Startup crystal ball: AI-driven venture...
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| 1 Aalto Fintech Seminar Series 2018-09-18 Startup crystal ball: AI-driven venture capital?
Transcript of Startup crystal ball: AI-driven venture...
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Aalto Fintech Seminar Series
2018-09-18
Startup crystal ball: AI-driven venture capital?
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Kaj HagrosCombining global experience from both corporate and startup worlds:digital business strategist, startup coach and venture capital investor
Sample Corporate VC Projects Sample Startup Deals Executed
Academic BackgroundCareer
▪ 2006 – 2008 Trium MBANYU Stern School of Business,London School of EconomicsHEC Paris
▪ 1994 – 1995 Ecole supérieure de Commerce de Reims▪ 1989 – 1995 MSc. (eng)
Helsinki University of Technology,Industrial Management
Managing Partner, Nordics25+ years in mobile, IT, media industries, COO/CEO corporate roles across Asia, Europe, Americas.50+ seed investments in digital media, healthcare, fintech. Chaired 10 startups.Lived and worked in Finland, France, Germany, Lithuania, Singapore, Sweden, UK, USA
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Redstone at a glanceA powerful team and strong technology leading to outstanding investment results in the digital startup ecosystem
Berlin, Germany
Zurich, Switzerland
Helsinki, Finland
Seoul, South Korea
San Francisco, USA
Paris, France
OFFICES
VENTURE PARTNERS
Nationalities: 11
Tech Team: 6
Investment Team: 14
TEAM
EXPERIENCEStrategic Consultancy, DataEngineering, Law, BusinessPsychology, Corporate Finance,M&A, IT, Financial Computing,Private Equity, InvestmentBanking, Data Science, MachineLearning, Market Research, SerialEntrepreneur, Business Angel
Partners: 10
Size: 29ANALYTICS
DEAL FLOW
500.000+ Startups from all over the world
12.000+ Startups added every year
CLIENTS
DEALS
30+Corporate Clients in the past
5 years
300+ DealsCombined executed by our team
What we are most proud of
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Redstone is trusted partner of many sector leaders
INVESTMENT STRATEGY
FUND MANAGEMENT
INVESTMENT STRATEGY
VC TRANSACTION SERVICE
FUND MANAGEMENT
DIGITAL MONITOR
INVESTMENT STRATEGY
VC TRANSACTION SERVICE
VC TRANSACTION SERVICE
FUND MANAGEMENT
DIGITAL MONITORDIGITAL MONITOR
VC TRANSACTION SERVICE
VC TRANSACTION SERVICE
VC TRANSACTION SERVICE
DIGITAL MONITOR DIGITAL MONITOR INVESTMENT STRATEGY
Venture capital is traditionally basedon personal networks and gut feeling.
We wish to put data into work.For better & faster decision making.
Redstone’s proprietary technologyAI-powered analytics platform with algorithmic search capabilities
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➢ Gain global access to massive dealflow of startups
➢ Leverage our proprietary technology to your firms advantage
➢ Ensure early detection of startupsthrough our AI-powered algorithm
➢ Receive all companies within one sector
➢ Company information available in a standardized format
➢ Fast and flexible process to adapt to your needs
➢ Receive only relevant deal flow using customized search criteria
➢ Continuously adapt search criteria
➢ Explore new areas of interest that were previously unknown
➢ Receive market mappings of top-notch startups showcasing the different subsegments in the sector
➢ Gain a meaningful understanding of the market and bespoke search criteria
➢ Receive a custom-made short list with startups posing a strategic fit for your company
➢ Decide on which companies to invest in and how to continue the investment journey
DATABASE SCREENING MAPPING SHORT LISTSOURCING500.000+ Startups < 200 Startups < 100 Startups < 20 Startups< 2.000 Startups
AUTOMATED TECH AUGMENTED
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CollectingCompany Data
Sourcing Engine “Sophia”Integrating company and people information across 6 diverse data sources to identify micro- and macro-patterns about global, early stage investing activities.
