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
