Artemis Ventures, LLC 19991 Capital Acquisition Strategies Christine Comaford Managing Director.

Artemis Ventures, LLC 1999 1

Capital Acquisition Strategies

Christine ComafordManaging Director


Bio

Engineer, entrepreneur, venture catalyst 5x entrepreneur, 2 IPOs, 3 M&A, $100

million raised in last 5 years Incubator/financier specializing in enterprise

software & Internet software/services 1 other partner: Kimball Atwood


Did You Know?

6 in 1,000,000 high tech ideas will result in a

company that goes public


Did You Know?

Founder CEOs own an average of less than 4% of their companies after

the IPO


Did You Know?

On average, 6 in every 1,000 business plans will

be funded


Did You Know?

10% of startups in a given VC portfolio will succeed


Did You Know?

The #1 reason a startup’s valuation is cut is an

incomplete executive team


Why Create & Execute A Capital

Acquisition Strategy?


To Get…

The right amount of money At the right time From the right investors With the right terms


Know the Risks to Address

Financial Market Technology Team -- THIS IS THE BIGGEST ONE!


6 Things You Must Have

Stable, working business model Good business plan Strong management Great vision Big markets Good teams


Business Model Components Markets & Customers

Profile and Segmentation Key Pain Points Size of the Problem in Dollars Location of those Dollars Competition

Products & Services Product Definition Value Proposition Total Cost Analysis Add-on Product Strategy


Business Model Components (cont’d)

Marketing & Distribution Marketing Strategy Sales Process Implementation Process Strategic Alliances

Financial Engine Pricing Model Revenue Model Cost Structure


Step 1: How Much Money?

Rule #1: Take More Than You Need... Rule #2: Only If It Is Cheap! Multiple rounds (3-5) Each round should last ~ 12 mos Build a working financing model to do

scenarios for differing financing amounts


Each Round Needs Goals

Such as…. Seed - get to beta, build basic exec team Series A - launch full product, marketing/sales,

get paying customers, more hires Series B - Marketing extravaganza, major

partnerships, next product rev Series C - CFO, killer IPO board members,

acquisitions


Heads Up!

Avoid corporate financiers until series B+ Around third institutional financing start

planning exit Minimum you’ll need to exit is $10 million

if software/commerce, up to $40 million if content-focused


Step 2: When Do You Need It?

Rule #1: Raise Money Before You Need It Rule #2: It Will Always Take Longer Than

You Think! Start raising money 6-9 months prior to

flame out Build a strong banking relationship NOW Time rounds for 2-3x+ valuation jumps


Heads Up! Internet cos should have 120% minimum growth

annually Progress milestones: more customers, new

product revs, new product/service lines, increased market share, stronger team

Timing rounds to milestones = higher valuations BUT avoid conditional financing or milestone-

based tranches


Step 3: From Whom? Rule #1: Only take money from someone you like

and respect Rule #2: We realize they can be hard to come by! Passive or active?

Active early on Passive if strong extended team already

List 10 most appropriate investors, take on the first 5


A Good Investor Match = Understands/is active in your space or badly

wants to be Serves your company’s stage Plays well with others Doesn’t want to own the board/run the

company Has portfolio companies you can work with

-- leverage!


Heads Up! Never tell prospective investors about one

another (“collusion happens”) Plan for investor relations -- this will be

time-consuming Plans get passed around: only offer after

strong meeting Do your homework! Create a sense of scarcity


Step 4: What Compromises? Rule #1: Don’t Be Greedy Rule #2: But Don’t Be Taken Advantage of

Either! Lower valuation and higher value investor is

a decent trade-off “Dilution happens”- expect to sell 10-25%

on seed round, 20-40% each round thereafter


Basic Compromises Loss of equity Loss of control Valuation differences

Go for value, trust Greed extends financing process and can result

in loss of interested investors

Reimbursing startup expenses (this is “sweat equity”, friends!)


