Inaugural Asian Business Angel Forum Keynote

Inaugural Asian Business Angels Forum
Angel Investing as Foundation for Entrepreneurship

Aydin Senkut
Founder & Managing Director
Felicis Ventures

http://www.felicisvc.com
Twitter.com/asenkut

© 2009 Felicis Ventures LLC

Aydin Senkut – Felicis Ventures
Bringing operational excellence & scaling experience to funding start-ups
  First Google Product Manager & International Sales
  Angel Investor with 50+ investments, 11 exits

  One of the top 25 Tech Angels according to Businessweek (March 8, 2010)

Acquired by Acquired by
IAC AT&T

Mixer Labs
Intuit Twitter

Acquired by
Acquired by Google
Shanda Games

Google Microsoft


Angel Investing – Why Does It Matter ?
Biggest Success Stories of Today were once backed by Angel Investors


What is an Angel Investor ?
Anyone who provides private capital to a [non family] start-up

•  Usually the first outside investor

•  Invest with the expectation of a financial return

•  Invest usually locally and regionally

•  Participate actively in the investment process

•  Usually care about the entrepreneurs and the companies
they invest in / interested in building personal
relationships with companies & employees

•  Offer advice and guidance to founders


Angel Investors in VC Ecosystem
Idea Start up Intro Rollout Growth Expansion Maturity

Inv. Banks / PE
$10MM - 100MM+

Grants of up to $1MM
Acquisition Stage / IPO /
Mergers
Revenue / EBITDA

Angel Investors
$10k – $1MM Investment Banks & PE
Funds

Venture Capital
Friends, Family or Funds
Grants

Individual Angels / Groups /
Boutique VCs


Angel Investors in the US

225,000

U.S. Estimate Of Estimate of Active Investors In Angel Groups
Millionaires Informal Angels
Investors (Center For Venture Research)

* Source: Angel Capital Association Presentation by Ian Sobieski, Band of Angels, Oct 2007


Rising Popularity of Angel Investing
3x Growth in North American Angel Organizations in 7 yrs

NUMBER OF ANGEL ORGANIZATIONS

* Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)


Angel Investing – Investment Focus
Internet / Software lead other segments

* Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)


Angel Investments in Perspective
In the Context of Venture Capital
Early Stage to Late Stage

3,416 Deals
Average Deal Size:
$7,500,000

51,000 Deals

Average Deal Size:
$500,000

2007 Angel Investments 2007 VC Investments

* Source: University of New Hampshire Center for Venture Research, Price Waterhouse Coopers


Venture Capital is Highly Concentrated
Silicon Valley (40%) and NY (7%)
account for nearly half of venture investment

* Source: NVCA Research 2009; PriceWaterhouseCoopers


What Makes Silicon Valley Special

No Success Adaptability
Without
Failure

Successful Entrepreneurs
Elite
Act as Mentors & Angel Investors
Universities
(with Global,
Highly-Selected
Student Bodies)


Silicon Valley Success Story
“Internet is the Greatest Legal Wealth Creation in History”
Last Valuation
Total $Raised Last Valuation ExitType Multiple InYears Founded at IPO or Exit
Facebook $716.0 $10,000 - 14 5 2004 2009
Twitter $55.0 $285 - 5 3 2006 2009

Zappos $62.8 $920 M&A 15 10 1999 2009
Adify $27.0 $300 M&A 11 2 2006 2008
Google $25.1 $23,100 IPO 920 7 1998 2005
Bebo $15.0 $850 M&A 57 3 2005 2008
Zimbra $14.5 $350 M&A 24 3 2004 2007
Photobucket $13.5 $300 M&A 22 4 2003 2007
YouTube $11.5 $1,650 M&A 143 1 2005 2006
Last.fm $5.0 $280 M&A 56 5 2002 2007
Note: All amounts in millions 

•  Consumer internet still offers best path to high multiple returns
•  Key differentiator: capital efficiency
•  Virtually all the big successes were first backed by angels


Where Should Angels Invest ?
Finding Great Companies is the Basis of Angel Investing

Passion
Talent Innovation

Unique
Focus Culture
and Fun

Great
Companies


What Does It Take…
…To Be A Successful [ Angel ] Investor ?

