Investec Ventures Presentation to TCD Michael Murphy 13 th February - - PowerPoint PPT Presentation

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Investec Ventures Presentation to TCD Michael Murphy 13 th February - - PowerPoint PPT Presentation

Investec Ventures Presentation to TCD Michael Murphy 13 th February 2014 Introduction to Investec Ventures Investec Ventures is the venture capital arm of Investec - Investec is an international specialist bank - Dual listed in London


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Investec Ventures

Presentation to TCD Michael Murphy

13th February 2014

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Introduction to Investec Ventures

  • Investec Ventures is the venture capital arm of Investec
  • Investec is an international specialist bank
  • Dual listed in London & Johannesburg
  • We invest capital in Ireland in private unquoted companies
  • We currently manage the Ulster Bank Diageo Venture Fund (“the Fund”) a

€75m fund

  • The Fund and earlier funds have invested in 42 early and expansion stage

companies in Ireland

  • Building businesses from low entry values to EVs of €50m - €100m
  • Exits include: AMCS, Magnetic Solutions, Phonecard Warehouse, National Linen,

Newcourt, KCC Security

  • The Fund is actively seeking investment opportunities and has made 17

investments

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Mobile Technology, eCommerce, Internet, Search, Analytics/BI, Digital Media, Cloud, Storage, Healthcare

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History

  • Presence in Ireland for over 12 years
  • Acquired Gandon Capital Markets and operations of GE

Capital Woodchester Bank in 2000 to enter the market

  • Acquired NCB Group in 2012
  • Continuing to expand and develop in the market

Overview

  • Over 230 employees in Ireland
  • Full Corporate Service offering servicing corporate needs

as well as senior executive needs

  • Local relationship management, supported by specialised

international teams Ireland’s First Specialist Corporate Bank

Investec in Ireland - A Distinctive Product Offering

Investec Ireland

Corporate Finance Treasury Solutions Debt and Equity Capital Markets Wealth Management Venture Capital Debt Advisory

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What is Venture Capital ?

  • Venture Capital is professionally managed capital that is invested in private

unquoted companies on a long-term basis

  • Is invested in early stage (seed and start-up) or expansion ventures
  • High risk so expectation of higher than average returns
  • Active management, value added, transformational

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Who Invests in Venture Capital Funds?

  • European institutional investors allocate 1%-2% to Venture Capital

compared with 5% in the US

  • European Funds raise funds from Pension Funds, Banks, Fund of Funds,

Insurance Companies, Government, Privates, Corporates, Capital Markets and Academic sources (source EVCA)

  • Investec Ventures raised €75 million from Fund of Funds 25%, Government

20%, Privates 18%, Corporates 17%, Banks 13%, and Insurance Companies 7% (source Investec)

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  • Favourable corporate tax rate
  • FDI clusters
  • Technology/MedTech/Pharma
  • Educated English speaking

workforce

  • Euro membership
  • Flexible labour market
  • Entrepreneurial culture
  • Good place to do business
  • Science Foundation Ireland

Market - FDI : A Platform for Entrepreneurial Activity

Spin outs and sub-supply “linkages” to MNCs offer investment opportunities

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Market - Examples of Entrepreneurial Irish Companies

Enterprise SW, SAAS, Social Media, eCommerce, Mobile, Internet

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Market - Overview of VC in Ireland

  • Strong emphasis on increasing the availability of risk capital for innovative high

growth companies

  • IVCA estimates that in 2013-2017 VC’s will invest €1.5 billion (€300 million per

annum)

‒ Increased level of activity arising out of previous seed capital initiatives

  • Growing market with demand for equity finance for SMEs
  • Strong multinational base in Ireland

‒ Breeding ground for entrepreneurs

  • Government Initiatives

‒ Innovation Fund Ireland (NPRF/EI) ‒ Development Capital Fund (EI) ‒ New Seed & Venture Capital Programme (EI) ‒ NPRF Strategic Investment Fund

  • Vibrant support structures and networks

‒ Investec Ventures is already networked into the IVCA, E&Y Entrepreneur of the Year, Deloitte Fast 50, InterTrade, NDRC, EI, IDA, ISA, Web Summit

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Fund Investment Strategy

  • Build a balanced portfolio of 18 - 20 companies (17 to date)
  • Investment range €1m - €5m on initial investment – geographical focus Ireland
  • Maximum investment per investee €11m (15% of the Fund size)
  • Acquire strategic minority stakes 15-30% and appoint a nominee to board
  • Long term investor with follow-on / reserve capability
  • ICT sectoral focus
  • Software - Mobile comms; eCommerce; Internet; Digital, Social Media & Search; Business Intelligence /

Big data analytics; Content management systems; Middleware; Gaming; SAAS solutions; Payments;

  • Hardware – Wireless; Telecoms; Semiconductor; Cloud & Data Storage; Display & Touch screen

technology

  • Back management teams
  • Expanding their businesses
  • Effecting recapitalisations/take privates and spin outs
  • Implementing “buy and build” strategies
  • Realise investments in a 5-7 year time horizon

Building a balanced portfolio of early and expansion stage companies and cash generative buyout opportunities

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  • Ventures “Own Initiatives”
  • WMT / Private Clients
  • Corporate Finance
  • FX / Treasury
  • Angel Investors
  • Family Offices
  • Corporate Venturing
  • Local / Intl. PE / VC Houses
  • 3rd party CF Houses
  • Consultants / Accountants
  • BES Funds
  • Other Banks

Our Coverage - Dealflow Channels

Management Team Referrals Direct to Us “Brand Identity” Group Reach Corporate Venturing Service Providers / Intermediaries R&D Universities / Innovation Centres Government / State Agencies Market Coverage & Collaboration Co-Investment

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Deal Pipeline (previous funds) - How does it work?

