Startnowhow - The Investment Process

THE INVESTMENT PROCESS – PITCHING, NEGOTIATIONS AND

TERMSHEET Dr. Joachim Behrendt / Ebru Gürses

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StartNowHow

• Open seminar series for active and prospective entrepreneurs

• 10 sessions on monthly basis until summer 2015

• Covers relevant theoretical and practical aspects of entrepreneurship

• Based on lecture „entrepreneurship“ @Bogazici University

• Based on experiences of entrepreneurs, investors, mentors and consultants

• Each session with guest speaker (entrepreneurs, investors, mentors, etc.)

• Seminar materials can be downloaded after the event

• Thursdays 17.15h – 19.30h

• Next session:

• ALT 1: Thu, July 9th, 2015

• Award ceremony will take place at 9.7. as well

• TOPIC: Success and Failure as an Entrepreneur

• SPEAKER: tbd

• Certificate provided for participants joining at least 7/10 sessions

BIC Angels Investments 01.06.2015 2

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StartNowHow - Seminar Topics (preliminary)

1. Mon, 20.10.: The entrepreneurial ecosystem in Turkey

2. Mon, 10.11.: Entrepreneurship as a profession

3. Mon, 8.12.: Opportunity recognition and evaluation

4. Mon, 12.1.: Planning, testing and developing a business model

5. Thu, 19.2. – lot of snow but no seminar -

6. Thu, 19.3.: Market and competitor research

7. Thu, 16.4.: Financial planning for startups

8. CANC: Marketing planning and control – the role of key performance indicators

9. Thu, 14.5.: Funding the startup – stage financing for ventures

10. Thu, 1.6.: The investment process – pitching, negotiations and termsheet

11. Thu, 9.7.: Success and failure as an entrepreneur / Graduation


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Success Rates

4 BIC Angels Investments 01.06.2015

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12 slides is all you need

Cover Page/Introduction

Overview

Problem

Market

Team

Technology/Solution

Customers/Revenue Model

Go to Market

Competition

Financials

Milestones

Summary

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01.06.2015 BIC Angels Investments 5

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Stage 1: Sourcing and Initial Screening


Target: 16 / month

Ratio: ??

1/month 2/month 4/month PR

2/month

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Stage 2: First Pitch and First Analysis


Target: 16 / month

Ratio: 25%

= 25% total

4x market analysis

Target: 4 / month

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Stage 3: Second Meeting / Full Analysis


Target: 4 / month

Ratio: 50%

= 6.25% total

2x fin.analysis

Target: 2 / month

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Stage 4: Agreement


Target: 2 / month

Ratio: 50%

= 6.25% total

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Presentation Delivery

• Know your deck – own your deck

• Be flexible – know where your slides are

• Don’t read the bullet points – have a conversation

• Use visuals / logos /graphics

• Preparation: Do your homework and know your audience

• Ask questions (e.g. any competing deals they are looking at?)

• Take notes

• No more than two of you should present

Practice, practice, practice and let your enthusiasm and passion show!

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How To Get To Investors

• Develop a strategy for fundraising

• Find a connection through someone the investor trusts

• via exec of the investors portfolio company

• Banker

• Lawyer

• Accountant

• Networking events

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L Investment Process


• Standardized termsheet / legal

documents based on

international benchmarks

• Legal support Moroglu &

Arseven

• Post investment process

(mentoring etc.) starts

immediately after termsheet

• Startup has to set up AS and

provide full initial funding

• If not already established

• Asset deal with old startups‘

company at arm‘s length

principle possible

• Short due diligence

• Financials if established

• Legal

• Personnel / reference check

• Definitve legal agreements

standardized

• Articles of Association, Share

Purchasing Agreement

• Employment / Noncompete

• Techncal Service Agreement

• Full capital payments

immediately after signing

Target: 6 / year

Ratio: 50%

= 3.13% total

Target: 1 / month

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LEGAL STEPS BEFORE INVESTMENT

01.06.2015 BIC Angels Investments

• Establishing company

• AoA should be ready;

• Taken notary and trade registry approval;

• 2-3 weeks period.

• All previous legal and tax issues should be clarified.

• BKS approval – (1 -1,5 month)

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LEGAL STEPS OF INVESTMENT


• Term sheet

• Company’s business description;

• Closing conditions;

• Dividends;

• Liquidation preferences;

• Right to Participate in Future Rounds;

• Anti-dilution rights;

• Right of first Refusal/ Co-sale (tag-along) rights;

• What about drag along right?

• Lock-up;

• Voting rights;

• BOD;

• Protective provisions;

• Non-Competition and Non-Solicitation Agreements;

• No Shop/Confidentiality.

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LEGAL STEPS OF INVESTMENT


• SHA

• BOD minutes

• Updated AoA

• General assembly minutes

- 1-2 months

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LEGAL STEPS AFTER SIGNATURES


• Bank letter

• Trade registry office approvals

• Release money !!!

• 1 week

Full investment process can be finalized in 2-3

months!!

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New Venture Valuation: Market Multiples

01.06.2015 17 BIC Angels Investments

Source: Grichnik, D./Bretttel, M./Koropp, C./Mauer,R., Entrepreneurship, p.101

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New Venture Valuation: CF Multiples


Source: Smith, J.K./Smith, R.L./Bliss, R.T., Entrepreneurial Finance, p.422,423

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New Venture Valuation: DCF Valuation


Source: Smith, J.K./Smith, R.L./Bliss, R.T., Entrepreneurial Finance, p.416

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Estimating Risk-Free Rate of Return



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Estimating Beta



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Estimating Beta



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New Venture Valuation: VC Method



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New Venture Valuation: First-Chicago-Method – Required Share %


Source: Leach, J.C./Melicher, R.W., Entrepreneurial Finance, p.378

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K StartNowHow - Outlook

• Today‘s materials will be made available to participants for downloading

• Next Seminar: „Success and Failure as an Entrepreneur“

• Guest Speaker: tbd

• Thursday, 9.7.2015, 17.15 – 19.30h

• Award Ceremony will take place at Thu 9.7. as well

• Don‘t forget to register early (eventbrite) - capacity 50 people!

• Priority for participants / registrants from today‘s session

• General rule: Allocation of seats according to participation

• Regular participation = certificate (70% participation)


BIC ANGEL INVESTMENTS Dr. Joachim Behrendt

Phone: +90 212 328 1939 Fax: +90 212 328 1933

www.behrendt.com.tr www.nexum.com.tr http:/twitter.com/joachimbehrendt http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

Email: [email protected]

http://www.behrendt.com.tr/

http://www.behrendt.com.tr/

http://www.nexum.com.tr/

http://twitter.com/joachimbehrendt

http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a



Startnowhow - The Investment Process

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