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'Meet the investor' workshop @ Startup Week 2011

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'Meet the investor' workshop @ Startup Week 2011

  1. 1. Meet the Investor Workshop Part 1<br />Startup Week 2011<br />Oliver Holle, CEO<br />
  2. 2. Challenges for CEE Start-Ups<br />Great Talent, Great Products, Great Momentum in Vienna – but…<br />Little entrepreneurial experience, network or international sales / BD skills <br />Significant operational gaps in founding team<br />Limited exit possibilites if you stay too local<br />First time entrepreneurs face steep learning curve<br />OUTCOME: Long learning cycles, lots of mistakes<br />
  3. 3. Phenomenon: Investors as Entrepreneurs<br />Seasoned entrepreneurs are rolling up their sleeves...<br />Cases:<br /><ul><li>Founders, not bankers
  4. 4. Excellent track record of founder/investor partnerships
  5. 5. Investors are Business Angels, but also Venture Capitalist and Strategic Investors</li></ul>Reasons:<br /><ul><li>Investors collect tacit knowledge on markets, trends, technologies
  6. 6. New behavior reduces agency problems based on information asymmetry
  7. 7. Investor owns the majority of shares, controls the company and influences its strategy.
  8. 8. VCs’ involvement may not be necessary any more as the amount of money needed is shrinking and entrepreneurs often follow bootstrapping strategies</li></ul>© Stephan Jung, Institut für Unternehmensführung und Innovation, WU Wien<br />
  9. 9. On SpeedInvest <br />Approach<br />Leading Austrian internet/mobile entrepreneurs come together to form start-up ‘accelerator’ platform for Central Europe<br />Full partnership approach: “hands on” work with cash investment<br />Total funds of EUR 10m <br />3-5 investments per year, dealsize 250,000 - 500,000 EUR<br />Focus<br />Early stage internet/mobile startups<br />Alps and Danube region, closeby CEE/SEE markets<br />4<br />
  10. 10. SpeedInvest Team<br />EUR 15m<br />EUR 55m<br />EUR 280m<br />EUR 275m<br />EUR 10m+<br />sold to <br />sold to <br />sold to <br />sold to <br />sold to <br />VeriSign<br />Page Jaunes<br />Amdocs <br />CBS<br />Digital River<br /><ul><li>Co-Entrepreneurs = ‘Hands On’
  11. 11. NO Consultants, NO Bankers
  12. 12. Network & industry insiders
  13. 13. Silicon Valley Operations
  14. 14. Global ‚Smart Money‘ – product, ops, M&A, atc.
  15. 15. Team since 2004</li></ul>5<br />Team & Market Background<br />
  16. 16. Partners in Entrepreneurship<br />Operational support “that money can’t buy” for a startup<br /><ul><li>Free housing & office in Santa Cruz, CA
  17. 17. Erik = 100% dedicated US resource </li></ul>Silicon Valley Operations<br /><ul><li>U.S. business development, fundraising
  18. 18. Access to mobile industry and media </li></ul>Business/Corp Development<br />Presence in Silicon Valley<br /><ul><li>Social media PR, SEO/SEM Marketing
  19. 19. Strategy support, corporate planning</li></ul>Marketing & Strategy<br />BusinessDevelopment<br /><ul><li>Quality check, architecture, scalability
  20. 20. Sourcing / vendor management </li></ul>Technology Support<br />Technology Support<br />Marketing & Strategy Support <br /><ul><li>Public grants, subsidies
  21. 21. Interim COO, CFO</li></ul>Business Services<br />BusinessServices<br />6<br />Speed Invest in Detail<br />
  22. 22. Five Investor Myths that are plain wrong <br />VC‘s are stupid<br />You need a hockey stick <br />It‘s all about the right pitch<br />Avoid „dumb“ money<br />Dilution is death<br />
  23. 23. Find your Ballpark <br />Idea, Businessplan<br />First Subsidy, Prototype<br />Beta (B2C) / 1st Client (B2B)<br />Successful metrics<br />Revenue Growth<br />FF&F<br />(Prof.) Angel<br />Seed Fund<br />Seed / VC<br />VC<br />
  24. 24. Stages of a Marriage<br />1st <br />Meeting<br />Follow <br />Up<br />Term- <br />sheet<br />1st <br />Contact<br />2nd<br />Meeting<br />Face to Face<br />Social proof<br />Be concise, polite & fast<br />Chose your target carefully<br />Everyone is important<br />Flirt, don‘t chase<br />
  25. 25. Stages of a Marriage<br />1st <br />Meeting<br />Follow <br />Up<br />Term- <br />sheet<br />1st <br />Contact<br />2nd<br />Meeting<br />Start from scratch<br />Build trust: don‘t lie, don‘t oversell, explain yourself<br />Focus is on product and you (your team)<br />Don‘t bore us with tons of slides, numbers<br />Sidenote: it may take a few 1st meetings…<br />
