Funding, Financing and
Investment - Engines of
Startup Growth?
Antonio José Junqueira Botelho PhD
Professor Titular / Coordenador do Programa de Pós-Graduação em
Ciência Política e Relações Internacionais / Coordenador do Laboratório
de Estudos em Ciência, Tecnologia, Inovação & Sociedade LECTIS,
Instituto Universitário de Pesquisas do Rio de Janeiro - Iuperj / UCAM
Presidente do Conselho Diretor, Gávea Angels
3ª Conferência Consórcio Internacional de Estudos sobre Inovação e
Empreendedorismo:Políticas e Recursos de Apoio ao Empreendedorismo
Mesa 3: Startups: Funding and Financing /Investimento e Financiamento de Startups
Rio de Janeiro, 21 de novembro de 2013
Agenda
1. Funding, Financing and Investment
2. Startup Growth
3. Context
4. Funding & Financing in Brazil
5. Engines of Startup Growth?
1. Funding, Financing and Investment
Agenda
1. Funding, Financing and Investment
2. Startup Growth
3. Context
4. Funding & Financing in Brazil
1.0
0.5
Existing
Technology
Market
Discontinuity
0.0
Creative
Destruction
MRI
Cellphone
Digital Cameras
DVD
Leverage base
Automobiles
Evolutionary
Electronics
businesses
Cameras
0
]
Existing
IBM PC
0.5
New
1
Market
5
Gomper’s Entrepreneurial Financing 4 Factors for
assessing startup financing
Uncertainty is the measure of of the array of potetial
outcomes for a company or a project
Asymmetric information – moral hazard / adverse
selection
Nature of firm assets – tangible / intangible
Market conditions – different supply and cost of
capital-public vs private / nature of product market
shifts
Sanlman’s 4 Critical Success Factors
• People – key players / experienceopporunity / s & w / add-remove
• Opportunity – nature / competitive advantage / barriers to entry /
exploitation timing / milestones
• Deal – right structure / incentives and contingencies
• Context – most dificult / government polocies+> market size &
industrial structure
• 3 Questions:
What can go right?
What can go wrong?
What actions can be taken to increase the probability that things go
right and to minimize the chances that things will go wrong?
=> FIT
1. Startup Growth
Startup Life Cycle
Source: Chandra, A. (2007)
Competência
Tecnológica
Differents Forms of Startup Growth Capital
Proof of Concept
Financing
Financing: Innovation Capital
Investing: Angel Capital
Seed Capital
Startup Capital
Development / Growth Capital
Mezzanine
Capital
Competência em Negócios
Clássico
Transição
Descoberta e Invenção
Mercantil
Venture Capital
Pre-Venture Capital
Funding: R&D Capital / Concept Capital
1. Context
Globalization of competition at startup level …
•
Makes angel capital more important, as time-to-market is
now critical
•
Pushes VC to internationalize launch market and production
•
Beyond Guerrilla /Bootstrap/Royalty Financing
•
Brings discipline and structure to startup
•
Takes startup from proof of concept to optimized business
model faster
•
Crossing the chasm (‫‏‬Geoffrey Moore)‫‏‬
12
Funding and Financing Mechanisms - Brazil
Nível de risco p/investidor
Alto
Baixo
Founders,
friends and
family
Capital
semente
SENAI Inovação
Startup
Brasil, Rio
Faperj e Rio
PM
Fundos
Semente
Capital de
risco
Empresas não
financeiras
Tecnova
Fundos VC
Fundos incubadoras
INOVAR
Inova Empresa
Desenvolvimento e financiamento
de empresas
Inicial
Mercado de
capitais
Bancos
Emergente
Crescimento
Estágio
Consolidada
13
Angels: Majority of US Startup Funding
•
•
•
•
•
US $22.5 billion
~66,200 deals
42% seed/startup
57% early/expansion stage
318,500 individuals
Venture Capital 2011
•
•
•
•
•
US $28.4 billion
~3,750 deals
3% seed/startup/ 29% early stage
68% later/expansion capital
462 firms active
