Download Washington DC - Simple Numbers

Money Day
Assess Your Need and Readiness
For Venture Capital
Content provided by Gazelles Systems
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Session Objectives
After completing this session, you will be able
to:
• Determine whether your business is in need of
venture capital
• Complete a gap analysis to determine your
business’s funding readiness
• Conduct due diligence on potential VC partners
• Conduct internal due diligence to determine
whether you are ready to make the pitch
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Positive
Result
Venture Capital
Questions to Consider
1. Do I need capital?
2. How do VC’s decide?
3. How do I prepare?
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Venture Capital
Question 1: Do I need capital?
• Is it time to inject
some capital into
my business?
• What can I
expect to gain
from it?
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Purpose of Venture Capital
Fudge Factor
(because
Murphy’s Law
is a law)
Opportunity Capital
(take advantage of
unforeseen
opportunities)
Debt
Repayment
(as approved)
Capital Raised
Day-to-Day
Operating
Capital
R&D Capital
Project-Specific
Capital
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Venture Capital
Question 2: How do venture capitalists
decide?
• What are the key
points VC’s consider
in their decisionmaking process?
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Balancing Competing Interests
THE DEAL
(meeting of the
minds/compromise)
INVESTOR
WANTS/NEEDS
ENTREPRENEUR
WANTS/NEEDS
COMMON
OBJECTIVES
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Balancing Competing Interests
THE DEAL
(meeting of the
minds/compromise)
INVESTOR
WANTS/NEEDS
ENTREPRENEUR
WANTS/NEEDS
• Maximum return
• Maximum capital/valuation
• Mitigate risk/downside protection
• Avoid dilution/control
• Input on future and growth of the
business/control
• Affordable cost of capital
• Relationships and introductions
• Growth in the value of the business
COMMON OBJECTIVES
• Additional rounds of funding at more
favorable valuations
• Mutually beneficial exit strategy
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Types of
Investors
• Angels
• Strategic
• Commercial Lenders
• Venture Capitalists
• Private Placement
Investors
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Sources of Venture Capital
• Typical institutional venture capital firms
• Corporate venture capital divisions
• Small Business Investment Companies
(SBIC’s)
• Private equity funds
• Hedge funds
• Super angels and angel investing clubs
• Strategic investors
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Components of Investment Decisions
Management Team
•
•
•
•
Background, knowledge, skills, and abilities of team members
Individual roles and responsibilities
How risks and problems are identified, managed, and eliminated
Entrepreneurial personality traits of management team
Products and Services
•
•
•
•
•
Stage of development
Specific opportunity
Unique, innovative, and proprietary
Level of control of the means of production
Technological breakthrough or low-tech
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Components of Investment Decisions
Markets
•
•
•
•
•
•
Stage in the life cycle
Size and projected growth rate of targeted market
Marketing, sales, and distribution methods
Strengths and weaknesses of competitors
New markets, and barriers to entry
Characteristics of typical consumer
Return on Investment
•
•
•
•
•
Current and projected valuation and performance
Personal investment in the business
Financial acuity
Capital required
Projected return on investment (ROI)
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Experience Sharing
• Share successes and pitfalls
in raising capital
• Discuss the toughest
questions you’ve had to
answer and how you dealt
with them
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Break
• 10 Minutes
Venture Capital
Question 3: How do I prepare?
• Presenting and
negotiating
• Checklists
• Managing your VC
partner after the
deal is done
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Presentation Tips
from
Guy Kawasaki
The 10/20/30 Rule
• 10 Slides
• 20 Minutes
• 30-point font minimum
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10 Slides: What to Cover
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Checklists (Right Tools)
• Funding
readiness
• Due diligence
on VC
• Due diligence
on you
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Managing VC’s
After the Deal
• Over-communicate
– P2P (People-to-People)
• Board meetings
– Provide financial reports
early
– Dashboard handful of
KPI’s
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Experience Sharing
• What can you share about
presenting to VC’s?
• What was your experience
during due diligence?
• How did you communicate
with your board and VC’s on
your board?
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Summary & Wrap-Up
•
Being prepared to make the pitch to a prospective investor
is one of the most critical parts of the process.
•
Almost all businesses will need an infusion of capital at
some point in their life cycle.
•
Your due diligence needs to focus on these three questions:
• Is your business funding ready?
• Do you know which investors are the right fit for your business
and the opportunity?
• Is everything in place to meet the potential investor’s
expectations?
•
After the deal, be sure to communicate frequently to keep
your investor informed and ready to help when needed.
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