  26. 26. Stages of a Marriage<br />1st <br />Meeting<br />Follow <br />Up<br />Term- <br />sheet<br />1st <br />Contact<br />2nd<br />Meeting<br />Bring your team<br />Have good, concise answers to the hard questions<br />If not, explain why but remain the expert<br />Be numbers driven, be the expert<br />Dont get annoyed: this is grilling time<br />
  27. 27. Stages of a Marriage<br />1st <br />Meeting<br />Follow <br />Up<br />Term- <br />sheet<br />1st <br />Contact<br />2nd<br />Meeting<br />Continue to build relationships<br />Deliver in high quality (this is a test)<br />Make sure you have a „Plan B“<br />Be patient, it always takes longer<br />Sort out any issues you have NOW<br />
  28. 28. Stages of a Marriage<br />1st <br />Meeting<br />Follow <br />Up<br />Term- <br />sheet<br />1st <br />Contact<br />2nd<br />Meeting<br />This is not an ego battle, keep friendly and cooperate<br />Have a (credible) plan B, and you have a negotiation<br />Choose your (few) battles wisely<br />Valuation is overvalued – understand the details<br />Relax, they want you <br />
  29. 29. Stages of a Marriage<br />1st <br />Meeting<br />Follow <br />Up<br />Term- <br />sheet<br />1st <br />Contact<br />2nd<br />Meeting<br />This is not an ego battle, keep friendly and cooperate<br />Have a (credible) plan B, and you have a negotiation<br />Choose your (few) battles wisely<br />Valuation is overvalued – understand the details<br />Relax, they want you <br />$$$$$ <br />
  30. 30. Solution<br />How do you address this need?<br />Why is this better/cheaper/unique?<br />What value for the user/client?<br />Commercially relevant factors neglected<br />Driven by feasibility, not need<br />Prototype<br />Scalability<br />Route to market and its cost not considered<br />How will you capture value?<br />How do you monetize this value?<br />Is this concept scaleable?<br />Business Model<br />Too much focus on technology<br />Just because something works does not mean anyone needs it<br />Data / prototype<br />Patent list<br />Full patent texts<br />Why is it unique / different?<br />How can you defend it?<br />Does it work? Have you proof?<br />Technology<br />Not enough focus on it<br />Not well enough thought through<br />Not enough resources (€, HR…) devoted to execution<br />Anything of relevance<br />The more specific (i.e. closer to reality, action oriented), the better<br />How will you sell it?<br />What resources will you need?<br />What drives buying decisions?<br />Marketing & Sales<br />Anatomy: Ten topics dissected<br />Topic<br />Questions to answer<br />Common fallacies<br />Supporting mat‘s<br />Problem<br />What’s the need you address?<br />How big, significant, urgent?<br />Mission-critical or nice-to-have?<br />Insignificant problem<br />Engineering driven (solution seeking problem)<br />Market research<br />Customer interviews<br />-<br />Source: GCP<br />
  31. 31. Team<br />Who will implement the plan?<br />Can they do it? track record?<br />Advisors? Recruitment needs?<br />All R&D, no sales / commercial<br />No assessment of future needs<br />Full CVs<br />Reference list<br />Unrealistic/intransparent assumptions (both ways)<br />No clearly identified milestones<br />No linking of risk & return<br />Unrealistic funding requirement (both ways – too lo/hi)<br />Financial Plan, esp. monthly Cash-Flows<br />Milestone Plan<br />Funding requirement & use of proceeds<br />What do you plan to achieve when?<br />What are your assumptions?<br />How do you measure progress?<br />What resources do you need?<br />What will you use them for?<br />Projections, Milestones<br />Anatomy: Ten topics dissected<br />Topic<br />Questions to answer<br />Common fallacies<br />Supporting mat‘s<br />Competition<br />Who else is in the game?<br />Substitutes? Industry food chain?<br />What’s your unfair advantage/USP?<br />“Nobody offers this (yet)”<br />Unknown competitors<br />“Our widget can….”<br />-<br />Not action-oriented<br />-<br />Where are you now?<br />What next?<br />Status & Timeline<br />Introduction rather than summary<br />Written first, rather than last<br />Too long<br />-<br />Give a complete and concise overview of the opportunity on no more than two pages<br />ExecSum<br />Source: GCP<br />
  32. 32. How to do it right? <br />Focus on your product<br />Save time – choose your targets wisely<br />Build social capital<br />Build up multiple routes (competition)<br />Don‘t be greedy to early<br />
  33. 33. How to get a 5M USD Sequoia A Round!<br />By Erik Bovee, Founder SpeedInvest<br />18<br />
  34. 34. We just won ‘Go Silicon Valley’/AWS pre-seed/grandma died, and our CEO is moving to Sunnyvale for 12 weeks to get US funding! <br />Outcome -12 weeks without a rudder, product delays, you spend all the money, everyone moves back in with parents<br />19<br />
