Venture Capital -The entrepreneur behind the entrepreneurIdeal TMC, Big Money, Big Talk. By Robin Han

VC

What is the common point of the following companies?

In Oct, 2000, Softbank invested USD20m to Alibaba in just 6 minsIn April 2004, Softbank invested another USD60m to AlibabaIn 2007 Alibaba listed in H.K. Stock Exchange, Softbank’s ROI reached 1000%

What is VC?

• Venture Capital

• A fund management company leaded by a group of professionals, most of them have successful entrepreneurial experience, or from investment banks

• They manage a huge sum of money from millions of USD to multi-billion USD

• VC normally don’t have money, they just manage money, the money belong to many millionaires, bankers, oil tycoons, or government social security fund, pension fund, etc.

• They charge management fee for the fund

Why this world needs VC?• Because now is the era of entrepreneurship, e

verybody wanna be boss of themselves

• The fact however is we are poor, most of us doesn’t born with a silver spoon, so we need money to start up a business or expand business

• The nature of capitalists is greed, what else they can make more money beside stock market and real-estate? Company!

• After you bring a company to Nasdaq, or you have been sick and tired to be a CEO or chairman, what else can you do? To become a VC!

Different kinds of VC

• Star-up stage: angel investment• Early stage: Seed fund• Grow-up stage: VC• Pre-IPO stage: PE

Angel Investment

• For start-up company

• Normally RMB 0.1m-0.5m

• The investors are normally your friends, colleagues, relatives, classmates, etc

• They are just like an angel give the life of your business

• The risk is the highest

• Normally ask for 30% shareholding

$

Seed Fund

• For early-stage company

• Normally RMB 0.5m-5m

• The investors are normally those VC who focus on early-stage companies

• They provide water, earth, air, sunshine and other key element for your business growing up

• The risk is very high

• Normally ask for 20-30% shareholding

Venture Capital• For developing-stage company

• Normally RMB 5m-30m

• The investors are normally professional VCs who focus on investment of bottle-neck-stage of the company

• They provide a ladder to level up your business from one level to another level

• The risk is high

• Normally ask for 20-30% shareholding

Private Equity (PE)• For pre-IPO company

• Normally RMB 30m-100m

• The investors are normally fund management companies, their money are from organizational investors

• They provide huge money to make sure your company can list in stock market

• Low risk

• Normally 10-20% shareholding

What is the criteria VC select companies?• Basically follow the principle of BTM

B – Business & Market

T – Team

M – Model (Business Model)

• B: high growth rate, high potential market such as IT, Internet, biotechnology, clean tech, etc.

• T: Invest a company is actually invest people, the management team! Are they passionate, committed, responsible, dedicated and capable?

• M: How you make money?

What role a VC can play

• An Angel

• A mother

• A wife

• A teacher

• A doctor

• A headhunter

• A couch

Does VC always make money?

• 6-7 investments out of 10 are failed

• 2-3 investments out of 10 breakeven

• 1 out of 10 maybe successful, but this 1 will normally is a big shot!

How VC get return of their investment?• IPO of invested company

• Invested company is merged and acquired

• Other VC/PE come in and buy your share

Some famous VCs in China

Thank you!