Sloan killer presentations

8/7/2019 Sloan killer presentations

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1

Financing Silicon Valley:Understanding Venture Capital and

Making a Killer Pitch

J. Alexander Sloan

Partner

Blackwolf Partners



2

Agenda

I. My Background

II. Some Basics on the Venture Business

III. Making a Killer Presentation

IV. Discussion



3

My Experience and Perspective

1993 - 1996: The Vietnam Fund Limited

1996 - 1998: Cornell MBA

1999 - 2002: Hambrecht & Quist venture capital unit

Merged into J.P. Morgan Partners

Invested in many younger private technology companies

2004 on: Founding Partner, Blackwolf Partners

Early stage venture fund focus on Cleantech: healthier,

cleaner, more energy efficient products & services.

Board Member, Center for Sustainable Global Enterprise at JGSM



4

Blackwolf Ventures$100 m. Tech Fund

driven by demands of:

Blackwolf Ventures$100 m. Tech Fund

driven by demands of:

Healthy Lifestyle(~33%)

Healthy Lifestyle(~33%)

Natural Resource

Sensibility(~33%)

Natural Resource

Sensibility(~33%)

Differentiated

Healthcare(~33%)

Differentiated

Healthcare(~33%)

• Food quality & choice• Clean air & water • Personal development

• Air & water utilization• Energy efficiency• Environmental management

• Healthcare solutions• Complimentary medicine• Cleaner Pharma

Clean TechnologiesClean Technologies

The Blackwolf Cleantech Strategy



5

Company Stage

CapitalRequired IPO/Buy Out/Merger

Financing Lifecycle

Takes months to years to reach IPO/Buy Out

$25 m.

< $1 m.

$50 m. +

Startup Expansion Mid to Late Mezzanine Post IPO Mature

R i s k

Capi

tal Req

uired &

Valua

tion



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Many Types of Financing Partners• Founders/bootstrap: entrepreneur and personal savings

• Angels: Individuals: “friends and family”“Bands of Angels”: informal groups of “professional” angels

• Specialized venture firms: smaller, more specialized: Blackwolf

• Traditional venture capital firms: Kleiner, Benchmark, Sequoia, etc.

• Strategic corporate: customers/suppliers who buy into the company.

• Corporate venture units: Intel Ventures, Nokia Ventures, etc.

• Investment banking venture: JP Morgan Partners, Goldman Sachs, etc.

• Investment banks: IPO underwriting.

• Public investors, public stock = currency.

• Debt instruments

Don’t expect to get traditional venture funding…look for best option.



7

“Valuation”: what is a company worth?

Public Company:• # shares outstanding X market price per share =

market capitalization = valuation.

• Stock price changes minute to minute, set in pubicmarket of buyers and sellers.

• This is an “indirect”, secondary market.

Private Company:

• # shares outstanding X negotiated price per share.• Transaction negotiated directly between investor and

owner, no “market clearing” mechanism.



8

Fuzzy Math:The Mechanics of Valuation and Dilution

“Pre-Money” Valuation

( negotiated value for company)

+ Capital invested

= “Post Money” Valuation

(new valuation for company)

$10 million

$5 million

$15 million

• Investor now owes 5/15 or 33% of the company, and the prior

owners are “diluted” to 66% ownership.

• 33% of the company “cost” $5 m. But at a $20 m. “pre”, raising$5 m. only costs 20% of the company. Or 33% of the company at a$20 m. pre-money valuation raises $10 m.



9

Organization & People

• Firm culture: ranges from small private partnership to more

corporate style.

• Decision making process: rule by consensus of all partners.

• the “Monday meeting”

• Partners have diverse backgrounds: technology, banking, consulting,

engineering, operating, sales, marketing and/or venture experience.

• Classic polarities to each partner’s investment approach:

•

quantitative versus qualitative appraisal.

• Business (MBA) versus technical (Ph.D.) perspective.

• Operating versus finance experience.



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What Value do Venture Investors Add afterthe Money is Invested?

• Board seat, guidance on strategy, check and balancefor management

• Accessing contracts/customers/introductions

• Hiring key managers

• Interaction with management

• Network of relationships and synergies between

portfolio companies

Long-term, involved, active partner…..(theoretically)



11

Compensation to Venture Firm

1. Fees: 2% - 3% of committed capital, paid annually (covers

salaries, office, overhead, etc.).

2. Carried interest: 20% - 30% of profits after (and only if)

original capital is returned to investors.

• Fees can drive bigger fund size (bigger base) and faster

timing to raise the next fund (double dipping).

