Sandahl Austin Ventures Sept 15

Texas Economics Association

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Texas Economics AssociationGeneral Meeting #2

Today’s speaker:

Mr. Brian SandahlAnalyst

Our 25 th year!!

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Questions?

Ice Breakers!!

And now…

Mr. Brian SandahlAnalyst

Texas Economics Association Meeting

September 15, 2010

Brian SandahlAnalyst

Austin Ventures

Agenda– Private Equity Investing Overview– Firm Overview– Firm Structure– A Career in Growth Equity Investing

Background• BBA, May ’09

• Finance / Business Honors• Minor: Spanish

• Orgs• Freshman Business Association• Undergraduate Business Council

• Work Experience• Austin Capital Management

• Total Portfolio: Public Equity, Fixed Income, Cash

• Alternative Investments Hedge Funds, Private Equity, Real Estate Strategies, Energy & Natural Resources, Distressed Securities, Special Situations, Emerging Markets

• Private Equity Leveraged Buyouts, Secondary Funds, Growth Equity, Mezzanine Capital, Venture Capital

• Venture Capital Seed/ Startup Capital, Expansion Capital, Growth Capital

Investment Asset Classes In Perspective

Venture

Capital

Private Equity

Alternative Investments

Total Investment Portfolio

An Overview of the Private Equity Industry

• VENTURE CAPITAL

– Early Stage– Growth Stage– Later Stage

• PRIVATE EQUITY INVESTING

– Growth Capital Firms– LBO Firms

Overall, Private Equity Fundraising Remained Strong

US Venture Capital Fundraising(peak $104.3B)

US Buyout Fundraising(peak $281.6B)

Source: Thomson Financial

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 1H '10

$0

$50

$100

$150

$200

$250

$300

$12$18

$26$33

$38$52

$79$72

$88$78

$51$49

$79

$155

$200

$282

$252

$88

$54

(US

$ B

illio

ns

)

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 1H '10

$0

$20

$40

$60

$80

$100

$120

$5 $4$9 $10$12

$20

$30

$56

$104

$39

$9 $11

$20

$29$32

$35

$28

$16

$8

(US

$ B

illio

n)

Austin Ventures Overview

• A venture capital and growth equity firm• Over 25 years of venture capital/growth equity experience

– Growth equity businesses are more established, growing rapidly and can be modestly leveraged to enhance returns

– Venture capital investments are riskier, but investors can strike out on 5 deals and hit 1 home run and still provide a great return

– The combination of both investments in AV’s portfolio meets the needs of LPs wanting to invest in both asset classes

– Allows AV to invest at every stage of the funding lifecycle, from initial seed investments, through startup and growth capital, to management-led buyouts and recapitalizations

• $3.9 billion under management across 10 funds• Invest nationally but maintain a particular focus on Texas, where we are the region’s

most active investor

1984 1987 1991 1994 1997 1998 1999 2001 2005 2008

2008

2005

2001

1999

1998

1997

1994

1991

1987

1984

Austin Ventures Overview

Vintage

Fund I II III IV V VI VII VIII IX X

Cumulative Committed Capital

• 25+ years of venture capital/private equity investing

• Nationally-recognized, regionally-dominant

• 325 investments and 81 active portfolio companies

• 100 IPOs and acquisitions

• 27 investment professionals28M 88M

163M278M

448M768M

1.6B

2.9B

Annual Totals:

2.4B

3.9B

1984 1987 1991 1994 1997 1998 1999 2001 2005 2008

2008

2005

2001

1999

1998

1997

1994

1991

1987

1984

= $900M= $525M= $830M= $825M=$320M=$170M=$115M=$75M=$65M=$28M

Funding Every Stage of Innovation

Growth Equity Practice

• National investment sourcing effort

• Partnering with leading industry executives on high potential investment theses

• Focused on recurring revenue and asset-light business models

• Preference for the following industries:

— Supply Chain and Logistics

— Integrated Media

— Software

— Information, Financial, and Business Services

• Capital for acquisitions, growth, purchasing stock from owners, liquidity with leverage, management buyouts, PIPEs and take privates

Venture Capital Practice

• Partnering with innovative entrepreneurs and founding teams

• Seed and Series A lead investor

• Leveraging extensive talent network of experienced executives

• Focused on: Internet; Enterprise and Infrastructure Software; Data Center / Com Systems; Alternative Energy, and Semiconductors

