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This workshop presented by Shane Cheek at Acumen Venture talk about: How do you go about raising your first round of funding in Adelaide? What sources of capital are available out there? What should I know before I get started? How do I go about raising money? How much do I raise, on what terms, and how long will this take? Umm, should I even be trying to raise money?
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• Recirculating $20m seed fund
• 80% of all early tech investment in SA
• 8-10 investments
So What Do VC’s Do?
• Raise money
• Seek & screen opportunities
• Structure opportunities, deals
• Invest
• Work investments
• Seek exit and distribute returns
Investment Strategy
• Seed Stage
• Risk elimination at lowest possible cost is key variable
• What must ‘be in hand’ for next round?
• Series A and up
• Market/Execution risk
• Build business or build to exit
Staged Investments• Optionality
• Funding linked to arrival of new information
• Prod dev
• Market acceptance
• Competition
• Team
• Preserve the option to abandon or invest
Build Product & Validate Customer Use• Structure
• 1-3 founders
• Incubation environment: heavy mentor/advisor assistance
• Test Functional Prototype• Beta prototype in ~3-6 months
• Develop minimal critical feature set => get to “It works, somebody uses it!”
• Improve design and usability, set up conversion metrics
• Test small-scale customer acquisition strategy
• Demonstrate Concept, Reduce Product Risk, Test Functional Use• Develop Metrics & Filter For Stage 2 Investment
$100-$300k Round
Focus & Grow Market• Structure
• 2-10 person team
• Syndicate with Angel Investors / Seed Funds
• Improve Product, Expand Customers, Test Revenue Model• Beta+ prototype in ~6-12 months
• Scale customer adoption => “Many people use it & they pay!”
• Testing marketing campaign, customer acquisition channels + costs
• Test revenue generation, find profitable customer segments
• Prove Benefit of Solution, Assess Real Market Size• Test Channel Cost, Revenue Opportunity• Determine Org Structure, Key Hires
$750k - $1.5m Round
Maxamize Revenue Growth• Structure
• 5-25 person team
• Syndicate with Seed & Venture Investors in Exit Market
• Make Money (or Go Big), Get to Sustainability• Production version in ~12-24 months
• Revenue/Growth => “We can make lots of money!”
• Marketing plan => predictable channels/campaigns + budget
• Scalability & Infrastructure, Customer Service & Operations
• Connect with Distribution Partners, Expand Growth
• Expand Market, Operationalize Business• Optimize for Sustainability / Exit Opportunity
$2m - $10m Round
3. Is it a good investment? Valuation is key
• What can we sell the company for in x years if it achieves its goals?
• What is the probability of achieving this ‘success’?
• How much $$$ will be needed to achieve ‘success’?
• What % does this round need to own to get target portfolio return?
3. Is it a good investment? • What does success look like? • Revenue in year 6 $25m • Enterprise Value 3x
Revenue • Enterprise Value $75m • Plus Cash at Bank $2m • Less Debt $0m • Equity Value at exit $77m
3. Is it a good investment? What return do I need on my money? First round investment $1.5m Probability of success 10% Portfolio target return 2x investment Success target at exit $1.5m x 2 / 10% = $30m Percentage held at exit $30m / $77m = 39%
Assuming no follow on rounds Investors willing to pay $1.5m for 39% of the company Post money valuation $1.5m / 39% = $3.9m Pre money valuation $3.9m – 1.5m = $2.4m