Venture Capital

Newsletter Newsletter Vol. 1 25/05/2018 Cass M&A and PE Society

I NSIDE VENTURE Getting Started CAPITAL By Albert Steffes

1. Introduction to VC The Cass M&A and PE Society of Cass School is delighted to present the very first Venture Capital Newsletter. 2. Exclusive Interview: Stasher Since 2017, the society has expanded its field expertise and established a separate Venture Capital (VC) department with a 3. Crazy Softbank Funding Head of VC. The prerogative being that it is quite different to other types of Private Equity and therefore requires a different 4. Promising Tech Start-Ups: approach and focus. Wrisk, Coinfirm & ProSapient We would like to give keen students the chance to dig deeper into this field and explore it as a career path, and introducing it as a financing option for upcoming Entrepreneurs among the Cass community. This newsletter will provide students with interesting articles “The biggest secret in on VC topics, exclusive interviews with Venture Capitalists and venture capital is that the Entrepreneurs, and ultimately the hottest news and trends in best investment in a the industry. successful fund equals or We hope the reader will find this newsletter informative and outperforms the entire rest enjoyable to read while arousing curiosity. of the fund combined.” For further information or enquiries, please reach out to the -Peter Thiel- contact persons at the end of this newsletter. The Cass M&A and PE Society hope you enjoy the reading and that it provides you with new insight. Let us get started – take a deep breath and let us immerse ourselves in the world of Venture Capital…

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Introduction to Venture Capital By Albert Steffes Venture Capital – a word itself that triggers excitement from readers, “Venture capital is respect from fellow investors, and a hopeful awe from on-going about 0.02% of the U.S. Entrepreneurs. This article will look to clear the smoke screen often held economy invested, and between Venture Capitalists and those on the outside. We want to reveal it accounts for 11% of the nature of Venture Capital, its characteristics, the key players, and total U.S. jobs and 21% eventually finish with current trends and examples. U.S. economic output. And the reason why is A dictionary definition “Venture capital (VC) is a type of private equity, a because these form of financing that is provided by firms or funds to small, early-stage, companies can get emerging firms that are deemed to have high growth potential, or which very big, very quickly.” have demonstrated high growth”. -Juan Enriquez- As part of Private Equity, Venture Capital invests in private companies in

exchange for equity. However, Venture Capital is quite different compared to the common term of Private Equity, with later-stage funds (i.e. buyout funds) being the largest group. More specifically, VC firms are investing in early-stage companies (i.e. start-ups) that are very restricted regarding funding due to the high risk of failing and a limited track record or profits. VC firms are financial intermediaries who are collecting money from investors (LPS – Limited Partners) and investing it into private companies on behalf of the investors. The biggest group of such investors are pension funds, university endowments, foundations, insurance companies or very wealthy investors. As the second word within Venture Capital already assumes, the main objective of VC firms is to maximize the return on the invested capital. In order to understand the structure of a VC fund, it is San Francisco – the melting pot of VC. important to be aware of all the key players and their incentives.

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VC Structure

The main investment vehicle, the VC fund, is structured as a Limited Liability Corporation (LLC) governed by partnership agreement covenants of finite life - usually with a 7-10 year harvest period. This means that after a defined number of years, the fund is required to return the proceeds from investments to investors. The investors, as mentioned above, are Limited Partners (LPs). Hence, they are only liable with their invested capital. On average, it takes 3-4 years until the committed capital is fully invested. The Venture Capital partners are the core of VC funds and in industry jargon called General Partners (GPs). Their responsibilities include raising and managing these venture funds, making investment decisions, helping their portfolio companies to exit and as the most time-consuming part, acting as advisors to the portfolio companies. They usually sit on several boards of various portfolio companies/start-ups at the same time. These portfolio companies receive financing, strategic advice and help in various ways to grow in exchange for shares of preferred equity in their companies. From a generalized point of view, there are 3 types of VCs: 1. The domain (industry) expert who possesses of a deep knowledge of the industry. 2. The operator who holds a long track record of growing and scaling companies. 3. The networker who is well connected and can introduce start-ups to important contacts. And of course, some excellent VCs will provide all of the above! Given the variety in background, it is difficult to generalize VCs to a certain stereotype. However, three career paths are quite common in order to break into VC: The first group consists of former Entrepreneurs who have successfully proofed how to run and scale a business, or even failed but got the whole operational experience and start-up exposure. These people would mostly cover the operational side or provide domain expertise. The second group consists of former consultants and investment bankers with management/corporate finance background. Since the word Venture Capital still contains the word “capital”, finance professionals are crucial to make those VC deals.

