VENTURE CAPITAL ROLE and CHARACTERISTICS

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VENTURE CAPITALROLE and CHARACTERISTICS
HORIZONTE VENTURE MANAGEMENT

• Franz R. Krejs Bratislava,
  November 2006

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VENTURE CAPITALOVERVIEW___________________

• THERE HAVE ALWAYS BEEN RISKY VENTURES AND PEOPLE
• OR INSTITUTIONS WHO FINANCED THEM, e.g
• sailing ships
• expeditions
• VC SYSTEMATIC APPROACH TO THE FINANCING AND
  MANAGING THE RISKS OF VENTURES
• PORTFOLIO APPROACH
• (SPREAD OF RISK)
• PROFESSIONAL MANAGEMENT
• ADDITION OF VALUE

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VENTURE CAPITAL

• Globalization
• improved transportation systems
• improved communication systems
• Increased Competitive Pressure
• Strategies to meet this pressure
• automation
• shift labour intensive production to low wage
  countries
• lessen or remove competitive pressure by
  producing unique, innovative, superior
  products/services
• (often technology based)

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COLLATERAL SECURITY ______________________________
__________
collateral
capital
Financier (Bank)

• The collateral is the fall back position
• Reduced need to understand the primary project
• Danger of plug pulling when there are deviations
  from expectations

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VC UNSECURED NO COLLATERIAL____________________
____________________________________

• NO COLLATERAL
• the investee company has to be successful
• if successful significant success
  participation
• CONSEQUENCES
• different level of due diligence
• differently structured deals
• addition of value

capital (equity)
VC-Fund
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MANAGEMENT SUPPORT

• sounding board
• organizational development
• team building
• INTERNATIONALIZATION

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VENTURE LIFE CYCLE OF AN INDIVIDUAL INVESTMENT

• Project acquisition and screening
• due diligence
• negotiations of conditions
• investment
• investment development
• exit

screening
deal negotiation
exit
contact
due diligence
investment development
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Addition of Value
Horizonte Slovene Enterprise
Fund Volume 8.4 million Vintage
Year 1995 Portfolio 12 investmentsTotal
sales of all portfolio companies 1995 24
million 2004 104 million (330)Employment
in 1999 the Horizonte portfolio was the second
largest foreign employer in Slovenia.Technolo
gy 40 of the Fund was invested in technology
based companies. Not taking the large
pharmaceutical companies (Lek, Krka) into
account, two of the portfolio companies hold
50 of all foreign patents granted to Slovene
companies.
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HOW TO APPROACH A VC

• THE MEDIUM TO COMMUNICATE IS THE
• BUSINESS PLAN
• BUSINESS PLAN
• it should describe concisely and thoroughly the
  business venture
• It should address all relevant aspects
• business, products, market, competition,
  production, sales marketing, management, IPRs,
  financials, etc.

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HOW DO VCs OPERATE

• PRINCIPLE
• Go where there are many fish
• Fish with a loosely knit net to only catch the
  big fish (never mind if you miss a few)
• CONSEQUENCE
• VCs see and screen many deals (2-4 acceptance
  rate)
• They look for killer factors to eliminate
  projects
• You need to get over this first stop/go-barrier

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DUE DILIGENCEOVERVIEW____________________

• Basic understanding
• DUE DILIGENCE PROCEDURE
• ____________________________
• OPPORTUNITY
• - product
• - competition
• - market
• ? there is an opportunity

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II. STRATEGY AND ORGANIZATION___________________
__________________________________________________
____________________

• Does the company have a realistic strategy and
  how will it organize itself to exploit the
  opportunity?
• sales and distribution strategy
• manufacturing/suppliers/QA
• product development
• organization/financial controls
• ? there is an opportunity and a strategy to
  exploit it

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FINANCIAL, ECONOMICS AND HARVEST
ISSUES___________________________________________
________________________

• opportunity and strategy finally are reflected
  in a financial forecast
• - income statement
• - cash flow
• - balance sheet
• issues profit after tax
• time to break even
• time to pos. cash flow and capital requirement
• ROI-Potential

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• IV. MANAGEMENT
• Are the people there to execute the strategy?
• V. EXIT
• How will we get out of the investment?
• VI. VALUATION AND DEFINITION OF A DEAL

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HORIZONTE VENTURE MANAGEMENTVienna, Ljubljana,
Sarajevo_________________________________________
__________

• Founded 1985
• Ownership Management
• FinanzierungsgarantiegesmbH (FGG)
• Advent International Corp.
• Dr. Uwe Burkheiser
• Offices Vienna, Austria
• Ljubljana, Slovenia
• Sarajevo, Bosnia Herzegovina
• Funds Horizonte Slovene Enterprise Fund
• Horizonte Bosnia Herzegovina Enterprise Fund
• Horizonte Austrian Technology Fund
• Alpe Adria Venture Fund