considerations raising venture capital (copyright-allegis)
TRANSCRIPT
Raising Venture CapitalConsiderations for Entrepreneurs
Robert R. Ackerman, Jr.Founder & Managing DirectorAllegis Capital
Copyright 2012 – Robert R. Ackerman, Jr.
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 EssentialAre 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 BossChoose Very Carefully
Are you and your Company Ready?Timing is ImportantPreparation Essential
Copyright 2012 – Robert R. Ackerman, Jr.
SELECTING POTENTIAL INVESTORS
Not all Venture Capitalists are Right for YouLocation
Most Firms Invest Within 100 Miles of Their Offices
Sector PreferenceFirms Invest in Targeted Areas (Expertise)
Stage PreferenceFirms Tends to Focus on Different Stages of Investment
Partners Collection of Individuals – Domain Knowledge (Expertise)
PortfolioComplimentary or Conflicting Investments (Expertise)
AssetsDo 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 EqualWhat 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 Year1% +/- Will Lead to New InvestmentsYou 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 FirstPutting Your Money Where Your Mouth IsGet to the “Right Time” to Seek Venture Capital
Raise Money When You Don’t Need ItRaise from a Position of Strength
Have Options
Convey Scarcity and Build Momentum
You are Selling YourselfIdeas are Great, but Success is About People
Investors Have Heard it All BeforeNeed 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-UpMarketProductExecution
Ensure You Know Your Customer Better Than Anyone
Validation of Problem & Value PropositionCustomer ReferencesCritical to Conveying an Ability to “PIVOT”
Have a ProductAddress Technical CredibilityBrings the VISION to Life
Get TractionConnecting 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…
3Months
12Months
6Months
15Months
9Months
18MonthsNOW
Financing
Product
Revenue
Marketing
THE PLAN – SUMMARY TIME LINE
Series A
Product Alpha
Marketing
Revenue
Product Beta Product GeneralAvailability
Series B Series B
Copyright 2012 – Robert R. Ackerman, Jr.
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 ColdOpen your meeting by Framing the Conversation
Manage your Meeting Time30 Minutes for the Presentation10 Minutes for the Demo20 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 FAILEngage with Questions – Don’t Become DefensiveDon’t Bulls#$% - Building Confidence is Essential
Anticipate Due Diligence Requests and BE PREPAREDRead http://venturebeat.com/author/scott-weiss/
Copyright 2012 – Robert R. Ackerman, Jr.
Check List 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”
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
