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International Entrepreneurship & Global Fundraising. May 30 th 2008. Richard P Kivel CEO TheraGenetics MIT Entrepreneurship Center, Deshpande Center, MITEF, MIT $100K. Entrepreneurship. “ In America they celebrate working hard. Like, ‘Wow! Look how hard they worked,

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slide1

International Entrepreneurship & Global Fundraising

May 30th 2008

Richard P Kivel

CEO

TheraGenetics

MIT Entrepreneurship Center, Deshpande Center, MITEF, MIT $100K

entrepreneurship
Entrepreneurship

“ In America they celebrate working hard.

Like, ‘Wow! Look how hard they worked,

And maybe I can do that too’

It’s a beautiful thing”

Rachel Weisz

Actress / London

the entrepreneur a special species
The Entrepreneur: A Special Species?
  • What do successful entrepreneurs look like?
    • Integrity
    • Leadership
    • Impatient; bias toward action (with analysis).
    • Modest ego. Recognizes, and hires to overcome weaknesses.
    • Willing to be different, but knows it
    • Pragmatic; willing to compromise (in order to move forward).
    • Rejoices in others’ victories (no petty jealousy).
    • Driven to solve a valuable problem for customers (not driven by money or technology).
    • Able to attract world class talent.

* With special thanks to Flagship Ventures

slide5

CEO must divide time between

  • Raise cash
  • Recruiting and Building Culture
  • Managing the Board and Investors
  • Operations and Finance
  • Customers and Partners
critical success factors in entrepreneurship
Critical Success Factors in Entrepreneurship
  • Believe that Startup Ventures can Succeed:
    • Parent(s) who are entrepreneurs
    • Early contact with successful entrepreneurs
    • Exposure to success stories and case studies.
  • Gain practical, real world experience before, during and after university studies.
  • Be willing to be Unusual/Unconventional.
  • Agree to Embrace Risk, and possibly failure.
  • Want to create a large Company.
  • Live in a society that sees the above as normal, not a strange exception.
  • Ambitious Entrepreneurs ask : “What do we really want to do?”
  • We want to make a world class product whatever it is.
  • We want to have fun doing it.
  • We want to get involved in a business area or business segment that is at its ground floor and in its infancy.
the current climate b2b back to basics
The Current Climate:B2B = Back to Basics
  • Entrepreneurs need to have an outstanding
    • Team
    • Technology
    • Value Proposition
    • Market
    • Customers
  • Applies to VCs as well…
    • Europe
    • Canada
    • USA
financing
Financing

“My interest in life comes from setting myself huge, apparently unachievable challenges and trying to rise above them.”

Richard Branson

slide9

Can you answer the tough questions?

Is there a need?

Have the market segments been identified and are they understood?

Is the market large and will it grow rapidly?

Can the company establish a defensible market position?

Is there or will there be formidable competition?

Is the sales cycle a serious hurdle?

Organization

Does the CEO have a successful track record?

If necessary, can we attract a new CEO?

Are the founders experienced and respected in their industries?

Is the team innovative, experienced and success-oriented?

What are the founder\'s strengths and weaknesses?

Is the team capable of building a large company?

Does the team have an in-depth knowledge of the market?

Products/Technology

slide10

If not, who will?

Is the concept unique?

Are the products differentiated?

How does the technology address a market need?

Does the company have a patent or other proprietary position?

Is the engineering plan explicit and can the engineering team execute?

Is the technology realistic and feasible?

What are the major risks?

Financing Arrangements

What is the capital structure?

Are the numbers realistic and achievable?

Risks

What are the major risks?

What is the magnitude of the risks?

What is the risk/reward ratio?

What are comparable market caps for companies of this nature?

What are the company\'s capital needs?

What are the paths to liquidity and what is the timing?

Can the company be financed in the future?

Plan

Is the strategy well-conceived?

Can the management team articulate the strategy?

Can the strategy result in a large company?

Does the company have a roadmap to profitability?

What business is the company in? Is its mission explicit?

Economics

Is the company profit-oriented?

Are the company\'s ratios attractive?