Sophisticated Compromises Board structure

# seats in total (5-7 is best) # seats for investors (2, or 20-40% of board) # seats for company execs (2 max, usually 1 early on)

Terms - keep them squeaky clean! No ratchets! Founders shares vesting/exec employment

terms/exec salary/termination package


Financing Process Checklist Create capital acquisition strategy: how much,

when, from whom, acceptable compromises Contact targeted investors (preferably through

a personal introduction) Pitch/exec sum/ business plan -- don’t state a

valuation! Ask! Focus on finding lead investor Get a silicon valley savvy attorney


Key Issues That Slow Funding

Full board Incomplete/unimpressive exec team Lack of extended/credible team (advisors) Lack of contacts/understanding of process Lack of sizzle (often simply poor

presentation) No capital acquisition strategy!


7 Tips for The Right Presentation


1 - State Credibility

Exec team Pedigree (education, past startups) Publicity (published pieces, notoriety, awards) Connections (technology advisor to White

House, etc)

Well-known board members, advisors (who are betting on this company)


Who You Need On Your Team

Visionaries (assorted positions) Leaders (CEO, Managers) Implementers (Sales, Marketing,

Technology) Infrastructure Builders/Supporters

(Operations)


2 - Be Clear

Have 3 key points to deliver Show and tell your story (use words AND

pictures) Repeat the 3 key points at least 3 times Only tell stories that enhance your points


3 - Be Concise and Complete

Why is this a great idea? How will it be executed? How will risk be minimized, return

maximized? What are the sustainable barriers to entry? 20 page plan (3-5 page exec sum with 1

page financials)


Complete Means… Pain/Solution Opportunity/Market Size/Market Analysis Competitors: today and tomorrow Product/Service Definition & Futures Marketing Plan/Sales Strategy/Strategic

Alliances The Team: staff and extended Financials (create a dynamic model)


4 - Be Compelling This is a HUGE opportunity, we’re the best

to seize it, here are 3-5 specific reasons why You think this opportunity is HUGE today?

Check it out in 2-4 years! There is major PAIN, we remove it -- no

doubt We have the team, technology, right

market, “just add water”


5 - Give Them a Reason to Believe

Create the excitement (greed), then… Convey the long term vision (wow! Look

at all the additional markets we can get into!), then...

Spell out the short term practicalities (hey -- these guys look like they could actually make this happen!)


6 - Give Them the Right Info

What is your elevator pitch? In other words if you had to tell someone about your company on a short elevator ride, what would you say?

What product or service is sold?

Who is it sold to?

How much does it cost (average sales price)?


Right Info Cont’d How big is the target market?

What percentage of that market do you need to

penetrate to reach $30 million in sales?

What is your key competition?

What is your KEY differentiation from the competition?


Right Info Cont’d How long would this differentiation last?

Do you have customers? How many? Revenue? How much?Strategic Alliances? With whom?

Is your technology complete? If not, when?


7 - Present Properly

Practice and know it cold Have backup slides for key areas (such as

market segmentation, financials) Be ready with a reference list (for all key

execs, both personal and customer references)


How Long Should a Pitch Be?

A VC pitch should be 20 minutes long (goal: book next meeting)

A customer pitch should be 30 minutes long (goal: convince them to bring the decision maker in)

A recruiting pitch should be 30 minutes (goal: check them out,sell the vision, decide next step)


Great Entrepreneurial Resources Read “Burn Rate” - Michael Wolff Read “High Tech Startup” - John Nesheim Subscribe to Fast Company, Industry

Standard, Biz 2.0, Internet Week, etc Check out www.vfinance.com,

www.startupweb.com www.artemisventures.com resources section

has growing library of goodies


Entrepreneurial Resources


Christine ComafordGeneral Partner and Managing Director

[email protected]

Thank You!

Artemis Ventures, LLC 19991 Capital Acquisition Strategies Christine Comaford Managing Director.

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