Pitching the Plan: The Investor Perspective December 12, 2012

1  

Experts  

•  Chuck  Goldman  -­‐  Founder,  Apperian  •  Arnie  Sco<  –  Investor,  Hub  Angels  •  Tom  Egan,  LaunchCapital  

•  Mirena  Bagur  –  President,  CONTeXO  Group  

2  

Agenda  

• PROCESS  • PLANNING  AND  MARKETING  MATERIALS    

• PRESENTATION  SKILLS  •  INTERACTING  WITH  INVESTORS  

• Q&A  

3  

PerspecTve  

•  Map  Analogy:  Detail  and  Overview  Balance  

•  Watch  for  Zoom  In  vs.  Zoom  Out  moments  

4  

PLAN  -­‐  Strategic  Financing  Plan  

•  How  much  outside  capital  should  you  raise  now?  

•  Generally  -­‐  the  least  capital  you  need  to  get  to  next  major  valuaTon  milestone  (with  90-­‐120  day  /  10-­‐20%  cushion).  You  need  enough  cash  to:  

•  Hire  criTcal  team  members  at  (start-­‐up)  market  compensaTon  

•  A<ract  Customers  /  Convert  beta  customers  to  paying  customers  

•  Acquire  criTcal  technologies,  systems  and  resources  

•  How  much  capital  will  you  need  later?    

•  ConTnued  R&D  

•  Sales  and  R&D  Development  Teams  

•  Sales  and  MarkeTng  Efforts  

•  Growth  and  Expansion  

•  Impact  on  valuaTon  and  diluTon  

5  

The  Fundraising  Sales  Process  

•  Financing  Plan  •  IdenTfy  and  qualify  opTmal  and  backup  investors    

•  Gather  direct  and  indirect  contact  informaTon  and  prioriTze  

•  Contact  through  trusted  source  •  OpTmizing  first  impressions  -­‐  Don’t  Pitch!  Get  a  MeeTng!  

•  Be  prepared  for  diligence  •  Contracts  and  paperwork  •  IP  and  Market  Diligence  about  opportunity  (freedom)  to  operate  

•  Reference  customers  or  thought  leaders  

•  Close,  or  move  on  

•  Deal  syndicaTon  &  Investor  CoaliTon  PoliTcs  6  

Deal Size, Funding Sources and the Company Lifecycle

7  

Deal Size

FF Commercial Rollout

1.0 Beta Alpha Lifecycle Stages

2.0, expansion

Idea

Angels

Early VCs

VCs

PE; II

Source: The CONTeXO Group, Spring 2012

The “Right” Investors

8  

Create a shortlist - don’t use a shotgun approach

Funds available

Stage Size Geography

No direct competitors in portfolio

Track record

Relevant portfolio

Fundraising Sales Process

9  

Prepare   Engage   “Pitch”   Due  Diligence  

Pique  Interest  Inform/  

Evaluate  ValidaTon   Investment

Marriage

6 months -1 year

4-6 months Investor Process

Entrepreneur Process

Investor Screening Process  

•  Who  is  the  referral  source?  Credible?  

•  Does  the  company  fit  my  criteria?  

–  Geography  –  Sector  –  Investment  size/Stage  

•  Is  the  team  credible?  (honest,  authenTc,  upfront,  confident,  humble,  passionate)  

•  Do  I  get  excited  about:  

–  CEO  –  Do  I  ‘like’  him/her  

–  Target  Market  –  Unmet  need/problem  being  solved  

–  Technology  being  developed  

10  

MARKETING  MATERIALS    

•  Matching  Materials  and  Process  to  Investor  Type  and  Seqng  

•  Pre-­‐first  mee*ng/  Investor  Conferences  

•  The  1  Page  Summary  (the  “Teaser”)  

•  The  5  Page  “ExecuTve  Summary”  

•  The  15  –  20  page  “Slide  Deck”  -­‐  foundaTon  •  The  10  second  oral  presentaTon  pitch  (the  “Elevator  Pitch)  •  The  30  sec  –  2:00  min  oral  presentaTon  (the  “Quick  ConversaTon”)                  

