stanford university data mining and e-business

SPARRING PARTNERS CAPITAL

April 22, 2023

Stanford UniversityData Mining and E-Business

Sparring Partners

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WARREN H SPAR 20+ Years on Wall Street: Capital Markets & Corporate Finance

Partner at Lehman Brothers

Managing Director at Bankers Trust/Alex Brown/Deutsche Bank

Experience with a variety of industries including Software, Marketing Services, Financial Services, and

Business Services

Closed over $100 billion dollars worth of transactions

M.B.A. from University of Chicago

SPARRING PARTNERS Boutique investment bank with special focus on advising privately-held growth companies in the

software & technology-enabled businesses sectors

Licensed broker-dealer; Member FINRA / SIPC

Sell-Side Advisory: Strong access to senior management of leading global strategic buyers

Equity Capital Raising: Well-connected to the top venture capital and private equity firms in the U.S.

Debt Capital Raising: Strong relationships with global debt lenders, traditional and non-traditional

Private Equity Fundraising: Relationships with U.S. endowments, foundations, pension funds, family

offices, and advisors/consultants

INTRODUCTION

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VC Misses – Bessemer Venture Partners’ Anti-Portfolio

eBay"Stamps? Coins? Comic books? You've GOT to be kidding," thought Cowan. "No-brainer pass.”

Apple ComputerBVP had the opportunity to invest in pre-IPO secondary stock in Apple at a $60M valuation. BVP's Neill Brownstein called it "outrageously expensive."

GoogleCowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”

IntelBVP's Pete Bancroft never quite settled on terms with Bob Noyce, who instead took venture financing from a guy named Arthur Rock

IntuitAlong with every venture capitalist on Sand Hill Road, Neill Brownstein turned down Intuit founder Scott Cook. Scott managed to scrape together only $225K from friends, including HBS classmate and Sierra Ventures founder Peter Wendell, who personally invested $25K to get Scott off his back.

PaypalDavid Cowan passed on the Series A round. Rookie team, regulatory nightmare, and, 4 years later, a $1.5 billion acquisition by eBay.

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Don’t Get Discouraged!

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Most Popular Websites: August 2001 vs. August 2007Ranked By Monthly Attention

Rank SiteAttention

(2001)Attention

(2007)Change Rank Site

Attention(2001)

Attention(2007)

Change

1 msn.com 10.94% 4.96% -55% 16 audiogalaxy.com 0.40% 0.00% -100%

2 yahoo.com 10.69% 6.65% -38% 17 microsoft.com 0.40% 0.18% -55%

3 ebay.com 2.77% 2.50% -10% 18 altavista.com 0.39% 0.02% -95%

4 neopets.com 0.95% 0.22% -77% 19 monster.com 0.38% 0.12% -68%

5 goto.com 0.88% 20 weather.com 0.34% 0.07% -79%

6 aol.com 0.88% 0.94% 7% 21 pogo.com 0.34% 1.69% 397%

7 go.com 0.86% 0.53% -38% 22 amazon.com 0.34% 0.27% -21%

8 passport.com 0.83% 23 blackplanet.com 0.32% 0.10% -69%

9 excite.com 0.82% 0.06% -93% 24 iwin.com 0.31% 0.01% -97%

10 geocities.com 0.58% 0.02% -97% 25 reliaquote.com 0.27%

11 netscape.com 0.57% 0.02% -96% 26 expedia.com 0.26% 0.09% -65%

12 google.com 0.54% 2.60% 381% 27 cartoonnetwork.com 0.25% 0.08% -68%

13 nytimes.com 0.51% 0.07% -86% 28 cnet.com 0.25% 0.01% -96%

14 lycos.com 0.41% 0.03% -93% 29 half.com 0.25%

15 iwon.com 0.41% 0.07% -83% 30 bizrate.com 0.23% 0.02% -91%

Acquired

Acquired

Acquired

Acquired

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On The Internet, There Are No Entrenched Companies!

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eBayPierre wanted to allow his wife to sell Pez dispensers online

YahooDavid & Jerry built a directory of the Internet for their personal use

GoogleLarry & Sergey started Google as a Stanford PhD research project

Craig’s ListCraig’s list was a list of fun parties and events for him and his friends to attendcraigslist

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The Biggest Ideas Are Often Born Out Of Ordinary Needs!

