A Turkish Private Equity Web Log

In an effort to cover the Turkish Private Equity Industry - for the promotion of Entrepreneurship, the private equity asset-investment model, and the communication thereof.

ENTREPRENEUR FEATURE: Trink Looking for Seed/Venture Funding
In building this site, it was always my intention to feature Turkey's entrepreneurs. So when Serkan of Trink (http://www.trink.com.tr) and 4Yaprak Bilgi Teknolojileri emailed me his business plan with his elevator pitch in an email, I was more than happy to publish his inquiry. Here is some of what he wrote:

Dear Sir,

I produce a prototype and apply to TTGV (TECHNOLOGY DEVELOPMENT FOUNDATION OF TURKEY) for the fund that I need to create my product (TRINK).

They gave me an incubation fund to create my first pre_production prototype. But now, I need the real fund for startup and mass production for TRINK.

The problem is starting from here: TTGV is one of the biggest foundations in Turkey, but they can not invest any enterpreneur or a company directly -except the incubation fund that we get- because of our laws in Turkey (because TTGV is a FOUNDATION ). So, they(TTGV) set up another company called Teknoloji Yatirim A.S. (Technology Investment Corp.) to support new ideas/companies. Teknoloji Yatirim A.S. supports the enterpreneurs with a fund and create a new partnership company for 4 or 5 years then they exit from this partnership.

But, the problem is that we are not in the range of Teknoloji Yatirim A.S.'s investments. They are investing the new ideas in nanotechnology, advanced technology, …etc. with minimum 200.000 USD startup fund and with minimum 5 million USD income expectation. So, I am trying to find an investor for my project. Here is our situation:

  1. We need ~120.000 USD
  2. Our technology is not an advanced technology. It's new for Turkey but not an advanced technology (our project is a coin/change dispenser).
  3. Our expected income is max. 5 million USD for 4 years in Turkey.
So, for any interested parties, angels, seed and venture investors out there, please check out Trink's business presentation (PDF) and Trink's Brochure (PDF) for further details (in Turkish).

I realize this not "new technology" but an investment all the same, and if Serkan's numbers are sound (per due diligence) and with some VC guidance, this is a valid opportunity waiting to be scooped up. On last speaking with Serkan, he was on his way to speak with IBM on developing the software to be compatible with IBM POS systems. So time is of the essence...

For any information on Trink, please visit the Trink website. In addition, you can also inquire at Grandstanding Traction at turkvcanalyst@gmail.com.

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Posted @ 11:04   0 Comments
The Home Run Mentality in Venture Capital: the 80/5 Principle
As an American that misses baseball, and in the spirit of the boys of summer, I can't help but mention that Barry Bonds hit his 756th All-time Home Run on August 7th, breaking Hank Aaron's long-standing record of 755 set in 1974. Despite the controversy over steroid use, we must remember that Babe Ruth did it on hot dogs and beer, and it is an incredible moment in baseball history and for its fans. Way to go, Barry!

Within the reference of the home run, in my last post regarding Guy Fraser-Sampson's book, Private Equity as an Asset Class, I highlighted a very interesting statistic regarding the need for Venture Capitalists to "swing for the benches" and look for home runs when making investments. GFS had a very interesting chart in his book that observed this statistic from the famous data released from Horsley Bridge. Last week, a lot of traffic came from search criteria looking for this very data. Here are the basics that I have somewhat reproduced here:

The idea is that an investment in a potential "home run" at 5% of cost to the fund will produce 80% of total returns for the fund. This is not to say that it is easy, but VC's should be aggressive in this mentality to get this type of return. GFS reminds you to please not confuse this concept with buyout funds. The concept of having a home run mentality does not really work for the buyout space. However, we could see this principle go down in history (courtesy of Horsley Bridge) much like in comparison with the 80/20 rule. Its an impressive statistic and is very telling as to why the Netscapes, the Googles, and the YouTubes of the world are every VC's objective.

Now if only we can get something to come out of Turkey in comparison.

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Posted @ 09:50   1 Comments
REVIEW: Private Equity as an Asset Class by Guy Fraser-Sampson
To the average man on the street, the world of private equity can take on a perception of big-men-banker types, cigar smoke-filled boardrooms and ivory towers. However, Guy Fraser-Sampson's new book, Private Equity as an Asset Class, puts a face of the common man to private equity that makes it an easy (and enjoyable) read for students of finance, PE/VC professionals, pensioners, gatekeepers and first-time investors.

