Financiers and their habits by Mr Ties van der Laan Ties Corporate Finance 10, rue des Alouettes, L-1121 Luxembourg-Cents Luxembourg m , t/f e i Equity investors

Who am I? After nearly ten years in Dutch venture capital companies (ING Group) I am coaching since 1999 entrepreneurs and management teams to raise finance, first through LIFT and from mid 2002 as an independent business coach

Life cycle/finance/financiers Life CycleFinanceFinanciers ResearchGrantsPublic sector Start-upEquitySponsors Early stage Seed capital Founder, friends, family Expansion Venture capital Banks Buy-out/in Private equity Business angels Turnaround MezzanineCorporate venturers Loans Venture capitalists And will finish with a summary and a step-by-step plan!

General characteristics: 4Focus is on future 4Seek risk, expect high return 4Buy shares 4Temporary involvement 4Seek (serial) managers/entrepreneurs Equity investors

4Business angels 4Corporate investors 4Venture capitalists 4(Institutional investors) Types of equity investors

4Characteristics 4Who are they? 4What do they seek? 4How do they operate? Business angels

BA’s: characteristics 4Successful business(wo)men 4“Have been there, done that” 4Invest their own money 4Funds: up to € 1m, few larger 4Deals: from € k, typically € 75k 4Aged between years, few younger 4Driven by “giving something back” 4Other agendas - fun, involvement 4Profit less significant

4Executive angel  Active entrepreneurs, executives or consultants  Investments between € 50k - € 100k  Extra turnover, networking, hobby 4Job seeking angel  Redundant executives  Work in the € 30k - € 70k area  Busy, active 4Retired angel  Workaholics  Smaller amounts (€ 15k - € 50k)  Busy, active Who are the BAs?

4Small companies  Mostly active in markets they know  Growth in growing, large, empty niche markets  In 7-10 years potential turnover >100m  Also invest in seed phase  Nearby 4Return  Profit through tradesale or IPO  Dividend, interest and fees 4Likeable persons  In business (entrepreneur) and private (talk)  Mutual trust What do BAs seek?

4Intake  Via friends, family or business (angel) networks  Low due diligence 4The deal  Straightforward structure  Veto rights, minority protection, anti-dilution  Time frame from several weeks to one month 4After the deal  Close involvement: 1-3 days/week  Hands on unless going badly  Business devils How do BAs operate?

4Characteristics? 4Who are they? 4What do they seek? 4How do they operate? Corporate venturers

4Large, operating companies 4Successful, cash rich 4Invest company’s money 4Funds: active € 10, passive € 200m 4Deals: small ( € 5m) 4Active managers years old 4Objective strategic: market reconnaissance 4Outside (but close) to own market 4Profit less important CV’s: characteristics

4Market leaders (or just below) in:  Technology (ICT: Intel, Life Science: BASF)  Telecom (Vodafone)  Consumer products (Unilever)  Capital goods (Siemens) 4Quoted on the stock exchange 4See Who are the CVs?

Active  Small companies/individuals (in or external)  Focussed on seed phase/technology  Incubate until ready for VCs  Buy when successful Passive  Mature businesses (MBOs, restructuring)  Direct: partner with VC’s  Indirect: fund of funds  Buy or trade sale (IPO) What do CVs seek?

Active  Intake through investment manager  Fast decisions, little due diligence  Simple deal structure  Hands-on even when going badly  Invest for the long run (> 5 years), buy when successful  Enhance your credibility, give access to network Passive  Direct: passive in deal structuring (VC)  Indirect: in investment committee  Sometimes in Board of Directors or Supervisory Board  Hands-off or buy when going badly How do CVs operate?

