Kreos‚Äôs 6th annual Growth Finance seminar held in London earlier this year, brought together 200 GPs, management team members, LPs and friends from our network for lively discussion on the most relevant current topics in our markets.
The focus of the seminar‚Äôs theme this year ‚Äì Navigating Changing Environments ‚Äì was highly relevant, since a powerful outcome of changes which have a fundamental impact on our markets is the terrific range of opportunities across Europe and Israel which are the focus of activity for all of the day‚Äôs participants. The aim of our seminar was to provide an opportunity to exchange views on the main dynamics that we are all seeing.
Chemi Peres, co-founder and managing director of Pitango, and Chairman of the Peres Center for Peace, addressed the changing global environment.
Chemi described how innovation is now almost frictionless, with innovative companies in downtown industrial spaces in cities across the world. Innovation driving social impact is also far-reaching¬† – many more people want to utilise social innovation to do something meaningful to impact the world. We are often over-optimistic about radical innovation in the short term, but in the long term underestimate its profound impacts ‚Äì which challenges everyone who invests in fast-growing disruptive businesses.¬† ¬†As an example of emerging services, autonomous car sharing is receiving significant investment with the objective that cars become shared resources more like ‚Äòhorizontal elevators‚Äô which solve the problems of accidents, parking, pollution and 90+% idle time. While it will be challenging to meet near-term investor objectives, such as Tesla‚Äôs production targets, in the long run the impact of shared car services will indeed be profound.
Chemi also discussed that the world has new macro challenges including energy, water and cybersecurity. And new approaches to governance and collaboration are required to meet these challenges. For example, he noted that our increasingly global economy, where data and IP have become more important, needs different sorts of taxes.
In addition to Chemi leaving us some food for thought, several of Kreos‚Äôs portfolio company CEOs had joined us for the day, and shared with us how their businesses have been driven by some of the global changes that Chemi discussed.
Graham Cooke, founder and CEO of QuBit, the data analytics platform, highlighted that our economy has evolved from resources extraction, through manufacturing, to delivery of goods and services, and now to an ‚Äúexperience economy‚Äù that is just opening up, with data at its heart. Daily life is becoming a personalised journey providing unprecedented amounts of data to services able to connect with a customer ‚Äì which drives businesses to focus much more on users‚Äô daily lives.
Joe Steele, CEO of Bookatable, talked to Kreos partner M√•rten Vading about his experience of building a real-time reservation platform for 13,000 restaurants across 12 countries by focusing on the customer‚Äôs experience, culminating in its successful sale to Michelin in January 2016.
Jan Thiel, deputy CEO of Paddle8 (formerly Auctionata), described how the online auction house runs 3-4 auctions a day by connecting to their customers wherever they may be (nearly 50% of their customers are on mobile devices), and as a result, has the highest average basket in the e-commerce space.
Eido Gal, co-founder and CEO of Riskified, explained the shifting focus of eCommerce fraud prevention. Traditional approaches to screening seemingly fraudulent transactions cost merchants $10bn in managing risk, and $35bn in lost revenue annually in false declines and negative customer experience. Riskified allows some ‚Äúgrey area‚Äù transactions to pass, which are analysed to develop more sophisticated screening techniques.
Ronald Brus, founder and CEO of MyTomorrows, told his own inspiring story of developing a model providing early access to new drug development for deployment in compassionate use programmes.
To round out the day, our panel was moderated by Stewart Licudi of William Blair, who led a discussion of the changing environment in the growth and financing of companies in Europe and Israel. He was joined by Hubert Birner (TVM), Adam Kostyal (NASDAQ), Mathias Ackermand (Transmode; NASDAQ 2011), and Jussi Wuoristo (Vitruvian). Some of their observations included:
¬®¬†the last 12 months has been a complex picture, as the record numbers of IPOs of the previous 3 years have reverted to previous lower levels, yet private investment appetite is strong and there is no shortage of cash availability.
¬®¬†high quality private companies now have a choice between 5-8 potential investors rather than 2-3. Founders also need to understand whether they are on a 10-year journey with their investors, or face shorter horizons.
¬®¬†as an exit strategy, the IPO is still an ideal for many companies and investors ‚Äì but it is a tough journey, needing 18-24 months to prepare the business and strengthen the management team.
¬®¬†management teams with cash should spend it wisely; investors competing for deals need to meet companies early and differentiate the value they bring beyond just cash; and markets need to readjust to greater focus on M&As and secondary sales as exit channels.
We look forward to you joining us for our 7th Kreos annual Growth Finance seminar in the Spring of 2017!