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‘Entrepreneurship’

A dialog and food for


thought

Jayan Ramankutty (1975 – 80 :


75F04480)
Founding CEO YuMe Networks
BITSAA.org, Jan 20th 2007
What is Entrepreneurship
en· tre· pre· neur   ( n tr-pr-nûr , -n r )n.
– A person who organizes, operates, and
assumes the risk for a business venture
Identifies pain-points as opportunities
Takes calculated risks and leads
positively
Passionate, Unconventional and Open
Creates jobs
– Enhances peoples lives
And reaps the rewards
First Step: Exploration
BITS, Pilani teaches you
– HOW to learn
– Compete but yet Collaborate in a social
environment
• Rules, Ethics, Morality etc
Gain real world experience – people and
money
– Be open and inclusive while team building
– Trust-worthy, Fearless, Respectful, Lacking
Greed
Get to the bottom of everything but don’t
get stuck
– “Analysis Paralysis”
Pain Points -
Opportunities
Life Sciences Software Internet Telecom Media & Entt

$1.5B $1.2B $0.8B $0.6B $0.4B


$5.6B, 716 deals in Q1 06
$1.3B, 215 first-time financing deals
Source: PWC NVCA Report
Q1 ‘06
RISK

•“Chance of injury or loss”


•Survival
•Brain - Primordial
•Analysis Tools – complex
Funding Sources
Angel Investors
– Self, family – sold on the idea!
– Wealthy individuals with industry background or individual
funds
– Small investment (~ $1M) in a very early-stage
company (demo, 2-3 employees)
Financial VCs – sophisticated money lenders
– Venture Capital, Private Equity and Hedge Funds
– Fund sizes: ~$25M to 10’s of billions
– Main goal ROI through IPOs, Mergers and Acquisitions
(M&A), Dividends
Strategic VCs
– Typically a division of a large company.
• Examples: Intel, Cisco, Siemens, AT&T,
– Strategic investment for Corporate expansion of product
Funding Stages
Initial Funding Stages

Pre-Seed A small amount of capital to prove a concept for a


potentially profitable business opportunity.
Seed Financing is provided to newly formed companies for
use in completing product development and in initial
A marketing.
Financing is provided to companies that require funds
to initiate commercial-scale manufacturing and
sales. Funding Stages
Growth & Expansion
B Working capital is provided for the expansion of a
company to support growing accounts receivable
C and inventories.
Funds are provided for the major expansion of a
company which has increasing sales volume.
Later Financing is provided for a company expected to "go
public“ within six months to a year.
Funding Criteria
Criteria Ranking Rankin
by g by
Trustworthiness of the entrepreneur (s) Angels
2 VCs
1
Enthusiasm of the entrepreneur (s) 1 3
Expertise of the entrepreneur (s) 4 2
Sales potential of the product 3 5
Growth potential of the market 6 6
Perceived financial rewards 8 4
Investor liked entrepreneur (s) upon meeting 5 9
Quality of product 7 10
Track record of the entrepreneur 9 8
Expected rate of return 10 7
Source: Ten3 Coach
Funding – a timeline
perspective

Source: Ten3 Coach


Angel (Seed) Valuation

Historically seed stage funding is limited


to $1M+
– higher risk – lower funding
Seed valuations tend to be subjective
– Quality of the leadership
• Trust, enthusiasm etc
– Strength of intellectual property
– Time-to-market expectations
– Cap-ex and burn rates expectations
– Sector volatility
VC( Series A) Evaluation
Start
•Mgmt, •Valuation
•Presentation
Personnel •Ownership
•Exec •Marketing •Control
Summary •Management
•Production •Mgmt
•Milestones Team
•Financials •Legal
•CF forecast •Business Plan
•References Contract

FUNDING

1. 2. Initial Screen
3. Due Diligence
4. Negotiation
Opportunity
Introductio
n
6 in 1000 business plans get funded on an average
5% of business plans are read beyond the executive
summary
10% of proposals pass initial screening
10% of pre-screened proposals pass due diligence &
receive funding
State of the VC Industry
Q1 2006 Investment of $5.6B for 761 deals
Total Investment in Billions

$100

$80 8000

$60 6000

$40 4000

$20 2000

$0 -
1999 2000 2001 2002 2003 2004 2005
Source: PWC NVCA Report
Q1 ‘06 Investment # of Deals

Investment reaches a state of equilibrium


Chronology
Lara Technology
June 1, 1997 Oct 24, 1997 March 12, ‘98 June – Dec 1998 Jan – March 99 June 2, 2001

•3 Founders •Cisco signs Series A •First working samples Series B Cypress Acquires
•$50K each on to use of TCAM1 delivered to •$13MM Lara Networks
•4 engineers TCAM for •$4.4MM Cisco •Battery - $7MM • $300MM
•$0.01/sh catalyst •F&F - $2MM •Hit $1MM revenue by •TelesoftVC - $3MM •A- $5.41/sh
products •Investar Dec 98 •$1.30/sh •B- $12.91/sh
•First time •$0.55/sh •C- $4.91/sh
switches will •$20MM options
cross 100MX/s

Y 2000

Total Investment - US$17.4MM •Splits into


•Lara Networks
•empowerTel Networks
•$20MM annual rev
Financial Chronology of
Amazon.com

Source: Ten3 Coach


Reward

What is this?
Why does this matter?
Is that the end goal?
Q&A
BIO
80-83: ORG Systems, Baroda, Bangalore
84-86: Tata Elxsi, Singapore
87 : CSU, Chico, Summer job – Elxsi
87-89 : Full time Elxsi, Part-time CSU, San Jose
90 : MS Computer Engineering
89-91 : Via Technology
91-93 : co-Founder Nimbus Technology
93-97 : Alliance Semiconductor acquires Nimbus, built PCI
multimedia chips
97- 01: Co-founded Lara Networks, EmpowerTel Networks
June 01: Lara – pioneer in TCAM Acquired by Cypress
June 02: EmpowerTel pioneer in VoIP Acquired by Ipunity
Sept 03: Founded YuMe Networks – New Media Company pioneer in
inserting RT video Ads
July 06: Closed $7.2MM Series A funding for YuMe
Dec 06: Stepped down from active duty at YuMe
Mentoring Duke Graduates on entrepreneurship
TiE Charter Member and Co-Chair of Media and Entertainment
Five patents to date in routing, VoIP. Have applied for video over IP,