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Insider Tips for finding and landing Seed Investment World Startup Expo 2016 Bangalore #WSE

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Startup Manufactory

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Our services

• Startup business consulting• FinTech startup compliance• Public sector consulting• Entrepreneurship education• Route-to-market strategy• Fundraising services• Business planning documents

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Our Location

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Our clients

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Introspection

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Why raising money in the first place?

On fundraising

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Four Factor Value Matrix

FrequencyNeed

ScalabilityBarriers

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Should I really raise money? Why can’t I make it work it without?Who is my best source of funding?

Introspection

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On Crowdfunding

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Crowdfunding platforms

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Crowdfunding: The 30% rule

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• Projects starting with 0% showed a 15% chance of success

• Projects beginning with 1%  experienced a 27% likelihood of success

• Projects with 5% gives 50-50 odds• Projects with 10% odds increase to 70%• Projects having 20% experienced a 80% chance of

success• Projects starting with 35% or more completed their

goals in every instance = 100%

Crowdfunding: Success probability

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Crowdfunding pros/cons

• Never met investors before• Opportunity costs investors• Sign many terms sheet• Legal costs may be higher• Red tape• Early stage valuation

• Easy to raise money• Early market validation• Increase visibility/PR• Raise a couple of times• Saves time• Reach low-end investor

market

Pros Cons

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The fundraising campaign

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Where to start searching• Your alumni network, friends’ startups, events, news, etc• List everyone you know and send a 10 line max teaser email –

ask for referrals• Investment clubs – register, but use connections mercilessly to

jump the queue!• Approach professionals – local accountants, banks, notaries• Online: LinkedIn, AngelList, Startups, Crunchbase, Startups

sites, incubators, accelerators – do your homework!• Advantage Austria

The fundraising campaign

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• Your alumni network, friends’ startups, events, news, etc• List everyone you know and send a 10 line max teaser email –

ask for referrals• Investment clubs – register, but use connections mercilessly to

jump the queue!

Where to start searching

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• Approach professionals – local accountants, banks, notaries• Online: LinkedIn, AngelList, Startups, Crunchbase, Startups

sites, incubators, accelerators – do your homework!• Advantage Austria

Where to start searching

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They don’t like people asking for money

Common perception of angels

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They want to invest

Real angel investors

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• “In y3 we expect a revenue of $12m”• “We aim to minimise staff recruitment costs through our MBA

network”• “Provided we get 250 sign-ups/day we will meet our projected

figures”

The usual rubbish

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• “We will be fully operational 60days after funding and profitable after 90 days!”

• No backup data “We will send this missing piece later!”• “We will sell our startup to Google and if not then to Yahoo!”

The usual rubbish

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• Proposition – what’s in it for me, the investor?• Pitch – winning ‘engagement’• Persistence - through to close

The usual rubbish

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• Management team shows commitment (financial, time spend)• The idea/plan/business model is ‘oven ready’ and just needs

the last ingredient (money)• Add value- background sector to the angel (personalisation!) • Enough funding asked for to make it work

What do angels look out for?

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• At least 10% of equity for having a voice • Accessible location of the business• Attractive valuation/investment return min. 5x+ • Downside protection before upside gains!

What do angels look out for?

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• Back up your business model with as much evidence as possible (facts, comparable, research, focus groups, interviews, etc.)

• Team looks like it can pull it off in terms of credibility, experience, track record, etc.

• Former corporates with “do my own thing” attitude are usually more professional

What facts do angels need?

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Be familiar with the terminology

Sweat equity Equity options Trigger

Preferred shares Cliff

Tag along

EIS SEIS

Vesting period

Fully vested

Dilution protectio

n

Drag along

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The fundraising pitch

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Main objective:Get another meeting!

The fundraising pitch

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100% of story in first 10 minutes• Plan your first 10 min emphasis:• Introducing the team – 1 min• The ‘elevator pitch’ – 1 min• The big idea/ revenue model – 2 mins• Show evidence it will work – 2 mins• Financial summary/funds needed – 2 mins• Personal offer to this angel – 2 mins• Be positive, confident, then...Close!

The fundraising pitch structure

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• No interaction with the audience – does the Angel actually understand what you do after the first 30 seconds? Did you ask?

• Slides and images too complex and confusing – could be very simple, might be shown to someone else – do they tell the story if you’re not presenting them?

• No conclusion – Don’t forget to close!!!

Common mistakes

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• How your input will be of value• How much £ we want from you• What return on your investment we expect• How we are managing risk for you• Why this would be enjoyable/rewarding to you

The bespoke offer

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Be prepared to haggle:• Pre-money valuation re-negotiated• Equity % given for the angel funding is linked to performance

against business plan • Funds offered as convertible debt• ‘Finder’s fees’ - angel wants fee for find own money!• Board fees for directorship• Option/warrant - future ‘bargain’ on equity• Complex shareholders’ agreement

The fundraising pitch

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• “We’re looking for 4 angel investors with complementary (non-overlapping) industry skills and connections to put up £50,000 each”.

• “We’re looking for a lead investor who will take the primary due diligence role and go forward to be a non-executive director on our board”

• “We’re looking for a small group of angel investors to put in £250,000 now but with an option to follow on in about 12 months with the same amount at an attractive (to them) options price”

The fundraising pitch

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• Board seat offered?• Shareholders’ agreement• Time/access commitment from Angel• Title = chairman, director, or none• Fees or no fees? (an issue nowadays)• Any conflicts of interest – check it out

The fundraising pitch other factors

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“I would like you Mr/Ms Investor to invest X for Y% of my business. The business will achieve Z financial performance over N years. The proposition will become valuable to various potential buyers from 5 years, and I intend to sell to one of these acquirers between 5 to 7 years.

Given comparable deals in the market, I anticipate that the business will sell for a price which equals 5X profit [sometimes revenue is the multiple used], and our forecasts show that we will achieve that in that time period.”

The bespoke offer

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• BREAKING THE ICE• THE MARKET• TEAM, FOUNDERS, GROUP INTERACTION• YOUR IDEA / PRODUCT / SERVICE• THE COMPETITION• ROUTE-TO-MARKET / CUSTOMER ACQUISITION• TRACTION & ADOPTION• DOWNSIDES, RISKS AND THREATS• THE EXIT STRATEGY• PATENTS / INTELLECTUAL PROPERTY / TRADEMARK• YOUR FINANCIALS• THE FINANCING ROUND

Be prepared – not scared!

Source: Startup Manufactory http://www.startupmanufactory.com/questions-investors-ask-startups-when-pitching/© STARTUP MANUFACTORY 2016

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You made it!

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Contact

Matt Kuppers | Founder & CEOmatt@startupmanufactory.com

Letitia Seglah| Venture Developmentletitia@startupmanufactory.com

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Startup Manufactory Ltd207 Regent StreetLONDON W1B 3HHUnited Kingdom

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