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LGT Venture Philanthropy
Q3 2013
LGT Venture Philanthropy: Our team
Our global team is based in six regions and passionate about creating societal impact
LGT Venture Philanthropy is supported by different competence centers within LGT Group such as HR, accounting, marketing, legal department and asset management.
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Board members
Countries with local team members
LGT Venture Philanthropy: Our impact
Since inception, our over 25 portfolio organizations improved the quality of life of more than 7 million less advantaged people
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2007/08 2009 2010 2011 2012 Time
*Most organizations have several donors/investors; therefore, the # of people reached is not only correlated with our donations or investments.
Portfolio organizations
Impact * (cumulative)
1‘100 lives improved
1.7m lives improved
4.2m lives improved
5.5m lives improved
7.9m lives improved
USD allocated (cumulative)
USD 2.2m
USD 5.3m
USD 8.3m
USD 12m
USD 16m
# of organizations 1 10 13 19 26
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LGT Venture Philanthropy: Our approach
Venture Philanthropy
Focus on few organizations
Financing combined with management know-how
and networks
Intense local due diligence to build knowledge and
relationship
Continuous controlling
Long-term engagement
Tailored financing: Equity, debt
and grants
Optimization of long-term social & environmental return
Young, rapidly growing organizations
“We want to be as efficient
and transparent as possible in
our impact investing /
philanthropic efforts.
With this objective in mind we
have applied many proven
principles and processes from
the venture capital and
consulting industry to our
impact investing /
philanthropy approach.”
H.S.H. Prince Max von und zu
Liechtenstein
Applying the Venture Philanthropy approach, we provide more than just financing: Management know-how and access to relevant networks can be even more important to achieving sustainable growth.
We use 8 Principles of Venture Philanthropy: Long-term, deep engagement; growth orientation; customized support
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LGT Venture Philanthropy: Our approach
Our investment process uses deep analysis to select the best organizations, as the number we can work with at once is limited
Due Diligence 6 – 12 months
Main activities
Preliminary review
Deal execution
Portfolio controlling & reporting
Exit
Tools/
Documents
Process
Timing 5 – 10 years 1 week – 3 months
Deal sourcing
Monthly reports
Quarterly KPI
Annual report
Post investment monitoring
Business, risk and capabilities assessment
Depth and scale of Impact assessment
Continuous support/meeting (management know-how and networks)
Each investment manager covers on average 5 investments, spending min. 0.5 day/week with each organization
Business, risk and capabilities assessment
Depth and scale of impact assessment
Termsheet
Investment Memo (~30 pgs)
Contract(s)
Intensive on-site due diligence
Reference calls for each management team member of investee
KPI and milestones determination
Final investment decision board/client
Preliminary Review (~7 pgs)
Evaluation of business plan/ proposal
Intensive discussions with senior mgt team members
Stop-go decision board/client
Factsheet (~2 pgs)
Capabilities Assessment (light)
Screening of organizational information
Gathering of basic information
Calls or first meeting with senior mgt members
Stop-go decision team/partners
Tracking database
Quick-screen checklist
Sourcing of potential deals
Information exchange with cooperation partner/ reference calls
Stop-go decision partners
Contract(s)
Options for exit are: MBO Sell to social
strategic buyer Sell to social
investor Exit is clarified
and agreed on with the organization upon deal execution (pre-investment)
# deals to date 700 70 40 26* 5* 5‘000
Deal screening
* 26% grants, 19% debt, 6% convertible debt, 49% equity (including SWAP deals with average deal size USD 50k ) ** Exit: 1 debt, 4 grants
LGT Venture Philanthropy: Our approach
We typcially invest $200k - $5mm in the early growth stage, using the following criteria
Sectors: Education, Health, ICT, Agriculture, Renewable Energy
Growth stage: Early to growth phase At least 1-2 years old
Funding need: USD 200K to 5M
Track record: Not pre-revenue Team / legal entity should exist
Org. & Mgt. Quality: Relevant experience / track record of CEO + mgt. team
Effectiveness of solution: Proof of solution / business model?
Growth potential: Potential / ability to scale ops. across regions / countries?
Efficiency of implementation: Focus; presence of systems / processes; plans
Impact: Potential to reach a high number of beneficiaries?
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LGT Venture Philanthropy: Sample investments
Impact Measurement: Varthana India
IMPACT
Varthana’s loans help in increasing schools’ capacity by constructing new classrooms, putting additional benches etc., and thereby increasing the access to education for low-income household students
Financing by Varthana also helps in improving the quality of education by enhancing school infrastructure and adding key learning resources such as a computer/science lab or expanding a library
Improved material well-being: Increase in education is directly proportional to increase in income
Improved physical well-being: Better education increases awareness about sanitation, nutrition etc.
Improved social well-being: Increase in self-esteem as well as more respect in the society
Improved security: NA
Improved freedom: Increased freedom to choose an occupation depending on the education
PROBLEM
Lack of expansion capital is a major hurdle to the progress of affordable private schools that offer low cost (avg. monthly fee of USD 5 to 20 per student) high quality education to low-income household children
These schools are not viewed as business entities by banks; their typical loan requirement (~USD 15’000) is too small for banks and too big for Micro Finance Institutions
As a result, they cannot access the right type of financing, and therefore have to compromise on quality of infrastructure as well as the capacity to enroll students
SOLUTION
Varthana aims to fill the current gap of financing affordable private schools by providing loans to help school proprietors grow and improve their schools’ infrastructure
Varthana offers loans ranging from USD 2’000 to USD 80’000 at interest rates ranging from 20% to 25% with monthly repayments over a 2 – 5 year period
ENGAGEMENT OF LGT VENTURE PHILANTHROPY
USD 200’000 investment through compulsorily convertible zero coupon debentures
Varthana has access to LGT Venture Philanthropy’s iCats Program, its network as well as ongoing mentoring support
2013e 2014e 2015e 2016e 2017e
# schools funded p.a. 150 1’191 3’924 9’876 20’940
# students (‘000) p.a. 75 595 1’962 4’938 10’470
pablosalgado.com
Depth
Reach
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LGT Venture Philanthropy: Sample investments
Impact Measurement: M-Kopa Solar Kenya
IMPACT
M-Kopa’s inaugural product makes clean and renewable solar energy available to low-income households, thus potentially increasing productive work days, improving income opportunities and reducing health-related hazards .
