HKSTP Lunch & Learn named “Investment” presented
by our investment team. The agenda
included “Global Investment Trends”, “Favorable Government Policies”, “Investment
Jargons”, “Investors” and “Buy Side & Sell Side”.
Firstly, comparison of new and old economy in
different market were discussed and Hong Kong was found that only 3% of new
economy in the stock market. USA’s stock
market for new economy form 47% to 60%.
Then we reviewed some favorable government policies including R&D Spending, Tax Deduction on R&D, University Research Funding, Technology Talent Scheme, IT Hub – Park & Bay Area, Investment Fund, etc.
One of jargon named unicorn was stated that invested
upto USD 1B. Then the financing cycle
was discussed. We need to assist
potential company in the Valley of Dearth region.
The different between CVF (HKSTP fund) and ITVF were
summarized in the following table.
However, CVF is designed for early stage of start-up and ITVF for series
A & B. There were four types of
investors for early stage investment and they were Angel Investors, Venture
Capitalists, Family Offices and Strategic Investor.
The second part was Investment – Sell-side
Fundraising & Capital Market. My
colleagues briefed that five elements made the value chain on investment
support. And they were “Training”, “Consulting”, “Matching”, “Transaction
Support” and “Investment Community / Ecosystem”.
Fundraising Process was briefed.
i)
Preliminary
-
Meet with VCs
-
Provide materials: Teaser (2~3 page
summary), PowerPoint, Business Plan, etc.
-
Deeper discussion (Preliminary Due
Diligence)
-
Term sheet / MOU / LOI (Major business
terms)
ii)
Negotiation
-
Term sheet negotiation
-
Official Due Diligence
-
Negotiation revised terms
-
Negotiate / prepare transaction documents
(S&P, Shareholder’s agreement, etc.)
-
Closing
The comparison of Angels and VC was discussed.
Investor considerations were mentioned.
i)
Return
-
Pre-money and Post-money Valuation (Peer
Analysis, Discounted Cash Flow)
-
Exit Timing
-
Additional Funding Rounds
-
Exit Options
ii)
Risk
-
Solution / Business Model (Entry Barrier
/ Uniqueness, Scalability, etc.)
-
Market (Acceptance, Size, Competition,
etc.)
-
Execution Risk (Management, Corporation
Structure, etc.)
The following diagram showed what information needed
by investor.
Points to be considered
The third part was Investment – Buy-side – overview
of Corporate Venture Fund (CVF) investment.
The history was mentioned that Financial Secretary announced on 25 Feb
2015 that “HKSTP will earmark HK$50 million to set up a corporate venture fund
for co-investment with private funds, in start-ups which are located in the
Science Park or have participated in its incubation programmes.” Then CVF was formally launched in July 2015.
The CVF Due Diligence and Closing Process was
described.
The market-based investment criteria had “Business
Model”, “Founder Team Assessment”, “Financing Plan”, “Potential Return” and
“Capabilities of Co-investors”. Then
closing process and post-closing monitoring were discussed.
The CVF achievements were briefed and benefits to
start-up summarized as follows:
-
Money to reach funding requirements
-
Assists in attracting potential investor
-
Assistance from CVF team in identifying
and accessing resources and networks, both within HKSTP and externally
-
Board advice from CVF as board observers
-
Reputational benefits of having HKSTP as
a shareholder
Reference:
20170726: HKSTP Lunch & Learn – The Startup
Scene in Hong Kong - https://qualityalchemist.blogspot.hk/2017/07/hkstp-lunch-learn-startup-scene-in-hong.html
20170627: HKSTP Lunch & Learn – Accounting 101 -
https://qualityalchemist.blogspot.hk/2017/06/hkstp-lunch-learn-accounting-101.html
20170221: HKSTP Lunch & Learn – Finance for
Non-Financial People - https://qualityalchemist.blogspot.hk/2017/02/hkstp-lunch-learn-finance-for-non.html
20161026: HKSTP Lunch & Learn – Sustainability
Team - https://qualityalchemist.blogspot.hk/2016/10/hkstp-lunch-learn-sustainability-team.html
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