Everything you need to know about an investment and fundraising for start-ups. The presentation covers all different sources of financing for high growth companies:
- Bootstrapping and the four Fs
- Angel investors
- Startup accelerators
- Venture capital funds
- Investment documentation
- Alternative funding sources (crowdfunding, etc.)
- Grants and incentives
In the presentation you will also find some basics how to prepare your investment documentation and how to pitch to venture capital investors.
2. BLAZ KOS
• 10+ years working with start-ups
• Management of university incubator, technology park and business angel network
• Management of two start-up accelerators and co-working space
• PODIM Conference – one of the biggest conferences in Alps-Adriatic region
• 600+ lectures in CEE
• Mentored over 300 start-ups
• Two handbooks about startups, 1500+ pages on two blogs
I am on a life mission to make the world a more innovative, organized and transparent place to be by
helping individuals, organizations and communities achieve their peak potential and an entirely new level of
performance.
5. Bootstrapping / Retained Earnings
• Internally Generated Funds
• You reinvest money in growth of the business
Grants and support on offers
• Tenders
• Incubators, technology parks, …
Debt financing
• Credit, leasing, factoring, franchising…
Equity financing
• The investors becomes co-owner
Crowd funding
6. Personal Bootstrapping
• Personal savings
• Maximize credit cards
• Keep the day job (until first customers)
• Use personal computer, car and offices
• Minimal salary when you start a business
8. Grants and support on offers
Infrastructure
Incubators
Technology parks
Business plan competitions
Tenders
Municipality level
National level
Regional level
EU level
9. Debt financing
• Banks look at the company history
• Cash flow
• Insurance (assets, surety)
• No added value
• Influences your cash flow
• Start-ups
• No history
• No assets
12. FFFF
Founders
• Put your money where your mouth is
• Sweat and tears
Friends
• Not always wise
• Don’t mix business with pleasure
Family
• Financial and moral support
• Big difference between US and EU
Fools
• You can probably always find a fool ;)
Oh, really?
13. Startup Accelerators
• Competition
• Micro Funds for small equity
• 10.000€ – 50.000€ / 5% - 10%
• Training and mentoring
• Pitching for bigger investment
14. Business angels
• High net worth individuals
• High emotional incentive
• Smart money
• Business / sector know how
• Experiences
• Social capital
• Drive to create companies
• Not all angels are alike
• Industry
• Business background
• Active / Passive
MVP / Traction
50k€ - 500k€
15. Venture Capital Funds
• It’s a FUND with hired management team
• Management team are usually also partners in the fund
• Strict Investment policy
• Investments in later stages (in CEE region)
• Expansion capital
• Higher investment size: 1 mio € to 3 mio €
• Different type of funds: Sector, Geography, Stage of development
16. What do they look for?
• Innovative idea: Problem, pain, solution
• Business model: Scalability, profit margins etc.
• Big market: Potential for Explosive Growth
• Top executive team with strong leadership
• Exit strategy
Enthusiasm: Spark in the eye
Expertise: Sector and business knowledge
17. What do they look for?
Good signs
• Unfair advantage
• Disruptive technology
• High profit margins
• Short sales cycle
• Repeated sales
• Recession proof
Sectors
• IT and telecommunications
• Web startups
• Medical
• Clean tech
Bad signs
• No core competence
• Dominant players on the market
• Price driven competition
• Low profit margins
• Long sales cycles
Sectors
• Retail
• Restaurants
• Services
18. It Matters Whom You Marry
• You have to be 100% sure you want to get married
• Meeting point
• Networks, conferences (20%)
• People you already know (80%) - Trust
• Good sales pitch
• Chemistry (!)
• Same vision
• Trust
• Contribution into relationship
• Signing the contract
• Divorce
19. Syndication
• More angels/VCs invest in one company
• Lower risk for the investors
• Lead investor and co investors
• Lead investor should speak for the whole syndicate
Cons
• Coordination
• Too many shareholders
• Passive investors
• It takes longer to make key decisions
Pros
• More added value and help
• More contacts and reputation
• More money and less pressure
21. Short Description of Your Business
• Elevator Pitch
• Few paragraphs you can e-mail or explain to
potential investor in a few minutes
• What does your company do?
• So what?
• Example…
• What do you want?
22. Business Plan PPT Presentation
COMPANY PURPOSE
• Define the company/business in a single declarative sentence.
PROBLEM
• Describe the pain of the customer (or the customer’s customer).
• Outline how the customer addresses the issue today.
SOLUTION
• Demonstrate your company’s value proposition to make the customer’s life better.
• Show where your product physically sits.
• Provide use cases.
WHY NOW
• Set-up the historical evolution of your category.
• Define recent trends that make your solution possible.
MARKET SIZE
• Identify/profile the customer you cater to.
• Calculate the TAM (top down), SAM (bottoms up) and SOM.
COMPETITION
• List competitors
• List competitive advantages
PRODUCT
• Product line-up (form factor, functionality, features, architecture, intellectual
property).
• Development roadmap.
BUSINESS MODEL
• Revenue model
• Pricing
• Average account size and/or lifetime value
• Sales & distribution model
• Customer/pipeline list
TEAM
• Founders & Management
• Board of Directors/Board of Advisors
FINANCIALS
• P&L
• Balance sheet
• Cash flow
• Cap table
• The deal
23. Key things for investor
• The problem
• The size of the opportunity
• Strength of the team
• Level of competition
• Your competitive advantage
• Plan of attack
• Current status
• Milestones
• Financials
24. 20 min presentation to VC on a meeting
3 min presentation to super angel
7 min presentation on conference
25. • Business Plan
• No one reads them
• Investors prefer demos, MVPs, prototypes, traction
• Necessary document for some investors
• Executive Summary
• One to three page description of your business
• Private placement memorandum (PPM)
• For investment bankers not VCs
Other Fund-Raising Materials
26. • 100% of them are wrong
• Nevertheless you must understand the financial
dynamics of your business
• Think innovation accounting and key metrics
• Assumptions underlying the revenue forecast
• Monthly burn rate
Detailed Financial Model
28. Best way to get to the VC is with help of your
fellow entrepreneurs or ask for an advice.
29. General Advice
• Decide what you want
• Do your homework - RESEARCH
• Prepare all the necessary documentation
• Make awesome first impression
• Network, network, network
• Do the follow up
• Get the lead investor
• Push, push, push
• Listen to your gut instinct
30. Disadvantages of VC Financing
• It’s the most expensive sort of money
• The cheapest is the one you can get from your customers
• All the shareholders have rights
• You will rarely hear NO
• Nobody know what’s going to be next big thing
• But NO really means NO
• It takes a lot of energy & time
• Getting an investor is a hard work
31. Biggest mistakes
• Hiding your idea or having more than one idea / Don‘t ask for NDA
• Having just an idea / Being solo founder
• No fundraising materials
• No competition attitude
• To technology oriented (on patent for example)
• Just top down analysis (1% of Chinese market)
• Having to much faith in viral marketing
• No focus or no full commitment
• Financial forecasts are really conservative
• Not telling the truth (we have contracts etc.)
• Expecting too much too fast
32. Due Diligence
Investigation of the business
Technical: Intellectual property, risks, etc.
Financial: Debt, past financials, etc.
Legal: Contracts
Sales: Talking with potential clients
People: Track record
Time spend on due diligence is in strong
connection with the quality of the deal