AESE Look for angles before angels - womenwinwin.com -ASJ Look for business angles... · invitation...
Transcript of AESE Look for angles before angels - womenwinwin.com -ASJ Look for business angles... · invitation...
LOOK FOR BUSINESS ANGLES BEFORE GOING FOR ANGELS
Startup Cash Flow
Startup developmentSeed Growth DevelopmentPre‐Seed
Lower risk
“Death Valley”
Early stage VC (A series)Early stage VC (A series)
Corporates, Strategic investors, IPOs, bank debt
Corporates, Strategic investors, IPOs, bank debt
Savings, credit cards, 3FS,
public money,
Savings, credit cards, 3FS,
public money,
Business Angels
Are all investors the same?
Start‐up
Crowdfunding, accelerators
3Fs, public money, contests
3Fs, public money, contests
Crowdequity
Later stage VCsLater stage VCs
INVESTORS TEND TO SAY NO
Company profile / deck
SelectionComittee Pitch event Initial
AnalysisThoroughanalysis Negotiation Agreement
• Success rate in raising funds
450 25
300 101 88 35 ~26 ~25
Fundraising process
How to be in the 5%? 5
450
STATISTICS ARE AGAINST ENTREPRENEURS … & AND INVESTORS
(~5%)
• The business of Business Angels and VCs is not to invest… but to divest … in ~5 years
• Investors often get it wrong …– 56% ‐ Do not return the money invested
– 35% ‐Modest returns of (1 to 2) times the money invested
– 9% ‐ Returns as expected and needed (+10x)
Fuente: Wiltbank, R. (2005). Siding with Angels (para una media de 4 entre la entrada y la salida)
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A BUSINESS WITH INVESTORS
A real, and successful, case
2010
Launch
Seed
FFF
Undisclosed
2012
Startup
900,000€
BAs & VCs
3,600,000€
2013
Series A
4,500,000€
VC (2 inverstors)
13,400,000€
2015
Series B
13,400,000€
VC&CVC
(7 Investors)
40,200,000€
9,000,000€Turnover
100 employees
2016
Trade sale
80,000,000€
Corporate
123,000,000€
14,000,0000€Turnover
200 employees
Bought by Vente‐privee.com march 23rd
2016. Total funds raised previously $189.19M 5 5 capital increases, from 7 large investors. Up to series E!
Bought by Airbnb on september 19th, 2016. Total funds raised $3.14M in 4 capital increases with 6 investors.
… and if you do it well, how much you keep
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Company Major Founders/CEOFounder
%VC%
VC's
Facebook Mark Zuckerburg 57% 17% Accel Partners, DST Global Limited
Linkedin Reid Hoffman 21% 40%Sequoia Capital, Greylock partners, Bessemer Venture partners
Twitter Dick Costolo 2% 25%RizviTraverse, Spark capital, Benchmarkcapital partnersVI, Unionsquare partners, DST global
Priceline Jay Walker 47% 74%General Atlantic partners, vulcanventures, walker digital corp
eBay Pierre Omidyar 42% 22% Benchmark
TripAdvisor Barry Diller 30% ‐‐‐ Created from a spin off ‐ no s1 filed
Shutterstock Jonathan Oringer 55% 18% Insight venture partners
Lending Club Renaud laplanche 5% 57%norwest venture partners, canaanVII LP, Foudation capital vi, morgenthalerventure partners ix
Groupon Andrew mason 8% 59%Green media, Rugger Ventures LLC, New enterprise assocciates, AccelGrowth Fund,City deal management
GoogleSergey Brin, Larry Page 51% 20% KPCB Holdings, Sequoia capital
Company Major Founders/CEO Founder%
VC% VC's
Netflix Jay Hoag 43% 68%Institutional venture management, technology grossover management, foundation capital management
Fitbit James Park 11% 57%Foundry Group, True Ventures, Softbank
GoPro Nicholas Woodman 43% 34% RiverwoodCapital, Foxteq, Sageview
Shopify Tobias Lutke 15% 42% Bessemer, FirstMark, Klister, Omers
Square Jack Dorsey 24% 34%KhoslaVentures, JPMC Strategic, Sequoia Capital, RizviTraverse
‐Upon exit, the median level of founder ownership across the 79 companies was 11%. The average was slightly higher at 17%, due to the very heavy ownership stakes of founders at GoPro (43%), Netflix (43%), eBay (42%), and Google (51%). A long as you’re at least at 11% upon exit, you’re in line with your peers. ‐The median level of VC ownership upon exit was 62% and the average was 56%. In other words, to get to the IPO level, generally it takes a significant amount of outside investment so nurturing and maintaining large investor relationships is important. ‐Both the median and averages of the founders and VC sum to 73% (11+62 and 17+56). That means smaller investors and employees owned 27% of these businesses at IPO. The lesson there is that small investors will be as important to your success as large investors, especially early on. Additionally, option pools are going to need to be set up along the way and sharing equity with your key employees will be critical to growing a large, IPO‐worthy business. http://blossomstreetventures.com/blog_details.php?bcat_id=106
S1 filings of 79 publicly traded tech companies
WHAT DO THEYLOOK FOR?
AttractiveFor the entrepreneur
FeasibleFor this team at this time
Investment opportunityFor the business angel
ViableIn the market
How do investorsevaluate anopportunity?