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The third group is formed by previous professionals working in operations or a certain product group (i.e. Ads & Search product manager at Google). This is also a reason why VC attracts broadly MBA students that have prior experience in those roles. In most of those previous corporate roles, the positions and hierarchy are determined meticulously and the timing is predictable – for instance in investment banking, you will be commonly promoted from an analyst to an associate in 2-3 years’ time.

How does it work in Venture Capital?

Since VC firms are small organizations, the hierarchy is quite flat and positions vary from fund to firm to region to the team. In general, the The notorious open office work places. junior positions at a VC fund are analyst and associates. They will do most of the due diligence, attending conferences and screen potential investment opportunities. The next positions are then VP, Principal and eventually Partner. The more senior members are spending most of their time on the boards of the portfolio companies, providing them with support (see 3 types of VCs) and making the final investment decisions for the fund. “One of the cautionary However, this structure differs among VCs. lessons of VC is, if you What are the chances of landing a job in VC? don’t invest on the basis of serious flaws, you It is notoriously hard to break into VC – even harder than IB for the bigger don’t invest in most of VC funds since there are fewer positions, the employee attrition rate is the big winners.” lower and open job positions are rarely advertised, but rather circulated within the network. Hence, VC job seekers have to continuously screen the -Marc Andreessen- industry for such opportunities since the application windows are short.

Investments

Outside of VC the myth is that VCs are watching out primarily for exceptional founders with great ideas. Although this is a key ingredient, the key to success lies often in the industry. Given that over 70% of start-ups fail or die, investments in fast growing industries are more important in most cases in order to mitigate this risk. Moreover, VC investments in high- growth segments are likely to have more exit opportunities because investment bankers are continually looking for new high-growth companies to bring to market. Therefore, the idea is to invest in a company’s expected EBIT multiplied by their expected value in 5-7 years’ time. This is no easy task, particular when bearing in mind that over 70% of start-ups end up failing! However, when looking at one of the investments that does materialise, an ‘exit’ culminates when a company reaches sufficient size that it can be sold to a corporation (trade sale) or be brought to the public market providing liquidity (IPO). So, VC operates in a niche market where “What are your 3-Years financial projections?” traditional, low-cost financing is unavailable. Remember: mostly finance new only when there are hard assets against which to secure the debt.

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So what stage has a start-up to reach until VCs are willing to provide funds? VCs focus primarily on the middle part of the classic industry S-curve. They avoid both the very early stages, when technologies and market demand are uncertain, and the later stages, with competitive shakeouts, consolidations, mature businesses and decreasing growth rates.

By Kmuehmel: Startup_financing_cycle.JPG

VCs invest to fund internal growth of companies having demonstrated early sales and a minimum rather through external. According to a study, viable product. Series A marks the first institutional approximately 80% of the money invested by VCs round. Following investment rounds are called Series goes into building the infrastructure required to B, Series C and so on. This is where most companies grow the business - manufacturing, marketing, grow rapidly and require a significant amount of sales, fixed assets and working capital. It is a working capital. In the expansion stage, companies portfolio game - time plays a crucial role! receive VC funding if they are already a profitable company and pursuing further growth. The last stage There are different stages of VC investing: is the exit for VCs, where liquidity is provided through Since VCs do not provide much early investment a secondary sale, an IPO or an acquisition. (seed investing), the growth stage (Series A) is typically when they provide funds to companies Venture Capital - Newsletter Page 6

Returns

What about the returns and salaries VCs can expect from such a high-risk commitment?

As shown above, the profit comes from two streams: carried interest (20%) which is a performance fee, and the fixed management fee of 2%, which is supposed to cover the administrative/operating expenses of the VC fund.

Since start-ups need some time to grow and to scale, most of the gains are realized when there is a liquidity event. This could be done in form of a share purchase, an acquisition by another company or the jackpot for every VC - an IPO. Usually, an IPO is the exit option which takes the longest time – sometimes decades, i.e. Spotify (2006-2018). The rewards for the high risk of failure and the long investment period can be super lucrative: after WhatsApp’s $22 billion acquisition by Facebook, Sequoia Capital (the company’s only venture investor) turned its $60M investment into $3B – a 4900% return!