4History of venture capital 4Characteristics 4Who are they? 4What do they seek? 4How do they operate? Venture capitalists

History of venture capital 4Started in USA in early Rich families (e.g. Rockefellers) invested outside own conglomerate as business angels 41 st time distinction: ownership/management 4After WOII: professional VCs 4Early 60s: UK 4Early 80s: continental Europe (banks in NL)

4Professional buyers of share in private companies 4Invest money of institutional investors (II) 4II = LP, fund manager = GP 4Funds: € 10m – € 15bn (!) 4Deals: € 1m – several € 100m 4Investment managers between 25–55 years old 4Dealmakers with financial background 4Objective is generating cash 4Driven by building profitable/sellable companies VC: characteristics

41. Private equity vs. venture capital 42. Evergreens (mostly captives) vs. revolving funds 43a. Large VCs (<10 in EU)  Funds: several € 1bn, deals: € 1m-250m  Sector and/or region specific sections/subsidiaries  Fund of funds 43b. Medium sized generalists ( )  Funds: € m, deals: € 1m several € 10m  Private equity, venture capital and fund of funds 43c. Niche VCs (< 100)  Funds: € m, deals: € 250k-5m  Focused on technology markets or niches  Combine investors with industry knowledge  Mostly venture capital Who are the VCs?

Private equity  90% (!) of money yearly raised  Mature companies with turnover > € 50m  Buy-outs mostly (MBO, MBI, IBO, BIMBO etc.)  No market specialisation  Return > 20%: € 10 in, 4 years later € 20m out Financial engineering Buy and build Sale What do VCs seek? (I)

Venture capital  Young companies: seed, start-up, early stage  Large, global empty markets  Experienced entrepreneurs  Return > 50%: € 1m in, 4 years later € 5m out Growth Sale (trade or IPO) Investing is trust in people  PE = balanced management teams  VC = entrepreneurs What do VCs seek? (II)

4Intake  Receive more plans than read  Introduction via network  Selective: invest in 1% of business plans read  Extensive due diligence: 2 to 6 months Market(ing), technology, management, legal, financial PE: mostly external specialists  Syndicates (so no competition between VCs) Deal-sourcing in other regions Follow-on investments Prevent entrapment Control with minority share  Cross-border only with local lead How do VCs operate? (I)

4The deal  Sometimes complex deals  Management option scheme  Veto-rights, minority protection, anti-dilution  Board representation  Monthly or quarterly reporting  Control over exit  Investment committee decides  Typically 2 months How do VCs operate? (II)

4After the deal  Real work starts  Frequent contact in beginning  Support: knowledge, experience and network  Focus on: Growth Reporting Exit  Hands-off unless going badly No good money for bad money Sell healthy part of company via network How do VCs operate? (III)

4BAs: money + market experience + network, long term, < € 0,2m in small fast growing companies, not for return only, local, hands-on 4CVs: money + market knowledge + network + credibility, long term or short term, € 5m in companies close to their market, active + hands-on or passive + VC, buy when successful 4VCs: money + experience + network, professionals in private mostly mature companies (PE), PE: financial engineering & buy/build & exit, VC: growth & exit, return only, prefer syndication with local party, due diligence: 4-8 months Conclusion equity investors

From start to finish (I) The more steps you complete the easier it becomes to raise finance: 1. Finalise your product (grants) 2. Find entrepreneur (yourself?) 3. Found company (own money, house, FFF) 4. Find business partners (sponsors) 5. Find customers and sell (auto-finance) 6. (Accelerated) growth (raise finance) continued on next slide

From start to finish (II) continued from the previous slide 7. Raising equity finance:  1. Prepare business plan/presentation/pitch üWith help of dedicated professionals?  2. Research financial world üBusiness Angel Networks (BANs, üEVCA/local VCAs ( üNetworking  3. Approach chosen potential investors With help of dedicated professionals? 8. Later stage: MBO/MBI/Turnaround 9. Raising equity finance: see Sell: tradesale or IPO

Ties Corporate Finance Business coach in raising finance for the expansion of businesses  To create a winning business plan  To approach investors professionally  To negotiate with investors successfully

Ties Corporate Finance Ties van der Laan 10, rue des Alouettes L-1121 Luxembourg-Cents Mobile: (+352) Fax: (+352) Internet: Contact details