benchmark Capital
Draper Fisher Jurvetson
BlueRun Capital
Accel Partners
Entrepreneurs
Venture
Capital
Research
Research
Build a world-class University The best MINDS from all over the world travel
here to study here Incredible pool of world class talent
Google Larry Page (Michigan) Sergei Brin (Mathematics prodigy from
Russia) PhD Computer Science candidates Started Google in a garage within Stanford
Research
Venture Capital
Access to EASY seed capital Google got $100K in seed capital from
Andy Bechtolsheim (Angel Investor & Co-Founder of Sun Microsystems) over lunch
Access to EASY startup capital Google got $1.1M in startup capital from
Sequoia and Kleiner Perkins No proven management team No proven technology No proven business model
Sequoia Capital got lucky?
VentureCapital
Sequoia Capital
AND MANY MORE….
A Question for You
What does Hewlett-Packard, Apple, Ebay, Microsoft, Google, Yahoo and YouTube have in common? No Proven Team No Proven Technology No Proven Business Model
How Do You Evaluate Startups?
Risk Aversion Reward Management
Banking Approach Investment Approach
Risk Cutting Reward Calculating
Proven concepts Innovation and Disruption
Banking vs. Investment PorfolioBanking Investment
• Cash Flow Oriented
• Short-term horizon (12 – 18 months)
• Collateralized Loan
• Proven Business Model
• ROI Oriented
• Long-term horizon (3 – 5 years)
• Preferred Equity
• Law of Numbers
1/2 of investments loose money
1/3 of investments break even
1/6 of investments make (lots of) money
1/6 $$$ > 5/6 $
Risk vs. Reward
Risk Cutting vs. Reward Projecting Risk Cutting▪ Concentrate on avoiding the company that
will loose 100% of your funding▪ The “Restaurant” Play
Reward Projecting▪ Concentrate on finding the company that will
give you a 100x return on your funding▪ The “Cure for Cancer” Play
Case-Study: Google
Seed funding: $100K from Andy Bechtolsheim (angel
investor & co-founder of Sun Microsystems) over lunch
Early stage funding: $1.1M from Kleiner Perkins, Sequoia
Capital on unproven management, technology and business model
IPO: $23B valuation - 2300x ROI Today: $210B valuation – 21,000x ROIAs a VC, what is the success / failure ratio you are willing to
risk?
Entrepreneurs
1 in 20 new companies survive past 1st year
More of a myth U.S. SBA : 50% of new companies fail in
first 5 years But mindset must be the same
Be willing to go off the business plan A business plan is just a beginning
Iterate through discoveries market/technology/business model
Entrepreneurs
The Iteration Game (Evolution) Raise more money than you need, to
iterate Don’t expect your 1st iteration to hit the lottery Every iteration tells you what you shouldn’t
do, to get you to what you need to do Google Business Model / Omid vs. Larry
Expect second or third round of VC funding
Build milestones Understand your failures
Closing
US Innovation Ecosystem is about:
For VCs Risking x failures to find the next Google
For Entrepreneurs Failure *is* an option Risking x failures (iterations) to find the
next Google
failureRisking to get outsized rewards
Fail Fast, Fail Often to Find Success