Sounds too good to be true? Good point – these so-called “Unicorns” are extremely rare and hard to spot in reality! As mentioned earlier, over 70% of start-ups fail or die.

Here is an illustrative example:

Let us presume that only › 3 % of companies exit above $100 million. Then › 0.7 % exit above $500 million, and with Unicorns (> $1 billion valuation) - only › 0.2 % exit above $1 billion and › 0.06 % exit above $2 billion.

VCs’ are betting on only 10% of their portfolio companies to sky rocket and deliver enormous returns, and consider the other 90% to fail. Given the average expected annual return of 20%, two ‘winner’ investments would have to achieve cucuttuc a 30x return – and that is just to generate a minimum respectable return.

www.hbr.org/1998/11/how-venture-capital-works What about the salary for VCs?

One might expect the salaries to be attractive for graduating MBA’s given their desire to work in the sector and forgo what could be a lucrative salary in their previous sector. As always, it depends on a variety of factors, but three factors play an integral role: assets under management (AUM), the VC’s performance, and the reputation of the VC. Most of the best deals are allocated to a few major players within VC – those with a phenomenal reputation and team. As a result, they attract the most-promising Entrepreneurs and investors, which attracts investors to the fund. Significant demand from investors increases AUM and available capital to invest, when paired with great performance – exiting at a high valuation – the cycle becomes self-fulfilling. Given a 2% management fee on £100mn AUM, a VC has £2mn per annum as the base for covering expenses.

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Let us take 20% as the required investors’ annual return. From the chart, it follows that over 5 years; the annual performance fee can be easily over £1m per partner. Experience, geography and the VC strongly influence the pay for this job. Here a few figures from some salary databases:

www.hbr.org/1998/11/how-venture-capital-works

VC generally pays less than later-stage Private Equity, but the working hours are on average less, so the hourly compensation may actually be higher. The bonuses and carried interest from investments in portfolio companies also form a significant portion of the total pay. As shown below, the bonus can easily be over 100% of the base salary, which is befitting for an industry focused on performance incentives. www.payscale.com

A well-paid job with a better work-life balance makes VC very appealing for many MBA’s, finance professionals, former Entrepreneurs

and people who are passionate about new business ideas, cutting-edge technology trends

and start-ups.

www.wallstreetoasis.com

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Industry overview and current trends in VC

VC is a relatively small industry in comparison to other sectors within finance. As mentioned above, the best deals are often accumulated among a few key players. The dominating countries for VC are, not surprisingly, the USA and China.

To give you an example: One of the most active and successful VC firms in the world is Sequoia Capital based in Menlo Park (USA) with early investments in Apple, Google, YouTube, Instagram and WhatsApp. From 1972-2014, Sequoia has invested in over 250 companies with a combined market value of $1.4 trillion - equivalent to 22% of the NASDAQ in 2014. This confirms the important role of VC for a country’s economy. Another West coast-based VC firm with an outstanding track record to mention is the famous Y Combinator with early investments in and Dropbox. It is notoriously tough to even get the chance to pitch in front of the partners at this firm – which might already be viewed as an accomplishment. However, there is certainly a severe shift towards Chinese VC firms acquiring market shares predominately in their domestic market – which one is larger than the USA. One can safely assume we are going see Chinese VC firms becoming more dominant globally in the future, potentially claiming the throne of the USA as “the VC country”. For instance, China Reform Fund Management is already the largest VC fund manager in the world by total capital raised, with $20.2bn in the last 10 years. CRFM is a predominantly central state-owned private equity firm established in 2014. According to the FT, this is a Chinese incentive to move away from subsidies in favour of pouring billions into VC style funds and to deploy its deep pool of capital outside of state- controlled industries.

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Europe is in the third place, with London the #1 hotspot for VC followed by Berlin and Paris. In fact, London had a record-high in 2017 with £2.5bn in VC fundraising. London’s ecosystem provides easy access to talent, capital and a broad consumer market. As an English-speaking VC hotspot, scaling and building businesses globally is also an important success factor. In 2017, fintech firms raised the overwhelming majority of funds – one of highest VC-funded sectors in the UK. The most famous and largest VC deals globally in 2017 were , Snap and WeWork.

www.preqin.com Current Trends

In 2017, 417 venture capital funds reached a final close, securing an aggregate $55bn in capital. Aggregate capital raised remains near the 10-year average for VC funds (2008-2017) - despite a 27% decrease in the number of funds closed compared with 2016. With 145 VC deals completed globally for an aggregate value of $182bn, this amount represents a 4-year low in the number of deals completed but a record high for aggregate annual deal value!

