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Entrepreneur turned Investor
Danny Moore – Founder, Lough Shore Investments


                      w: loughshore.co   -   Tw: @loughshore
Overview

•   Background and the Wombat story.

•   Fundraising.

•   Lough Shore:

    •   The big idea and where we fit in.

•   Experience, comments, lessons learned.

•   Questions.



                              w: loughshore.co   -   Tw: @loughshore
A little background…
•   From Glenavy, Co. Antrim.
•   Studied Queen’s University, Belfast.
•   Joined First Derivatives Plc in January 2001,
    with a focus on New York from early 2002.
•   Joined Wombat as the second FTE in Jan
    2004, based in New York.




                                                         •      Wombat was acquired by NYSE in 2008.
                                                         •      Became COO of NYSE Technologies
                                                                through to April 2010.
                                                         •      Founded Lough Shore Investments in
                                                                November 2010.
                                                         •      Won first Oscar in 2012.
                                  w: loughshore.co   -       Tw: @loughshore
Wombat – key facts

•   Massive compound organic growth, circa $500k billings in 12 months
    before I joined in Q4 2003, business unit circa $40m in 12 months to
    Sept 30th 2008.

•   Quarterly cash positive Q1 2005 through to exit (Q4 2007). Over 12
    months runway on the balance sheet on exit.

•   Combative penetrate and up-sell “base-hit” driven business model.
    Only a handful of the more than dozen competitors in the sector in
    2003 were still around in 2008.

•   Maximum deal size (total product value) per customer circa $400k in
    2003, $5m in 2008.

                            w: loughshore.co   -   Tw: @loughshore
w: loughshore.co   -   Tw: @loughshore
Wombat & Belfast

•   New York first, Belfast second. The company’s center of heart was
    always out and out Wall Street (office in 25 Broad, across the road
    from the exchange).

•   Engine room was out and out Belfast, 70% of the global team were
    sourced through the Belfast office.

•   Average age across the company globally on exit – 26 ½!

•   Four major Invest NI investments, culminating in its biggest ever ICT
    deal in 2009, £10m to secure 550 jobs from NYSE Euronext.

•   Virtuous circle continues: CME, Cowen Group, First Derivatives in
    Belfast, Lough Shore Capital.
                            w: loughshore.co   -   Tw: @loughshore
The Dream Team, March 2008




            w: loughshore.co   -   Tw: @loughshore
Fundraising - Wombat
•   The million dollar secret: the best way to fund a technology business is by selling stuff
    to customers with strong margins!

•   Merrill Lynch made a circa $3.5m strategic investment in Q4 2005, got returned $55m
    in Q1 2008.

    •   Best deal we ever did, doubled the exit value in my estimation,

    •   Used the cash to bolster the balance sheet, then buy Harco.

•   Auction to sell the company started out as a fundraising round for an MBO. We were
    working with twelve suitors through 2007, eight bid in round one.

•   The $200m secret; VCs or acquirers will see your projections nine months before a
    deal closes; hitting the numbers needs to be in the DNA. You disappoint, you die.

•   Invest NI was a great partner – has to be said.
                                    w: loughshore.co   -   Tw: @loughshore
Lough Shore Investments

❝ Our mission is to invest in high potential management teams and
partner with them to build great businesses. Our goal is to bring ten
             great companies to exit or IPO by 2025 ❞




                        w: loughshore.co   -   Tw: @loughshore
Lough Shore – Big idea
•   Create an outward focused seed investor, specializing in taking local
    companies to the US market and raising international capital through
    to IPO. Platinum player in a small market.

•   Develop strong links in local funding community to help these
    companies fully leverage all the assets available.

•   Partnership approach, strong focus on developing management
    teams and working with them to grow the business with a focus on
    investablity.

    •   Really strong focus on skills, ecosystem and go to market, both
        here and in the US.

    •   Partner with government to address the management skills gap.
                              w: loughshore.co   -   Tw: @loughshore
Partnering with Management
                     The Essence of Running a Business

 Face time with                                                       Building a
                                        Product and                                  International
 customers and    Doing Deals                                         Team and
                                        Engineering                                   Expansion
    partners                                                         Leadership

                    Always Be Selling / Always Be Closing

                                    The Boring Stuff

   Finance and                                                                      PR and
                          Legal                        Go To Market
      Admin                                                                        Marketing


   Management
                        Logistics                       Governance                  M&A
    Process

                      Need To Be Doing This Really Well
                                w: loughshore.co   -   Tw: @loughshore
Strategic planning, execution and tracking using the 8QP

                                  8QP Heatmap shows progress at a glance
❝The 8QP has been a
fantastic tool for helping
me step back and take a
real strategic view on
the direction of the
company❞
Jonathan Chesney,
WorldDesk

               w: loughshore.co   -   Tw: @loughshore
Advice to founders

•   Manage the business, if you don’t need the money they’ll be knocking on your door.
    Patience and consistency with careful cash management.