• Larger fund size can drive up average size of

investments sought: bigger bets.



12

Exit and Timing are Key

•

We need to get our investment out of the company to make money.

• Primary means to exit: acquisition/trade sale or IPO.

• Time horizon from investment to exit: months to 5-7 years.

• Returns calculated and compensation paid to venture managers only

when cash or securities are actually distributed to investors.

$0

$5

$10

$15$20

$25

$30

$35

$40

$45

Ven

ture

Day

of IPO

+30

days

+12

0 da

ys

+36

5 da

ys

Co X Stock

• Lock-ups and other sellingrestrictions can dramaticallyaffect returns.



II. Making Killer Presentations

So, you have:

a winning team, a compelling and practical product,

a clear business plan,

…and you want to pitch to a venture firm or

other investor?



14

Your Overall Challenge

• You must clearly convey TWO value propositions:

1. To the customer

2. To the investor

• They are related but not the same.

• Convince me that both are highly attractive and likelyto be realized.



15

Understand Your Audience

• Try to learn the backgrounds and perspectives of your expectedaudience.

• Research the firm’s website and Google the team.

– Prior successful and loser deals in your space?

– MBA or Ph.D. “mentality” or both? Adjust your pitch.

– Understands your industry?

• In larger firms, an associate or EIR will likely meet with you first.Partners can drift in and out.

– Play to the firm’s point person. Get an advocate.

• No venture investor ever got fired for saying “Pass”.



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What Do Venture Investors Look for?

• Our Needs:– Company matches current Fund’s investment strategy and timing?

• The Opportunity:– What is the core business opportunity? How big?

• Management:– Great management team? Done this before? Done it together? Can I work

with them?

• Well Planned:– Clear business plan? Plan B & C?

– Unique approach/technology that can be defended?

• The “Deal”:

– Attractive price/valuation? Potential for up-rounds?– Extent of future financing needs before profitability?

– What are the exit opportunities, how long to get there?

You need to communicate answers clearly through a writtenbusiness plan and sharp presentation.



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General Tips to Knock Em Dead

• This is not a corporate presentation. Totally different dynamic.

• One hour (including Q&A), one shot.

• The audience is unprepared and has A.D.D. (and has a Blackberry

under the table).

• Expect to be interrupted.

• It’s not about your slides or your planned order. Feel the flow of

each meeting. Give them what they want.

• Smile and make good eye contact.

• “Touch, Turn, Talk.”



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Interruptions & Flow Management

• You will be interrupted and asked questions out of your plannedsequence. Expect it, and go with it happily.

• Answer the question, then try to get back to your order.

• Be prepared to jump to a supporting “go-to” slide if askedsomething out of your planned order.– Have a printed reference guide of your slide order for yourself.

• A presentation is ideally a give and take of what you want to sayand the audience wants to hear.– Respect both.

• Go with the flow of each meeting, but maintain control.– Yes, it is a test…

• Watch your time.



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Manage Your Content

• Carefully balance your allocation (time and content) to:

1. Your market and its dynamics and opportunities.

2. Your product/service.

3. Competition: lessons, successes, opportunities.

4. Management team and advisors.5. Business model.

• If I don’t get the info, then you get zero credit for it.

Let’s discuss some additional venture investor-orientedneeds for each of these section…



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On slide 1 or 2, no later, explain:1. How big is the company: age, stage, # of employees,

product status, revenue/customers (if any)?

2. How much money has been raised/invested to date, when,valuations used?

3. How much investment are you looking for now?

First, Just the Facts…please!

Startup Mid to Late Post IPO

I need to put your company intoinvestment & portfolio context.

Don’t make me wait or dig for it. ?

? ?

?



21

Market Opportunity

• Be highly specific to your product’s target market segment.

– Don’t just use the biggest market research numbers you can find.

– IDC and Gartner are often wrong…and we know it (just check our trackrecords).

• Who are your customers? Explain customers’ current buying behaviors.

• Where is their demand need/pain? What is the current solution? Whyis this solution insufficient?

• Go quickly into discussing your product as the solution.

Too much time is typically spent on this section. Keep moving.



22

Your Product/Service

• What is the technology?– How does it work? Is it new or repurposed?

– Is it yours?

• What are the next phases/applications/opportunities foryour core product/service if Plan A fails?

• How will your product sell? Nice or need to have?– Push or Pull market dynamic? Build it and they will come?

– Did you start with a technology or with a market need?

• How will you defend your technology/advantage?– Patents: yeah, and….