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The high valuation was driven by a high number of $1bn+ transactions and larger late-stage funding rounds. Around 78% of funds closed in 2017 achieved 100% or more of their target size, constituting the largest proportion for 2008-2017.

Geographically speaking, North America-focused funds accounted for more than half of funds closed (53%) and capital raised (55%) in 2017, with the majority (58%) of capital raised by California-focused funds. The USA still possesses the most active VC funds. New Enterprise Associates XVI, a US focused early stage vehicle, was the largest fund closed in 2017, securing $3.3bn.

However, as previously mentioned, there is a continued movement away from North American markets, shifting towards emerging opportunities in Greater China and the European markets. Europe has recently tried to combat its American VC competitors by launching VenturesEU, a joint venture featuring six of the largest fund managers in the UK, their goal is to find more ‘Unicorns’ (Tech companies at valuation of over $1bn). A recent unicorn example would be the UK digital banking start-up Revolut at a $1.7bn valuation.

Greater China saw an increase in the number of deals in 2017 (2,633 vs. 2,547 in 2016), and its market share has increased for the fifth consecutive year to 24%, well above the 11% average in 2007-2016! In comparison, the average size of Europe-focused funds has increased each year since 2014 and stands at a record $123mn for funds closed in 2017. The Berlin-based VC firm and company builder, Rocket Internet, successfully launched its debut fund (Rocket Internet Capital Partners Fund) - the largest Europe-focused fund closed in the 2017 ($1bn).

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Deal Flow by Stage VC Exits

The earliest stages, Angel/Seed financing, The aggregate value of exits globally accounted for $3.8bn in aggregate value in increased $71bn in 2017. However, the 2017. Series A and earlier stage financing number of exits declined for a fourth continued to lead the VC market in 2017, consecutive year to its lowest level since accounting for the majority (60%) of deals and 2011, driven by the slowdown in IPO & 16% of aggregate deal value. Series D and later follow-on exit activity. stage investments saw one of the largest year- on-year growths in both completed deals North America remained the most active (+30%) and capital invested (+88%) of any stage! region for VC exits in 2017, accounting for 59% of all exits and 73% of global value.

27% fewer European exits resulted in an 11% decline in value in 2017, while the number and value of exits in Greater China fell by 33% and 11% respectively from 2016, with 60 exits amassing $5.6bn in value.

Israel is the only region that saw an increase in VC exit activity in 2017, with 16% more exits and an 84% increase in aggregate value compared to 2016. VC exits in 2017 were led by the software sector, which accounted for 30% of all exits and 21% of total value.

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Industry Preferences

Not surprisingly, information technology is the most popular and attractive industry to VC firms. Healthcare is in second place, made even more interesting given the announced healthcare project partnership between Amazon, Warren Buffet and JP Morgan. The largest proportion (26%) of venture capital transactions in 2017 were in the software sector, surpassing the internet sector for the first time since 2009; however, deal value is still dominated by the internet sector (24%). Healthcare deals reached a record-high value of $28bn in 2017, despite accounting for just 14% of aggregate deal value.

Other emerging trends in VC investments are in Blockchain start-ups, the total of which increased considerably in 2017 to $911 million, an 88% jump from 2016. We feature one firm, Coinfirm, later in the article who are looking to capitalise on the need for compliance in the blockchain and crypto start-ups. Cybersecurity, IoT and ML are other tech areas receiving a great deal of funding currently.

In December 2017 alone, investors poured 50% more into token sales (ICOs) than VCs invested in the space over the course of the entire year, and 3x more than all Blockchain-related VC deals in 2016. Artificial Intelligence (AI) start up acquisitions were up 44% in 2017. Around 42% of the AI companies acquired since 2013 have had VC backing which confirms AI as an emerging industry with high-growth potential.

VC Outlook VC deal activity has expanded rapidly over the past decade –global deal flow has more than doubled and aggregate deal value has more than quadrupled in this period. This and the growing influence of non-traditional investors entering the VC market is making this industry ever more competitive. Consequently, portfolio company valuations are at record-high levels, and investors are concerned about over-inflated assets and the deployment of their capital. In the next few years, it will be interesting to see where this trend leads.