•  One-­‐on-­‐one  VC  mee*ng  

•  The  full  Business  Plan  –  Formal  presentaTon    

•  Back  up  materials  

•  Financials  •  Tailoring  the  emphasis  of  materials  for  the  specific  investor  (similar  to  tailoring  a  

resume)  vs.  Consistency  across  all  iteraTons  

•  Tracking  distribuTon  of  materials   11  

PresentaTon  and  Slide  Deck  OrganizaTon  1.  Cover Slide

2.  Problem or Opportunity + Metrics + Core Customer 3.  Company Value Proposition + Investment Rationale 4.  Product/Service Solution 5.  Product/service Value Proposition 6.  Addressable Market 7.  Business and Revenue Model 8.  Sales and Distribution Model 9.  Competitive Landscape/Competitive Advantage 10.  Defensibility / Barriers to Entry/IP 11.  Team 12.  Current Status 13.  Funding Requirements, Cash and Use of Proceeds 14.  Risks and Plans 15.  Exit Strategy and Options 16.  Investment Rationale/Summary Slide

+ Appendices or backup slides 12  

Improve Your Odds by Building a Great Team

• Balance skill sets – complement •  Only people make things happen

•  Aligned motivations •  Prior success •  Passionate

 Investors  bet  on  the  Jockey    A  Team  +  B  Idea  vs.  B  Team  +  A    Idea  

13  

Management Team and Advisors

•  List top executives and key advisors –  Include choice words about them

•  Experience with startups, domain experience and customers •  Don’t put their whole resume on the slide

•  Show current staffing gaps and strategy for filling •  Board of Directors

–  Scientific Advisory Board –  Key Opinion Leaders

•  Don’t list advisors unless they are actively involved

14  

General PowerPoint Dos and Don’ts “Presentation is a visual not a reference”

Do • Use one topic per slide • Limit text on each slide • Use pictures, graphs, video’s

–  Not all bullets • Choose fonts and colors that are easy to read • PowerPoint is the accessory to YOUR presentation • Spell Check

Don’t • Use sounds with slide transitions • Overdo the ALL CAPS, bolded, italicized or underlined text • Use too many different fonts • Overuse special effects – focus on the content • Have technical difficulties – test before the meeting

15  

PRESENTATION  SKILLS:  Part    I  

•  Know  your  material  cold!    Don’t  wing  it.    

•  Use  note  cards  &  appendix  slides  for  easy  access  to  informaTon.    

•  DON’T  READ  your  presentaTon.      

•  You  should  have  answers  to  likely  quesTons,  even  if  you  don’t  intend  to  cover  such  material  in  your  core  presentaTon.  AnTcipate  the  quesTons  –  be  surprised  only  once!  

•  It’s  okay  to  not  know  everything  –  no  one  does.    Unless  someone  asks  you  something  that  you  clearly  should  know,  it  is  okay  to  directly  state  that  you  don’t  have  an  answer  and  that  you  will  get  back  to  someone.    This  builds  credibility  with  your  audience.    

•  When  possible,  know  the  room.  Arrive  early,  walk  around  the  speaking  area  and  pracTce  using  the  microphone  and  any  visual  aids.    

•  Wear  clothes  that  represent  you  and  which  reinforce  your  authority  and  confidence.    

•  Work  to  control  filler  words  such  as  “Um” “Ah”  Eh”  or  “Like”.    Try  to  limit  distracTng  repeTTve  hand  or  body  gestures.    

•  Realize  that  audiences  want  you  to  be  interesTng,  sTmulaTng,  informaTve  and  entertaining.  They’re  rooTng  for  you.    

16  

PRESENTATION  SKILLS:  Part    II  •  PrioriTze  and  eliminate  less  criTcal  points.      

•  Be  flexible  –  be  prepared  to  be  interrupted.    

