1. Introduction to Entrepreneurship
From Startups to Venture Financing
ALBERTO ONETTI
Chairman, Mind the Bridge Foundation
Firenze, May 13th
Pavia, June 17th
Genova, June 22nd

2. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
2

3. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
3

4. The Problem we have (1)
} Italy has grown slowly during the past decade – slower than
Germany, France or the UK (0.27%/yr. since 2001)
} Its competitiveness – its rising unit labor costs – has slipped, as
wages rose but productivity stagnated
} Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti &
Napolitano, New York, 2011
5,0
4,0
Real GDP growth (Percent)
3,0
2,0
1,0
0,0 ITA
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-1,0 EEA
-2,0
-3,0
-4,0
-5,0
-6,0 Source: OECD Economic Outlook 88 database 4

5. The Problem we have (2)
} In Italy competitiveness has slipped, as wages rose but
productivity stagnated
} Unemployment is lower than the German/French experience
BUT
} Participation rate (58%) is the second lowest in Europe
} Worst employment problem pertains to youth (28%
unemployment for people between 15-24)
} Source: “Italy. Europe’s Investment Opportunity”, White Paper by Vietor, Onetti &
Napolitano, New York, 2011
1,5
Average TFP growth (Percent)
1
0,5 1980-1995
0 1995-2005
ESP ITA GBR DEU EEA FRA US
-0,5
-1 Source: EU KLEMS database
5

6. State of Entrepreneurship in Italy
} Lack of large companies
} In Italy SMEs are 98% of the total
} Mostly mature business
} Primarily Services (66% of GDP)
} Manufacturing is only 17% (it was 21% in 2000)
} Innovative industries play a minor role (2-6%)
} Strong family business vocation Food Wood
Textile
Metals
Plastic&Rubber
Automotive
Industrial
Machinery
Chemical
Electronics
Pharma
Biotech Software
ITALY: INDUSTRY CONTRIBUTION TO GDP (2009)
Source: CrESIT 2011
6

7. State of Venture Finance in Italy
Annual
VC
Investments
(B
US$)
2008
Italy
Europe
Silicon
Valley
US
Italy
0,169
Europe
7,41
Silicon
Valley
10,8
US
29,7
} Lack of an established venture capital community
} Of the €3.8B invested yearly (avg. 2005-2009), approximately €70M
went to early-stage investments (AIFI & Pricewaterhouse-Coopers
2005-2009)
} Only 255 start-ups were able to get funded in the last three years
} In 2009: 79 deals despite the financial crisis (€98M invested)
} Small size of the stock market
} The stock market capitalization to GDP ratio is lower than 60%,
versus 140% in the US and 170% in the UK (IMF & World Federation
of Exchange)
7

8. State of Italian R&D
} Quality basic research
} Cumulative R&D investments are €17B (4% of GDP) (ICE, Cotec, Istat)
} 400k scientific publication in the period 1998-2008 ranking 8th in the
global classification (7th for number of citations) (Thomson Reuters,
2008)
} Biotech: 233 clinical trials in progress during 2009 (Ernst & Young 2010)
} Issues in turning research into business
} Lack of efficient technology transfer offices
} Universities do not offer incentives for lecturers to spin-off business
initiatives
} Scarcity of skilled executives with strong entrepreneurial skills
} Italian scientists do not think business
8

9. Italy: Key Issues
} A few startups often lacking high-quality business plans (deal “trickle”)
} Legal barriers to entry and exit (Italy is not a “corporate haven”)
} Reduce labor market rigidities
} Obstacles in bridging research into business
} Lack of managerial skills
} High mortality (“crisi del primo miglio”) and “Dwarfism”
} Change the mindset
} Lack of seed funds
} Exit on the domestic market
} High Tech “Leviathans” are not here
} Small size of the stock market and lack of large corporations doesn’t help
} Language barriers
9

10. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
10

11. Ingredients for a Start-up
11

12. What is an Entrepreneur
12

13. Average Entrepreneur’s Profile
AGE 41 year old 68.8% between 35-43
SEX 79.7% men 20.3% women
STUDIES 64% University student
MARITAL STATUS 60% married
FAMILY BUSINESS 60.3%
COMPANY ORIGIN 76% Creation 20% Inheritance 4% Purchase
FINANCE Own/Family/VC
EMPLOYMENT IN
5
5 YEARS 13

14. MtB Entrepreneur’s Profile
} He/She is 35
} 86% is male, only 14% is female
} 67% has a scientific/technological background, while
33% has a business/humanistic education
} 42% holds a Ph.D. or MBA and the 33% got it abroad
} Only 5% does not hold a university degree
} 28% has prior entrepreneurial experience
Source: CrESIT/Mind the Bridge 2011
14

15. What makes a successful
entrepreneur?
Education matters a lot
} 2.0 Startups are founded by highly educated people
Experience matters as well
} Being a serial entrepreneur is a job
} The right startup is never the first one you found
Working/Studying abroad does open your mind
} It means more network, opportunities, ideas, experience
A successful startup is a team effort
} One-man bands do not go too far
15

16. Manager VS Entrepreneur
• What resources do I control? • Where is the opportunity?
• What structure determines our • How do I capitalize on it?
organization’s relationship to
its market? • What resources do I need?
• How can I minimize the • How can I gain control over
impact of others on my ability them?
to perform?
• What structure is best?
• What opportunity is
appropriate?
The typical The
administrator entrepreneur
asks . . . asks . . .
16

17. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
17

18. Business Idea
THE BIG IDEA!!!
… THAT MATTERS A
LOT, BUT IT’S ALL
ABOUT EXECUTION …
18

19. The question every entrepreneur
must answer
Are my Goals Do I have the Can I execute
well defined right strategy the strategy
• personal • clear definition • resources
aspirations • profitability • organizational
• business and growth infrastructure
sustainability/ potential • the founder’s
size • durability role
• risk profile (sustainability)
• rate of growth
19

20. The Business Plan
THE OPPORTUNITY THE MARKET
} The problem we solve (description } The market you are
of your product highlighting the addressing
benefits to the users/customers) } Market size
} The competitive advantage (why } Potential growth
your product is better)
} Competition
} Compelling reason to buy
BUSINESS PLAN
THE BUSINESS MODEL THE TEAM
} How do you make money? } The team
} Financials
} Your relevant experience in the
} What are you looking for (capital you domain you're addressing
are raising- use of proceeds)
20

21. Why a Business Plan
21

22. Good and Bad Business Plans
• Concise
• Management, management, management
• Realist, logical, convincing, clear
Good • Shows clearly that the opportunity exists in the market
• Description of essential resources
• Risk analysis
• Clear funding needs and return on capital employed
• When funding is required, specify the terms of agreement (deal)
• Infatuation with the idea
• Insufficient research
• Lack of funding
• No target group
• Over optimistic sales forecasts not based on market analysis
Bad
• Too long
• Badly written: does not get ideas across
• Illogical
• Scant explanation of opportunity
• Superficial analysis of competitors
• No executive summary
22

23. The Business Plan Outline
Executive summary
Company Description
Management team/key individuals
Products and services
Market, customers and competition
Strategy and resource plan
Business model
Assumptions and risks Financial plan Appendices
23

24. Scientists vs Entrepreneurs
24

25. Talking $$$
25

26. Financials: Statement of Operations
P&L 2011 2012 2012 2013 2014
established anticipatory forecast forecast forecast
Revenue (000)
# of main
customers users
Avr rev. per
cust.
Gross Margin
Operating
Expenses
Operating
Margin
Ebit (000)
Headcount
R&D
Mktg & Sales
Production
G&A
Total Expenses
Source: Mind the Bridge 2011
26

27. Financials: Key Data
Bookings
Billings
Revenue
Cash
on
Burn
Hand
(net/gross)
27

28. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
28

29. Investment Types
Seed capital
• Design of new products
>$ 100K
• 1-3 Years
Start-up capital
• Launch of a new product (or
company)
>$ 2M Development capital
• 3-7 Years • Expand sales or production
Consolidation capital
• Consolidate and/or reinforce
IPO market position
29