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Enables analytics before the crowd
Example: Social Media sourcing tracks companies before they register at public databases.
• 13 month median gap between registration on Crunchbase and Month Founded• 3 month median gap between registration on Twitter and Month FoundedCompany Identification
Company Taxonomy
Transaction Analytics
Team Analytics
Financial Analytics
Trend Analysis
Investor Analytics
Ranking & Backtesting
PUBLIC DATABASES
COMPANY WEBSITES
SOCIAL MEDIA NEWS COMPANY
DECKS
PATENTS & PUBLICAT-
IONS
Comprises diverse data sources
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OrganizingCompany Data
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Tagging investment opportunities with two machine learning based methodologies.
Startup Taxonomy
Supervised Learning Unsupervised Learning
• Sector (27 distinct industries)
• Business model (Market place, SaaS, License, …)
• Client focus (B2B, B2C, B2B2C, P2P)
• Technology (IoT, AI, AR, Blockchain, 3D Printing, …)
• Business solutions (700 distinct tags)
• Up to 5 tags per company
• Hierarchical structure → similar business solutions grouped into general
clusters
• Pre-defined categories
• Trained using a supervised machine learning model
• Flexible tags changing according to new trends
• Grouping tags using a multi-level clustering algorithm.
• Sector: Professional Services
• Business model: License
• Client focus: B2B
• Technology: Drones
• Computer Vision
• Geospatial
• Image Recognition
• Robotics
• Software
→ Allows to quickly classify any company to a category → Granular detail, monitor trends and benchmark business solutions
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ChoosingInvestment Targets
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Startup RankingAccelerating target selection with a multi-level startup ranking system.
*Financials manually scored as financial information about peers are not publicly available.** Back-tested on historical data
Relevant factors
• Previous funding• Last/previous ratio• Gap from last funding
• Education (e.g. top universities)• Previous roles and experience (e.g.
executive roles, previous founders)• Employee growth
• Top investor rank• Median investor rank• Foreign investors
• Top line growth• Gross margin improvement• EBITDA improvement
• Relative growth of the segment• Segment proportion of growth stage
investments over the past 2 years
Percentile rank
0 - 1
0 - 1
0 - 1
0 - 1
0 - 1
Criteria
Funding score
Team score
Investor score
Financial score*
Segment score
Attributed weight**
Weight 1
Weight 2
Weight 3
Weight 4
Weight 5
Criteria
Funding score
Team score
Investor score
Financial score*
Overall score
Segment score
Target 1
0.31
0.45
0.22
0.40
0.36
0.52
Target 2
0.66
0.48
0.94
0.80
0.70
0.50
Target 3
0.48
0.31
0.29
0.50
0.48
0.54
Target 4
0.87
0.85
0.93
0.90
0.87
0.54
Performance IndexThe performance Index measures portfolio performance such as exit share, share of lead investments, recent investment activity among others.
Network IndexThe Network Index ranks importance of investors in the global and local investment network. The higher the score, the more central and the more important an investor is in the network.
VIEW SAMPLE: INVESTOR RANKING CHINA INVESTOR RANKING ELEMENTS
Specific IndexThe Specific Index ranks investors investment activity in a geographical region or specific industry. Redstone distinguishes between 27 industry segments and 700+ business solutions.
Information Basis
Investment activities of VC investors, the underlying investment target characteristics and the related network of co-investments.
Industry / Geographical Filter
In-house developed classification taxonomy with several dimensions allows ranking investors in a specific area of interest.
Investor Ranking
Investment ranking methodology is based on portfolio performance, network centrality and specialization level of VC-investors worldwide.
Rank Investor Name Index Network Index Performance Index
LocalIndex
% Investments in the region Funding Rounds HQ
1 IDG Capital 0,919 0,993 0,957 0,475 72% 373 CHN
2 Baidu 0,914 0,978 0,961 0,472 70% 61 CHN
4 Matrix Partners China 0,912 0,980 0,949 0,494 77% 210 CHN
5 Legend Capital 0,911 0,977 0,954 0,472 71% 108 CHN
6 Hillhouse Capital Group 0,907 0,979 0,959 0,415 55% 52 CHN
14 GSR Ventures 0,901 0,976 0,934 0,468 67% 101 -
15 GGV Capital 0,900 0,995 0,960 0,276 36% 131 USA
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Investor RankingIdentifying top-tier co-investors in a specific geography, industry or technology.