•   Major on proof of traction. The best stories are based around revenue acceleration.
    The founding team has already got the business up and running, but need to augment
    the balance sheet and invest to scale sales / delivery (inc. globally).

•   Be honest and transparent. There isn’t a serious angel investor or VC out there who
    hasn’t got sold a pup (or a litter of pups). Many have been on the receiving end of fraud
    and other vicious practices. They are cautious and rightly so!

•   Be realistic about growth projections and valuation. Take outside advice. Many
    eleventh hour collapses stem from investor unease about either the valuation or the
    integrity of the founders.

•   Seed investing in particular is about partnership.
                                   w: loughshore.co   -   Tw: @loughshore
Compounding = Patience


                      Einstein considered                 Buffet’s life story “The
                     compound interest “the                     snowball”.
                     most powerful force in
                         the universe”.




 •   To make it big in the medium term, entrepreneurs need to understand the power of
     compound growth (including how it relates to building a balance sheet).

 •   It is a concept that’s fundamental to growing a customer base, cash flow, team,
     balance sheet, & retaining equity.

 •   Small changes in level of debt, revenue growth, margin, return on equity, have
     massive impacts on how a business scales in the medium term.
                                w: loughshore.co   -   Tw: @loughshore
Mr Consistency


•   Get the small calls right and grind out the
    results, consistently. Day after day, week
    after week, year after year.

•   It’s all about base hits and RBIs (i.e. take
    the base hits and the home runs will
    come). Or, as they say in Ireland, take
    your points and the goals will come!

•   The concept of the “flywheel” is key,
    aggregating hundreds of small wins to
    build sustainable momentum – Jim
    Collins



                                    w: loughshore.co   -   Tw: @loughshore
Compounding Consistency
                          Decade    2011     2010      2009      2008      2007     2006      2005     2004    2003      2002    2001
First Derivatives
Turnover                            36.74   25.48      17.55    12.67      9.33      6.31     3.79     2.68     1.65      1.78    1.85
Operating profit (loss)              6.57    6.29       5.94     5.23      2.63      1.64     0.88     0.60     0.42      0.63    0.54
EBITDA                               8.58    7.25       6.45     5.56      2.91      1.92     1.13     0.63     0.44      0.65    0.56
EBITDA Margin                       23.34   28.45      36.74    43.89     31.16     30.35    29.69    23.52    26.38     36.73   30.18
Return on Common
Equity                              24.82   27.46      31.38    44.49     43.65     39.39    29.84    26.81    33.81    100.12
Revenue Growth             37.1%   44.2%    45.2%     38.5%     35.8%     47.8%    66.4%    41.6%    62.5%     -7.3%    -4.0%
EBITDA Growth              36.7%   18.3%    12.4%     15.9%     91.2%     51.8%    70.2%    78.7%    44.8%    -33.4%    16.8%
Andor
Turnover                            57.35   42.72      33.11    24.72     21.27     19.24    15.71    11.65     9.21
Operating profit (loss)              8.94    5.73       4.79     2.12      1.35      1.40     0.78     1.24     1.06
EBITDA                              11.19    7.42       6.02     2.92      2.14      2.13     1.41     1.53     1.33
EBITDA Margin                       19.51   17.37      18.18    11.82     10.08     11.09     8.99    13.09    14.48
Return on Common
Equity                              19.10   19.55      24.99     8.90     10.22     17.13    14.38    31.05
Revenue Growth             26.0%   34.3%    29.0%     34.0%     16.2%     10.5%    22.4%    34.9%    26.5%
EBITDA Growth              34.4%   50.8%    23.3%    106.0%     36.3%      0.5%    51.0%    -7.3%    14.4%
Apple ($billions)
Revenue                            108.25   65.23      42.91    37.49     24.58     19.32    13.93     8.28     6.21      5.74    5.36
Operating Income                    33.79   18.39      11.74     8.33      4.41      2.45     1.64     0.35     0.03      0.05   -0.33
EBITDA                              35.60   19.41      12.47     8.82      4.73      2.68     1.82     0.50     0.14      0.16   -0.23
EBITDA Margin                       32.89   29.76      29.07    23.53     19.26     13.86    13.08     6.03     2.22      2.86   -4.31
Return on Common
Equity                              41.67   35.28      30.54    33.23     28.51     22.85    21.24     5.94     1.66      1.62   -0.63
Revenue Growth             36.8%   66.0%    52.0%      14.4%     52.5%    27.2%     38.6%    68.3%    33.4%     8.1%      7.1%
EBITDA Growth              73.0%   83.4%    55.6%   w: 41.4%
                                                       loughshore.co -
                                                                 86.4%   Tw: @loughshore
                                                                          76.8%     47.0%   265.1%   261.6%   -15.9%   -171.0%
Questions