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2. Exclusive Interview: Stasher

By Anthony Collias, Ilias Vougioukas, Albert Steffes

A month ago, we had the opportunity to sit down with Anthony Collias, the Co-founder and CCO of Stasher (previously CityStasher) to ask him about his experience of starting a viable business, finding financing, maintaining success, innovating and growing into a global business (www.stasher.com).

Stasher is an online platform for luggage storage. Users can drop their bags off at StashPoints around the city and pay through the app from £6/item. To date, Stasher has stored more than 62k items. It is predominantly aimed at travellers who might have had to check out early from their hotel or Airbnb and are then left carrying around a heavy bag for the rest of the day with time before their flight in the evening.

In Stasher’s own words, the Eureka moment came when “People were always asking to store their stuff at Anthony's home near King's Cross. When Matt (the other Co-founder) asked, Anthony replied ‘Sure, but I'm charging you for it’...On 21 September 2015 we incorporated CityStasher Ltd (now Stasher)”.

What makes Stasher unique?

The business model itself is based on Airbnb but the luggage storage market has not had much innovation, which Stasher is seeking to address. Previously, you could store your baggage in train station lockers which are significantly more expensive than Stasher. Stasher is 50% cheaper than traditional station storage in the UK, with a standard fixed rate for the majority of the StashPoints.

A little bit about the founders…three friends, Jacob, Matt and Anthony, who met at university and founded the business in the summer after graduating having known that they all wanted to build something of their own. The business began to grow and Stasher currently has 8 (soon to be 10) team members in London and 4-5 business development managers in European countries such as Rome, Germany and France to name a few. Stasher is still growing and has many interesting expansion plans for the future, including more depth in European markets and a larger geographical reach.

How was the business funded? Did you use Venture Capital and how easy was it to get funding? What are your future funding plans?

Stasher is VC backed. The business was launched originally with angel capital and has raised $1.1mn from three VC investors in a seed round to date. We are looking to raise more capital in the coming months to facilitate the growth of the business and dynamic team, while having a strong track record of revenue- generation for their investors. Venture Capital - Newsletter Page 14

How does one approach the VC firms?

We would simply either approach them, cold call them, fill in the VC fund’s own application form or ask people in our network for an intro. However, I’d stress the importance of networking and conferences, having met our investors at a conference! People tend to underestimate the power of their network. Business is not like social life and it is not strange to reach out to people who you may not feel you have a strong connection with, such as a friend of a friend who may have experience in app development.

How was the idea pitched?

From my experience, business plans are not used too much anymore, apart from in business schools. VCs are looking for financial plans, dashboards and decks showing how you plan to use their money in the future.

From the VC side, is it more a gut feeling, or do they see a growth rate?

With Pre-series A, they are looking at softer things as numbers might not be available. How will you make money, what does the team look like, what traction if any is there and is there credible research on the market size (in Stasher’s case it is difficult as it is a niche market). You should aim to create a narrative on how you will turn this into a credible business!

Series A – the VCs are looking for marketing channels that work and a business model that works so that they can essentially put more money into the machine and it will/should work!

What is the market estimate?

It is not a standard market and there is no PwC report that comes up with growth and size figures but, from the research that Stasher did into the European market, we estimated it at around €5bn.

What are the VC funds used for then?

Growth – more specifically, hiring of European staff, bringing the tech team in-house and marketing (those are the two main costs in general for Stasher).

VCs of course will take equity (convertible notes sometimes) but not always a majority – dilution for the first rounds is around 10-15%. Dilution does suck, but what you really care about is the value of your equity and the value of the company and money to grow it.

Did the VCs you partnered with work in start-ups?

You can tell if the VCs are finance based – they tend to ask very similar questions, whereas start-up based VCs want to find out more about you and to develop the relationship.

How much guidance do the VCs provide?

For Stasher’s VC partners, it is a fair amount without being overbearing. They do monthly check-ins in a very supportive way. The VCs want to see the business succeed and they invest because they believe in the abilities of the team. Furthermore, the VCs are good for intros to other investors to talk about future plans and follow-up rounds.