30. The Funding Decision
Bootstrapping Equity Financing
Early sources Founders’ capital/
Family/friends,
Angels, Early stage
savings
VC
VC firms, Corporate
Later sources Venture Debt/Loans,
Acconts receivable,
VC, Private
placement,
Strategic Partners,
Investment banking,
Retained earnings
Public markets
30

31. Investment Strategy
Medium Risk High Risk Medium Risk Low Risk
IPO
M&A
Valuation
M&A
Investment
Focus
Cumulative
Investment
IDEA DEVELOPMENT BETA CUSTOMERS EXPANSION MARKET SHARE
12-24 months 3 months 3-6 months 12-18 months 12-24 months
Management Focus
Vision/ Product Focus Customer / Market Share Focus
31

32. Early and Late Stage Financing
EARLY LATE
• Seed financing ($ 50k – 1m) • Expansion financing ($ 2-50m)
• research, assess & develop • To finance increased
initial concept production capacity, market
• product development or product development; to
• Start-up financing ($ 1-3m) provide working capital
• product development, • For companies that break
launch and initial marketing even or trade profitably and
wish to grow/expand
• Often “first round”
• Bridge/mezzanine financing ($
• For companies that are in the
2-50m)
process of being set up or
that are in business for a short • For companies that are in the
time (little revenue, no profits) period of transition from
being privately owned to
• Other early stage financing ($
being publicly quoted
2-8m)
• Other stages ($ 10m-several
• To initiate commercial
billions)
manufacturing and sales
• Buyout
• For companies with
completed product • Replacement capital
development but without • Rescue/turnaround
32
profit

33. The Angel Investor
Definition
• High net worth individual ($1
million to invest) who provides
financing, advice, and
networking to early stage
companies.
Key investment Criteria
• Geography (close to home)
• High growth industry
• Growth Potential of the venture
• Personal attributes of the
entrepreneur and team
• Track record of entrepreneur and
team
33

34. Angel Typologies
High
Low
RELEVANT INDUSTRY
EXPERIENCE
High
Low
RELEVANT ENTREPRENEURIAL EXPERIENCE
34

35. The Venture Capitalist
DEFINITION
• VC Firms are financial intermediaries that
provide the following to privately held
enterprises:
• Equity (often coupled with debt) financing
• Risk sharing
• Managerial expense
• Contacts
• Reputation
• In exchange, VC firms obtain equity
TYPES OF VCs
• Private Fund VC
• Legal Structures: Partnership, Limited Liability
Corporation, Corporation
• Stakeholders in a Partnership: General Partners
(GP), Special Limited Partners (SLP), Limited
Partners, Advisory Board
• Corporate VC
• Consider impact on earning of parent
• How does it further the parent’s objective?
35

36. VC: General Investment Process
Limited Partners
Distributions Fundraising Commitments
VC Firm (General Partners)
Fund Fund Fund
Proceeds Investment Disbursements
Startup Companies
Exit
IPO/M&A
36

37. VC Compensation Structure
• get a management fee + carried interest (about 20% to
GP
30%)
• allocation among partners on seniority, effort, or
performance
• vesting for new partners based on seniority, performance
and special circumstances (e.g., death, sale of firm, ipo)
SLP • pay reduced management fee
• receive carried interest
LP
• pay 2-3% annual management fee ("two and 20"
arrangement)
• receive % of the fund’s returns (in the range of 70% - 80%)
37

38. The Valuation is a two side process
• Size of market opportunity
• how big is the market segment, what market
share can you gain? revenue / price model
• Comparables
• multiple of revenue (trailing/forward) or EBITDA
• Financial Projections
• EBITDA, DCF
• Ultimately
• Bid vs. Ask negotiation