When will the company turn a profit?

sources of capital
Gifts and Grants

Federal Government – NIH, SBIR, DARPA, other

State Government - Various

Foreign Governments

Philanthropists

Bloomberg donation to John Hopkins

Gates Foundation

Wellcome Trust

Celebrity Charitable Organizations

Michael J. Fox Foundation

Reeve Foundation

Debt Capital

Secured

Unsecured

Private Equity Investors (principally VCs)

Public Equity Investors

Sources of Capital
slide12

U.S. Venture Capital Investment Reaches Highest Level Since Q1 2001,

Rises 8% to $8.07 Billion in Third Quarter of 2007

Venture capitalists invested $7.1 billion in 922 deals in the first quarter of 2008

“You have to pretend you\'re 100 percent sure. You have to take action; you can\'t hesitate or hedge your bets. Anything less will condemn your efforts to failure. “

Andy Grove / Intel

slide13

What is Venture Capital?

Venture Capital Is...

… Investing in high potential, high growth private companies

… Identifying and assisting talented entrepreneurs as they build successful companies

… Helping to drive growth, productivity, and technological innovation

vc value chain
VC Value Chain

(1) Raise Capital

(7) Liquidate / Sell

Portfolio Companies

(6) Nurture

Portfolio Companies

(2) Evaluate

Market Segments

(5) Negotiate and

Structure Investments

(3) Generate

Deal Flow

(4) Select Investment

Candidates

slide15

Venture Capital Investment Path

Ongoing

  • Venture Research
    • Identification of attractive sectors and investment opportunities
  • Source deals and initially screen opportunities
  • Meet with management team of potential investment
  • Partner meeting and further screening
  • Due diligence begins
  • Prepare formal Investment Opportunity Summary (IOS) memorandum
  • IOS partners meeting and investment decision
  • Term Sheet submission
  • Legal negotiations
  • Co-investor syndicate selection
  • Due diligence checklist completed
  • Investment closing
  • Active investment management

Week 1

Months 2-4

slide16

US Venture First-Time Financings

  • The dollar value of first-time deals was $1.6 billion going into 294 first-time deals.
  • First time financings accounted for 23 percent of all dollars and 32 percent of all deals in the first quarter.
  • Companies in Software, Medical Devices, Biotechnology, and Media/Entertainment received the highest level of first-time dollars.
  • Financial Services, Computers &Peripherals, and IT Services also saw more dollars invested into their industries for thefirst-time this quarter as compared to last.
  • Only the Media/Entertainment industry experienced an increase in both dollars and deals with 45 companies receiving $210 million in funding.
  • The average first-time deal in the first quarter was $5.6 million compared to $6.2 millionone quarter ago.
  • Seed/Early stage companies received the bulk of first-time investmentsgarnering 57 percent of the dollars and 66 percent of the deals.
slide17

US Venture Industry Analysis

  • The Biotechnology industry narrowly edged out Software as the number one industrysector for the quarter with $1.27 billion going into 126 deals.
  • Investments in Life Sciences companies represented 32 percent of all investment dollarsand 24 percent of all deals in the first quarter.
  • Internet-specific companies garnered $1.3 billion going into 195 deals in the first quarter,
  • Four of the last five quarters have seen Internet-specific investment ofmore than $1 billion.
  • ‘Internet-Specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.
international stock exchanges
US

NYSE/NASDAQ

Pan-European

Euronext

SWX

Other regional exchanges

UK

LSE/AIM

Germany

FSE

Dubai

DIFX

International Stock Exchanges
  • Japan
    • TSE/Mothers
  • Hong Kong
    • HKE
  • Mainland China
    • SSE
  • India
    • BSE
  • Singapore
    • SGX
2007 life science financing overview

US: NASDAQ & NYSE

2007 Life Science Financing Overview

US Biotech Industry Financings 2007

Initial Public Offerings:

  • 27 offerings with proceeds of at least $20.0m
  • $2b total proceeds raised
  • $70m average deal size
  • $162.3m median pre-money valuation
  • The share price of issuing companies increased 2% on average 5 days post pricing
  • The share price since time of offering has increased 2% on average
ipos not what they used to be1
IPOs – Not What They Used to Be

IPO WINDOW SUMMARY 2003 TO 2007

Amount Raised*

Number of IPOs

($ Million)

2003

7

$438

2004

29

$1,628

2005

17

$819

2006

19

$920

2007

28

$2,041

Total

100

$5,846

*Includes over-allotments

Source: Burrill & Company

london stock exchange aim

AIM is the London Stock Exchange’s internationalmarket specifically designed for smaller, growing companies, combining the benefits of a public flotation with appropriate levels of regulation.