For the private equity industry, the writing of this book was sorely needed. Guy Fraser-Sampson is the right man for the job - a man with 20+ years of PE experience and previously a partner and managing director at Horsley Bridge. It has just gone on sale in the United States and sold over 1000 copies in the first 10 weeks in Europe. When first I was sent his book, I was delighted. It has been described as "the only definitive text book in the world on private equity." After reading it, I can honestly say it will provide a benchmark and turning point for the global PE industry for years to come. Guy Fraser-Sampson has hit a home-run (pun intended).

Private Equity as an Asset Class follows his first book, Multi Asset Class Investment Strategy, which went into the Amazon "Hot 100" six weeks after launch and has been hailed as a major contribution to modern portfolio theory. With the objective of answering the question, "What is Private Equity?", Guy Fraser-Sampson does just that with a straight-forward, "common-sensed" approach - making this the most up-to-date tome on the PE/VC asset class investment model and an ideal textbook. Because of this, it provides an excellent template for future abridged editions, if the writer later feels so inclined.

In addition, the author makes good use of data compiled from Thomson Financial's VentureExpert bringing to the reader the most recent comparisons of the European and US PE/VC space. There is an excellent glossary and clarification of terms for the PE industry such as Internal Rate of Return (IRR) and Multiples. This also includes a breakdown of the similarities and difference between the venture and buyout spaces - by the sizes of funds, received returns and vintage years. Guy Fraser-Sampson takes this data, combines it with his experience at Horsley Bridge and provides possible reasons for the results and an inside look at the world of private equity. Some other key points that the reader can take away are:

  • For academics and students of finance: It provides the basics of mathematical and financial formulas that can be used as a springboard for continued reading and research of other PE/VC academic papers in circulation.
  • For Venture Capitalists and PE professionals: The book stresses (and proves) the need for a "home-run mentality" when making investments. From Horsley Bridge's (now famous) data on home-run selection, a home-run can represent only 5% of a venture fund's cost, but also represent 80% of total returns for a fund! Thus the mindset and the search for more Googles and YouTubes is mandatory for a successful fund. In addition, the data concerning fund sizes versus returns provides an excellent picture of a perceived "sweet spot" for optimal fund size with maximum return for investors.
  • For first-time PE/VC LPs and pension fund investors: The book is an accurate guide toward the development of a PE investment program and allocation of capital. It also provides a lecture on how IRR, multiples and a "Total Return" method are the only true ways to analyze prospective PE/VC funds. The idea of budgeting, measuring and analyzing compound annual returns of a PE/VC fund is simply impossible and therefore foolish.
If I were to provide some negative qualities of the book, I can only say that in some cases, the author defers discussion of certain areas as "needing a book of its own" where the reader may have preferred more discussion. Some sections of chapters do not read like a textbook, but rather like an editorial column or a novel. Where simplicity was attempted and with added real-life examples, it is here that perhaps more elaboration was needed.

To add to this, (and this is by far no fault of Guy Fraser-Sampson), the European data gleaned from Thomson Financial's VentureExpert is riddled with badly categorized outliers. It is an analytical tool filled with holes. Mr. Fraser-Sampson makes a note of this as "rather overzealous research on Thomson's part as well as some PE/VC organizations too enthusiastic for inclusion in the database". The reader is made aware of these sections. Therefore, some of Mr. Fraser-Sampson's results and analyses are speculations (although sound) based on his years of experience. If anything, this should be a wake-up call to Thomson Financial to get its house in order.

Despite this, Private Equity as an Asset Class is a welcome addition to anyone's finance library. As it is using the most recent data, PE professionals would be negligent not having it as a reference. For Pension Fund professionals and investors, it is a must-read, because it nearly is a "first" of its kind. So before you dive into those boring journals of master's theses and conference papers, you should pick up this book.

For questions about this review, please email me at turkvcanalyst@gmail.com. If Amazon is unable to deliver to your country, go to your nearest bookstore and order it (in Turkey, via Remzi or D&R).

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Posted @ 15:20   0 Comments

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