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Investor Rankings / Q1-2019Example: Global Top 20 Investors
Rank Investor Name Final Index
Network Index
Performance Index
1 Insight Venture Partners 0,989 0,998 0,9792 Meritech Capital Partners 0,989 0,998 0,9793 OrbiMed 0,989 0,998 0,9794 TCV 0,988 0,998 0,9785 Goldman Sachs 0,988 0,999 0,9766 IVP (Institutional Venture Partners) 0,988 0,998 0,9777 Accel 0,988 1,000 0,9758 New Enterprise Associates 0,988 1,000 0,9759 Benchmark 0,987 0,999 0,975
10 Scale Venture Partners 0,987 0,997 0,97711 Sapphire Ventures 0,987 0,997 0,97712 NextGen Venture Partners 0,987 0,999 0,97513 Tiger Global Management 0,987 0,998 0,97614 T. Rowe Price 0,987 0,996 0,97815 Warburg Pincus 0,987 0,996 0,97816 Battery Ventures 0,987 0,999 0,97517 Sequoia Capital 0,987 1,000 0,97418 Venrock 0,987 0,999 0,97519 Tencent Holdings 0,987 0,999 0,97520 Canaan Partners 0,987 0,999 0,974
Regional and stage focus of investment activity
Size of the bubble = number of investment rounds Color = investor ranking
Sourcing Engine “Sophia” allows identification of top performing investors globally.
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Investor Rankings / Q1-2019Example: Europe Top 20 Investors in Mobility Sector
Rank Investor Name Final Index
Network Index
Performance Index
1 Partech 0,960 0,982 0,9372 Baillie Gifford 0,945 0,931 0,9583 360 Capital Partners 0,936 0,944 0,9274 Daimler 0,921 0,912 0,9305 Target Global 0,894 0,893 0,8946 Anthemis Group 0,881 0,940 0,8217 Credit Suisse 0,879 0,865 0,8928 Index Ventures 0,878 0,995 0,7609 Atomico 0,855 0,968 0,742
10 Idinvest Partners 0,850 0,951 0,74911 Eight Roads Ventures 0,839 0,965 0,71312 Earlybird Venture Capital 0,838 0,951 0,72513 Balderton Capital 0,838 0,967 0,70914 EU Executive Agency for SMEs 0,838 0,964 0,71115 Bpifrance 0,832 0,931 0,73216 European Investment Bank (EIB) 0,830 0,725 0,93417 DN Capital 0,828 0,970 0,68518 Robert Bosch Venture Capital 0,819 0,920 0,71819 HV Holtzbrinck Ventures 0,814 0,947 0,68120 Amadeus Capital Partners 0,813 0,936 0,690
Sourcing Engine “Sophia” allows identification of top performing investors within a specific geography and stage focus.
Size of the bubble = number of investment rounds Color = investor ranking
Regional and stage focus of investment activity
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KnowledgeTracking
Note: (1) Highlighted are the organizations from DACH Region, Central Europe and the Nordics.(2) Circle Size = Page Rank (measure of relative importance by counting the number and quality of citations ). Connections between organizations represent inbound or outbound citations in published academic papers.(3) Locations on the map are approximated.Source: Redstone
As an exercise, we have identified thetop knowledge producers in quantumcomputing that can lead to successful
spin-offs in selected European countries
• We analyse patents to assess startups‘ intangible asset value• We map academic publications to identify the core institutions leading to potential commercial
spin-offs
Knowledge Tracking
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Bottom-Up Trend Analysis
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Built your investment thesis based on bottom-up trend analysisDriving Forces in Internet of Things - Technology Drivers translating into the Commercial Applications
Technology Drivers
XXXCloud Computing
Analytics-as-a-Service
Commercial Applications # 14,514
App Explosion
Marketing Automation
Sensors
IPv6
S H O W C A S E .
