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Short presentation on "Software Tools for Venture Capital Process" discussing some of the innovations and developments in tools that support the venture capital process. Presented at ISBE 2012 conference in Dublin.
Software Tools for VentureCapital Investment Process ISBE 2012 Conference
300+ “software tools” documentedCurrent effort classifies bydecision process and stageof investment
Definition of stages of venturecapital investmentSeed – Financing that allows a business concept to be developed,perhaps involving the production of a business plan, prototypes andadditional research, prior to bringing a product to market andcommencing large-scale manufacturing.Startup – Financing provided to companies for use in productdevelopment and initial marketing. Companies may be in the Stage ofprocess of being setup or may have been in business for a short investmenttime, but have not yet sold their product commercially.Expansion – Financing provided to companies that have reached afairly stable growth rate; that is, not growing as fast as the ratesattained in the early stage. These companies may or may not beprofitable, but are more likely to be than in previous stages ofdevelopment. British Venture Capital Association, 2010. BVCA Private Equity and Venture Capital Report on Investment Activity 2010. Av ailable at: http://www.bvca.co.uk National Venture Capital Association, 2011. NVCA Yearbook. Available at: http://www.nvca.org European Venture Capital Association, 2011. EVCA Yearbook. Available at: http://www.evca.eu/
Decision process model of venturecapitalist investment activityOrigination – the processes by which deals enterinto consideration as investment prospectsScreening – involves a delineation of key policyvariables which delimit investment prospects to amanageable few for in-depth evaluationEvaluation – involves the assessment of perceivedrisk and expected return on the basis of a weightingof several characteristics of the prospective ventureand the decision whether or not to invest asdetermined by the relative levels of perceived riskand expected returnStructuring – covers the negotiation of the price ofthe deal, namely the equity relinquished to theinvestor, plus the covenants which limit the risk ofthe investorPost-Investment Activities – assistance to theventure in the areas of recruiting key executives,strategic planning, locating expansion financing, andorchestrating a merger, acquisition or public offering  Tyebjee, T.T. & Bruno, A.V., 1984. A Model of Venture Capitalist Investment Activity. Management Science
Investment NetworksInvestment Networks are essentially socialnetworks linking entrepreneurs and investorsExamples:• AngelList• SeedSummit• Angel’s Den
Case Study: AngelList―AngelList is a platform forstartups to meet investorsand talent.‖Online pitching – Ability to pitch online to getconnected with angel investorsDatabase – 600+ angel investors, 100+ seed fundsand 300+ VCsKey information - including investment history,criteria and contact details AngelList, [Online], Available at: http://angel.co [9 June 2012]
DatabasesPopular Databases used in industry.Examples:• Dow Jones’ VentureSource• Standard & Poor’s Capital IQ• Bureau van Dijk’s FAME• Thomson Reuters’ ThomsonONE (formerly VentureXpert)• CB Insights• Duedil
Case Study: CB Insights―CB Insights is aninformation platformtracking startups investedin by VCs, angelinvestors, incubators anduniversity programs.‖Advanced search – 80,000+ high growth privatecompanies and 50,000+ funding eventsIn-depth company profiles – with funding history,management team and competitorsTracking and alerts – track and receive alerts oncompanies and funding events“Funding Recommendation Engine (FRE)” –analyzes funding history in order to recommendrelevant funding sources CB Insights, [Online], Available at: http://www.cbinsights.com [9 June 2012]
Market IntelligenceMarket Intelligence platforms generally utilize largesets of data in order to give insight and provideinformation on market dynamics and participants.Examples:• Startup Intelligence• Quid
Predictive ValuationTools that allow entrepreneurs to submit theirapplication for funding to investors.Examples:• YouNoodle
Case Study: Younoodle―Younoodle is a place todiscover and support thehottest early-stagecompanies and universityinnovation.‖Social network – a social networking platformfocused on university entrepreneurship“Startup Predictor” – algorithmic predictionestimating companys expected future value“Podium” – a business plan competition platform YouNoodle, [Online], Available at: http://www.younoodle.com [9 June 2012]
MarketsMarkets offer a marketplace to buy and sell sharesin private companies.Examples:• Sharespost• SecondMarket (formerly Restricted Stock Partners)• NASDAQ’s BX Venture Market
Case Study: SecondMarket―SecondMarket helpsbuyers and sellerstransact in illiquid,restricted and alternativeinvestments‖Centralized online platform – 30,000+participants, thousands of transactions, representingbillions of dollars in assetsStreamlined process – specialists streamlineprocess from listing to settlement SecondMarket, [Online], Available at: http://www.secondmarket.com [9 June 2012]
BenchmarkingBenchmarking tools allow companies tobenchmark their performance against theircompetition and peer-group.Examples:• Startup Genome Compass• SVB Analytics Benchmarking• CB Insights Mosaic
Deal PlatformsDeal Platforms offer a solution for investors tomanage their deal flow of prospective investments.Examples:• Gust (formerly Angelsoft)• Sevanta Dealflow• CapLinked• EquityNet
Case Study: Gust―Gust provides a flexible,secure platform that helpsinvestors andentrepreneurs seamlesslycoordinate on fundingdecisions.‖Investor search engine – to find investment fromover 600 angel groupsCommon application – to apply for funding directlyto one or more groupsInvestor Relations Site – allows companies topresent all the information investors need to know Gust, [Online], Available at: http://www.gust.com [9 June 2012]
Alternative FinanceAlternative Finance tools, covering Crowdfunding andPeer-to-peer offerings, which don’t necessarily fit ourtradition venture capital investment process but offerinsight into new innovations and developments inrelation to early-stage investment.Examples:• Kickstarter• GrowVC• Crowdcube• Seedrs• Funding Circle• MarketInvoice
Case Study: Seedrs―Seedrs makesinvesting in startupssimple and rewarding.‖Equity-based – allowing investment between£10 and £100,000 through the platform in returnfor equityInvestor Access – access capital from a widerange of investors up to £100,000FSA Authorised – approved by the FinancialServices Authority (FSA) Seedrs, [Online], Available at: http://www.seedrs.com [9 June 2012]