            w: loughshore.co   -   Tw: @loughshore

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Angel Meetup 2012

  • 1. Entrepreneur turned Investor Danny Moore – Founder, Lough Shore Investments w: loughshore.co - Tw: @loughshore
  • 2. Overview • Background and the Wombat story. • Fundraising. • Lough Shore: • The big idea and where we fit in. • Experience, comments, lessons learned. • Questions. w: loughshore.co - Tw: @loughshore
  • 3. A little background… • From Glenavy, Co. Antrim. • Studied Queen’s University, Belfast. • Joined First Derivatives Plc in January 2001, with a focus on New York from early 2002. • Joined Wombat as the second FTE in Jan 2004, based in New York. • Wombat was acquired by NYSE in 2008. • Became COO of NYSE Technologies through to April 2010. • Founded Lough Shore Investments in November 2010. • Won first Oscar in 2012. w: loughshore.co - Tw: @loughshore
  • 4. Wombat – key facts • Massive compound organic growth, circa $500k billings in 12 months before I joined in Q4 2003, business unit circa $40m in 12 months to Sept 30th 2008. • Quarterly cash positive Q1 2005 through to exit (Q4 2007). Over 12 months runway on the balance sheet on exit. • Combative penetrate and up-sell “base-hit” driven business model. Only a handful of the more than dozen competitors in the sector in 2003 were still around in 2008. • Maximum deal size (total product value) per customer circa $400k in 2003, $5m in 2008. w: loughshore.co - Tw: @loughshore
  • 5. w: loughshore.co - Tw: @loughshore
  • 6. Wombat & Belfast • New York first, Belfast second. The company’s center of heart was always out and out Wall Street (office in 25 Broad, across the road from the exchange). • Engine room was out and out Belfast, 70% of the global team were sourced through the Belfast office. • Average age across the company globally on exit – 26 ½! • Four major Invest NI investments, culminating in its biggest ever ICT deal in 2009, £10m to secure 550 jobs from NYSE Euronext. • Virtuous circle continues: CME, Cowen Group, First Derivatives in Belfast, Lough Shore Capital. w: loughshore.co - Tw: @loughshore
  • 7. The Dream Team, March 2008 w: loughshore.co - Tw: @loughshore
  • 8. Fundraising - Wombat • The million dollar secret: the best way to fund a technology business is by selling stuff to customers with strong margins! • Merrill Lynch made a circa $3.5m strategic investment in Q4 2005, got returned $55m in Q1 2008. • Best deal we ever did, doubled the exit value in my estimation, • Used the cash to bolster the balance sheet, then buy Harco. • Auction to sell the company started out as a fundraising round for an MBO. We were working with twelve suitors through 2007, eight bid in round one. • The $200m secret; VCs or acquirers will see your projections nine months before a deal closes; hitting the numbers needs to be in the DNA. You disappoint, you die. • Invest NI was a great partner – has to be said. w: loughshore.co - Tw: @loughshore
  • 9. Lough Shore Investments ❝ Our mission is to invest in high potential management teams and partner with them to build great businesses. Our goal is to bring ten great companies to exit or IPO by 2025 ❞ w: loughshore.co - Tw: @loughshore
  • 10. Lough Shore – Big idea • Create an outward focused seed investor, specializing in taking local companies to the US market and raising international capital through to IPO. Platinum player in a small market. • Develop strong links in local funding community to help these companies fully leverage all the assets available. • Partnership approach, strong focus on developing management teams and working with them to grow the business with a focus on investablity. • Really strong focus on skills, ecosystem and go to market, both here and in the US. • Partner with government to address the management skills gap. w: loughshore.co - Tw: @loughshore
  • 11. Partnering with Management The Essence of Running a Business Face time with Building a Product and International customers and Doing Deals Team and Engineering Expansion partners Leadership Always Be Selling / Always Be Closing The Boring Stuff Finance and PR and Legal Go To Market Admin Marketing Management Logistics Governance M&A Process Need To Be Doing This Really Well w: loughshore.co - Tw: @loughshore
