A Presentation to be given to Cohort 4 at Incubes on Thursday July 25 On Due Diligence, Valuation and Deals Terms to be expected from Investors.

1. Terms to Expect from
an
Investors Term Sheet
There should be no surprises!

3. Agenda
• Meet & Greet
• Elevator Pitches
• Due-Diligence
• Valuations
• Common Terms
• Q & A
• Wishing you all the best on Demo Day

4. Due-Diligence
• Company
• Business Proposition
• Product of Service Offering
• Market Opportunity
• Governance and Key Management
• Operations
• Company Financials
• Economic Assessment
• Staffing
• Ownership and Exit Strategy

7. Business Valuations
• Every valuation and Pricing is unique
• 65% of business owners don’t know what
their company is worth
• 85% have no exit strategy
• 75% of their worth is tied up in their business
• If you have revenue get a proper valuation
from a CBV

8. Valuation of Early Stage Companies
1. Venture Capital Method (ARI)
2. Scorecard Method (David Berkus)
3. Risk Factor Method (ARI)
4. The Shamrock Method (Buckley)

9. Scorecard Method
30% Management - quality team in place, except sales
25% Opportunity - appears to be a huge opportunity
15% Product – disruptive technology, prototype done
10% Sales – team not in place , channels unclear
10% Competition – many small players, lack technology
10% Other Factors – foreign Market, partners

10. Risk Factor Method
• Management
• Stage of the business
• Legislation/Political risk
• Manufacturing risk
• Sales and marketing risk
• Funding/capital raising
risk
• Competition risk
• Technology risk
• Litigation risk
• International risk
• Reputation risk
• Potential lucrative exit

11. The Shamrock Method
• Credit for Actual Invested Capital
• Up to 250K for Management Team
• Up to 250K for Proof of Concept or Product Validation
• Up to 250K for Business Model, pricing, etc.
• Up to 250K for other including advisors, governance,
financials, company infrastructure, etc.
• Up to 250k for go to market strategy
• Credit for 2 years of revenue run rate up to 3 years

12. Common Deal Terms
• Requirement for a BOD Seat
• Anti-Dilution Provision – Pre-Emptive Rights
• Share Option Plan 10 – 15% of authorized shares
• Drag Along Rights – a majority SHR
• Tag Along Rights – a minority SHR
• Postponement Agreements
• Key officer insurance in addition to D & O
• Price protection from a down round
• Requirement to buy out investors after 5 years without an exit
• Observer Rights
• Reporting Requirements

13. Common Deal Terms
• CD Valuation Cap
• CD Discount to Qualified Financing 15 or 20%
• Change of Control Provisions
• Representations and Warrants
• Covenants
• Default provisions
• Prepayment
• Conversion at next round financing
• Governing Law
• Conversion on Sale or Optional Conversion
• Legal Fees
• Founder Stock Vesting

14. Liquidity Preference
• Convertible Debenture – many objectives that
include liquidity preference
• There is a lot of discussion around how
liquidity preference should be given in a
company liquidation vs. sale of company
• Warrant coverage is often and better way to
ensure CD protection is given – Equity Kicker

15. Future Topics
1. Bootstrapping a Company & Exec Summary
2. Preparing a Pitch for Investors
3. Accessing Capital from a Angel Network
4. Terms to expect from an Investors Term
Sheet
5. Forming an Advisory Board
6. Pros of Cons of accessing Venture Capital too
early & some of the pitfalls to avoid

16. Gerard Buckley, BBA, FICB, ICD.D
President and CEO
Jaguar Capital Inc.
(C) 416-884-9522
(W) 416-646-6789
g.buckley@jaguarcapital.ca
www.jaguarcapital.ca
@jaguarcapital
@gerardbuckley