What does it take?
What does it take?
•
Passion and Commitment
•
Visionary Leadership
•
Well-balanced Team
•
Focus
•
Respect for Team & Employees
What does it take?
•
FUNDING!!! $$$
•
FUNDING!! $$$
•
And More FUNDING!! $$$$
Financing Life Cycle
Discovery
Idea
Proof-of
Concept
Pre-seed
Funding
Product
Design
Seed
Funding
Product
Development
Start-up
Funding
Manufacturing/
Delivery
Expansion/Mezzanine
Operating Cap.
Founder
Venture Funds
Friends and Family
Angels
Angel Groups
Seed Funds
Institutional Equity
Loans / Bonds
Investor Types
•
TWO TYPES: Sophisticated & Unsophisticated
•
FFF (friends, family and fools)
•
Super angels
•
Angel groups
•
Venture capitalists
Angels: Majority of Startup Funding
$12.4B
$9.9B
$9.8B
$9.5B
$8.4B
$1.0B
$0.45B*
$0.22B*
*estimated
Angel Investors 2011
•
•
•
•
•
$22.5B
~66,000 deals
42% seed/startup
55% early stage
~ 318,500 individuals
Venture Capital 2011
•
•
•
•
•
$29B
~3,750 deals
3.5% seed/startup
68% later/expansion capital
Total 791 firms (not all active)
Sources: UNH Center for Venture Research, PwC MoneyTree and NVCA
The Number of Angel Groups is Growing
Sources: Center for Venture Research, Kauffman Foundation and ARI
BlueTree Allied Angels
•
An investment “network” of accredited investors
formed in October 2003
•
Pittsburgh and Erie
•
Members: cashed-out entrepreneurs, C-Level types,
business executives, professionals
•
65 Members and growing
•
Invested $22 Million in 35 companies
•
Members make individual investments
Deal Flow Process
10
Typical Deal Process
Submissions
(~30 Plans
Per Month)
Screening Team General Meeting
Review
Presentations
(5 – 10 Plans
Per Month)
(1 – 3 Plans
Per Month)
Diligence & Term
Sheet Negotiations
Coordinated by:
Managing Director
& Deal Lead
Manage
Investment
(1 – 2
investments per
quarter)
Managing
Director prescreens emailed
submissions.
Screening team
votes on which
companies to
invite to general
meeting.
Managing Director
polls members for level
of investment interest
in deals, recruits
diligence team, and
facilitates selection of
deal lead to begin term
sheet negotiations.
Source: James Geshwiler, CommonAngels, Boston
Deal lead closes
transaction and the
sidecar fund invests
in companies that
attract at least
$250K in
investment from at
least 5 members.
Board member
represents
member
interests and
seeks an
attractive exit.
How will my start-up be
evaluated by investors?
12
Management! – Management!
Management!!
13
WHY?
Because it’s all about Execution!
14
Investor Considerations
•
•
•
•
•
Management team
Opportunity size and maturity
Product or service
Technology/solution uniqueness
Investment structure
35%
25%
20%
15%
10%
• Management Team usually most important
– CEO
o Coachable, vertical experience, leadership
– Team
o Balanced & complete
o Experience working together
o OK to have some positions unfilled
Angel Investor Expectations
• Potential for company to grow and scale
– $30M min. revenue in 5 years
– High gross margins business
– Large “niche” market
– Unfair competitive advantage
– Ready for customers
– Fundable management team
• Business capable of providing a return to Investors
through an acquisition (rarely IPO)
– Expect a 10X – 30X ROI
– 1-2 of every 10 investments bring most of return
– >50% of businesses will fail
Elements of the Pitch
17
The Pitch
•
Based upon Solid Business Plan/ Model
•
Always have 2 page Executive Summary
•
Deploy: 10 – 20 – 30 Rule
•
Presentation - 10 Slides, 20 Minutes, 30 Point Font
Opening Slide
• Organization name, your name and title, and contact
information.
• Explain what your organization does:
– “We sell hardware for data networking companies."
– "We are a medical device company."
• Amount of money to be raised, and the purpose of the
money.
• Cut to the chase!
• Do not try this… http://www.youtube.com/embed/LMmdl4VltD4?rel=0“ :01-:36
Problem
• Describe the pain/issues/problems you're alleviating
• The goal is to get everyone nodding and "buying in” that
the problem is real
• Avoid looking like a solution searching for a problem
Solution
• Explain how you alleviate this pain and the relevance
of your product to the solution.
• Ensure that the audience clearly understands what you
sell and your value proposition.
• Not the place for in-depth technical explanation.
• Provide the gist of how you fix the pain. Example:
– “We have software that searches all other travel
sites and collates their price quotes into one
report."
Potential Market: US
Seasonal Flu:
40 million people infected
20 million patients seek help
200,000 hospitalizations
36,000 deaths
US data
Swine Flu:
4/2009 – 1/2010
57 million people infected
274,000 hospitalizations
11,690 deaths
US data
Source: CDC report 3/5/2010
Market estimate of 4M treatments (Seasonal)
22
CONFIDENTIAL
Current Technology Insufficient
Current standard of care:
− Pulse oximetry
− late indicator
− Respiratory rate
− half-the picture
− inconclusive
Normal
Respiratory Status
•
Respiratory
Compromise
ExSpiron
Respiratory
Failure / Arrest
Pulse
Oximetry
Death
Time
•
Anesthesiology 2011: “Existing technologies can detect
adverse events, but have not demonstrated significant
clinical impact predicting deterioration in advance of
adverse occurrences.” (Taenzer)
23
Business Model
• Provide a simple explanation of precisely how you make
money
– Who pays you?