  • 12. Strategic planning, execution and tracking using the 8QP 8QP Heatmap shows progress at a glance ❝The 8QP has been a fantastic tool for helping me step back and take a real strategic view on the direction of the company❞ Jonathan Chesney, WorldDesk w: loughshore.co - Tw: @loughshore
  • 13. Advice to founders • Manage the business, if you don’t need the money they’ll be knocking on your door. Patience and consistency with careful cash management. • Major on proof of traction. The best stories are based around revenue acceleration. The founding team has already got the business up and running, but need to augment the balance sheet and invest to scale sales / delivery (inc. globally). • Be honest and transparent. There isn’t a serious angel investor or VC out there who hasn’t got sold a pup (or a litter of pups). Many have been on the receiving end of fraud and other vicious practices. They are cautious and rightly so! • Be realistic about growth projections and valuation. Take outside advice. Many eleventh hour collapses stem from investor unease about either the valuation or the integrity of the founders. • Seed investing in particular is about partnership. w: loughshore.co - Tw: @loughshore
  • 14. Compounding = Patience Einstein considered Buffet’s life story “The compound interest “the snowball”. most powerful force in the universe”. • To make it big in the medium term, entrepreneurs need to understand the power of compound growth (including how it relates to building a balance sheet). • It is a concept that’s fundamental to growing a customer base, cash flow, team, balance sheet, & retaining equity. • Small changes in level of debt, revenue growth, margin, return on equity, have massive impacts on how a business scales in the medium term. w: loughshore.co - Tw: @loughshore
  • 15. Mr Consistency • Get the small calls right and grind out the results, consistently. Day after day, week after week, year after year. • It’s all about base hits and RBIs (i.e. take the base hits and the home runs will come). Or, as they say in Ireland, take your points and the goals will come! • The concept of the “flywheel” is key, aggregating hundreds of small wins to build sustainable momentum – Jim Collins w: loughshore.co - Tw: @loughshore
  • 16. Compounding Consistency Decade 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 First Derivatives Turnover 36.74 25.48 17.55 12.67 9.33 6.31 3.79 2.68 1.65 1.78 1.85 Operating profit (loss) 6.57 6.29 5.94 5.23 2.63 1.64 0.88 0.60 0.42 0.63 0.54 EBITDA 8.58 7.25 6.45 5.56 2.91 1.92 1.13 0.63 0.44 0.65 0.56 EBITDA Margin 23.34 28.45 36.74 43.89 31.16 30.35 29.69 23.52 26.38 36.73 30.18 Return on Common Equity 24.82 27.46 31.38 44.49 43.65 39.39 29.84 26.81 33.81 100.12 Revenue Growth 37.1% 44.2% 45.2% 38.5% 35.8% 47.8% 66.4% 41.6% 62.5% -7.3% -4.0% EBITDA Growth 36.7% 18.3% 12.4% 15.9% 91.2% 51.8% 70.2% 78.7% 44.8% -33.4% 16.8% Andor Turnover 57.35 42.72 33.11 24.72 21.27 19.24 15.71 11.65 9.21 Operating profit (loss) 8.94 5.73 4.79 2.12 1.35 1.40 0.78 1.24 1.06 EBITDA 11.19 7.42 6.02 2.92 2.14 2.13 1.41 1.53 1.33 EBITDA Margin 19.51 17.37 18.18 11.82 10.08 11.09 8.99 13.09 14.48 Return on Common Equity 19.10 19.55 24.99 8.90 10.22 17.13 14.38 31.05 Revenue Growth 26.0% 34.3% 29.0% 34.0% 16.2% 10.5% 22.4% 34.9% 26.5% EBITDA Growth 34.4% 50.8% 23.3% 106.0% 36.3% 0.5% 51.0% -7.3% 14.4% Apple ($billions) Revenue 108.25 65.23 42.91 37.49 24.58 19.32 13.93 8.28 6.21 5.74 5.36 Operating Income 33.79 18.39 11.74 8.33 4.41 2.45 1.64 0.35 0.03 0.05 -0.33 EBITDA 35.60 19.41 12.47 8.82 4.73 2.68 1.82 0.50 0.14 0.16 -0.23 EBITDA Margin 32.89 29.76 29.07 23.53 19.26 13.86 13.08 6.03 2.22 2.86 -4.31 Return on Common Equity 41.67 35.28 30.54 33.23 28.51 22.85 21.24 5.94 1.66 1.62 -0.63 Revenue Growth 36.8% 66.0% 52.0% 14.4% 52.5% 27.2% 38.6% 68.3% 33.4% 8.1% 7.1% EBITDA Growth 73.0% 83.4% 55.6% w: 41.4% loughshore.co - 86.4% Tw: @loughshore 76.8% 47.0% 265.1% 261.6% -15.9% -171.0%
  • 17. Questions w: loughshore.co - Tw: @loughshore