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Raising Capital from a VC

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How to raise capital from a Venture Capital fund, what to think about, how to approach them, what to do afterwards regardless of whether it is yes or no?

Raising Capital from a VC

  1. 1. Getting investment from a VC William McQuillan Twitter: @willmcq / @frontline Feb 2015
  2. 2. Overview 1.  Frontline Ventures 2.  Getting a Meeting 3.  The Pitch 4.  What next?
  3. 3. Section 1. Frontline Ventures @frontline @wilp @willmcq WHO WE ARE? We are a pioneering early stage venture capital firm, believing in ideas, and investing in passion. We are looking for ambitious teams with global ideas! WHYCHOOSE FRONTLINE? WHATWE INVESTIN? First Fast Follow We are able to go early and aim to be the FIRST institutional investor We spend time building knowledge and networks so that we can make FAST decisions. We have a fund large enough to FOLLOW our startups in future funding rounds
  4. 4. Section 2. Getting a Meeting Sometimes it might seem difficult but not if you know what to do…
  5. 5. Why are you raising capital? §  Pay wages/bills? §  Build a product? §  Scale a company? §  Expand Internationally? §  Get strategic partnerships? §  Business mentoring? §  Financial security? §  Credibility? §  Stock?
  6. 6. Because not all capital sources are created equal ONE SIZE DOES NOT FIT ALL §  Friends & Family §  Banks §  Angel Investors §  Incubators §  Accelerators §  Crowd Funding §  Government §  Grants §  Prepayments by customers §  Venture Capital §  Corporate Venture Capital Different Timings Geography Round sizes Follow vs lead? Hands on/off Traction needed? Equity/DebtLegal ComplexitySignals
  7. 7. Be selective about the investors you target VS. §  Do your homework in advance (Don’t approach people who don’t invest in your stage, sector or geography) §  Be very selective about who you approach first §  Most relevent to your company §  E.g. ex-entrepreneurs in your space, VCs who’ve invested in your space, industry expert who can invest §  Investors in your space will either see the opportunity or give you the best feedback §  Early wins with the right investors, can create momentum Rifle Shotgun *You’refarfrominvestmentsodon’tusetheshotgun.Target yourinvestorscarefully! *
  8. 8. Understand your target audience! (VCs) §  Inbox/Facebook/Twitter/LinkedIn over run with messages §  Companies pitching at every event/party/conference/meetup §  Not even counting time with portfolio companies Therefore time is in short supply!! §  Approach investors in the right way and at the right time §  Be prepared when you do DRINKING FROM THE FIREHOSE
  9. 9. How to Approach GO THROUGH A CONTACT!! §  E.g. Angel, another VC, industry expert §  If you have advisors or investors already ask them who they can introduce you to §  At events don’t pitch your company, pitch for a meeting* §  Intelligent tweets §  Ask for advice rather than money at first *Jason Bell – 3 steps to meet investors at events- http://bit.ly/XDV2Wv * Tip: use facebook and linked to find someone to introduce us, not to contact me!
  10. 10. The Process Treat it like a process (courtship)! §  Get a meeting (date) §  M1: Deal with market and team (chemistry) §  M2: Deal with financials/other partners (friends) §  M3: Show progress from last meetings (?) VC’s don’t do one-night stands!
  11. 11. What to send? §  LESS is more at the beginining §  NO Dissertation emails!! §  Don’t send word doc, powerpoints, always PDFs §  Initially short pitch deck is perfect §  Send more later if they then want it Death by too much information
  12. 12. Section 3. Building a Pitch Deck
  13. 13. The Composition Different VCs have different preferences and layouts. Some prefer team early, others market size, others product. Again understand your audience! Sequoia has a good break down of key elements to address 1.  Company Purpose 2.  The Problem 3.  The Solution 4.  Why Now 5.  Market Size 6.  Competition 7.  Product 8.  Business Model 9.  Team 10.  Financials Some tips from Dave McClure (www.sequoiacap.com/us/ideas) (www.slideshare.net/dmc500hats/how-to-pitch-a-vc-sept-2010) Focus on getting these right!!
  14. 14. 1. Company Purpose §  Define the company/business in a single clear sentence §  This should be a brief and to the point slide, but still catchy so that almost instantaneously it portrays to the viewer the raison d’etre of your company and makes them want to know more §  Don’t use any business jargon or lingo E.g. AirBnB: Book rooms with locals rather than hotels Mint.com is the free and easy way to manage your money
  15. 15. AirBed&Breakfast – Company Purpose
  16. 16. 2. The Problem §  Describe the pain of the customer §  Outline how the customer addresses the issue today §  Who has the problem? §  How many have it? §  How do you know?
  17. 17. AirBed&Breakfast – Problem