Is it worth the risk?Risk versus return on a professional / personal basis
Is it a lifestyle business?Companies without investment are also attractive for entrepreneursIs he/she willing to share decisions?
¿What motivates the entrepreneur?Social recognition? Intellectual challenges? Creating something new from scratch? Solving a problem? Legacy motivations?
Interpersonal skillsIs he/she a “social” person willing to spend time with employees, clients, providers…
Attractive
Is there a market or we have to create it?A market is a crowd (larger or smaller) willing to buy, “and pay” and identifiable
Is the market accessible?Channels, access cost
Do we have a competitive advantage?Competition: none? or, we do not see it?Will the incumbents react and how?Type of competitive advantage: ¿cost driven or price driven?Is it sustainable?
Viable
Why this team?CompleteComplementaryCohesiveStarters, businessmen or techiesCompetenciesContacts
Why now?Too early or too lateWhy now and not beforeOpportunity window
Feasible
Viable, feasible and attractive are not enoughMust need money investment
To whom is generating value / money?Cash flowsReturns to investors
Is scalable? Business modelThe larger the betterMargin’s evolutionNew’ clients costs tend to be marginal
Is it for me? Size of investment, portfolio fit, risk profile
Investment opportunity
MY STARTUP CHECKS ALL THE MARKS, DONE?
IESE BAN
Reception of proposals
/
Venture profile sheets
Presentation to an investor audience (Forum)
Interview -Individual
presentation
Due Diligence
Definition of
Agreement
Closing of Agreement
Business Angels Decision-Making Process
I trust this team? Seems an investment
opportunity?
Feasible, viable? A real investment opportunity?Is it for me?
Can we reach a good
agreement?
Rel
evan
ceof
inte
rper
sona
l sk
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Interesting sector, size of the deal, risk
Entrepreneur does not solve
questions raised.
Not scalable,
Business model, market analysis,
strategy underperform
Lack of agreement on
terms
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First contect Pitch event BusinessAnalysis Negotiation Agree on terms
Due diligence Close deal
COMMUNICATINGWITH INVESTORS
Objective
30 ‐ 120’’
2 p.
10 ‐ 20 tr
20 ‐ 40 p.
Length
Prepare your communication strategy and plan
Create interest or drop outGet telephone number …
Get a meeting, a referral or an invitation to pitch
Understand the Business model and the investment opportunityCreate interest to invest
Describe in detail operations (typical marketing, operations …)
Business’ plansBusiness’ plans
Pitch / Deck / PresentationPitch / Deck / Presentation
ES / One pagerES / One pager
“Elevator Pitch”/ Liner
“Elevator Pitch”/ Liner
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“Elevator Pitch”“Elevator Pitch”
Decide spending more time or not on this.
Basic criteria.
Invitation to present and basic review of Business models and
KPIs
Through analysis of operations and
investment aspects
Negotiation and terms agreement
ES / One‐pagerES / One‐pager
Demo / Deck / PresentationDemo / Deck / Presentation
Planes de NegocioPlanes de Negocio
First contact Investment Forum
One one onemeetings
Analysis and DD
Negotiation Agreement and signature
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THE PITCH
A (Possible) Structure for a 3’ Presentation
The Opening (Cover)
TheProblem
TheSolution
The Business Potential
The Team
The Achieve-
ments
The Closing
(Future plans)
THE DECK
Pitch structure and contents
Opening
1. The problem
2. The solution and theopportunity
3. The product or service
4. Clients
5. Unique valueproposition for clients
9. Achievements
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6. Go to market
10. Technology partners
7. Market strategy: comm. & distribution
8. Business model
11. Competition
12. Team
13.Funding plan
14. Call for acgtion
Closing
About the Story and How is ToldSome basic recommendations
Know your purpose and target
Solve a problem and get to the point
Focus on value creation potential
Avoid talking in an overly technical manner
Convey personal credibility… but also professional organization
Be prepared
And… do not forget saying what are you looking for, and for what
Things To Remember
Attract the audience’sinterest
ObjectiveA fact or issue thatattracts immediatelythe interest of theaudience
“Hook”If you are not inspired byyour busineess, nobodywill
PassionStick to the time
Time
BESIDES A GOOD PROJECT MUST CLOSE A GOOD DEAL
I trust this team? Seems an investment
opportunity?
Feasible, viable? A real investment opportunity?Is it for me?
Can we reach a good
agreement?
Rel
evan
ceof
inte
rper
sona
l sk
ills
Interesting sector, size of the deal, risk
Entrepreneur does not solve
questions raised.
Not scalable,
Business model, market analysis,
strategy underperform
Lack of agreement on
terms
The image part with relationship ID rId3 was not found in the file.
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First contect Pitch event BusinessAnalysis Negotiation Agree on terms
Due diligence Close deal
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Competitors
Flaws of BM
Due DiligenceNegotiation
Structuring
Follow up
Pushing for growthPreparing for exit
PRE‐INVESTMENT INVESTMENT POST‐INVESTMENT EXIT
Other options
100 ~6
Successful exit
Active vs Passive
implication
Investors interest / before ‐ after
Defending their interests
Monitor
• Ask Friends, Business contacts and other entrepreneurs about the investor
• … do some google search,
Homework…
– Check investor’s portfolio, success and failures, partners and coinvestors etc.
– Sound their understanding of your technologies.– Assess how big are their pockets. – Seek references.– Talk to them as much as possible …
Finding the right investor…