tsh master class winning the hearts & minds of venture capitalists

Winning the Hearts and Minds of Venture Capitalists Alan Wallace awallace@octopusventure s.com

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• About Octopus:o Growth & early stage focuso Invests £250K-5Mo Every Wednesday they run ‘open office’- message [email protected] Looks for companies with: product, route to market, team, ability to validate customer acquisition costs with traction• VC or Angel?o If you have traction and want to fund growth, go for VC funding. Go for angel if you are pre-product or pre-traction.o Choose your initial seed investor wisely. 20-25% for £500K-1M is a good rule of thumb. Be careful that they do not give you too high a valuation that will make it unattractive to the VC in the next round.• Preparing the approach:o Ensure you understand the VC that you are going to meet, and ensure your business is a good fit. Find out what the VC is looking for and do your homework on what value they might be able to add to your businesso Your chances of getting an investment: 12K business plans sent each year, see 200 company meetings per year, then make a single deal every 6-8 weekso Get a referral from someone in their network (one option is through the portfolio companies)• Meet up with the VCo Send presentation in advanceo Bring the two execs from your team, but ask firsto impress the VC right away with who you are and why you are specialo Communicate the business plan in simple termso If you don’t know answers to the questions, don’t wing it, just say that you will come back to them with the answer• It’s all about the teamo This is more important than the product or business plan!o Be proud to talk about what makes you and your team specialo Ensure that there is one clear leadero Ensure that there is a blend of complementary skills. If there are gaps, say so and ask the VC for help finding that person• How big can you grow?o At minimum, VCs want a 10x exito Businesses worth £100M is the minimumo Under promise your investors in terms of returnso Consider getting the money that you need in chunks based on hitting milestones. Milestones could be something like: 1) breakeven 2) get 10% growth per month and 3) get to exit.• Strike Zoneo It takes 8-12 weeks to close a deal including negotiating.o Remember that you will sign a warranty that what you told the VC is true about your business• Get married (make the deal)o Most VCs look for an exit after 3-5 years. A corporate finance advisor will be appointed to help sell the business. Know what valuation you want over what time period. VCs do not want lifestyle businesses (i.e. high salaried staff, ongoing low returns)• What we say & what we mean:o “send us a short message” means “keep your deck or email SHORT.”o “we need to see customer validation” means “we’re not sure your solving a market need”o “we need help understanding your market” means :we don’t believe you will get the market traction you forecast”o “we want to talk about valuation” means “we’re interested but be realistic”o “sorry- it’s not for us” means “it’s a no today, but do come back to us in the future...it is never an absolute no forever”o “we’re excited by the opportunity” means “you are in the strike zone, and we want to do business with you”

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