  18. 18. 3. The Solution Vitamins are great but you NEED a painkiller How do you solve this problem better than anyone else Demonstrate your company’s value proposition to make the customer’s life better. Mint.com First Pitch TechCrunch40 §  Do you know how your money can work for you? §  I’m going to make everyone in the room over $1,000 in 6 minutes! (http://blip.tv/techcrunch40/session-5-mint-416933)
  19. 19. AirBed&Breakfast – Solution
  20. 20. 4. Why Now? (page optional, often part of market slide) It’s going to be a long road why start now? §  Why is now the right time to do this §  Define recent trends that make your solution possible §  Trends could be related to market, distribution channels, user behaviour,
  21. 21. AirBed&Breakfast – Why now?
  22. 22. 5. The Market Identify who your target market is Calculate it either by: §  TAM: Total addressable market §  SAM: Serviceable Addressable Market (SAM < TAM) §  SOM: Serviceable Obtainable Market (SOM < SAM) If possible use bottom up approach Big vs. Niche
  23. 23. AirBed&Breakfast – Market
  24. 24. 6. Competition §  List the main competitors §  Why are you different, what competitive advantages do you have §  2 axis graph are useful (see example later) §  Don’t tell me there are NO competitors there are always competitors §  Don’t hide competitors because we will find out about them and it just makes you look worse
  25. 25. AirBed&Breakfast – Competition
  26. 26. 7. The Product §  I want to see a demo, screenshots or a video. Something that will show me the product §  Key features, functionality, design, IP §  Development/feature roadmap §  If doing a LIVE demo: practice and have backups as things will always go wrong* *(tip: just have it on a video) http://grumomedia.com/
  27. 27. AirBed&Breakfast – Product
  28. 28. 8. Business Model Things I want to know: §  What is your revenue model* §  What is your distribution model §  Product pricing §  Customer pipeline §  Customer validation *Tip: Don’t list too many revenue models, it makes it look like you don’t know how you’re going to make revenue
  29. 29. AirBed&Breakfast – Business Model
  30. 30. 9. Team (Why you?) §  Who are the founding team and why are they amazing §  Who are you advisors/strategic investors? §  List core positions that you need but don’t have filled yet §  If you have potential people for these then mention it verbally
  31. 31. AirBed&Breakfast – Team They didn’t show the team slide but… §  Harvard §  Microsoft §  Lead Engineer (Batiq) §  Founded a company at college §  Ran a design studio §  Rhode Island School of Design §  Lived in AIRbnbs Nathan Blecharczyk Brian Chesky §  UX / Designer §  Founded a small design company §  Rhode Island School of Design Joe Gebbia
  32. 32. 10. Financials / Deal §  If you’re looking for seed capital, the investor does not need to see detailed financials in the pitch (but do need later) §  If you have revenue/profit tell the investor §  Current monthly cash burn §  How much do you want? §  What are planning on doing with the capital raised?
  33. 33. Some Extra Pitch Tips §  Speak to VCs before you start looking for capital §  Good design makes a pitch better §  Less words is better (Guy Kawasaki – font 30 smallest. Extreme but anything bigger than font size 16 is fine. §  Expect to be constantly interupted (that’s a good thing it means investor is engaged and not bored) §  Ask for a range not a fixed amount (e.g. €300-500k not €500k) §  Finish on a high (and by the way we have just reached 1,000 customers, launched, got a new amazing CTO, raised ¾ of the round etc…) §  Make sure you have new milestones / traction for the next meeting
  34. 34. Section 4. What’s Next…? §  Keep us updated in- between meetings §  Some investors are slower to give answers than others §  Get them to give you timelines and if they’re slow follow up with them with updates §  Investors are not slow on deals they like and can do What to do next?
  35. 35. So we said NO… what next? §  Ask for feedback §  Be gracious with criticism and don’t take it personally §  The VC doesn’t have to give any and she/he’s giving up their time in doing it §  Remember that you may be looking for capital in the future for this company or maybe for a different company so keep the relationship §  We are not the only source of capital! Ask us if we know others that are more relevant to you
  36. 36. But what do we know! Bessemer Anti-Portfolio… who they said NO to!! www.bvp.com/portfolio/antiportfolio
  37. 37. VC is Not the Only Source of Capital c. 75% of technology acquisitions in 2012 & 2013 were of non-VC funded companies “I call my product ‘The Wheel’, but so far I’ve been unable to attract venture capital”
  38. 38. So we said YES (we want to invest)… §  Build your round (again back to the first slide why are you looking for money, expansion, advise, customers etc…) §  Termsheets and Legals (a conversation for another day) §  Do due diligence on your investor!! (On the fund and the partner) http://berlinvc.com/2013/02/12/due-diligence-should-go-both-ways-vc-check-list-for-entrepreneurs/ §  You did the courting and now we’re getting married (so make sure you choose wisely!) Now back to focusing on your actual company!