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A practical approach with concrete suggestions to aid your business plan development, streamline your monetization model, deliver a successful pitch to grab the funder's attention, and get familiar with what to expect during the first meeting to the term sheet.
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Alexander M Orlando, DBA
The life of many start-up
Your Profile: You think “Out of the Box”
InnovaHub
The four S of Innovation Individuals that inspire through their wishes innovation
Professionals that utilize their skills and knowledge to propose innovative solutions for a prize.
Inventors or innovators that seek to to sell, license, or fund their inventions.
Entrepreneurs, organizations, and investors that are looking for new ideas, solutions, or inventions.
Seeders
Solvers
Seekers
Sellers
VC
1. Elevator Pitch
2. The Problem
3. Your Solution
4. Market Size
5. Business Model
6. Proprietary Tech
7. Competition
8. Marketing Plan
9. Team / Hires
10. Money / Milestones
Money Shot Goes Here
Teaser ImageGoes Here
picture your idea
an effective elevator pitch is illustrative and tangible.
90 seconds
IMPOSSIBLE?
3 keywords and your name
describeyour idea
to
….. tell me more…
MAKE YOUR IDEA
UNDERSTANDABLE
be confident
have fun
show passion
show integrity
YOUR ATTITUDE
keep your eyes shut while someone reads your text out loud
Business Model(How Do You Plan to Make Money?)
• Describe Top 1-3 Revenue Sources– Prioritize by Size, Growth, and/or Potential– Cite current market activity / customer behavior as proof
• Show How You Get to Break-even (or Profitable)– Ideally, on the current round of funding you’re raising
• Common Revenue Models– Direct: ecommerce, subscription, digital goods, brands– Indirect: advertising, lead gen, affiliate / CPA
What do VC’s want Team
• Domain expertise with core technical strength and knowledge of given market opportunity
• History of collaboration and success• A willingness to allow VC’s to help build the team
Market • Emerging and fast growing market• Bad markets make for bad companies
Business model• How will you make money, how will you sell
Technology • Defensible technology/IP that can be protected to form competitive barriers
over time
The Executive Summary
• Stimulate and motivate the investor to learn more.
• Hook them on the first page. Most investors are inundated with business plans. Your first page must make them want to keep reading.
• Keep it simple. After reading the first page, investors often do not understand the business. If your business is truly complex, you can dive into the details later on.
• Be brief. The executive summary should be 2 to 4 pages in length.
23
Why VC Is Helpful?
Friends & Family
Angels/Demons
Venture Capitalists
Capital
Advice
Connections
Low High
24
Are You Ready For VC?
Great Team
Huge Market
Product in Market
Seed($50K - $1M)
X
Series A(>$1M – 5M)
Economics of VC Firm• Management Fees (typically 2-2.5% of AUM)
– Charge a management fee to cover the costs of managing the committed capital.
• Carried Interest (typically 20-25%)– "Carried interest" is the term used to denote the profit split of proceeds to the
general partner.
• Example $100m fund – 4x return and 2 and 20%– $2m per year in management fee– (($100m x 4) - $100m) * 20% = $60m in carried interest
What to Expect• 12-16 week process
– First meeting to close– 1st mtg diligence partner
meeting TS negotiation close• Prepare Investor Package
– Presentation– Financial Plan– Personal references– Customer references– Market references– Cap Table– Market research– Product documentation– Competitive Analysis
• Investors will seek:– 20-50% of the company– Valuation function of targeted raise,
ownership, and stage, – Preferred Equity securities, with key
terms:• BoD seat• Liquidation Preference• Anti-dilution Protection• Participation• Pro Rata rights• Protective Provisions• Vesting terms for founders and
employees
What to Consider• Is the idea sufficiently baked?
– Optimal time is 6 months of iteration• Pick your co-founders very carefully• Test fit with VC
– Personality, values, knowledge of market• Optimize for best deal not best price• Consider the downstream effects of the financing
– High-post moneys can by Pyrrhic victories if company misfires– Angel financing can be a mixed blessing – be careful
Approaching VC’s
• Investing is a people business, and getting a meeting is all about “who you know”
• Best way to approach a VC is some form of introduction– If you don’t know a VC, find someone who knows you
and get them to introduce you– Entrepreneur, professor, attorney… (Linkedin…)
– Sending a plan to [email protected] is a waste of time