39. The Valuation Process:
Pre- e Post-Money Valuation
How
much
you
need
How
much
equity
you
and
want
to
give
up
(
Y
%)
Why
(Cap
Incr)
e.g.
25%
e.g.
€
1,0M
Post
Money
ValuaPon
(V)
=
Cap
Incr
/
Y
=
1/0,25
=
€
4,0M
Pre
Money
ValuaPon
=
V
-­‐
Cap
Incr
=
€
4,0M
-­‐
1,0M=
€
3,0M

40. VC Financing Process:
Getting through the Funnel
1,000 Leads
150 Meetings
Actively
Pursued
70
$
Less than 1% of all $ 5 – 10
leads get funded $ Financed
40

41. VC Average Investment Portfolio
" DEFAULTS 60%
" BREAKEVEN 12%
" “FIRE SALES” 10%
" ZOMBIES 8%
" IPO/M&A 6%
" GOOD IPO/M&A 4%
" WILD ONES (IPO) 0%
TOTAL 100%
Source: ATV 41

42. What does an investor do with a BP?
h Looks to see who sent it
15 sec
h Analyzes key aspects
sector
location
investment required
60 sec
h Reads the plan
15 min
h Decides whether or not
to request a formal
presentation
10min
Total: 26 min 15 sec
42

43. Agreement Variables and
Control Mechanisms
Agreement Control
• Amount and timing of
investment Mechanisms
• Form of investment
• Convertible
• Terms of investment Preferred securities
• Rights • Syndication of
• Puts and call investment
• Registration • Staging of capital
• Preemptive and first infusion
refusal
• Vesting/buy-back
provisions
• Board representation
43

44. Why Venture Capital?
44

45. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
45

46. The History of the Valley
46

47. The (REAL) History of the Valley
47

48. The (REAL) History of the Valley
INTERNET
? Today:
25 of Fortune 100
PERSONAL Adobe Systems
COMPUTERS AMD
Agilent Technologies
Apple Inc.
WAVES OF INNOVATION
Applied Materials
Business Objects
Cisco Systems
INTEGRATED ◊ Yahoo, ebay,
eBay
Electronic Arts
CIRCUITS Google (90s) Google
Hewlett-Packard
Intel
◊ 3Com, Adobe, Intuit
Cisco LSI Logic
Maxtor
DEFENSE ◊ Apple (80) National Semiconductor
Network Appliance
Nvidia
Oracle Corporation
◊ Kleiner Perkins
SanDisk
(72) Seagate Technology
Solectron
◊ Intel Symantec
(68) Sun Microsystems
Yahoo!
◊ HP (47) …
◊
◊ NASA Lockheed
1930 1940 1950 1960 1970 1980 1990 2000
48

49. UNIVERSITIES
highly
connected with
biz world
The Main Pillars
ENTREPRENEURS
The garage
culture
FINANCIAL MARKET
M&A, IPO dream
KEY QUESTIONS
◊ Is that replicable / portable?
◊ Is it sustainable long-term?
◊ What is the impact of the changing 49
international outlook?

50. Soft Factors
KEY TO SUCCESS
◊ The importance of Dynamism,
speed: continuous evolving world
◊ Approach to Risk
◊ Value of Failure (not just a
downside but a must-have)
◊ Importance of the Hub: a world of
opportunities
◊ Think Big
50

51. Raising money today (@#$!)
in Silicon Valley
DON’T TALK TO ME IF YOU…
" are you not local
" how many exits again?
" don’t show me the buyer (don’t
IPO me…)
" haven’t jumped yet
51

52. Investments B US$ (1997-2010)
US Silicon Valley
$98,6
$50,9
$37,6
$31,8 $29,9
$26 $28,1
$19,4 $20,7 $21,7 $22,5 $21,8
$16,8 $18,8 $18,3
$14 $11,6 $10,9 $11
$6,8 $6,3 $7,8 $8,1 $9,6 $7,3 $8,5
$4,4 $5,5
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Deals (1997-2010)
US Silicon Valley
7.973
5.556
4.543
4.035 4.025
3.694 3.754
3.201 3.157 3.145 3.201 3.277
2.990 2.927
2.169
1.703
1.049 1.108 1.209 1.265 1.252
875 808 874 951 994 915 961
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: MoneyTree Report 2011, Data: Thomson Reuters 52