Capital Network

Judgment
(Pattern Recognition)

Proprietary Domain
Deal-flow Expertise


Seeding Future Winners - Incubators
LEADING EXAMPLE IN THE US

•  Review 600+ companies every 6 months
•  Each batch around 20+ companies (~4% acceptance rate)*
•  Investment: $5K USD + $5K USD per founder
•  Stake: Usually 2-10%

INTERESTING FACTS
•  25% of accepted companies are international
•  Last batch, more than half the companies changed what they were working on
•  Last Investor Day included 27 companies and 210 Investors

KEY RESULTS
Companies Acquired Companies with sizeable VC rounds
•  Reddit (acquired by Conde Nast) •  Heyzap •  Justin.tv
•  Parakey (acquired by Facebook) •  Loopt •  Xobni
•  Omnisio (acquired by Youtube/Google) •  Scribd •  Posterous
•  Zenter (acquired by Google)
•  Anywhere.fm (acquired by iMeem)


How Can Incubators Succeed ?
Filter, Stress, Mentor, Engage & Create an Eco-system

  Strong brand & highly selective (admission ratio of 1-5%)

  Limited time (~3 months) to encourage execution and fast iteration

  Heavy Mentorship in all key product areas (especially engineering,
product, and fund-raising)

  Community and participation (Biggest success factor cited by founders)

  Active involvement of investors increases funding rate to 75%*

* Techstars


Growth is Key to Successful Investing
Key: Target the Fastest Growing Internet and Mobile Markets
INTERNET USER NET ADDITIONS

Global 2007Users
Rank Country Added(000s) 2007Y/Y Growth Penetration
1 China 73,000 53% 16%
2 US 9,800 5% 73%
3 Brazil 7,400 17% 26%
6 India 5,000 7% 7%
8 Russia 4,311 17% 21%

MOBILE SUBSCRIBER NET ADDITIONS

Global 2007 Net Subs
Rank Country Added(000s) 2007Y/Y Growth Penetration
1 China 86,228 19% 41%
2 India 67,570 41% 21%
4 Brazil 21,062 21% 64%
5 Russia 19,326 13% 120%
7 US 13,596 6% 85%

Source: Morgan Stanley Research, ITU


Growth is Happening Faster
Example: Disruptive Platforms - Time to Success much Shorter

Approximate
Time Since Applications Applications
Platform Inception Users Y/Y Growth Available Downloaded

Skype 6 yrs 405MM 47% - -

Youtube 4 yrs 363MM 40% - -

Facebook 5 yrs 236MM 135% 52K+ 308MM+

iTunes Store 8 yrs 75MM - 10MM+ 6B+

Nintendo Wii 2 yrs 45MM 125% ~1K 189MM+
iPhone /
2 yrs 33M 265% 35K++ 1B+
iPod Touch
Amazon Kindle 1 yrs - 239% 240K+ -

Source: Morgan Stanley Research; dates from inception based on Wikipedia; user numbers current as of mid 2009


Next Big Things
• Online Education / Next Generation Text Books
Education
• Specialized Networks around College Admissions

• Local / Real-time Search
Search
• Subjective Search

• Personal Genomics
Health
• Electronic Health Records

• Data Driven Smart Web Apps
Other
• Crowd Labor

• Mobile Social Gaming
Mobile
• Viral Mobile Apps


Drastic Changes in Exits
Start-ups Need Less Capital, Exits Shrinking…
400
Average IPO Offer Amount

350 Average M&A Deal Size

300

250

200

150

100

50

0
Q1-2006 Q2-2006 Q3-2006 Q4-2006 Q1-2007 Q2-2007 Q3-2007 Q4-2007 Q1-2008 Q2-2008 Q3-2008 Q4-2008 Q1-2009 Q2-2009

•  Ave exit size down about 4x in 2 years – M&A sweet spot is $100M

•  First big jump in Q2 of 2009

Source: 2009 report by NVCA and Thomson Reuters


Singapore in Context
Silicon Valley in Comparison

Silicon Valley Singapore

Population Population
•  4.22M •  4.84M
GDP GDP
•  $700+ billion* •  $163 billion*
Universities Universities
•  13 •  4

Source: CIA World Factbook, Wikipedia; SV GDP estimated as roughly 5% of US economy


Singapore in Context
Silicon Valley in Comparison

Silicon Valley Singapore
Companies in Fortune 500 Companies in Fortune Global 500


Food For Thought
What will it take to have an entry from Singapore here ?

TOP GLOBAL INTERNET COMPANIES

Rank Company Country Market Capitalization
1 Google US $102B
2 Amazon US $29B
3 Yahoo US $19B
4 eBay US $15B
5 Yahoo JP Japan $14B
6 Softbank Japan $13B
7 Activision US $13B
8 Tencent China $12B
9 Baidu China $6B
10 Rakuten Japan $6B
11 Electronic Arts US $6B
12 Alibaba China $5B
13 NHN Korea $5B
14 NetEase China $3B
15 Expedia US $2B

Source: Morgan Stanley Research, 2009 – Mary Meeker / State of the Internet presentation


Aydin Senkut
twitter.com/asenkut
www.felicisvc.com

Confidential – Copyright Felicis Ventures LLC

Inaugural Asian Business Angel Forum Keynote

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