21c venture capital

VENTURE CAPITAL IN 21CJUNE 2012

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We back teams rather than sectors Invest £100k to £5m £2.8bn FUM 100# Octopus Venture Partners [Always] Open Office Early Stage – Realised IRR of 39% + Growth – Realised IRR of 28%

OCTOPUS INVESTMENTSA SHORT INTRODUCTION

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acole@octopusventures.com@alliottAlliott.co

ALLIOTT COLEHOW TO CONTACT ME

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Agenda

Venture capital in 21C Venture capital and YOU? Raising venture capital Key investment terms Resources Q&A

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VENTURE CAPITAL IN 21CMULTI-DECADE LOW CAPITAL SUPPLY (UK)

The Equity Gap is continuing to widen Banks’ depressed lending to SMEs is likely to be prolonged Lack of VC fundraising is exacerbating the effects of the banking crisis

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08Jan

-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09Jan

-10

Mar-10

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Nov-10

-40-20

020406080

100120

Net Bank Lending to SMEs

£m p

er w

orki

ng d

ay

'00 '01 '02 '03 '04 '05 '06 '07 '08 '090

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Venture Capital Fund Raising

Year

£bn

Source 1: Bank of EnglandSource 2: NESTA

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VENTURE CAPITAL IN 21CEVOLVING INDUSTRY Imprecise term: wide array of investors Funds: geography, stage, sector and/or “thesis” New entrants:

Full time Angels Crowd platforms Incubators Accelerators

Stage of investment determines return requirement Seed – 15x Series A – 10x Series B – 5x

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VENTURE CAPITALIS IT RIGHT FOR YOU AND YOUR BUSINESS?

Very inefficient market: 3000 plans >>> 8 investments Can your business be worth £100m - £1bn? Really? Several alternatives:

Friends Family Fools (FFF) Angels Family Offices Grants Your customers

Adopt a rifle approach – and then listen to feedback

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RAISING VENTURE CAPITAL (I)COMPETITIVE TENSION

1. To get good terms, you need multiple offers.

2. To get multiple offers, you need to tell a good story to multiple investors at the same time.

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RAISING VENTURE CAPITAL (II)APPROACHING VENTURE CAPITALISTS

Endorsement from a trusted partner Treat a VC = Customer Short email with bullet points Rifle shot approach Don’t cold call Cf. Venture Hacks example email

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RAISING VENTURE CAPITAL (III)WHAT TO PRESENT Sell the vision and excitement. Short 10 Slide Deck

Team Product Traction Market Sizing Route to market Competitive landscape Barriers to entry Bottom up, assumptions led forecast Acquirer landscape Funding and allocation

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RAISING VENTURE CAPITAL (III)WHAT TO PRESENT

Appendix Very clear milestones / deliverables Explicit tech road map Clean and recent sales pipeline Relevant KPIs Share capital table

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RAISING VENTURE CAPITAL (IV)HOW TO PRESENT – GOLDEN RULES

Meet In the Morning Arrive Early Don’t hang out in reception Assume no knowledge of your sector or business Always speak to a slide deck 10 Slides Maximum 25 Minutes Video Kills the [pitch] Remember their Q&A

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RAISING VENTURE CAPITAL (V)KEY TERMS Valuation

25% dilution for £x Competitive tension is key

Structure Understand the differences: simple, participation Anti- dilution – walk away

Option Pool Structure against specific hires

Reverse Vesting Founder friendly Leaver Provisions

Portfolio Due Diligence

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RAISING VENTURE CAPITALRESOURCES

Surviving Fundraising – Paul Graham Lines Not Dots – Mark Suster AVC – Fred Wilson A16Z.com FredDestin.com

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THANK YOU FOR LISTENINGANY QUESTIONS

@Alliottacole@octopusventures.com