Investec Ventures Presentation to TCD Michael Murphy 13 th February 2014
Introduction to Investec Ventures • Investec Ventures is the venture capital arm of Investec - Investec is an international specialist bank - Dual listed in London & Johannesburg • We invest capital in Ireland in private unquoted companies • We currently manage the Ulster Bank Diageo Venture Fund (“the Fund”) a € 75m fund • The Fund and earlier funds have invested in 42 early and expansion stage companies in Ireland Building businesses from low entry values to EVs of € 50m - € 100m - - Exits include: AMCS, Magnetic Solutions, Phonecard Warehouse, National Linen, Newcourt, KCC Security • The Fund is actively seeking investment opportunities and has made 17 investments Mobile Technology, eCommerce, Internet, Search, Analytics/BI, Digital Media, Cloud, Storage, Healthcare 2
Investec in Ireland - A Distinctive Product Offering History Presence in Ireland for over 12 years Acquired Gandon Capital Markets and operations of GE Capital Woodchester Bank in 2000 to enter the market Treasury Corporate Solutions Acquired NCB Group in 2012 Finance Continuing to expand and develop in the market Overview Debt and Over 230 employees in Ireland Investec Equity Wealth Capital Ireland Full Corporate Service offering servicing corporate needs Management Markets as well as senior executive needs Local relationship management, supported by specialised international teams Debt Venture Advisory Capital Ireland’s First Specialist Corporate Bank 3
What is Venture Capital ? • Venture Capital is professionally managed capital that is invested in private unquoted companies on a long-term basis • Is invested in early stage (seed and start-up) or expansion ventures • High risk so expectation of higher than average returns • Active management, value added, transformational 4
Who Invests in Venture Capital Funds? • European institutional investors allocate 1%-2% to Venture Capital compared with 5% in the US • European Funds raise funds from Pension Funds, Banks, Fund of Funds, Insurance Companies, Government, Privates, Corporates, Capital Markets and Academic sources (source EVCA) • Investec Ventures raised € 75 million from Fund of Funds 25%, Government 20%, Privates 18%, Corporates 17%, Banks 13%, and Insurance Companies 7% (source Investec) 5
Market - FDI : A Platform for Entrepreneurial Activity • Favourable corporate tax rate • FDI clusters • Technology/MedTech/Pharma • Educated English speaking workforce • Euro membership • Flexible labour market • Entrepreneurial culture • Good place to do business • Science Foundation Ireland Spin outs and sub- supply “linkages” to MNCs offer investment opportunities 6
Market - Examples of Entrepreneurial Irish Companies Enterprise SW, SAAS, Social Media, eCommerce, Mobile, Internet 7
Market - Overview of VC in Ireland • Strong emphasis on increasing the availability of risk capital for innovative high growth companies • IVCA estimates that in 2013-2017 VC’s will invest € 1.5 billion ( € 300 million per annum) ‒ Increased level of activity arising out of previous seed capital initiatives • Growing market with demand for equity finance for SMEs • Strong multinational base in Ireland ‒ Breeding ground for entrepreneurs • Government Initiatives ‒ Innovation Fund Ireland (NPRF/EI) ‒ Development Capital Fund (EI) ‒ New Seed & Venture Capital Programme (EI) ‒ NPRF Strategic Investment Fund • Vibrant support structures and networks ‒ Investec Ventures is already networked into the IVCA, E&Y Entrepreneur of the Year, Deloitte Fast 50, InterTrade, NDRC, EI, IDA, ISA, Web Summit 8
