what does it take? passion and commitment visionary leadership well-balanced team focus respect for...

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

Idea

DiscoveryProof-ofConcept

ProductDesign

ProductDevelopment

Manufacturing/Delivery

Pre-seedFunding

Seed Funding

Expansion/Mezzanine

Operating Cap.

Friends and Family

Seed Funds

Founder

Institutional Equity

Loans / Bonds

Start-up Funding

Angels

Angel Groups

Venture Funds

Investor Types

• TWO TYPES: Sophisticated & Unsophisticated

• FFF (friends, family and fools)

• Super angels

• Angel groups

• Venture capitalists

Angels: Majority of Startup Funding

• $22.5B• ~66,000 deals• 42% seed/startup• 55% early stage• ~ 318,500 individuals

Angel Investors 2011

• $29B• ~3,750 deals• 3.5% seed/startup• 68% later/expansion capital• Total 791 firms (not all active)

Venture Capital 2011

Sources: UNH Center for Venture Research, PwC MoneyTree and NVCA

$9.5B

$12.4B

$0.45B* $0.22B*$1.0B

$8.4B

$9.8B $9.9B

*estimated

The Number of Angel Groups is Growing

Sources: Center for Venture Research, Kauffman Foundation and ARI

• 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

BlueTree Allied Angels

10

Deal Flow Process

Submissions

(~30 PlansPer Month)

Managing Director pre-

screens emailed submissions.

Screening TeamReview

(5 – 10 PlansPer Month)

Screening team votes on which companies to

invite to general meeting.

General MeetingPresentations

(1 – 3 PlansPer Month)

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.

Manage Investment

Board member represents member

interests and seeks an

attractive exit.

Deal lead closes transaction and the sidecar fund invests in companies that

attract at least $250K in

investment from at least 5 members.

Diligence & Term Sheet Negotiations

Coordinated by:Managing Director

& Deal Lead

Typical Deal Process

Source: James Geshwiler, CommonAngels, Boston

(1 – 2 investments per

quarter)

12

How will my start-up be evaluated by investors?

13

Management! – Management! Management!!

14

WHY? Because it’s all about Execution!

• Management Team usually most important– CEO

o Coachable, vertical experience, leadership– Team

o Balanced & completeo Experience working together o OK to have some positions unfilled

Investor Considerations

• Management team 35%• Opportunity size and maturity 25%• Product or service 20%• Technology/solution uniqueness 15%• Investment structure 10%

• 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

Angel Investor Expectations

17

Elements of 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

The Pitch

• 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

Opening Slide

• 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

Problem

• 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."

Solution

Potential Market: US

22 CONFIDENTIAL

Seasonal Flu: 40 million people infected 20 million patients seek help200,000 hospitalizations 36,000 deaths US data

Swine Flu: 4/2009 – 1/201057 million people infected274,000 hospitalizations 11,690 deaths US data

Source: CDC report 3/5/2010

Market estimate of 4M treatments (Seasonal)

Current Technology Insufficient

• Current standard of care:

−Pulse oximetry− late indicator

−Respiratory rate− half-the picture − inconclusive

• Anesthesiology 2011: “Existing technologies can detect adverse events, but have not demonstrated significant clinical impact predicting deterioration in advance of adverse occurrences.” (Taenzer)

23

Resp

irato

ry S

tatu

sTime

NormalRespiratory Compromise

Death

Respiratory Failure / Arrest

ExSpiron

Pulse Oximetry

• 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

Business Model

Go to market channels

1. Direct

Sales Reps

4. ResellersEasy Graphics

5.Independent RepsKevin FriendCynthia Jensen2. Integrations

Progress BookIts About Time

3. Teacher CampaignsMyron PincombEasy GraphicsEd. Leadership Conf.

Admin & Reporting Capabilities• All products come with back-end tracking and reporting

– Tracks scores and training completion for all users– Identifies users who open emails, click on links or input data– Tracks traps and threats that users fall for– Identifies areas of weakness for future training– User friendly administration & management reporting

• Easy to deploy, manage and administer

Growing Customer Base

•Government •Financial•Insurance•Healthcare•Communications•Energy •Petroleum•Transportation•Education

Proprietary & Confidential Information Copyright © Wombat Security Technologies, Inc. 2008-2012

• 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

Underlying Magic

ABC™- A Multi-Functional Sub-Nano Metrology System

Probe

Isolation Chamber

Proprietary Software Data Acquisition System

Sample Alignment Probe

• 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

Marketing and Sales

• 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

COMPETITION

CompetitorsItem level In-transit visibility

Passive RFID

Local read capability with doors

closed

No wires between devices

Transferable, Plug and Play Comments

ABC Company

Odin Nearly 3 x expensive

Lockheed-MartinSavi Tech

Read at portals only

GE CommerceGuard

Discontinued

Intermec “On-the-road”

operations only

UNISYS Read at portals

only

Cubic Central control

only

31Inteligistics Confidential and Proprietary

• 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!

Management Team

• 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.

Financial Projections and Key Metrics

ABC achieves $37 MM in Y5 revenue

$100 MM enterprise value in Y5Revenue + EBITDA in thousands

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%

• 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

Summary Slide(s)

• 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

Common Mistakes and Advice

• 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 Kawasakihttp://vimeo.com/26077079 4:10-7:10

37

Information, Resources and Support

PHONE: 724.475.4538info@bluetreealliedangels.co

mwww.bluetreealliedangels.com