23

Business Model

• Gets the least attention in presentations. Get to it quickly.– Not just excel sheets at the back. Tell a story.

– Clearly walk through the growth milestones of the business:

• Capital needs, hiring, spending, inflection/decision points, alternatives...

• Reasonable projections and assumptions are moreimpressive (and believable) than highly optimistic ones.– Seen too many “hockey sticks”.

• What is Plan B and C for your technology/product?– Think about downside protection, not just upside.

– Investor is buying into the company, not into the product.



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More Business Model Questions

• How much money will this company need to get profitable?

• Minimum and maximum manageable investment load?– What would you do with 1/2 or 2x or 3x the money you are looking

for now?

• Can my fund invest its per deal minimum (could be up to$15-$20 m.) in this company within 3 years.

• Exit strategies are key. Investors need to get out. How?– IPO only? Trade sale options? Likely buyers?

– Comps of similar deals done?

– Timing counts. A fund has its own specific timing needs.



25

Connect the Dots and Tell a StoryFYE FYE FYE FC Revised Projections

($ Millions) 6/30/02 6/30/03 6/30/04 (1) Year 1 (2) Year 2 Year 3 Year 4 Year 5

Revenue 5.4 4.8 6.6 10.8 16.5 23.2 29.4 35.0

Gross Profit 4.0 3.4 4.8 7.1 9.6 12.6 15.6 18.2

Gross Margin 74.1% 70.8% 72.7% 65.7% 58.2% 54.3% 53.1% 52.0%

Operating Expense 3.2 2.5 3.2 4.3 4.6 5.6 6.4 7.2

EBITDA 0.8 0.9 1.6 2.8 5.0 7.0 9.2 11.0

EBITDA Margin 14.8% 18.8% 24.2% 25.9% 30.3% 30.2% 31.3% 31.4%

(1) Preliminary, audit to be received prior to clos

(2) Revenue already under contract for year 1 is $7.6 million. Revenue relating to new system sales is projected to be $2.6 million.

New rental contracts in year 1 are assumed to generate only 3 months of revenue for the year ($0.3 million).

Staff 8 12 25 30 40 55

Capital Invested 4,000,000$ -$ -$ 15,000,000$ -$ -$

Cash Burn/month 100,000$ 250,000$ 323,000$ 500,000$ 800,000$ 1,200,000$

Cash Burn/year 1,200,000$ 3,000,000$ 3,876,000$ 6,000,000$ 9,600,000$ 14,400,000$

Cash Balance 2,800,000$ 1,000,000$ 124,000$ 9,000,000$ 5,400,000$ 600,000$

v1.0 v1.5 V 2.0Product

2005 2006 2007 2008 2009 2010 2011 2012

Exit Plan M&A IPO



26

Explain Your Competition

• Who is doing your business idea now?

• What do they do wrong or right? What have they taughtyou?

• Very few new companies have no competition. If youhave none, then are you smart or dumb for entering thespace?

• Is your competition a potential threat, partner, targetor source of acquisition…or all of those? How will you

manage this?

• Know case studies of your product area and industrythat show success, including a money-making exit forinvestor.



27

The Team• Backgrounds? Done this sector/product before?

• Worked together before?

• Made mistakes before? Learned what?

• Made money for investors before?

• Worked in startup, midsized, and/or larger companies?

• Worked with venture investors before? Whom?

• Relevant connections to this industry and product?

• Board of directors, advisors and investors?



28

The Softer Stuff

• Venture decisions are made on imperfect, “soft”qualitative data, this applies to decisions about workingwith people.

• Personality & chemistry matters.– Do I want to work with you for years, through tough times?

– Let your personality come through.

– Do you know your stuff?

– How well and openly do you respond to questions?

– Are you honest about weaknesses and needs?

• Is this just a one-person show?



29

Talking Valuation

A venture investor will ask,

“So, what do you think your company is worth today?”

Yes, it’s a sucker question, but be ready:

• Have a reasonable pre-money valuation range prepared.

• Have a plausible answer related to the current status ofthe product, sales and business.

• We love “comps”. Be ready with some examples andstories.



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Summary• Much easier for a venture investor to say “no” to a deal.

• Lots of deals come our way. You need to stand out.

• Great presentations are honest, clear, exciting, direct and flexible.

• It’s about the business opportunity, not just cool technology.

– We call it a “deal” for a reason.

• How can an investor buy low and sell high, and on time?

• Avoid seeking professional money until you have to (or never at all).

• Choose your investors as carefully as we choose you.

Thanks for your attention!

Sloan killer presentations

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