•  Understand  the  goal  of  your  presentaTon.      Is  it  to  inspire,  to  educate,  to  connect,  to  get  a<enTon,  to  get  a  second  more  personal  meeTng?    Your  focus  should  help  you  prioriTze.    

•  Modulate  your  pace,  pitch,  volume,  tone  and  enthusiasm  –  like  when  you  are  telling  a  story.    This  helps  keep  the  audience  focused.      

•  Use  humor,  personal  stories  and  conversaTonal  language  where  possible.    Your  use  of  easy  to  understand  analogies  can  help  you  draw  in  the  audience  and  create  tracTon.      

•  PracTce.  PracTce.  PracTce!  Rehearse  out  loud  with  all  equipment  and  with  a  Tmer.  Allow  Tme  for  the  unexpected.    GO  SEE  OTHER  PRESENTATIONS!  

•  Every  slide  should  be  consistent  with  your  corporate  image  –  each  should  bear  the  company  name  and  should  have  a  background  or  theme  consistent  with  the  company  type  or  culture.    

•  Slides  should  HELP  the  oral  presentaTon,  not  BE  the  presentaTon.  Avoid  wriTng  down  your  presentaTon  on  the  slides.      

17  

PRESENTATION  SKILLS:  Part    III  

•  Always  bring  a  backup  copy  of  the  presentaTon  with  you  in  paper  and  on  a  flash  drive  (it  is  also  useful  to  have  it  available  by  web  email).    

•  The  professionalism  of  the  powerpoint  may  convey  informaTon  to  the  audience  about  your  credibility.    If  it  looks  like  a  last-­‐minute  effort,  it  probably  was.      

•  Without  minimizing  the  above  rule,  spend  more  Tme  building  a  great  business  and  less  building  a  great  presentaTon.  

•  The  deck  is  just  a  tool.    If  the  computer  or  projector  cease  working  –  you  should  be  able  to  carry  on  with  your  presentaTon  without  geqng  flustered.    Remember,  this  is  just  a  tool,  it  is  not  the  presentaTon.    

•  Stand  up  (unless  it  is  one-­‐on-­‐one)  

•  Leave  Tme  for  quesTons.  

•  RELAX,  BREATHE  and  SLOW  DOWN  

18  

Interacting with Investors Basic Principles - Overview

•  Research the investor in advance •  Realize investors are thinking about exit strategy •  Pay attention to what you say during the presentation banter •  Communicate •  Be likeable •  State your value proposition up front •  Come prepared with sufficient data (including back up slides) •  Enjoy yourself and let it show •  Keep the presentation within allotted time •  Be realistic about valuations in the market •  Make due diligence easy

19  

DO

Interacting with Investors Cautionary Overview – Don’t do the following

•  Give investors a reason to turn you down •  Bash the competition •  Hype •  Condescend, talk down or be arrogant •  Be vague about your technology •  Deluge investors with facts •  Act desperate for funding (even if you are) •  Act like you don’t need money •  List ‘the company is undervalued’ as a reason to invest •  Overprice your rounds so you can keep stepping up valuation

20  

DO NOT

VC Glossary

21  Source: Eugene Hill, SV Life Sciences Advisers, LLC at HST921, Spring 2012

What We/They say… and What We/They Really Mean… Acquisition Strategy the current products have no market

Basically on plan revenue shortfall of 25 percent

Currently revisiting the budget financial plan is in total chaos

Cyclical industry posted a huge loss last year

Entrepreneurial CEO totally uncontrollable, bordering on maniacal

Funding Interruption investors tapped out; unwilling to fund again

Ingredients are there in two years we might find a workable strategy

Investing heavily in R&D trying desperately to catch the competition

Long-selling cycle yet to find a customer who likes the product

Possibility of a slight shortfall a revenue shortfall of 50 percent

Repositioning the business multimillion-dollar investment recently written off

Somewhat below the plan revenue shortfall of 75 percent

Too early to tell results to date have been grim

Turnaround opportunity lost cause

Unique no more than six competitors

Upgrading the management team the organization is in complete disarray

Window of opportunity without more money, the company is dead