  • AIM gives companies from all countries and sectors access to the market at an earlier stage of their development, allowing them to experience life as a public company.
  • Since AIM opened in 1995, more than 2,000 companies have been admitted and more than $42 billion has been raised collectively.
  • An AIM quotation offers companies:
    • A flexible regulatory regime
    • Access to a unique, globally respected market
    • Access to a wide pool of capital
    • Enhanced profile – heightened interest in your company
    • Increased status and credibility
    • Currency for and easier rules on acquisition
    • Lower cost of administration

London Stock Exchange / AiM

london stock exchange aim1

Number of and percentage of international AIM

companies December 2004 to December 2005

220

16.0%

Number of international AIM companies

200

15.0%

International percentage of AIM companies

180

14.0%

160

13.0%

140

12.0%

No of international AIM companies

International percentage of AIM companies

120

11.0%

100

10.0%

80

9.0%

60

8.0%

40

7.0%

20

6.0%

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

London Stock Exchange / AiM

  • 220 international companies Dec 2005 (16% of market)
  • Increased of 90% over 2005 (37% whole market)
  • Market value of overseas companies increased 98% over 2005 (78% for market)
london stock exchange aim2

Regulated by the London Stock Exchange, giving a more flexible regulatory environment

  • No trading record required
  • No minimum amount of shares to be in public hands
  • In most cases, no prior shareholder approval required for transactions
  • Admission documents not pre-vetted by Exchange or UKLA but by nominated adviser
  • Nominated adviser required at all times

London Stock Exchange / AiM

london stock exchange aim3

AIM companies are subject to the AIM Rules which outline the continuing obligations of being on a public market. Some of the key continuing obligations are:

Must have a Nomad at all times, otherwise they will be suspended from the market

AIM companies must disclose all price sensitive information in a timely manner including substantial transactions, related party transaction, reverse takeovers and other miscellaneous transactions

Half yearly and annual report and accounts required in adherence with deadlines

All directors accept full responsibilityfor the AIM Rules

Restrictions on deals for directors and applicable employees on AIM securities during close periods

UK Corporate Governance standards

London Stock Exchange / AiM

slide29

NYSE / Euronext / Alternext

The European regulated market of the NYSE Euronext groupThe leading equities marketplace in the worldCompanies include a cross-section of large, midsize and small capitalization companies

slide30

NYSE / Euronext

  • NYSE Euronext\'s nearly 4,000 listed companies
  • Representing a combined $27.3 / €17.3 trillion in total global market capitalization (as of March 31, 2008).
  • Four times that of any other exchange group.
  • NYSE Euronext\'s equity exchanges transact an average daily trading value of approximately $169.6 / €113.2 billion (as of March 31, 2008), which represents more than one-third of the world\'s cash equities trading.

Belgium France

The Netherlands Portugal

slide31

Now is the time!

  • Inexperienced gamblers are dying or dead.
  • A line of bull + .ppt is not enough.
  • Serious entrepreneurs, business angels, and VCs are quietly and carefully moving forward.
  • Expectations and time horizons are realistic.
  • Recruiting top talent is easier.
  • Unprofessional competition and their VCs have retreated to the sidelines. “Creative destruction” is a good thing.

“Go to bed early and wake up early.

The morning hours are good.”

Jeff Bezos

slide32

Summary / Review

  • Trends
  • Know the past and search for the future
  • Looks at trends and find leaders
  • Identify Convergence
  • 2. Entrepreneurship
  • Take the risks, life is short
  • Work with the best people
  • Manage your Board
  • Communicate with your Investors
  • 3.Financing
  • Raise more then you need
  • Investigate all sources of capital
  • Raise smart money
  • 4. Leadership & Rules of Engagement
  • Hire slow, Fire Fast
  • Create a culture not a work place
  • Passion is contagious , top down
slide33

Anybody can jump a motorcycle.

The trouble begins when you try to land it.

EvelKnievel

1938-2007

33

special thanks to

Special Thanks to:

MIT

Ken Morse

NVCA

Burrill and Co

UKTI

slide35

Richard P. Kivel

CEO

TheraGenetics Limited

[email protected] www.theragenetics.com

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