Webinar with BMI Executive Institute and Prof. Rudy Aernoudt

Fuel Your Fintech: Securing Venture Capital for Growth

1. Venture capital
FINTECH
4/10/2024
Prof. R. Aernoudt

2. 1. The venture capital funnel 2

3. From incubation to acceleration 3

4. 2. Desired return
by stage 4
13

5. Money multiple and IRR 5

6. Stage of investment and desired return6
Stage of investment
Angel Seed Growth CrossoverLate stage/BO
Investment size
(K€)
10 – 250 K€250 – 5000 K€ 5 – 50 M€ 50- 100 M€ M€ - B€
Holding period (yrs) 8 - 10 6 - 7 5 -7 3 -5 3 - 5
Return
expectations(%yr)
＞ 75% ＞60% ＞40% ＞25% ＞ 18%
Multiple +15x +10x +7x +5x +3x
Investor type BA BA/VC Serie A - B Serie C -
IPO
BO-Funds
Mezzanine

7. Realized versus desired return 7

8. Between dreams and reality 8
SCHWIENBACHER Armin, et.al, to be published

9. 3. Why we need VC?
Intangible investments
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Scale-ups Mature firms
Organizational and
business improvements
Training
Software, data, IT
networks
R&D
Machinery and
equipement
Land, business buildings
and infrastructure
Source: EIBIS (2019)
9

10. Intangibles
and
VC
10

11. General Partners
$
20%
“Carry”
$
1.5-3% Fee
Portfolio Company
Portfolio Company
Portfolio Company
Portfolio Company
Portfolio Company
Venture
Fund
$
$
$
$
$
$
$
$
$
$
Limited Partners
11
4. Agency problem: LP’s and GPs
19

12. Natural tendency for «big deals»
Need
high fees
High
volume
Prove
goodreturn
Larger
Volume
Topay
expensivefund
managers
Big deal
1236

13. 5. The lifecycle of a vc:
Fundraising – Investment - Divestment
13

14. 5.1. Fundraising
•Too much public
•Danger for crowding
out
•EU: 42%
14
PWC2024

15. 5.2. Duediligence 15
MANAGEMENT
CAPACITY AND
TRACK RECORD
MARKET AND
GROWTH
POTENTIAL
MARKET NICHE RETURN
(LIQUIDITY/EXIT)
MARKET IS MORE
IMPORTANT THAN
TECHNOLOGY

16. 25
5.3. Investment
DUE DILIGENCE ANALYSIS OF
GAPS
OPTIMAL
FINANCIAL
STRUCTURE
VALUATION STOCK OPTION
PLAN
(MILESTONES)

17. 2023 : not a grand cru … 17

18. 5.4. Managing the investment 18
CHOICE OF
DISTRIBUTION
CHANNELS
PRODUCT/MARKETING
STRATEGY
FIXING PRIORITIES NETWORKS: FINANCIAL ADVICE
(NEXT ROUNDS)

19. 5.5. EXITROUTES 19

20. 5.6. The exit
20
R&D, FISCAL
ADVICE
M&A EXIT ORGANISATION
(IPO, TRADE SALE,
…)
INTERNATIONAL
EXPERIENCE
SMART MONEY

21. 5.7. SUMMARY: the life of a VC -Fund: TIMELINE

22. 6.Pre-money and post-money valuation
Pre-money
The value of a company’s
equity before raising
financing
Post-money
The value of a company’s
equity after raising
financing
22
Post-money valuation =
financing raised/%Equity ownership

23. 7. Facts & figures: European Venture Capitalists23

24. A VC Worldview 24

25. Lack of exits 25

26. US – EU
•Scale-up gap is
widening
26

27. EU fails earlier and more frequently than US peers27

28. What have they in common?

29. Top Unicorn investors 29

30. Capital Needs
Time
Seed Start-up Early Growth Scale-up
High
Risk
Low
Risk
Friends,
Family &
Founders
Formal
Venture
Capital
EXIT
1
0
The three
‘Equity
Gaps’
First
equity gap
Scale-
up gap
IPO
Business
Angels
8. Policy : The three gaps
30

31. Scale-up gap: biggest obstacle for
scale-ups with external equity
31

32. Belgian vc’s go for early stage 32
PWC

33. InvestEU 2021 - 2027 33

34. FoFapproach
EIF-FoF
VC1 VC4.VC3VC2
Capital participation–co-investment
SME (accordingto the Europeandefinition)
EIF member of the different boards
Investmentsin SMEs
34

35. 35
PPP-structure
Balance sheet
Venture capital fund
FUNDING
MECHANISM
Assets Liabilities
1.
INVESTEES
(scale-up
companies)
2.
EQUITY
Including
Public money
3.
Quasi-equity
(leverage on return)
ESCALAR
(e.g. pension funds)

36. EIC (European Innovation Council)
•Pathfinder: 3 M
•Transition: 4 M
•Accelerator
•Grant: 2,5 M
•Equity: 15 M
36

37. 9. Challenges for VC business 37

38. 10. Tips a tricks for investees
1.“Right” valuation (egg of Columbus syndrome) – VC Method
2.Realistic business plan (not: 5% of the market ….)
3.Potential exit is key (map them)
4.Map the competition (no competition, no market)
5.Technology is a tool, not an objective (technology doesn’t sell)
6.Market is more important than technology
7.Be investment ready (= mindset)
38

39. VC Academy
Multiple professors &
VCs & BAs
1.VC in action
2.Legal framework
3.Valuation
4.VC in action
5.VC: caveats
39

40. 40

41. Verbo volant, scriptomanent
MAB
inspireert