Getting Investor Ready

Mark MacLeod@startupcfoMay 3, 2012

4 phases

Plan

Prepare

Pitch

Party!

1. Plan

BootstrapAngel

yes (seed) VC

Stop!

noReady?

no

yes Prep Roadshow

Investor Readiness...

YOU KNOW:

How much?

Who from? (angel vs. VC)

Why? (what for? Milestones?)

YOU HAVE:

Docs: Exec Summary, Pitch Deck, Basic Financials

Deal team

Pipeline

Angel vs. VC...

Opportunity Size < $20M $ 100M

Capital needs2 rounds

maxAs much as

it takes

Finance StrategyGet to

Cashflow Positive

Invest in growth

Angel VCMicro / Seed VCs ???

2. Prepare

Document Checklist:

Executive Summary

Pitch Deck

Financial Model

Bonus:

Roadmap

Competitive landscape

Team Bios & hiring plan

Exec Summ

1 - 2 pages max

Sales document

One purpose -

get a meeting!

http://www.docstoc.com/docs/120015412/Executive-Summary

Pitch Deck

Ten Buckets Model

10 - 15 slides

Sell, don’t explain

How I evaluate pitches...

Clear personalized problem statement

Evidence of domain expertise

Known target customer with $

Can touch and feel the product

Clear ask

http://www.startupcfo.ca/2011/04/the-vc-presentation-grader/

Financials

Baseline:

Expense Plan (hires, customer acquisition, overhead)

Months’ runway

Better:

2 year model with key assumptions (monthly yr 1, quarterly yr 2)

Examples:

http://andrewchenblog.com/2009/01/19/how-to-create-a-profitable-freemium-startup-spreadsheet-model-included/

http://unstructuredventures.com/

Final Preparations

Deal Team

Lawyer

Advisors / Mentors

Pipeline

Qualified list of investors that “fit”

Path to get intros

3. Pitch!Tips

✓ Be prepared - all docs & deal team ready

✓ Roadshow - parallel, not serial

✓ Running start - build relationships *before* pitching

✓ Start early enough (3 - 6 months)

✓ Target the right investors

✓ At the right time

✓ Build trust

✓ All about traction...

Pitch Do’s and Don’ts

DO!

✓ Talk about yourself - we invest in people!

✓ Summarize - make it easy & memorable

✓ Be different / yourself!

✓ Tell a story

✓ Impress

✓ Commit - full time effort!

Pitch Do’s and Don’ts

DON’T!

✓ Disagree with yourselves

✓ Make me read

✓ Read your own slides

✓ Target everyone - 1% of a B users...

✓ Be alone - no competition = no market

✓ Avoid phone if possible

✓ No agents / intermediaries

Demo Day

Build & qualify your pipeline

Don’t re-pitch

Ask questions - qualify!!!

Filter out the posers

Build rapport

Day after demo day...

Follow up immediately - presumptive close

Build your pipeline - track everything

Broadcast: Mentors, advisors, friends, lawyers

Go for the “No”

Love at 1st sight

Get a lead

$ first, then deal structure

Be realistic on valuations

Angel List

http://angel.co/

Great for finishing a round, not starting

Go there when

- you have a lead

- 2/3 of round committed

- traction (aka Social Proof)

Evaluating Investors...What do I want from this relationship?

Have they walked the talk? What is their track record?

Do they have deep pockets? Will they support me for future funding?

Can they put together high quality investor syndicates?

Can they help in building my organization?

Can they improve my company’s profile and bring in high standards of governance?Is the valuation fair for both sides?

And, ABOVE ALL: Is there mutual respect and can the VC be my sounding board?

Common roadblocksNobody wants to lead

Roll your own term sheet

Convertible note

Pitching a note to investors that prefer equity

Secure the $, then optimize the deal

Investors are dragging their feet

Plan a catalyzing event (launch, key hire, event, etc)

Build traction

Concerns over milestones

Raise more or spend less