Through pre-payments, low-income households can re-direct daily energy expenditures from inefficient, wasteful and unsafe sources such as kerosene lamps towards purchase and ownership of affordable solar home systems.
M-Kopa will bring energy access to a considerable portion of Kenya’s un-electrified households.
Improved material well-being: Increases household productivity and income
Improved physical well-being: Reduced health risk though cleaner energy and light sources
Improved social well-being: Increased social interactions due to micro-enterprise activities
Improved security: Secure access to electricity and light
Improved freedom: Greater freedom of choice of products through pay-per-use system
PROBLEM
Over 63% of Sub-Saharan Africa’s population are rural, lower-end consumers with small inconsistent incomes/revenue streams. They can barely afford basic services but end up allocating up to 70% of their household expenditures on poor, inefficient and potentially hazardous energy sources e.g. kerosene.
Studies show that 110 million households across Africa spend USD 160 or more every year on kerosene for lighting and cooking despite the poor quality of light provided by kerosene lamps and related health risks of smoke fumes.
SOLUTION
M-KOPA Solar enables low-income households purchase quality d.light solar home systems through an affordable and convenient pay-as-you-go payment plan using the renowned mobile payment system M-PESA.
The d.light solar home system has 3 bright lights and mobile charging abilities. Customers pay a USD 15 deposit followed by 85 US cents daily for up to one year; owning the product outright after completing payments.
M-Kopa plans to reach over 300’000 households with clean energy by 2015.
ENGAGEMENT OF LGT VENTURE PHILANTHROPY
LGT VP invested USD 500’000 debt and USD 37’500 equity to fund initial roll-out of M-Kopa Solar commercial product targeting low-income households
M-Kopa has access to LGT Venture Philanthropy’s iCats Program, LGT Venture Philanthropy’s network as well as ongoing mentoring support
Depth
M-KOPA Solar seeks to address energy needs of up to 300’000 low-income households across Kenya with its solar home system and could introduce new products for micro-entrepreneurs. To date over 20’000 have been sold in just over one year.
Reach
LGT Venture Philanthropy: Industry insights
Suggestions for working with impact investors
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CAPTIAL RAISING PROCESS: Find a lead investor, negotiate terms with the lead first, the rest will follow. Understand the different types of investment and the terms that go with them – or find an attorney to
consult Choose investors that share your values and approach – whether debt, equity or grant, impact investors
will see themselves as your partner and be heavily engaged in your business…it’s like a marriage
KEY INVESTOR CRITERIA: Quality management with proven track record/expertise to execute Ability to scale Impact Financial Sustainability
USE OF FUNDS: Know precisely how much capital you need, how you’re going to use it, and how it’s going to
grow your business and impact
IMPACT: Have at least a few relevant key impact metrics including lives improved
EXIT: Be able to articulate possible exits or payback period – loan repayment, share buybacks, strategic sale, IPO
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LGT Venture Philanthropy: Contact
Contact information
It all starts with a personal conversation. Contact us to arrange a meeting. We are looking forward to meeting you. En Lee Phone: +65 9868 8820 Co-Head, Asia Pacific Email: en.lee@lgtvp.com Raya Papp Phone: +65 8103 2780 Co-Head, Asia Pacific Email: raya.papp@lgtvp.com Joan Yao Phone: +63 917 811 5831 Investment Manager Email: joan.yao@lgtvp.com Website: www.lgtvp.com
Support LGT Venture Philanthropy is funded through substantial contributions from each of the following LGT Group companies: LGT Bank Ltd., LGT Bank (Switzerland) Ltd., LGT Bank (Austria) Ltd., LGT Bank (Singapore) Ltd., LGT Capital Management Ltd. and LGT Capital Partners Ltd.
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Legal Information
This document is intended solely for the recipient and may not be duplicated, distributed or published either in electronic or any other form without the prior written consent of LGT Group Foundation. This publication is for your information only and is not intended as an offer, solicitation of an offer, public advertisement or recommendation to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any undertaking or guarantee as to it being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published, therefore, information shall not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other consulting matters, nor should any investment or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Forecasts are not a reliable indicator of future value developments. The risk of price and foreign currency losses and of fluctuations in return as a result of unfavorable exchange rate movements cannot be ruled out. There is a possibility that investors will not recover the full amount they initially invested. We disclaim without qualification all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. It is up to potential investors to obtain comprehensive information and appropriate advice in their home country, country of residence or country of domicile about the applicable legal requirements and any tax consequences, foreign currency restrictions or foreign exchange controls and any other aspects that are of relevance prior to any decision to subscribe to, purchase, own, exchange or redeem such investments, or enter into any other transaction in relation to same. The securities and rights mentioned in this document may not be purchased or held by investors or for investors domiciled in the USA and/or with US citizenship, nor may such securities and rights be transferred to them.
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