Fund Investment Strategy Build a balanced portfolio of 18 - 20 companies (17 to date) Investment range € 1m - € 5m on initial investment – geographical focus Ireland Maximum investment per investee € 11m (15% of the Fund size) - Acquire strategic minority stakes 15-30% and appoint a nominee to board Long term investor with follow-on / reserve capability ICT sectoral focus - Software - Mobile comms; eCommerce; Internet; Digital, Social Media & Search; Business Intelligence / Big data analytics; Content management systems; Middleware; Gaming; SAAS solutions; Payments; Hardware – Wireless; Telecoms; Semiconductor; Cloud & Data Storage; Display & Touch screen - technology Back management teams - Expanding their businesses - Effecting recapitalisations/take privates and spin outs Implementing “buy and build” strategies - Realise investments in a 5-7 year time horizon Building a balanced portfolio of early and expansion stage companies and cash generative buyout opportunities 9
Our Coverage - Dealflow Channels Government / Direct to Us Corporate State “Brand Identity” Venturing Agencies R&D Market Universities / Management Team Coverage & Innovation Referrals Collaboration Centres Service Group Reach Providers / Co-Investment Intermediaries • • • Ventures “Own Initiatives” 3 rd party CF Houses Angel Investors • • • WMT / Private Clients Family Offices Consultants / Accountants • • • Corporate Finance Corporate Venturing BES Funds • • • FX / Treasury Local / Intl. PE / VC Houses Other Banks 10
Deal Pipeline (previous funds) - How does it work? No. of companies considered % since inception 1 st Contact with Company 1,079 100% 1 st Meeting Exploration Meetings ~ 6 Months Investment Committee Term Sheet Negotiation Due Diligence Legal Agreements Transfer of Funds 24 2% 11
Portfolio - Balanced by Sector and Stage of Development Consumer & Business Services ICT Software & Hardware Buy-Out Expansion Early Stage Stage Stage 12
Portfolio - As at 31 December 2013 Company Sector Cost Equity Stake Number % Of €’m (Fully Diluted) Employees AMCS CleanTech 1.70 8.4% 140 Betapond Social Media 1.50 17.7% 18 Brite:bill Paperless Billing Solutions 2.53 29.0% 27 Diona Tech Social security solutions 2.70 15.0% 62 ePub Direct On-line eBook Distribution 1.10 25.8% 12 Fenergo Banking compliance SW 3.50 20.0% 69 Ferfics Semiconductor Chip Design 1.64 21.5% 6 Gridstore Data Storage Solutions 2.49 8.6% 35 Helix Health Healthcare Software 5.00 22.7% 130 HeyStaks Social Web Search 1.25 20.4% 6 Micks Garage eCommerce 1.50 20.6% 42 Rainmaker Business Intelligence SW 2.38 36.7% 32 RAPT Touch Screen Technology 2.98 15.0% 23 SilverCloud Online Healthcare 1.10 22.0% 16 TerminalFour Web Content Management 1.00 27.1% 63 Zamano Mobile Services 2.50 14.2% 26 Sub-Total 34.87 707 22% of investees are in the portfolio ≤ 1 year (60% ≤ 3 years) Strategic stakes in investees Total equity investment in the Fund’s investees of c. € 83m 13
Competitive Strengths – Investec Ventures • Strong networks • Access to deal flow through multiple channels • Investment focus is Ireland • In-house access to skills required by Investees • Experienced team - Team has executed 40 deals • Adding value by utilsing our network of business contacts: - Sourcing independent Chairmen for the boards of AMCS, Britebill and Rainmaker - Rainmaker - the Chairman (Brian Dunne, former CFO of Aer Lingus and Air Canada) is well networked into the airline industry and this has led to sales being secured - Britebill - the Chairman, Cecil Hayes, former COO of Norkom plc, invested € 500k into the business and Vincent Ryan (ex Changing Worlds) has added sales & marketing skills - AMCS - the Chairman, Mike Wynne is a former CEO of Greenstar and brings a network of contacts from the industry in the UK and the US - Zamano - John Rockett has added financial and governance skills 14
Market Positioning - € 1.5 bn+ market Consumer & Business Services Carlyle Cardinal MML Investec Highland Capital Ventures Sector Focus Enterprise Equity Technology DFJ Better Capital Polaris Kernel Capital Atlantic Bridge Delta BDO DublinBIC Greencoat ACT Soffinova Life Sciences Capital Seroba Fountain Early Stage Expansion Stage MBO Stage of Development 15
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