Funding by Source and Stage- 2010
16,000
US$ Millions
Angel Investors 2011
8,000
4,000
Venture Capital
Angels
5,321
12,000
8,583
1,700
9,976
6,371
6,231
3,491
0
Seed
Early
Expansion
Investment Stage
Later
Angels Invest in the Majority of Startup & Early Stage Deals
Number of Deals in 2009: Angel Investment and Venture Capital
30,000
25,000
889
309
20,000
Venture Capital
Angel Investment
15,000
10,000
20,029
24,035
11,445
5,000
0
1,604
Startup/Seed
Early Stage
Expansion/Later
Source: Jeffrey E. Sohl, Center for Venture Research and 2010 NVCA Yearbook
ACA Members and Innovative Startups
• Fund about 800 new companies every year (mostly
USA, Canada)
• More than 5,000 companies in portfolio
• Typically on Board of Directors (or observers)
• See 75,000+ companies every year – lead deal flow
in their communities
• Exits by acquisition and IPO – more members are
partnering with strategic corporations for early exits
Gávea Angels
•
•
•
•
•
•
Founded November 2002
Associates: 30 => 36
Angels who made at least 1 investment: 12 => 22
Angels with > 1 investment: 6 => 12
Gávea Angels Forum: to date 25 => 2013: 5
Deals closed: 10 (2010:1 /2011:2 /2012:3 => 2013: 6
1 syndicated investment (RJ/SP)
1 Series A, 1 Series B
1 Seed follow-on in negotiation
•
•
•
•
Average deal size (with follow-on): US$ 300K
Negotiations: 2012= 8 / 2013 = 12
Investment proposals reviewed: 2012: 600
III International Angel Investor Workshop, 8-9 November
2012: 100 participants (LA/Europe/US)
Other Angel Groups in Brazil
•
Gávea Angels
Estimated number
of active angels:500
São Paulo Angels (July 2008):CLOSED?
• Floripa Angels (2009): ~10; absent
• Bahia Angels (2009) inactive
• C2i Anjos (Curitiba PR) (2011): 20+
• Vitória Anjos (ES) (2012): 10+
• HBS Angels (Sao Paulo) (2013) : 30+
Other angels – Boutiques:
Gávea Angels
Estimated number
of potential angels:
10,000
•
• Emidee (2005): one man angel fund
Ipanema Ventures (RJ) (2011): dormant
•
Jacard (SP and SC) (2010)
•
Bossa Nova Angels (SP) (2010)
Other angel organizations:
•
•
Inovar Seed Funds: 200+ ; passive
Anjos do Brasil, loose network individual angels
+ “financial investor “super-angels”, passive, risk averse
Latin America
Pais
Número de redes Inversionistas
(año 1a red)
ángeles en las redes
Inversiones Valor (US$
milliones)
Argentina
3(2006)
150
25
3.5
Bolivia
1(2008)
nd
1
nd
Brasil
4 (2002)
88
9
1.1
Chile
7(2004)
127
30
9
2(2010) +3
93
6
0.5
México
3(2009)
100
8
8.2
Panamá
1(2009)
26
3
nd
Perú
2(2009)
24
6
nd
Dominicana
1(2008)
57 (20)
0.270
nd
Venezuela
2(2000)
20
22
nd
Uruguay
1(2006)
26
5
nd
Colombia
1. Engines of Startup Growth?
Innovation clusters
• Global distribution of VC (2012): top 5 regions represent 52% of
$42.3 billion in global VC investments: SV, New England, S. Calif, Ny
Metro UK…. followed by Beijing , Germany, Israel…NO LA country or
region
• How to?
– Entrepreneurial communities, Brad Feld’s network bottom-up model
– Beijing innovation cluster state leverage, large market autarkic model
–
Israel military-entrepreneurial model: competences spillover and skillful incentives
– Ontario’s Waterloo state-private model: future tech to create newq market
• Silicon Valley model it IS NOT ABOUT funding and financing, is it
about investment ($ 11 billion VC in 2012) ?
– Bilions $ spent in attemps to replicate – top down strategy a failure
• Kendal Square densesr concetration of startups in the worls : 450+ next to $ 8.7 billion VC
investments
– 52% (1995-2005) of founders with at least one foreign-born founder
21
MUITO OBRIGADO
Antonio José J. Botelho
Professor Titular, Iuperj/ UCAM
[email protected]
(21) 2216 7421 / 9347 0472