– Distribution channels
– Gross margins, etc.
• A unique, untested business model is a scary proposition
– Explain a revolutionary business model in terms
of familiar ones
Go to market channels
1. Direct
Sales
Reps
3. Teacher Campaigns
Myron Pincomb
Easy Graphics
Ed. Leadership Conf.
5.Independent
Reps
Kevin Friend
Cynthia Jensen
AdminCustomer
& Reporting
Growing
BaseCapabilities
• All products come with back-end tracking and reporting
–
–
–
–
–
Tracks scores and training completion for all users
• Government
Identifies users who open emails, click on links or input data
• Financial
Tracks traps and threats that users fall for
• Insurance
Identifies areas of weakness for future training
• Healthcare
User friendly administration & management reporting
• Easy to deploy, manage and administer
Proprietary & Confidential Information
• Communications
• Energy
• Petroleum
• Transportation
• Education
Copyright © Wombat Security Technologies, Inc. 2008-2012
Underlying Magic
• Describe the technology, secret sauce, or magic
behind your product or service.
– Discuss source
– Why it can’t be easily duplicated
– Discuss patents
– Is the technology yours? licensed from a University?
Exclusive? are there royalties?
• The less text and the more diagrams, images,
flowcharts, the better
• White papers, research, and objective proofs of
concept are helpful
ABC™- A Multi-Functional SubNano Metrology System
Probe
Sample
Alignment
Proprietary Software
Probe
Isolation
Chamber
Data Acquisition System
Marketing and Sales
• Explain how you reach your customer and marketing
leverage points.
• Estimate market size and realistic percentage that
you can penetrate
• Convince the audience go-to-market strategy is effective
and won't break the bank
• Explain the logic behind growth plans
• NOTE: Be sure working capital in financial models
supports growth
Competition
• Provide a complete view of the competitive landscape.
Too much is better than too little
• Never dismiss direct or indirect competition in core or
adjacent market(s)
• Everyone including customers, investors and employees
want to hear why you're good, not why the
competition is bad
• There is always competition!
COMPETITION
Competitors
ABC Company
Odin
Lockheed-Martin
Savi Tech
GE Commerce
Guard
Intermec
UNISYS
Cubic
Item level
Passive
In-transit
RFID
visibility














Inteligistics Confidential and Proprietary
Local read
No wires
capability
Transferable,
between
Comments
with doors
Plug and Play
devices
closed





















Nearly 3 x
expensive
Read at portals
only
Discontinued
“On-the-road”
operations only
Read at portals
only
Central control
only
31
Management Team
• Key players are important
– Management team
– Board of directors
– Board of advisors
– Any major investors
• As a founder, are you the “right” President & CEO?
• Ok to have less-than-perfect team:
– All startups have holes in their team; what's
truly important is recognizing them and
being willing to fix them!
Financial Projections and Key Metrics
• Provide 5-year forecast:
– Chart or graph is better than just numbers
– Know your key metrics: customers numbers,
conversion rate, etc.
• Bottom-up forecast: consider long sales cycles
and seasonality.
• Explaining forecast’s underlying assumptions is
as important as the numbers.
• Clearly identify cash flow break even point.
ABC achieves $37 MM in Y5 revenue
2012
2013
2014 2015
2016
Parent revenue
145
692
3,736
17,673
37,134
Media/recruiters/replay
0
?
?
?
?
Percent gross margin
57%
51%
59%
60%
65%
EBITDA
(510)
(1,026)
(509)
5,562
12,687
ABC headcount
8
21
38
83
191
Number of athletes
1.2K
5K
43K
136K
238K
Market penetration
~0.0%
0.1%
0.4%
1.2%
2.4%
$100 MM enterprise value in Y5
Revenue + EBITDA in thousands
Summary Slide(s)
• Various Exit Strategies and ROI
• Offering Amount, Terms and Conditions
• How money will fund milestone achievement
• Current Status, Accomplishments & Timeline
• Positive momentum: close with a bias toward
action
Common Mistakes and Advice
• Common Mistakes
•
http://www.youtube.com/embed/LMmdl4VltD4?rel=0 1:25-1:44
– Discussing only the product and not the actual
business
– Lack of preparation
– Presentation too long and does not build
momentum
• Advice
– Have back up slides with details to help answer
questions
– Prepare
– Rehearse, Rehearse, Rehearse
Information, Resources and Support
• Kauffman Foundation: www.kauffman.org
• Angel Capital Association: www.angelcapitalassociation.org
• Angel Resource Institute: www.angelresourceinstitute.org
• Books
– Term Sheets & Valuations by Alex Wilmerding
– The Art of the Start by Guy Kawasaki
http://vimeo.com/26077079 4:10-7:10
37
PHONE: 724.475.4538
info@bluetreealliedangels.com
www.bluetreealliedangels.com