Coming To America Part II, Accessing US Capital
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Coming to America (Part II): Accessing U.S. Capital
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If you’ve decided to bring your company to the U.S. for its highly developed startup infrastructure, talented workforce, lucrative consumer market, transparent legal system, and great source of startup capital, you'll need some help tapping into the venture investment community. Check out this presentation (from Fried Frank, Rubicon Venture Capital, and Early Growth Financial Services) to get a good understanding of the current marketplace, what U.S. investors are looking for, and how to prepare to present your company to U.S. investors.
Transcript of Coming To America Part II, Accessing US Capital
Coming to America (Part II):Accessing U.S. Capital
• Meeting investors• What investors are looking for• Different rounds• How to create a winning pitch
deck• Creating your financials• Legal considerations
Once you’ve made the decision to bring your company to the U.S., what do you need to know to access U.S. capital?
• People know what’s going on
Why U.S. Is the Place to Be
• Solid startup ecosystem
• Exit values are highest in U.S.
• U.S. presence• Good backing from VCs (bonus if
backing is from US-based VCs)• Connections to VCs in other
places• Runway
What Makes You More Attractive to VCs
• Do you have full team (or will you need to hire)? • Do you have a minimal viable product?• Are you ready to execute?• Is there a proper market for what you’re doing?• Do you have U.S. based service providers?
What Investors Like to See
Meeting Investors
• Target key players• Networking game – build targeting list of all
VCs in your region, stage, industry. How are you connected to them?
• Introductions are strongest access point• Use your service providers / business partners
as resource• Start early
Fundraising Game Plan• Milestone financing• How much money do you need to raise?• 2-25% “fudge factor”• What’s that money going to be used for?• At what cost and with what terms and conditions?• What type of capital is best fit for your company, and why?• Where do you find the type of financing you need?
How Much Should You Raise?
Valuation(based on
opportunity, traction, etc.)
How much do you need for 12-
18 months? (milestones, cash
burn)
Dilution(target 20-25% per
round)
The Fundraising Process
• Business development process
• Timing – 6 months out• Build your value
proposition• Rely on your ecosystem
for investor intros
What You Need to Present to VCs
Elevator pitchExecutive summaryPitch deck
Pitching Tips• Let the best pitcher pitch• Pitch the company; not the product• Charts and graphs: replace words with a
simple graphics and charts• Know your numbers really well (but no
excel spreadsheets – save that for diligence!)
• Short sentences, non technical speak• Investors watch body language • Control emotion, be prepared for conflict
Building Your Financials
Business / Financial Model
Revenue Projections
Funding Requirements
Use of Funds / Milestones
Do you need to have a Delaware holding company?
UK & Irish holding companies have significant tax advantages – and US VC’s are increasingly comfortable with them
More exotic topco’s may be more problematic – transaction cost for VC’s/investors in understanding their rights etc.
14tech.friedfrank.com / @friedfranktech
Structuring for Investment
US operating subsidiary is generally a prerequisite to securing US investment (unless VC invests through non-US office)Key need is for founder/senior officer on the ground, located in proximity to potential investors. Implications:
May make sense to set up in the US at early stage given funding gap outside of the US
Location decision is influenced not only by location of customers and suppliers, but also by location of potential investors
US set-up needn’t be expensive – seek fixed fees, transparency as to costs, and experience
15tech.friedfrank.com / @friedfranktech
U.S. Operations
Key investor communities may vary depending on focus of your business Silicon Valley is not the only choice. Possible alternatives:
FinTech/Advertising/Publishing – NY Biotech – Boston/Washington Media – Los Angeles Insurance – NY/Chicago Emerging Markets – Miami/NY Tech - Seattle Others – Austin
16tech.friedfrank.com / @friedfranktech
Alternative Key Investor Communities
US Series A rounds tend to start at significantly higher amounts than elsewhere, e.g., $3 - $5 million or more.
Reason – transaction costs associated with Series A US Alternative at lower amounts – convertible debt. Key issues
Interest rate Size of round that triggers conversion. Price discount on first round Cap on conversion price Note loss of control from investor perspective
If do non-US Series A, consider what changes may be required on later series if you expect to secure financing in US.
17tech.friedfrank.com / @friedfranktech
U.S. Series A Rounds
If UK permanent establishment, for example, SEIS and EIS (significant tax incentives).
Preference shares don’t qualify for SEIS/EIS But preference shares can be included in the capital structure so
long as the SEIS/EIS shares are not preference shares
18tech.friedfrank.com / @friedfranktech
Other Sources of Early-Stage Financing
Coming to America: The Legal Basics
19tech.friedfrank.com / @friedfranktech
“Coming to America: The Legal Basics,” is now available as a free download on iTunes (search keywords “Coming to America”).
The guide is also available as an eReader file and as a PDF through our microsite, tech.friedfrank.com.
The guide summarizes key legal issues that companies looking to expand to the US should consider, including sections on US tax, IP, employment, immigration, corporate, financing and litigation considerations.
A guide to indicative legal and related costs for US expansion is available upon request. Please email [email protected].
Bob MollenFried [email protected]@friedfranktech
Joshua SiegelRubicon Venture Capitalhttp://rubicon.vc/@RubiconVC
Glenn McCraeEarly Growth Financial [email protected]@EarlyGrowthFS
