Kauffman fellows 2010-ssp

25
Sanjay Subhedar- Storm Venture Kauffman Fellows Program Kauffman Fellows Program Harvesting Case Studies

Transcript of Kauffman fellows 2010-ssp

Page 1: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Kauffman Fellows Program Kauffman Fellows Program

Harvesting Case Studies

Page 2: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

when asked to write the alphabet when asked to write the alphabet by his kindergarten teacherby his kindergarten teacher

Page 3: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Key ElementsKey ElementsThree most important decisions for VC’s are

When to InvestFollow on InvestmentsWhen to Exit

Page 4: Kauffman fellows 2010-ssp

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

Page 5: Kauffman fellows 2010-ssp

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

Page 6: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Distribution ChoicesDistribution Choices

Cash or StockTiming of Stock Sale or Distribution

Page 7: Kauffman fellows 2010-ssp

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)

Page 8: Kauffman fellows 2010-ssp

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

Page 9: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

Mar

ket C

apita

lizat

ion

$0

$50

$100

$150

$200

$250

$300

$350

Rev

enue

Market Cap Revenue

($ Million)

Frame RelayFrame RelayTakes offTakes off

Sold to Sold to Cisco Cisco $5B$5B

IPOIPOSlow growth for Slow growth for

many yearsmany years

Page 10: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Page 11: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

$0

$20

$40

$60

$80

$100

$120

$140

$160

Oct

-97

Feb-

98

Jun-

98

Oct

-98

Feb-

99

Jun-

99

Oct

-99

Feb-

00

Jun-

00

Oct

-00

Feb-

01

Jun-

01

Oct

-01

Feb-

02

Jun-

02

Oct

-02

Feb-

03

Jun-

03

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

Page 12: Kauffman fellows 2010-ssp

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

Page 13: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

CirculatorsOptical Add Drop Modules

Optomechanical Switches

Optical Performance Monitors

Dispersion Equalization Modules

Wavelength LockersVariable Attenuators

Page 14: Kauffman fellows 2010-ssp

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

Page 15: Kauffman fellows 2010-ssp

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

172.7

RecapRecap$120M$120M

IPOIPO$1.5B$1.5B

Sale to Sale to JDSUJDSU$19B$19B

Page 16: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Price Performance Price Performance –– EE--TekTekIPO IPO –– Close of SaleClose of Sale

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Dec-1998 Feb-1999 Apr-1999 Jul-1999 Sep-1999 Nov-1999 Feb-2000 Apr-2000

Daily from 02-Dec-1998 to 30-Jun-2000

Clo

sing

Pric

e (U

SD)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Volume (000)

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

Page 17: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Market exploded for optical componentsBandwidth demand from internetHuge telecom build outComponent shortages

Great Execution forces acquisition

Page 18: Kauffman fellows 2010-ssp

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

Page 19: Kauffman fellows 2010-ssp

Sanjay Subhedar- Storm Venture

Kidaro

Page 20: Kauffman fellows 2010-ssp

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

Page 21: Kauffman fellows 2010-ssp

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

Page 22: Kauffman fellows 2010-ssp

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.

Page 23: Kauffman fellows 2010-ssp

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

Page 24: Kauffman fellows 2010-ssp

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”

Page 25: Kauffman fellows 2010-ssp

Sanjay Subhedar Storm Venture

A venture capital firm dedicated to building and creating enduring value.

Thank YouThank You