Money Day Assess Your Need and Readiness For Venture Capital Content provided by Gazelles Systems Content by Gazelles Systems
Dec 23, 2015
Money Day
Assess Your Need and Readiness For Venture Capital
Content provided by Gazelles Systems
Content by Gazelles Systems
Session Objectives
After completing this session, you will be able to:
• Determine whether your business is in need of venture capital
• Complete a gap analysis to determine your business’s funding readiness
• Conduct due diligence on potential VC partners
• Conduct internal due diligence to determine whether you are ready to make the pitch
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Positive ResultVenture Capital
Questions to Consider
1. Do I need capital?
2. How do VC’s decide?
3. How do I prepare?
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Venture Capital
Question 1: Do I need capital?
• Is it time to inject some capital into my business?
• What can I expect to gain from it?
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Purpose of Venture Capital
Capital Raised
Opportunity Capital (take advantage of
unforeseen opportunities)
Fudge Factor (because
Murphy’s Law is a law)
R&D Capital
Debt Repayment
(as approved)
Day-to-Day Operating
CapitalProject-Specific
Capital
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• What are the key points VC’s consider in their decision- making process?
Venture Capital
Question 2: How do venture capitalists decide?
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Balancing Competing Interests
THE DEAL(meeting of the
minds/compromise)
ENTREPRENEUR WANTS/NEEDS
INVESTOR WANTS/NEEDS
COMMON OBJECTIVES
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Balancing Competing Interests
COMMON OBJECTIVES
THE DEAL(meeting of the
minds/compromise)
• Maximum return
• Mitigate risk/downside protection
• Input on future and growth of the business/control
• Maximum capital/valuation
• Avoid dilution/control
• Affordable cost of capital
• Relationships and introductions
ENTREPRENEUR WANTS/NEEDS
INVESTOR WANTS/NEEDS
• Growth in the value of the business
• Additional rounds of funding at more favorable valuations
• Mutually beneficial exit strategy
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Types of Investors• Angels
• Strategic
• Commercial Lenders
• Venture Capitalists
• Private Placement Investors
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Sources of Venture Capital
• Typical institutional venture capital firms
• Corporate venture capital divisions
• Small Business Investment Companies (SBIC’s)
• Private equity funds
• Hedge funds
• Super angels and angel investing clubs
• Strategic investors
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Management Team•Background, knowledge, skills, and abilities of team members
•Individual roles and responsibilities
• How risks and problems are identified, managed, and eliminated
•Entrepreneurial personality traits of management team
Products and Services•Stage of development
•Specific opportunity
•Unique, innovative, and proprietary
•Level of control of the means of production
•Technological breakthrough or low-tech
Components of Investment Decisions
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Markets•Stage in the life cycle •Size and projected growth rate of targeted market•Marketing, sales, and distribution methods •Strengths and weaknesses of competitors•New markets, and barriers to entry •Characteristics of typical consumer
Return on Investment•Current and projected valuation and performance •Personal investment in the business•Financial acuity•Capital required•Projected return on investment (ROI)
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Components of Investment Decisions
• Share successes and pitfalls in raising capital
• Discuss the toughest questions you’ve had to answer and how you dealt with them
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Experience Sharing
• 10 Minutes
Break
Venture Capital
Question 3: How do I prepare?
• Presenting and negotiating
• Checklists
• Managing your VC partner after the deal is done
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Presentation Tipsfrom
Guy Kawasaki
• 10 Slides
• 20 Minutes
• 30-point font minimum
The 10/20/30 Rule
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10 Slides: What to Cover
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Checklists (Right Tools)
• Funding readiness
• Due diligence on VC
• Due diligence on you
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Managing VC’s After the Deal
• Over-communicate– P2P (People-to-People)
• Board meetings– Provide financial reports
early
– Dashboard handful of KPI’s
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• What can you share about presenting to VC’s?
• What was your experience during due diligence?
• How did you communicate with your board and VC’s on your board?
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Experience Sharing
Summary & Wrap-Up• Being prepared to make the pitch to a prospective investor
is one of the most critical parts of the process.
• Almost all businesses will need an infusion of capital at some point in their life cycle.
• Your due diligence needs to focus on these three questions:• Is your business funding ready?
• Do you know which investors are the right fit for your business and the opportunity?
• Is everything in place to meet the potential investor’s expectations?
• After the deal, be sure to communicate frequently to keep your investor informed and ready to help when needed.
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