53. Why Now
IT’S THE BEST OPPORTUNITY
" talent abounds
" from scarcity comes clarity
" innovation comes from hunger
" startup cost ~0
53

54. 5 Lessons from Google
1. the team is all (almost)
2. healthy disregard for the
impossible
3. big problems are better than
small ones
4. users first
5. don’t pay attention to the VC
bandwagon
54

55. AGENDA
Entrepreneurship in Italy: key issues & opportunities
The Startup world
Business Planning
The Venture Capital Market
The Silicon Valley
Mind the Bridge
55

56. Mind the Bridge Foundation
Mission:
to promote a new Italian entrepreneurial ecosystem that is:
ETHICAL, HIGHLY PROFESSIONAL, INTERNATIONALLY FOCUSED,
EXCELLENCE DRIVEN
Model:
CONNECTING TALENT
funded by foundations/companies/private sector/donors
not government
partnering with the most relevant actors
INDEPENDENT
Ø
bridging opportunities of the Silicon Valley with Italian
talent
Ø associating mentors and role models
Ø professionalizing the business planning skills
Ø using and building the network
Ø “give back” to build a bigger pie
56

57. Building the Bridge: the Pillars
Ø Discovering and Nurturing the Italian Talents
MtB Italy Tour 2011
Ø Selecting the best of breed
MtB Business Plan Competition
Ø Providing training & education to the new generation of
entrepreneurs
MtB Bootcamp and MtB Coaching
Ø Showcasing the most promising startups and opening an
international debate
MtB Venture Camp @ Corriere della Sera
Ø Hosting & Mentoring the most promising startups in the Silicon
Valley
MtB Gym
Ø Pitching US investors / partners
MtB Gran Finale events
57

58. Building the Bridge: the Timeline
MtB US
MtB GYM Roadshows
March 2012 April 2012
MtB Venture Camp
4-5 November 2011
MtB Business Plan Competition
July 31st 2011
MtB Italy Tour 2011
Q1 & Q2
MtB GYM
Every Quarter
- MtB Affiliates
- Online Signups
58

59. MtB Italy Tour 2011
nn els
G oals and cha
Firenze
Ø Education
The MtB Startup Business School gives you the
“nuts and bolts” regarding entrepreneurship,
business planning, venture capital market
and Silicon Valley eco-system May 13th
Ø Honest Feedback Pavia
Thanks to the Gym session the startups
selected have the opportunity to present
their business idea in front of a panel of
investors and entrepreneurs Jun 17th
Geno
Ø Fine tuning the business idea va
Everybody can largely benefit from the
discussion of all the business ideas as well as
the education program in the morning.
Jun 259
th
2

60. Business Plan Competition 2011
WHO: High knowledge based companies
already established or planning to incorporate
before the end of the year
WHAT: Executive Summary (in the required
format*) & Business Plan/Pitch Presentation
WHEN: Deadline July 31st , 2011
HOW: Competition Rules*
PRIZES: Selected participants to Mind the Bridge
Business Plan Competition may be eligible to
receive prizes and equity investments.
* Download at www.mindthebridge.org
60

61. Business Plan Competition 2011:
Some Prizes
Premio Gaetano Marzotto
all’Idea Imprenditoriale Giovane sviluppata
nell'area Hi-Tech con possibilità di sviluppo
internazionale
RCS Digital Publishing Prize
Target: Innovative and Promising Ideas to
transform either the user experience of digital
readers or the appeal of digital publishing
platforms for advertisers
61

