This one-day workshop on venture capital will be facilitated by Douglas Abrams, who has experience as a Wharton MBA, JP Morgan vice president, co-founder of two venture capital funds, founder of an incubator fund and advisory, and professor at NUS and Sasin business schools. The workshop will cover the VC mindset of risk and return correlation, reasons for raising investment and investing in venture capital, key elements of successful companies, venture finance terms, company valuation methods, and how VCs make money through exits. It will also discuss the stages of funding, calculating investor ROI including dilution, capitalization tables, key deal elements, and the VC-startup negotiation process.

1. January 2015
From Idea to Investment
Venture Capital workshop one-day program
Douglas Abrams

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About the facilitator
• Wharton MBA
• JP Morgan – Vice President - IB Technology, Global
Markets Internet Marketing
• Parallax Capital Management – Co-founder and
MD - Venture Capital
• Extream Ventures – Co-founder and MD - S$20
million VC fund
• Expara – Founder and MD - IDM Ventures
Incubator, fund, advisory, training
• NUS – Adjunct Associate Professor, Business
School, Entrepreneurship
• Sasin – Visiting Professor, Venture Capital

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VC mindset
 Risk and return are highly correlated
 You cannot increase return without taking more risk
Return
Risk
Potential outcomes

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Why do companies raise investment?
 Lifestyle or scalable?
 Paycheck or payout?
 A big piece of a small pie?
 A small piece of a big pie?
Founder
Investors
Investors
Founder

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Why invest in venture capital?
As of June 30, 2014. The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,508 U.S. venture capital funds (963
early stage, 165 late & expansion stage, 374 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. (1)Pooled end-to-end
return, net of fees, expenses, and carried interest.(2) 2007-2015 Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's,
Thomson Reuters Datastream, and Wilshire Associates, Inc
Case Shiller Real Estate Index 4.1
Expara IDM Ventures (2) 43.03

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SEA exit markets at an inflection point
Exit activity in SEA, especially in Singapore, exploded in 2013
• Increased investment in startups since 2007 is beginning to yield results
• Number of exits increased from 6 in 2010 to 20 in 2013
• Singapore alone has had 30 exits since 2007, 13 in 2013
• Value of exits increased from 51 MM in 2010 to 400 MM in 2013

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Some recent exits
Company Country Acquiror Price Year
ZopIM Singapore Zendesk US$29.8MM 2014
Non-Stop Games Singapore King US$ 100MM 2014
sgCarMart Singapore SPH S$60 MM 2013
DS3 Singapore Gemalto S$50 MM est. 2013
Asian Food Channel Singapore Scripps Networks Undisclosed 2013
Reebonz Singapore MediaCorp and Existing investors S$250MM 2013
Yfind Singapore Ruckus Wireless Undisclosed 2013
Techsailor Singapore TO THE NEW Undisclosed 2013
travelmob Singapore HomeAway Undisclosed 2013
Catcha Digital Media Singapore Opt Inc Undisclosed 2013
GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013
Viki Singapore Rakuten US$200MM 2013
SGE Singapore Tech In Asia Undisclosed 2013
ThoughtBuzz India To The New Undisclosed 2013
AyoPay Indonesia MOL AccessPortal Undisclosed 2013
Tongue in Chic Malaysia PopDigital Undisclosed 2013
Ocision Malaysia Star Publication US$ 4.36MM 2013
Glamybox Vietnam VanityTrove Undisclosed 2013
PaymentLink Singapore Wirecard US$41.2MM 2013
Dealguru Singapore iBuy S$34.28 MM 2013
Buy Together Hong Kong iBuy S$21 MM 2013
Dealmates Malaysia iBuy S$10 MM 2013
PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012
HungryGoWhere Singapore Singtel S$12 MM 2012
AdMax Network Singapore Komli Media Undisclosed 2012
TheMobileGamer Singapore Singtel US$1.5 MM 2012

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Key elements for success
 Solve a problem for customers – Value proposition
 Develop an innovative product – Innovation
 Identify your customers – Market identification and analysis
 Reach your customers – Marketing strategy
 Compete when others enter - Sustainable competitive advantage
 Make money – Business model and financial plan
 Team – A team or B team

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Key venture finance terms
 Business model
 Financial projections
 Valuation
 Funding required & equity offered
 Use of Proceeds
 Exit Strategy and ROI
 Cap table

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Company valuation methods
 Price to earnings (p/e)
 Dividend yield
 Multiple of book value
 Comparables
 Discounted Cash Flow (DCF)
 VC method

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How much equity does the investor receive?
 Pre-money valuation
– Amount invested by VC ÷ (Agreed pre-money value of business
+ Amount invested by VC)
– $3MM pre + 1 MM VC = 25% VC equity
 Post-money valuation
– Amount invested by VC ÷ post-money valuation
– $4MM post = 25% VC equity

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How do VCs make money?
 Trade sale – sell to
another company
 IPO – sell to the
public through listing
on an exchange

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Trade sale or IPO?
www.nvca.org

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How does a venture capital fund work?
Fund
Investors
VC
8
$ 10 mm
2
$ 10 mm
$ 58 mm
25%
75%
Fund size 10,000,000$
Life of the fund 7
Management fee 2.5%
Investable 8,250,000$
Investment size 1,031,250$
Companies 8
Fail 4 50%
Break even 2 25%
Exit 2 25%
Investor's required ROI 35%
Fund multiple return 5.76
Fund size at exit 57,600,000$
Carry @ 20% 9,520,000
Distribution 48,080,000$
Fund return multiple 4.81
Fund ROI 35%
Required return per exit 28 times
Equity per company F/D 15%
Required value of equity at exit 28,800,000$
Required co value at exit 192,000,000$

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Stages and sources of funds
Founder’s
Capital
Seed/
Angel
Series
A, B, C
Mezzanine Pre-Exit Exit
VC hurdle rates 60-100% 40-60% 20%
OM
F,F&F
Incubators
corporations
government
Customers, suppliers,
strategic partners
VCs, Banks for VC loans
R&D Establishment GTM/Rollout Accelerated Expansion Maturity
Enablement growth

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Calculate investor’s ROI including dilution

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Cap table

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Key elements of a venture deal
 Board of directors
 Protective provisions
 Drag-along agreement
 Conversion
Control
 Price-per-share
 Valuation
 Amount of financing
 Liquidation preference
 Vesting
 Options pool
 Anti-dilution
 Pay-to-play
Economics

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VC-Start-up negotiation game

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Contact us
 Douglas Abrams
 Expara Pte. Ltd.
 dka@expara.com
 www.expara.com
 65-6323-3084, 65-9780-5381 (hp)
 Block 71 Ayer Rajah Crescent, #02-10/11 Singapore 139951