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I VENTURE CAPITAL MARKET

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Venture Capital Investment

0.0

20.0

40.0

60.0

80.0

100.0

120.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

E

Am

ou

nt

Inv

es

ted

(U

S$

bill

ion

)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Av

era

ge

De

al S

ize

(U

S$

mill

ion

)

Amount Invested Average Deal Size


Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial

LAST TEN YEARS

VENTURE CAPITAL INVESTMENTS

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VENTURE CAPITAL INVESTMENTS

Venture Capital Investment by Quarter

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Am

ou

nt

Inv

es

ted

(U

S$

bill

ion

)

0

200

400

600

800

1,000

1,200

# o

f D

ea

ls

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial


BY QUARTERS

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PRE-MONEY VALUATIONS

Source: Dow Jones VentureSource and Thomson Financial, PWC, NVCA


$0

$20

$40

$60

$80

$100

$120

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Am

ou

nt

Inve

sted

($b

n)

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90 Med

ian P

re-Mo

ney V

aluatio

n

($mm

)

Amount Invested First Round Second Round Later Stage

$4

$5

$6

$7

$8

4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07

Am

ou

nt

Inve

sted

($b

n)

$0

$10

$20

$30

$40

$50 Med

ian P

re-Mo

ney V

aluatio

n

Amount Invested First Round Second Round Later Stage

LAST TWELVE QUARTERS

LAST TEN YEARS

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RISK / REWARD PROFILE

High Risk

Low Risk

High ReturnsModest Returns

Early-Stage Firms

PrivateEquity

GrowthEquity

AngelInvestors


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What Makes a Good Business Model


Total Addressable Market (>$1 billion)

Conversion / Adoption Rates Network / Viral Effect (Bloomberg, Facebook)

Revenue Model Predictability of Revenue (Recurring vs. Non-Recurring)

Profitability EBITDA Margin

Growth Rates 10% per year or per month?

Concentration of Client base

Depth of Management Team

Proprietary Technology / Barriers to Entry

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Ideas for New Companies


Think “In-the-Box”

Mimic Ideas from Overseas Auction Sites

Ringtones

Improve on Existing Technology / Idea

Apply One Technology to Another Industry GPS

Think “Out-of-the-Box”

Create a Whole New Market Social Networks

Cleantech

What Do You Think?

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Starting Your Own Company


The Earliest Capital is the Most Expensive!

Beg your friend and family for money

Don’t pay yourself

Beg your developer friends to build the software for you

Give sweat equity to whomever you need in the early stages of the company

Penny pinch on everything – you most likely don’t need a CFO, nice offices, etc. Just get the product out of the door!

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Using A Knowledgeable Banker


Use a banker with domain expertise

Avoids conflicts with potential investors

Creates a perception of professionalism and investor demand

Running a sale process increases valuations and will result in better transaction terms

Bankers have strong relationships

Bankers have valuable insights into markets

Bankers can offer “out-of-the-box” thoughts on potential investors

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The Capital Raise Process


STAGE IDevelop Marketing Materials

Executive Summary PowerPoint Presentation Financial Model

STAGE II Contact Institutions

STAGE IIIMeetings & Conference Calls

STAGE IVReview Term Sheets

STAGE VDue Diligence & Closing

Contact Potential Strategic/Private Equity Investors Distribute Executive Summary Schedule Conference Calls/Meetings

Engage in Conference Calls/Meetings Initial Due Diligence

Review Term Sheets Negotiation Process Select Acquirer/Investor

Complete Due Diligence Documentation Close and fund

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Important Transaction Terms


Pre-Money Valuation + Investment = Post-Money Valuation

Participating vs. Non-Participating Preferred

Liquidation Preference

Anti-Dilution Provisions

Pay-to-Play

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II Case Studies

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SUBSCRIPTION GROWTH

II CASE STUDIES – COMPANY A

Total Subscriptions

0

50,000

100,000

150,000

200,000

250,000

300,000

Jan07

Feb07

Mar07

Apr07

May07

Jun07

Jul07

Aug07

Sep07

Oct07

Nov07

Dec07

Jan08

Feb08

Mar08

Month

Su

bsc

rip

tio

ns

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SUBSCRIBER GROWTH BY EDITION


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CHURN


Churn

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

Jan07

Feb07

Mar07

Apr07

May07

Jun07

Jul07

Aug07

Sep07

Oct07

Nov07

Dec07

Jan08

Feb08

Mar08

Month

Su

bsc

rip

tio

ns

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MEMBER GROWTH

II CASE STUDIES – COMPANY B

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PAID SUBSCRIBER GROWTH

II CASE STUDIES – COMPANY B

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

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SELECTED PAST CLIENTS

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SELECTED PAST CLIENTS

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For further information, please contact:

Warren SparSparring Partners Capital420 Lexington Ave, Suite 2458New York, NY [email protected]

Tel: 212-490-6525

stanford university data mining and e-business

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