62. 2010 Selected Startups
!
62

63. 2010 Winners
Barbara Labate - IID New York
Marco Brini - IID Stanford

64. Venture Camp
Mind the Bridge Venture Camp
is a 2-day event held each year
in Milan at Corriere della Sera
(the leading Italian newspaper)
to promote a healthier Italian
entrepreneurial ecosystem.
Selected entrepreneurs present
rs
their business ideas to a large +P artne
tors
audience, including potential +Inves
re n eurs
investors and partners. E ntrep
Selected startups will be invited
to participate in the MtB Gym,
a tutoring program between
Italy and the Silicon Valley.
64

65. Venture Camp Objectives
Event Goals
as
r good ide
tunities fo
Oppor Fostering a sustainable Italian
ecosystem for entrepreneurship
MEET MtB Business Plan
Competition 2011 finalists Boosting ideas with high potential
showing their business
Providing entrepreneurs with
pitches
direct exposure to venture
FIND successful links
capital investors both from
between Italy and the Italy and the Silicon Valley
Silicon Valley
LEARN from examples of Inspi
ration
Italian entrepreneurial
+
success Polic
NETWORK with y
+
entrepreneurs, potential Netw
orkin
investors, partners and g
65
mentors

66. Venture Camp 2011
ly
Milano, Ita
November 4-5, 2011
66

67. MtB GYM
San Francisco
@ Pier 38
s
c ription
ua l Subs
+Individ
Affiliates
67

68. The GYM
Mind the Bridge Gymnasium is a
startup incubator. Positioned in Pier
38 (San Francisco) we share the
space with some of the hottest
startups (50+) in Silicon Valley
(Socialmedia.com, WordPress,
Tweetme, etc.)
Selected Startups are assigned a
Mentor, supported in Business
Development activities and given
Training Sessions.
Training Sessions include:
Financing, Immigration Visas, Build
p a ce
a team, Corporate Operations, ining+ Office S
Presentation Skills, Taxes Mentors + Tra
68

69. The GYM: Open Now!
Accelerate the startup chances of success
• Hosting: office space @ Pier38 in San Francisco
• Mentoring: assign a dedicated mentor per startup
• Coaching: provide regular classes (training modules)
Build critical mass of startups
A constant flow of startups hosted(10-15) to maximize the
“educational impact”
Become a social hub for Italian entrepreneurship in Silicon Valley
Events, Mind-the-Beer, etc (social Gym)
Targets
• Early stage startups interested in a getting plugged into the
Silicon Valley
• Italian “origin”
• Min 3 months, average 6 months.
• Starting at beginning of each quarter possibility to stay longer
(as an affiliate startup)
Access
Affiliates Channel
Individual Subscriptions 69

70. MtB Startup Summer School
The Program: Lessons and Hands On
Theoretic Learning: Lessons (20 hrs)
Ø Introduction to the Silicon Valley ecosystem
Ø Corporate Operations and Legal Aspects in Silicon Valley
Ø Corporate Finance
Ø Business development
Ø Fund raising with investors
Ø Communication skills
Ø Visa issues
Ø Human resources
Practical Learning: Visits (20 hrs) + Business Planning (50 hrs)
Ø Google’s headquarter – Mountain View
Ø Funambol’s headquarter -Redwood City
Ø University of California, Berkeley eks
fo r 3 we
Ø Stanford University
ley S tartup
o n Val
Be a Silic
70

71. MtB Startup Summer School
WHO CAN PARTICIPATE?
Students, PhD Students,
Wanna-be-Entrepreneurs
SESSIONS
Three sessions are scheduled in 2011
1. July 5th– 23rd
2. August 1st – 20th
3. September 5th – 24th
WHERE?
Pier 38, San Francisco
HOW TO APPLY?
Send an email to:
summerschool@mindthebridge.org eks
fo r 3 we
yS tartup
o n Valle
B e a Silic
71

72. THANK YOU FOR YOUR
ATTENTION
Questions & Answers
SOCIAL MEDIA: BLOGS:
Facebook:
Mind
the
Bridge
-­‐
ConnecMng
Talent
mindthebridge.blogspot.com
Twier:
MindTheBridge
siliconvalley.corriere.it
EMAILS:
USEFUL
LINKS:
www.mindthebridge.org
informaPon@mindthebridge.org
72