Source: Deals sourced by Redstone.Note: Commercial applications founded between the years of 2000 and 2018.
Sector AgnosticReal EstateOil & Gas Smart Cities
FashionITTrade Transportation
ManufacturingFinanceAccommodation Education
Smart FoodSmart HomeConnected Cars Energy
UtilitiesTelecommunicationHealth Services Industrial IoT
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Funding Amount (m USD) # of Funding Rounds
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Snapshot of the Internet of Things market
Evolution of global investments
Fund
ing
amou
nt (i
n m
USD
)
No.
of f
undi
ng ro
unds
Recent statistics show that the market is growing and that market consolidation is taking place. The total amount of funding shows mixed results up until 2015 where it
starts increasing and shows significant growth. The total number of funding rounds peaked in 2016 and remains stable fairly unchanged since then.
I n s u r a n c e T e c h n o l o g yS H O W C A S E .
Source: Redstone Sourcing Engine, Tracxn
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Top Internet of Things Acquisitions in 2018I n s u r a n c e T e c h n o l o g y
S H O W C A S E .
Source: Index Ventures
Rank Acquire Amount DateAcquirer
# 1 NEST $ 3,2b 12 Feb 18Google
# 2 Mobike $ 2,7b 04 Apr 18Meintuan-Dianping
# 3 Cylance, Inc. $ 1,4b 16 Nov 18Blackberry
# 4 Ring $ 1b 28 Feb 18Amazon
# 5 Relayr $ 300m 05 Sep 18Munich Re (Group)
# 6 Propeller Health $ 225m 03 Dec 18ResMed
# 7 FIBARO $ 73m 13 Jul 18Nice SPA
# 8 Xively $ 50m 16 Feb 18Google
#9 Tapzo (formerly Helpchat) $ 40m 31 Aug 18Amazon
# 10 Lytro $ 40m 21 Mar 18Google
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Selected Case: Human Machine Interface (HMI)Market mapping of potential search clusters and relevant companies
H A P T I C
S H O W C A S E .
G E S T U R E R E C O G N I T I O N
E Y E T R A C K I N G
V O I C E R E C O G N I T I O N
HUMAN CENTRIC INTERFACE
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Keyword & Proximity Search
Redstone’s proprietary data analytics capabilityEmpowering investors to make faster and better informed decisions
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Data Aggregation Exploration and Analytics Due Diligence
DATABASE SCREENING MAPPING SHORT LISTSOURCING
500.000+
Startups
DEAL SELECTION DD COORDINATION
< 2.000
Startups
< 200
Startups
< 100
Startups
< 20
Startups
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Startup
• 500k+ startups
• 12k+ new startups per year
• 880k Founders, Advisors,..
• 250kTransactions
• Easy identification of relevant startupsthrough an automated taxonomy
• Long list generation
• Automated extraction of company deckcontents in pdf format
• Startup filtering based on pre-defined investment criteria defined by the client
• Market mappings
• Segment valuations and analytics
• Co-Investor and network analytics
• Talent and capital flows
• Short list generation
• Automated generation of startup teasers
• Automated startup ranking (team, investors, financials, etc.)
• Automatedinvestor ranking (network and performance evaluation)
• Team ranking (exits, CxOs, education)
• Competitor analysis
• Portfolio back-testing
• Company valuations
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Tech Roadmap 2016-2020
Automated sourcing engine2016
Global investment activity analytics2018
Technological innovation analytics2018
Pitch-deck processing moduleRoll-out: 2019-2020
Dynamic taxonomy2017
Proximity search according to similar companies2018
Automated digital monitorRoadmap 2019-2020
Competition & market analysis module2018
Back-testing tool2019
Automated investment case reportingRoadmap 2019-2020
Ranking tool2019
Data Aggregation Exploration and Analytics Due Diligence
