Raising Venture Capital
Considerations for Entrepreneurs
Robert R. Ackerman, Jr.
Founder & Managing Director
Allegis Capital
IS VENTURE CAPITAL RIGHT FOR YOU?
Venture Capitalists are Looking for Large Opportunities
Is Your Target Market Large Enough to Warrant Attention?
Are You a Feature? A Product? A Company?
Differentiation – Barriers to Entry are Essential
Are You Ready to Surrender Total Control?
“Investor” Means “Partner”
Most Companies Will Raise Capital “4” Times
You Will Likely See Dilution with Each Round
When You Have a Venture Board – You Have a Boss
Choose Very Carefully
Are you and your Company Ready?
Timing is Important
Preparation Essential
Copyright 2012 – Robert R. Ackerman, Jr.
SELECTING POTENTIAL INVESTORS
Not all Venture Capitalists are Right for You
Location
Most Firms Invest Within 100 Miles of Their Offices
Sector Preference
Firms Invest in Targeted Areas (Expertise)
Stage Preference
Firms Tends to Focus on Different Stages of Investment
Partners
Collection of Individuals – Domain Knowledge (Expertise)
Portfolio
Complimentary or Conflicting Investments (Expertise)
Assets
Do They Have Sufficient Capital
And then the Hard Work Begins
Copyright 2012 – Robert R. Ackerman, Jr.
SCREENING YOUR TARGET LIST
Not all Venture Capitalists are Equal
What is the Firm’s Reputation – With Entrepreneurs
Do They “Add Value”?
When Things get “Tough” – How Do They Respond?
Are They Helpful in Fund Raising?
Would Entrepreneurs Work with the Firm Again?
Where is the Firm in Their Fund Cycle?
Do They Have the Capital to Support You Through Your Growth?
Do Your Due Diligence
Can You Get a “Warm” Introduction to “the” Partner
Firms Will Look at 1000+ Opportunities in a Year
1% +/- Will Lead to New Investments
You Need to Get to the Top of the Stack of “Possibles”
Copyright 2012 – Robert R. Ackerman, Jr.
THINGS TO KEEP IN MIND
Invest in Yourself First
Putting Your Money Where Your Mouth Is
Get to the “Right Time” to Seek Venture Capital
Raise Money When You Don’t Need It
Raise from a Position of Strength
Have Options
Convey Scarcity and Build Momentum
You are Selling Yourself
Ideas are Great, but Success is About People
Investors Have Heard it All Before
Need to Build Credibility and Confidence
For Most Entrepreneurs – Success is About Persistence
A Lot like Dating
The Money is not raised until it’s IN THE BANK.
Copyright 2012 – Robert R. Ackerman, Jr.
TILTING THE ODDS IN YOUR FAVOR
Three Types of Risk for a Start-Up
Market
Product
Execution
Ensure You Know Your Customer Better Than Anyone
Validation of Problem & Value Proposition
Customer References
Critical to Conveying an Ability to “PIVOT”
Have a Product
Address Technical Credibility
Brings the VISION to Life
Get Traction
Connecting Supply and Demand Builds Confidence
Copyright 2012 – Robert R. Ackerman, Jr.
SEVEN SLIDES TO FUNDING
1) Your Credentials
2) The BFD (Big Fundable Deal)
3) The Market
4) Competition
5) What We Own (IP, Trade Secrets…)
6) Summary Financials
7) Summary Timeline…
Copyright 2012 – Robert R. Ackerman, Jr.
THE PLAN – SUMMARY TIME LINE
Revenue
Revenue
Marketing
Marketing
Product
Product Alpha
Product Beta
Product General
Availability
Financing
Series A
NOW
Series B
Series B
3
6
9
12
15
18
Months
Months
Months
Months
Months
Months
AN ALTERNATIVE
Just show up, no foils
We’ll give you a marker
and a white board
You’ll show your command
of your BFD
Copyright 2012 – Robert R. Ackerman, Jr.
FAMOUS COUNTER EXAMPLES
Just to keep (some) perspective
Jobs and Wozniak: Who will fund these unbathed hippies?
What? A third search engine?
WebVan: Big Idea, Big Names
(Investors, CEO), Big Crater…
Copyright 2012 – Robert R. Ackerman, Jr.
A FEW HINTS
Even with Screening – Don’t assume your Audience are Experts
You should be the “subject matter expert” in the room
Make Sure you have Your Elevator Pitch down Cold
Open your meeting by Framing the Conversation
Manage your Meeting Time
30 Minutes for the Presentation
10 Minutes for the Demo
20 Minutes for Questions
The Objective of the First Meeting is to Get to a Second Meeting
Don’t try to convey everything you know – You will FAIL
Engage with Questions – Don’t Become Defensive
Don’t Bulls#$% - Building Confidence is Essential
Anticipate Due Diligence Requests and BE PREPARED
Read http://venturebeat.com/author/scott-weiss/
Copyright 2012 – Robert R. Ackerman, Jr.
Check List
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Clearly articulate your vision
Overflow with passion and conviction
Keep it simple
Know your numbers cold
Start with the problem you intend to solve
Rehearse your pitch… a lot
Do something surprising
Make us believe in you
Don’t exaggerate
Tell us the hard part
Demonstrate how you can defend against
competition
Answer “Why does this business need to exist?”
Have a thoughtful and deliberate game plan
Remove any vagueness
Balance boldness with believability
Highlight what makes you unique
Proofread every correspondence
Show a pattern of achievement
Make every word count
Why us? Tell us what specific help you need
Never say, “We have no competition”
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Make sure you can defend your core assumptions
Provide a view into how you think through problems
Don’t talk too much – listen and engage, don’t preach
Follow up with absolute precision – every interaction
is a test
Never present two different ideas
Have a sense of humor
Never ask a VC to sign an NDA (you’ll look like an
amateur)
Focus more on the team than the exit
Tell us how you’ll overcome adversity
Show your product or service from the customer’s view
Answer, “It a feature or a business?”
Show us how the company can become big
Figure out a way to connect to us without cold-calling
Answer questions directly, quickly, and honestly
Why? Why you? Why now?
Show how you’ll create an “unfair advantage”
Be open-minded, humble, and coachable
Tell us how you’ll create a “category of one”
Never say your forecast is conservative
Don’t name drop
Make us feel your burning desire to achieve
Credit: Josh Linker – Detroit Venture Partners
Copyright 2012 – Robert R. Ackerman, Jr.
Questions?
Robert R. Ackerman, Jr.
ackerman@allegiscapital.com
Twitter: @BobAckerman