• Capital for new product and service innovation

Growth Equity: Providing “Flexible” Capital and Structuring Alternatives

Founder / Management

Buyout

Incubated Deals

Thematic Rollups

Expansion Capital

Take Private Transactions

Example DealsExample Deals What We Look ForWhat We Look For

Business attributes:• Revenues: $20 to $100MM• EBITDA: $5 to $15MM• Demonstrated growth• Recurring revenue• Scalable business model• Higher execution risk• Lower market risk• Founder led; not for sale• Asset light

Opportunity for:• $20 to $100MM equity commitment • Conservative use of leverage

http://www.newgistics.com/

http://www.staktek.com/

http://www.orionmarinegroup.com/

http://www.beechercarlson.com/

http://www.precash.com/

http://www.tantau.com/

Venture: Partnering with Visionaries to Build Category-Defining Companies

Recent DealsRecent Deals What We Look ForWhat We Look For

Target characteristics:• Proven entrepreneurs with deep domain

experience

Transaction / Company Size:• Seed and Series A• Growth capital

Investment Size:• $100k-$10MM

Industries:• Business Services & Supply Chain• Financial Services• New Media, Internet, & Information

Services• Software• Texas Special Situations

Lo

Software

New Media

Financial Services

Business Services

What Service Do We Provide?

Limited Partners (“LPs”)

Our Customers

AV raises $ from LPs

AV

Portfolio Company

AV invests $ on behalf of LPs in private or public companies

LP $

LP $ and AV Partner $

AV identifies, executes and manages investments in companies and seeks to exit the investment at a profit – our ability to profitably exit in turn affects our ability to attract more money from LPs

How AV Makes Money

$900 Million

AV Fund X

Management Fee Carried Interest

% %

• A fixed % of fund assets• Used to pay salaries, bonuses,

rent, utilities and deal related expenses

• % of Profits

• This is where the real money is made

Exit

Portfolio Company

Exit Strategy

IPO

Leveraged Recap

Sale

Wind Down

Sell a portion of AV’s ownership through a public offering of stock

Put more debt on the company and take a dividend

Sell the company in its entirety to either a strategic or financial buyer

Stop funding the company and eventually close the operations

Return of Capital

AV

LPs

A Career in Growth Equity Investing

I-Banking Consulting Public Accting

Exit Opps

Experience

Competition

Commitment

Private EquityHedge Funds

Corporate DevelopmentGraduate Business School

Highly Competitive

Top Accounting Majors

2 – 3 years 2 – 3 years Various

Highly Competitive

Valuation, M&A, Capital Raising

Business Strategy, Operations

Auditing, Financial Statement Analysis

Popular Career Choices Post-Graduation

A Career in Growth Equity Investing• Constant learning curve• Relatively few job openings• Competition among “the best of the best”• Investment banking and consulting are the closest analogs• You touch every aspect of company creation, growth and value

maximization• Strategy consulting; transactional / investment banking; operational involvement;

team building; recruiting• Unlike other types of investing, you can influence the outcome• Regardless of AV’s ownership % in a specific investment, you are in the

“power of persuasion” business• Be patient: very long term business with lots of uncertainty

Next Steps: Positioning Yourself for a Job in Private Equity

• Do your homework (READ, talk to people, self-reflect) and decide what your short-term career goals are• Have a diverse array of experiences through internships to see what fits you best; work hard and maximize your experiences• Challenge yourself to get the most out of school; don’t be afraid of tough classes• Pursue “tried and true” investment banking analyst program (preferably bulge bracket bank with M&A exposure) or

management consulting at top firm (McKinsey, Bain, BCG)– Investment banking is the easiest path to a job in private equity due to the analytical / modeling foundation– Consulting is a solid path due to its strategic emphasis– If you pursue a career outside these two fields, getting into private equity will be more challenging because you will

not be a “known quantity”• What are we looking for?

– Excellent academic record (BHP and/or MPA with high GPA and A’s in accounting classes) and high standardized test scores

– Strong professional experience in investment banking or consulting– A demonstrated hard work ethic, proven extracurricular leadership and involvement in activities outside of school– Someone with a clear idea of (1) why he/she wants to pursue growth equity investing and (2) why a position at AV

would be right for him/her – A general knowledge of how private equity investing works– Strong fundamental understanding of financial accounting and a track record of success in Intro, Intermediate and

Financial Statement Analysis courses– A curious mind with a knack for problem solving and comfort dealing with ambiguity– A fun person who has a good attitude, is easy to work with and good to be around in social, non-work settings– Broad interests and a passion for learning in fields beyond just finance and accounting

• Questions ???

Thank you!

Sandahl Austin Ventures Sept 15

Economy & Finance

Transcript of Sandahl Austin Ventures Sept 15