  35. 35. What Happens in Silicon Valley?<br />The Scene on the Ground is different than what you read in TechCrunch<br />‚You have a local/social/mobile shopping app? Cool! That was my MSc thesis at Stanford in 2007. We got funded, but went bankrupt in 2009...I‘m doing a Jedi robot start-up this year.‘ –annoying guy at the YCombinator party<br />20<br />
  36. 36. More Bad News....<br />Wirtschafts...what? I went to Stanford<br /> -Famous Austrian Engineer Fritz Pfleumer – yes, I had to look him up. 13 Facebook ‚Likes!<br />21<br />
  37. 37. …The End<br />You will not get funding on Sand Hill Road<br />Thanks for coming, and have a great Startup Week!<br />22<br />
  38. 38. Who are you and why are you telling me this?<br />Erik Bovee – Founder/General Partner, SpeedInvest<br /><ul><li>Founder Digital Mobility/Digimob – raised 7M USD
  39. 39. European Managing Director eMeta Corp – sold 30M USD 2006
  40. 40. Head of Product Management VeriSign (Fortune 500) Enterprise Messaging Services
  41. 41. VP Business Development Wikitude – RIM, Sony, Verizon</li></ul>Most important – about 1,000,000 unsuccessful VC pitches<br />23<br />
  42. 42. Seriously...What Does it Take?<br />Careful planning, traction, friends on the ground, being ‚American‘<br />As a foreign company, your idea won‘t sell on its own – VC perceive high risk<br />You need help building relationships – warm intros are essential<br />You need someone on the ground for you in SV year round<br />You need a solid US operational story <br />Your pitch should be 10 slides, and it should be absolutely perfect – (not European ‚perfect‘...Silicon Valley perfect) – get local advice and practice<br />24<br />
  43. 43. When Should We Go?<br />Go when you have the following:<br />Working product + growth (NOT research showing ‚hockey stick‘ in 2014...seriously, if you have that slide, throw it out)<br />Pitch that you have worked over 500+ times with US help<br />Credible US operational plan – CEO (and founders, sales, marketing) have to move to Palo Alto. Not optional.<br />US Customer or user base (or solid pipeline at least)<br />Carefully selected VC shortlist that you have been courting for 6 months – ask for advice early, soft pitch.<br />A founding team that interacts and presents well together (...spend time coaching the CTO on how to talk to human beings)<br />US-style ‚Passion‘ – ability to express energy and confidence (and you can‘t laugh when you do it)<br />Create media buzz – the appearance of growth, health and energy is essential - TC articles, conferences, etc., etc.<br />25<br />
  44. 44. How Do US VCs Think? – TOP SECRET<br />It really has nothing to do with your idea...<br />They think your pitch is great and want to keep talking...<br />Time is on the VC‘s side<br />They want to see how teams react under pressure<br />They get interested when someone else is interested<br />Do you have a track record in The Valley?<br />They love pre-funding milestones...you will go bankrupt reaching their milestones...<br />You will get a really loooooong ‚NO‘<br />26<br />
  45. 45. How Do US VCs Think? – TOP SECRET<br />Your best tactics - Create conditions for feeding frenzy<br /><ul><li>Momentum
  46. 46. Buzz
  47. 47. Short window of opportunity</li></ul>Get warm intros through us – soft pitch to friends first<br />Create buzz – put massive energy into PR, networking, pitching<br />Be a little arrogant – ‚We‘re raising 2.5M USD by end of Q2. Let us know by February 15 if you are in.‘<br />Set your own milestone agenda<br />‚When you ask for money, you get advice. When you ask for advice you get money.‘<br />Let people know you are shopping, and broadcast success (discreetly) – ‚I hear those guys are already negotiating a term sheet with SVAngel!‘<br />(PS – This stuff won‘t work on SpeedInvest)<br />27<br />
  48. 48. Do you Really Need US Money?<br />US VCs are great if there is a reason to be in the US<br />Can you differentiate against US market/competition – ‚Me, too!‘ products can find solid exits in Europe (and you might not even know your product is ‚Me, too!‘ until you spend 12 weeks in SV)<br />European VCs don‘t play by the same hard rules – closer to home is often a low risk option for seed/series A<br />Risks and costs of US market penetration have to be weighed carefully – even a 12 week CEO trip can be expensive (...and not just in terms of money)<br />28<br />
  49. 49. Thank You!<br />Oliver – oliver.holle@speedinvest.com mobile - +4369913205532<br />Daniel – daniel@speedinvest.com mobile<br />Erik – erik.bovee@speedinvest.com mobile - +1 831 239 0061<br />