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For students thinking about ideas with no tech What are Stasher’s exit plans, if any? background, how can they find an app developer? Anthony suggests that too many people focus on You can usually find third party off-the-shelf funding rounds and exits whereas stasher focuses on software and you can do things manually using excel building a business! Having said that, it would not or Google pages which you can then use as a base to be unfeasible that a large travel/hotel group buys a find a tech lead and proceed to try to raise money. service like Stasher. He uses the phrase - Do things that don’t scale to prove a point i.e. A platform for booking something One of the key questions/issues for young with a business doesn’t need to be complicated – use Entrepreneurs – do you raise money from friends google sheets, a phone and email - try and validate and family? your business idea without using advanced tech at the start. The aim is to make it scalable after first Stasher didn’t raise from family and friends, as the validating it. business tends to stay afloat only because your family and friends will generally give you funding If you know someone in your network then great but because of your relationship, and not because you it is hard… what about outsourcing? have a legitimately good business.

It is never going to be as good as making it yourself When it comes to Entrepreneurship do not be scared but can make more financial sense to start there – to ask people and validate your idea! Go to shops make sure you don’t put too much money into and ask the questions you need, get people to something that might be scrapped in the future. preregister and provide a service that could work in the meantime. Competition and barriers to entry – Stasher’s operations can be described using the analogy of Any general advice? food delivery - aside from the host, users don’t mind which service they use and they may use multiple LEGAL CONTRACTS! All of the co-founders must platforms. have vesting agreement (agreed total stock you will have but you will get it over time) and VCs will not How do you win in this market (i.e. Deliveroo)? invest unless all the parties involved have a vesting agreement. Furthermore, co-founders are really Raise the most money and create a network and important, and one person doesn’t have the time or economies of scale. Fun fact: Stasher has raised the the energy to do everything well. If you have not most in their market! As far as we can prove, Stasher found a co-founder you trust, you should within 6 started doing luggage storage first and right now, we months! You should trust them enough so that if are one of the two or three meaningful players doing legal contracts were messed up, could you rely on it in Europe and one of around 7 in New York. them to not take advantage of that.

So, seeing that there are other people out there, would Stasher consider M&A?

The clear answer is yes, as it is a good expansion opportunity and you could collaborate with good people. I’d emphazise that you should always try to be business friendly as you could end up partnering with another business.

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Where do you see the company in 5-10 years?

Global reach and providing 2-3 other serious services, but in 10 years it is hard to say!

Where is the industry heading (Anthony’s perception and experience)

Before: you worked in M&A and consulting and then went to VC/PE while some Entrepreneurs could jump into VC/PE as partners.

Now: actually, people have begun to realise that M&A doesn’t prepare you for actual business at a Start-Up. VCs who are hiring are looking to see if you have experience in scaling a Start-Up, and will often bring people in-house to help with growth and development in their Start-Ups.

What about other funding sources like – are they threats to VCs?

I don’t believe so. Maybe one day but ultimately, VCs are smart money and bring value. Crowdfunding is a great principal and good for marketing, but the hype is dying down.

The Cass M&A and PE Society, Ilias and Albert would like to personally thank Anthony for taking the time to talk to us – we wish Stasher all the success and look forward to keeping in contact to see how the business develops with the future funding rounds!

www.businessandfinance.com/ones-watch-citystasher/

www.stasher.com E-Mail: [email protected] Phone: +44 20 3355 3544 Venture Capital - Newsletter Page 17

3. Softbank invests in Wag! – an on-demand dog walking app

By Ilias Vougioukas You may have seen some pretty wild valuations out there but this one definitely raises some interest...

First of all, let’s introduce the SoftBank Vision Fund (SFV), as we expect to hear more from them in the future. They are a VC fund which has emerged as part of the Japanese SoftBank banking group. They are currently raising funds for future investments and have managed to raise $93bn (yes you read that right) with a final target of $100bn closing in 6 months. They count Apple, Qualcomm and the Mubadala Investment Company of the UAE to name a few as their investors. Some of their previous investments include Uber, WeWork and ride-hailing company Didi Chuxing So how much did SVF invest in Wag!? $300mn. In fact, SVF was not interested in investing anything less than $300mn. Furthermore, Wag had previously raised $68m from other VCs, such as Sherpa Capital and Freestyle Capital but SVF blew these out of the water with the new round. Wag! is definitely innovating in the space of pet care, and the market size in the US for pet care has been measured at $70bn, so perhaps SVF sees the potential in the market and will take a significant market share with Wag.

www.waggingworld.com/2015/07/08/wag-app-matching-dog-owners-with-dog-walkers/

Generally, young startups that manage to raise significant capital can scale quickly and become market leaders so Wag! definitely has the potential to do so. SVF also sees potential in Wag’s management and convinced them to accept the $300mn to expand globally and fend off competitors even though Wag! was only seeking $100mn. It sounds pretty positive for Wag! but the company is not without its own backlash.

