New Ventures. Geoff Dolphin Telstra Ventures 29 June 2016

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Bruce Ball
7 years ago
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1 New Ventures Geoff Dolphin Telstra Ventures 29 June 2016

2 Telstra Ventures overview Almost 4,000 investment opportunities reviewed which has resulted in 29 investments to date (15 USA / 9 Australia / 5 Asia) Our portfolio companies generated $1B+ of revenue in 2015 growing at 50%+ YoY and employ 5,000+ people We have had significant realisations from 7 liquidity events. Telstra has generated significant amounts of revenue with our portfolio to date Our Mission To serve Telstra s customers and business units by investing in market leading, high-growth companies Telstra Ventures aims to connect world class innovation from lighthouse entrepreneurs with forward looking Telstra leaders to create solutions for Telstra s customers and create long term value for Telstra s shareholders Telstra Ventures started 4½ years ago in late 2011 and has invested approximately $250M so far Our investment structures follow standard Silicon Valley terms and we lead and follow deals. We are an active investor normally represented on the investee s board Our primary focus is on Telstra s growth and innovation: creating new revenue streams broadening capabilities and cost reduction corporate development investment returns Our investments normally have Executive Sponsors from Telstra s business units to leverage Telstra s assets Our investment strategy consists of minority stake investments in later stage, high growth companies We are looking for world class innovation: Our portfolio companies represent global leaders in their fields and have been recognised by Gartner Magic Quadrant leaders or Cool Vendors Our team consists of 18 people including 10 investment professionals based in Australia, USA and China. We have a global investment focus Our target investment size is $5M-$10M per deal We have co-invested with 100+ leading VCs and CVCs PAGE 2

Jun 2014 Nov 2014 Nov 2014 Dec 2014 Dec 2014 Feb 2015 Feb 2015 Mar 2015 Mar

3 Telstra Ventures portfolio to date Feb 2012 Jun 2012 Jun 2012 Jun 2012 Dec 2012 May 2013 Jun 2013 Jun 2013 Sep 2013 Dec 2013 Apr 2014 May 2014 Jun 2014 Jun 2014 Nov 2014 Nov 2014 Dec 2014 Dec 2014 Feb 2015 Feb 2015 Mar 2015 Mar 2015 Jun 2015 Sep 2015 To be announced Jan 2016 Jan 2016 Mar 2016 Mar 2016 PAGE 3

4 Corporate Venture Capital vs Institutional Venture Capital CVC s: Invest for: Synergies (new revenue streams, costs savings) Strategic reasons (block, understand, compete), and finally Financial returns Outsource R&D Institutional VC s Invest for: Financial returns, Financial returns, and Financial returns CVC are often large public or listed companies: Concerned with earnings drag (equity accounted losses) Lower risk tolerance for privacy, confidentiality, geographical, political matters Financial returns are less important as difficult to achieve meaningful contribution (but don t lose money!) Later stage investors. Difficult to achieve synergies with raw start-up. AFR front page risk Challenge for CVC is attract VC experienced staff when financial returns are secondary PAGE 4

5 Investment Process different from a normal VC Finding the Deal: CVC deal managers listen for pain points from business or present solutions soon to be relevant to customers from outbound activity. (TV has USA & China venture staff) Mapping the deal Is it technically possible to integrate, or standalone Aligned to strategic roadmap, or worth changing the roadmap for this new opportunity Commercialising the Deal Cant be just a new plaything / toy Business needs to sign-up to targets with consequences Key is to align sales incentives to a revenue $ target and mix target PAGE 5

6 However investment rights the same to control risks CVC s invest alongside Institutional Investors, so use typical Venture Capital rights and controls: Preference shares with liquidity preferences Board Rights Key decision rights, including Hire/Fire decisions Price protection rights Drag & Tag Exits Truth is, CVC often would like to hold longer than they are able They invest later stage than Institutional, so they are often dragged into a sale by Institutional Investors Revenue size / funding requirements / market conditions drive exits Exit Types: Trade Sale IPO Consume A CVC only option PAGE 6

7 New Venture Risks People, People, People Good management across all functions this is so important Technology Need not be the greatest, avoid engineering perfectionists - get into hand of customers early Market Size of sandpit / wallet / spend. Is there a catalyst to migrate to new structures (e.g. cloud) PAGE 7

Analysis One Code Desc. Transaction Amount. Fiscal Period

Analysis One Code Desc. Transaction Amount. Fiscal Period Analysis One Code Desc Transaction Amount Fiscal Period 57.63 Oct-12 12.13 Oct-12-38.90 Oct-12-773.00 Oct-12-800.00 Oct-12-187.00 Oct-12-82.00 Oct-12-82.00 Oct-12-110.00 Oct-12-1115.25 Oct-12-71.00 Oct-12-41.00