Current Views on

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Current Views on Entrepreneurship Monte
Jade October 11, 2007 Milton Chang miltonchang_at_in
cubic.com www.incubic.com
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• Topics
• Current startup/funding environment
• Lessons learned from experience
• Where are the opportunities?
• Startup business models
• Take away messages

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The Backdrop
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Equity into VC-backed companies 25B annual
Amount Invested (B)
Number of Deals
Source Dow Jones VentureOne/Ernst Young
YTD06 1Q06 3Q06
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IPO Activity Has Increased Somewhat56 IPOs vs
400 MA transactions 2006Q2 2007, 22 IPOsstill
far fewer than old days
Amount Raised (B)
Venture-Backed IPOs
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Taking longer to reach IPO Median Time From
Initial Funding to IPO taking longer, mature
companies
Number of Years
Source Dow Jones VentureOne/Ernst Young
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Increasing Valuations for IPOsOnly larger value
companies reach IPO 1996(Q2 2007 450M)
400
Median Pre-Valuation at IPO (M)
Source Dow Jones VentureOne/Ernst Young
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IPOs Amount raised prior to going public 4x
more expensive than 1996, trend is upward
67
Median Amount Raised Prior to IPO (M)
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Gains from MA Exits Increasing 50MMedian
Amount Paid in MAs vs. Median Amount Raised
Prior to MAMedian Amount Raised Prior to MA (M)
Median Amount Paid (M)
Source Dow Jones VentureOne/Ernst Young
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Older Companies Being AcquiredMedian Time From
Initial Equity Funding to MA taking longer
Number of Years
Source Dow Jones VentureOne/Ernst Young
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• Venture industry 2006-Q2 2007
• Equity into VC backed companies about 25B
  annually
• IPO activity increased, 22 in Q2 2007,
• Medium IPO Pre 452M Vs 202 last year
• Taking over 6 years to IPO
• Takes more to get to IPO, 67M median
  
  
  
  
• MA around 100 exits per quarter, median 52M
  value
• Raise prior to MA Medium 23M
• They take 6 years also

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Environment Moving Forward
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Interpretation, VC Trends 2007

• Megafunds
• Geared for 500M IPOs
• International offices, India, China, Israel
• Aligned with the banking industry
• Smaller funds
• Open for first-time entrepreneurs
• Geared for 50M MA, potentially larger
• Looking for capital efficient investment (all-in)

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Trend areas of interest, 2007

• Areas of current VC interest
• 1. Web 2.0
• the next YouTube, you, gaming,
  entertainment, advertising
• 2. Mobile phenomenon.
• Connected life web, WAP, advertising
• 3. All the IT to support web and mobile
• 1B/year handsets drive disposable Moores law
• Video traffic majority of all network bandwidth
• Semiconductor, networking, security
• 4. Cleantech
• Alternative energy
• Now 10 of venture investing, 2B per year
• 5. Healthcare
• 95B technology market split
• aging/vascular/obesity/orthopedics
• healthy/vanity/aesthetics

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What I Do/did To Provide A Context
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• Built Ruby laser in 1964
• Laser components and tools Newport Uniphase
  Lightwave New Focus
• Laser applications Iridex
• Laser serving new fields Arcturus
• Make available entrepreneurial experience as
  resource for first-time entrepreneurs Incubic
• Communications OpVista

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(No Transcript)
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• Lessons Learned
• It takes more than a useful product idea
  everything has to be aligned
• Business model consistent with size of the
  opportunity, personal objectives, resources, team
  capability, financing strategy
  
  Execution being an industry- insider in
  the power-structure..investor support and
  being connected to the financial community
• Most failures are due to overly ambitious goals.
  The business model should focus on creating value
  efficiently, capitalizing on your strengths and
  competitive advantages

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Considerations When Starting A Business
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• Where are the opportunities?
• Random good ideas
• Your own area of expertise industry insider
• New emerging technologies areas

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• Startup Models (How people start businesses)
• Traditional Sand Hill Road VC funded startup
• Start with business prototypeand grow over
  time
• Lifestyle business

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• Summary
• Back to basics Capital efficiency, ROI,
  competitive advantages
• A successful startup requires a useful product
  idea, alignment of business strategy and
  resources, plus active participation of
  industry insiders
• A startup company should first focus on
  capitalizing on its strengths to create value
  efficiently by building a prototype of the
  business
• Turn over new rock Serve emerging fields with
  your expertise, and to become an industry insider
  over time

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What Chancellor Tien Would Have Said
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• Take Away Messages
• Prepare for entrepreneurship by taking on
  projects at work.
• Think small You are more likely to succeed with
  a modest goal.
• Think long-term Entrepreneurship is a life-long
  preoccupation. Once you have a success, even a
  small success, opportunities are likely to come
  your way.
• Seek self-consistency. Plan thoroughly. Do both
  top-down and bottom-up analysis of your business
  idea.
• The objective is not just to start it is to
  build a business to successful completion. Before
  that, it is just a job!

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MiltonChang_at_incubic.com