Kauffman fellows 2010-ssp
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Transcript of Kauffman fellows 2010-ssp
Sanjay Subhedar- Storm Venture
Kauffman Fellows Program Kauffman Fellows Program
Harvesting Case Studies
Sanjay Subhedar- Storm Venture
when asked to write the alphabet when asked to write the alphabet by his kindergarten teacherby his kindergarten teacher
Sanjay Subhedar- Storm Venture
Key ElementsKey ElementsThree most important decisions for VC’s are
When to InvestFollow on InvestmentsWhen to Exit
Sanjay Subhedar- Storm Venture
Valuations
TimeTechnology
TriggerPeak of Inflated
ExpectationsTrough of
DisillusionmentSlope of
EnlightenmentPlateau of
Productivity
Market Size
Evolutions of Markets
Don’t invest just because it is “in”
Don’t exitjust because it
is “out”
Enterprise Enterprise Value Value
Sanjay Subhedar- Storm Venture
Jumping the gunJumping the gun
Most of us make the mistake ofInvesting too earlyHarvesting early
Investing decisions are very much based on the firmHarvesting decisions influenced by
Management teamSyndicateCompetitive EnvironmentIPO environment
Sanjay Subhedar- Storm Venture
Distribution ChoicesDistribution Choices
Cash or StockTiming of Stock Sale or Distribution
Sanjay Subhedar- Storm Venture
Harvesting Case StudiesHarvesting Case StudiesStratacom, Inc (NASDAQ-STRM)
Passion, Persistence and Patience RewardedLightera (CIENA)
Early to market, early exitEtek Dynamics (NASDAQ-ETEK)
Good Timing, Superb Execution, Great Market=Super ReturnsAirespace (Cisco)
Early Market leadership creates early exit opportunityKidaro (Microsoft)
Company helped define the market, early exitSierra Monolithics (Semtech)
Sanjay Subhedar- Storm Venture
Incorporated Feb 1986VC Funding of $4.3 million in two tranchesAnother VC round of $10 millionCorporate Rounds
Motorola $10 millionDEC $10 million
IPO 1992 with a market Cap of $100 millionMerger with Cisco in 1996 at $4.7 Billion
Sanjay Subhedar- Storm Venture
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enue
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Frame RelayFrame RelayTakes offTakes off
Sold to Sold to Cisco Cisco $5B$5B
IPOIPOSlow growth for Slow growth for
many yearsmany years
Sanjay Subhedar- Storm Venture
Sanjay Subhedar- Storm Venture
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RaisedRaised$10M$10M
StartStart
Sold to Sold to CienaCienafor $550M; for $550M;
Product FCSProduct FCS
LighteraLightera’’ss product product represent 30%represent 30%--35% 35% of of CienaCiena’’ss revenuesrevenues
300x 300x returnreturn
Sanjay Subhedar- Storm Venture
Acquisition a huge success for the buyerSame customer baseSynergistic product lineDid not have the productSeller’s product was a world leader
Is it repeatable? YesLuck – guess right on new technology, new market, competition and timingMajor lead over the competitionRight buyer – currency and desire
Sanjay Subhedar- Storm Venture
CirculatorsOptical Add Drop Modules
Optomechanical Switches
Optical Performance Monitors
Dispersion Equalization Modules
Wavelength LockersVariable Attenuators
Sanjay Subhedar- Storm Venture
Phase IFounders create value
Phase IISummit Buys 60% from Founders- Jun1997Valuation was $200 millionBrings new Management team
Phase IIIRecast business for public ownershipIPO in Dec 1998
Phase IV: Merger with JDS Uniphase in June 2000
Sanjay Subhedar- Storm Venture
(in $ millions)
Fiscal years ended June 3019941993 1995 1996 1997 1998
6.514.6
31.740.4
73.1
106.9
1999
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RecapRecap$120M$120M
IPOIPO$1.5B$1.5B
Sale to Sale to JDSUJDSU$19B$19B
Sanjay Subhedar- Storm Venture
Price Performance Price Performance –– EE--TekTekIPO IPO –– Close of SaleClose of Sale
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Volume E-TEK DYNAMICS INC COM
Sale to JDSU announced on 1/17/2000Market cap: $15,394mm
IPO (12/2/1998) price: $12.00Price at end of day 1 trading: $26.75
Market cap at IPO price: $0.7bnMarket cap at end of day 1: $1.6bn
Sale to JDSU announced on 1/17/2000Market cap: $15.4bn
Transaction closes (6/30/2000)Market cap: $17.9bn
Sanjay Subhedar- Storm Venture
Market exploded for optical componentsBandwidth demand from internetHuge telecom build outComponent shortages
Great Execution forces acquisition
Sanjay Subhedar- Storm Venture
Founded by Storm in 2001Incubated with $500kStorm wrote plan and hired team
Series B led by Norwest with BatterySeries C led by FidelityKey OEM Relationships
Nortel, Alcatel and NEC
Cisco acquires for $450 million , Jan 2005Total raised $58 million
Sanjay Subhedar- Storm Venture
Kidaro
Sanjay Subhedar- Storm Venture
Founded in 2005, Israeli R&D centerEx-military IT security, Israel-based team
$4M Series A co-led by Storm and Genesis, 8/05
$10M Series B led by Opus, 12/06HQ moved to Silicon ValleyReceived & declined unsolicited acquisition offer.
Microsoft acquires, March 2008
Sanjay Subhedar- Storm Venture
Kidaro Managed Workspace At a GlanceKidaro Managed Workspace At a Glance
Leverage machine virtualization technology to create, deploy and centrally manage
end-user workspaces
Sanjay Subhedar- Storm Venture
Lessons LearnedLessons Learned
Thesis: Storm thesis in desktop virtualization has materialized.Team: Strong teams will find the right market insertion point
Kidaro helped the analysts define the space...and they kept mentioning Kidaro
Timing: Exit was well timed on the curveCash in the bank allows investors to time the exit.
Sanjay Subhedar- Storm Venture
Evolutions of Markets
Valuations
TimeTechnology
TriggerPeak of Inflated
ExpectationsTrough of
DisillusionmentSlope of
EnlightenmentPlateau of
Productivity
Market Size
Enterprise Enterprise Value Value
Sanjay Subhedar- Storm Venture
Top 10 Top 10 Rules For IPORules For IPO’’s or Exitss or Exits
1. Build for an independent destiny, don’t eliminate options2. Tactical Value makes an Acquisition/IPO interesting3. Strategic Value makes an Acquisition/IPO compelling4. Know and work the ecosystem…don’t create VETO pockets5. Know the landscape, have realistic expectations6. Leave money on the table7. Deliver value to acquirers or stockholders8. Transactions are forgotten, relationships can endure9. No surprises!!10. Companies are “Bought” not “Sold”
Sanjay Subhedar Storm Venture
A venture capital firm dedicated to building and creating enduring value.
Thank YouThank You