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1st Contact with Company 1st Meeting Exploration Meetings Investment Committee Term Sheet Negotiation Due Diligence Transfer of Funds

  • No. of

companies considered since inception %

1,079 100% 2% ~ 6 Months 24

Legal Agreements

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Portfolio - Balanced by Sector and Stage of Development

Early Stage Expansion Stage ICT Software & Hardware Consumer & Business Services Buy-Out Stage

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Portfolio - As at 31 December 2013

Company Sector Cost €’m Equity Stake % (Fully Diluted) Number Of Employees AMCS CleanTech 1.70 8.4% 140 Betapond Social Media 1.50 17.7% 18 Brite:bill Paperless Billing Solutions 2.53 29.0% 27 Diona Tech Social security solutions 2.70 15.0% 62 ePub Direct On-line eBook Distribution 1.10 25.8% 12 Fenergo Banking compliance SW 3.50 20.0% 69 Ferfics Semiconductor Chip Design 1.64 21.5% 6 Gridstore Data Storage Solutions 2.49 8.6% 35 Helix Health Healthcare Software 5.00 22.7% 130 HeyStaks Social Web Search 1.25 20.4% 6 Micks Garage eCommerce 1.50 20.6% 42 Rainmaker Business Intelligence SW 2.38 36.7% 32 RAPT Touch Screen Technology 2.98 15.0% 23 SilverCloud Online Healthcare 1.10 22.0% 16 TerminalFour Web Content Management 1.00 27.1% 63 Zamano Mobile Services 2.50 14.2% 26 Sub-Total 34.87 707

  • 22% of investees are in the portfolio ≤ 1 year (60% ≤ 3 years)
  • Strategic stakes in investees
  • Total equity investment in the Fund’s investees of c. €83m

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Competitive Strengths – Investec Ventures

  • Strong networks
  • Access to deal flow through multiple channels
  • Investment focus is Ireland
  • In-house access to skills required by Investees
  • Experienced team
  • Team has executed 40 deals
  • Adding value by utilsing our network of business contacts:
  • Sourcing independent Chairmen for the boards of AMCS, Britebill and Rainmaker
  • Rainmaker - the Chairman (Brian Dunne, former CFO of Aer Lingus and Air Canada)

is well networked into the airline industry and this has led to sales being secured

  • Britebill - the Chairman, Cecil Hayes, former COO of Norkom plc, invested €500k into

the business and Vincent Ryan (ex Changing Worlds) has added sales & marketing skills

  • AMCS - the Chairman, Mike Wynne is a former CEO of Greenstar and brings a

network of contacts from the industry in the UK and the US

  • Zamano - John Rockett has added financial and governance skills

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Early Stage Expansion Stage Technology Life Sciences Consumer & Business Services

Seroba

MBO

Kernel Capital Delta

Stage of Development Sector Focus

Fountain Atlantic Bridge DublinBIC Enterprise Equity DFJ Polaris Greencoat Capital ACT Soffinova

Investec Ventures

Highland Capital BDO Carlyle Cardinal Better Capital

Market Positioning - €1.5 bn+ market

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MML

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Building Company Capability

Investec Ventures provides the following management supports:

  • Nominee director - work with the promoting team

to assist in the formulation of strategy

  • Member of the remuneration and audit

committees of investee companies, assisting with the implementation of best practice and corporate governance

  • Research support. Investees can access

Investec research relevant to their businesses

  • Technical support. Investec Ventures has

technology experience within the team and provides guidance and feedback to investees

  • Team building. We assist with the identification

and appointment of non-executive directors/chairmen & senior management executives

Investec Ventures has strengthened management teams & Boards with domain expertise:

  • Rainmaker - the Chairman (Brian Dunne, former

CFO of Aer Lingus and Air Canada) is well networked into the airline industry and this has led to sales being secured

  • Britebill - the Chairman, Cecil Hayes, former COO
  • f Norkom plc, invested €500k into the business and

Vincent Ryan (ex Changing Worlds) has added sales & marketing skills

  • AMCS - the Chairman, Mike Wynne is a former CEO
  • f Greenstar and brings a network of contacts from

the industry in the UK and the US

  • Zamano - John Rockett (retired Former Head of AIB

Investment Managers) has added financial and governance skills to the board, while Pat Landy has lead the restructuring & repositioning of the business

  • Terminal4 - Strategic Reviews carried out by Sean

Blanchfield (R&D / technology) and Aidan Gallagher (Sales) have helped stabilise & returned T4 to growth

  • Micks Garage - supporting the recruitment of two

senior managers (CFO & COO)

We play a key role in selecting & helping to put together the right management teams

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Other Observations

  • Market potential, management, IP are all important – have a plan
  • Competition from other sectors for funding & raising money takes time
  • Are you selling a product or a consultancy service, what’s the revenue

model?

  • What is the go-to-market strategy? Direct; Channel; Acquisition?
  • What is the sales revenue trajectory and the “burn rate”?
  • Can you build a €100m value company?
  • Do you know where the exits are?
  • Companies change as they grow

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Thank You and best wishes for the remainder of your course.

Finally