Firstly, Wag! has been engaging in a strong marketing campaign using celebrity endorsements which has led to burning through $4mn in cash a month! Secondly, users of the app have claimed that their dogs have been lost by the dog walkers and one user said she was forced into silence through a lawsuit made by the company. However, it seems SVF is overlooking these hiccups and, with a new rebranding planned, it should be smooth sailing. It will be interesting to follow Wag’s expansion and future SVF deals. Venture Capital - Newsletter Page 18

4. Promising Tech Start-ups: Wrisk, Coinfirm & ProSapient By Ross Kelly

Wrisk –Flexible Insurance Start-Up

Following a successful Seedrs campaign, including a follow-on option on the 29th May, and a super seed round of $3m invested by Oxford Capital, Wrisk has just launched their Insurance app in beta phase to 200 invited guests.

Labelled recently by the Founder of a leading Tech Venture Capital firm as ‘Insurance’s Monzo’, Wrisk’s proposition is to bring the individual insurance world together: travel, vehicle, contents, property and the rest, and make the whole process straightforward. Their USP is this simplicity, because people are too often put off by complex insurance jargon. What Wrisk does is put it all into one central hub, and an algorithm creates a point score for each individual, much like a credit rating.

Its real difference from other insure-tech start-ups is being a pay-as-you-go service, on-demand and easy access for everyone. They are also looking to achieve a much more efficient claims process. What is truly impressive is that Co-Founders Niall Barton and Darius Kumana looked to assemble their team before even crowdfunding or pitching to VCs.

My prediction is that Wrisk will truly revolutionise the whole insurance field, so watch this space!

Get early access yourselves to Wrisk beta – www.wrisk.co

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Coinfirm – Blockchain AML Risk & Compliance Platform

Based in Krakow in Poland, Coinfirm are leading the market in cryptocurrency and blockchain risk and compliance. Founded by former head of anti-money laundering at RBS Pawel Kuskowski, Coinfirm are in Angel/Seed phase now (pre VC Series A) and already have $500mm under management.

For just a small fee Coinfirm can run an AML report on any company using the ledger, and this could become progressively more useful for investors looking at the crypto world.

With the amount of Fintech Venture Capital money currently going into Blockchain related start-ups at the moment, I think it is a salient time for the same to be said for a firm dedicated to enabling and ensuring compliance and effective risk management in the space. I think the VC money will pile in over the next 12 months or so.

ProSapient – AI Powered Expert Network Platform

ProSapient is an expert network with a difference – it uses machine learning to make the whole investor to expert connection that much quicker. They received part seed funding from Castle Digital Ventures and were co-founded by an ex hedge fund investment professional and an account manager from a research consultancy.

In a nutshell, ProSapient uses AI and ML to improve the quality of primary research by identifying key themes discussed in sector focused investment conferences across the world. For example, a hedge fund investment manager looking to improve their knowledge within pharma, could appoint ProSapient to swiftly find them an appropriate expert, rather than the investors trawling through their networks to do so themselves.

By utilising ML, as well as the co-founders excellent client base, ProSapient can achieve a similar outcome to their expert network competitors in a much more efficient timeframe.

ProSapient have just started their Series A funding pitches, so it will be interesting to see which early stage Venture Capitalists get involved. I can foresee it being a popular prospect! Venture Capital - Newsletter Page 20

We hope you enjoyed reading our very first VC newsletter and that you could take away a few new insights, interesting facts and that it sparks your interest in VC and its magical environment.

Thank you for reading!

Contact Details

Albert Steffes Head of M&A and Venture Capital MSc Corporate Finance 18’ Email: [email protected]

Ross Kelly

Head of VC Research & Corporate Relations

MBA 18’

Email: [email protected]

Ilias Vougioukas Analyst at Cass M&A and PE Society VC Research MSc Investment Management 18’ Email: [email protected]

Cass M&A and PE Society, 106 Bunhill Row, London EC1Y 8TZ www.cassmape.com [email protected]