New 1 · 2018. 1. 18. · Fundraising Materials Deck, business plan (m aybe), historical...

www.gogla.org1

•

•

•

•

•

•

•

•

•

2

Fundraising and Investors

Privileged & Confidential

GOGLA AcademyFebruary 2017

Confidential

Agenda

2

1. Blue Haven Initiative

2. Startup Capital 101

3. Investor Selection & Management

Blue Haven Initiative

Privileged & Confidential

Confidential

100% Impact

4

• Family office based in Cambridge, MA• Portfolio targeted to be 100% values aligned

across asset classes• Thought leader in impact investing by family

offices

Confidential

Venture Portfolio

• $50 million carve out• 11 global portfolio

companies• Ongoing focus in Sub

Saharan Africa• Fintech, renewable energy• Series A onwards,

$500,000 initialcommitments

5

Startup Capital 101

Privileged & Confidential

Confidential

Why do investors like PAYG?

7

• Scalable• Innovative model to reach underserved

markets• Utilizes mobile money• Adjacent asset finance opportunities• Social / environmental impact

Confidential

Funding Cycle of a Startup

8

Reve

nue

Time

Valley of Death

Brea

k ev

en

Venture Capital

SeedAngels

FFFGrants

Accelerators

Exit, IPO, Buyout

Confidential

Capital needs for off-grid solar

9

What type of capital does your company need and at what stage?

• Quasi-equity (convertible debt)– Looks like debt, but equity risk– Avoids valuation, haggling at earliest stages

• Equity– Series A, Series B– Highest cost of capital

• Debt– Secured by inventory / receivables– On or off-balance sheet– Local FX debt?

• Securitization– Special Purpose Vehicles (SPVs)– Separation of operational and financial risk

Confidential

Due Diligence Process

10

Pre-Diligence DD: Phase I Final DD

• Fit• Quality of source• Problem being

solved• First impression

• Team• Technology• Distribution• Revenue model• Market size• Risks

• Financial analysis• Cap table• Term sheets• Legal diligence• IC approval

Confidential

• Investors are betting on teams, people, founders• Market opportunity, but second

Seed Stage

11

Category of Needs Typical Deal

Stage Pre-revenue

Uses of Cash Prototyping, R&D, pilot product sales, basicinfrastructure buildout

Type of Capital Convertible debt, preferred equity, grants

Investors Friends, family [& fools], Crowdfunding,Venture Philanthropy

Fundraising Materials Deck, business plan (maybe), market sizing/financial model

Confidential

Where to go at seed stage?

12

Industry/GeogSpecialists

• Jives with areaof expertise,focus, location

• Limits universe• Shorter DD?• Value add

potential

Mission Aligned

• Broad;businesseswith impact

• DD may belengthy withsignificantreporting

• Involvementvaries

• Seal of “GoodHousekeeping”

Accelerators

• Broad or niche• Offers

curriculum +money

• Cohortnetwork

• Investigatethoroughly

• Variable quality

ConcessionarySources

• Differentstructuresavailable withvaryingrequirements

• Foundations• Venture

philanthropy• DFIs

Confidential

Grants…why, where and when

13

• Nascent venture ecosystems• High upfront R&D costs for innovative models• New markets only attractive with subsidy• If everyone else is doing it…

DON’TPivot to qualify for a grant

Build a model that can only survive on grants

Confidential

• Still betting on teams and market• Min. requirements will differ/evolve round to round

Venture Capital

14

Category of Needs Typical Deal

Stage Revenue traction, site line to breakeven

Uses of Cash Hiring sales team, new generation of products,general growth and cash burn

Type of Capital Preferred equity, venture debt

Investors Fund managers, family offices

Fundraising Materials Deck, business plan (maybe), historicalfinancials, market studies, use of funds,financial model

Reporting Requirements Impact metrics

Confidential

Term Sheets Components

15

• Investment Structure (preferred, note,common)

• Valuation & Round Size• Management incentives & controls• Shareholder rights

– Drag, Tag, ROFR– Liquidation preferences

• Governance

Confidential

16

Debt

Equity*

InvestorSelection & Management

Privileged & Confidential

Confidential

Investor Motivations

18

Profit• Cash flow• Exit• LPs

Impact• Feel good• Create new

industry

Experience• Industry• Geography• Impact

Confidential

Investor Management Tips & Tricks

19

• Negotiate and document information rights• Discuss expected level/frequency of

communications and set boundaries• Think through potential conflicts• Share highlights and bumps

Over-communicate during rocky times

SunFunderUnlocking beyond the grid solar finance

Shelmith Theuri

24 February 2017

Debt financing in the off-grid solar sector

SunFunder overview

Confidential. Please do not distribute. 3

Mission and track record

Over 90 loans completed

2.7 million people impacted in 12 countries

SunFunder is a solar finance business driving a global energy transformation to solve energy access and climate change

$40 million unlocked

Loan types

Confidential. Please do not distribute. 4

Solar lanternsSolar home systems

Micro-/mini-grids and C&I solar

Corporate loans for working capital and inventory

Pay-as-you-go receivables and other structured finance

Project / construction finance

SunFunder has financed more companies in the off-grid and grid deficit solar sectors than any other investor – 30 and counting...

Customers

Confidential. Please do not distribute. 5

Distributors / suppliers Pay-as-you-go solar Microgrids / commercial

SunFunder debt financing

Agenda

Confidential. Please do not distribute. 7

Industry debt financing needs

Loan process

What we look for

Pitfalls

Term sheet review

Confidential. Please do not distribute. 8

1.1. Off-grid solar industry value chain

Manufacturing~1 month

Shipping / transportation2–3 months

Customs<1 month

Delivery / sales~1 months

Sales~1 month

Payment plan12–36 months

● A typical solar company will have financing needs at every stage of the value chain

● This will be in different forms, e.g. inventory finance, working capital, receivables financing, etc.

Confidential. Please do not distribute. 9

1.2. Debt required at stages of growth

SeedEquity/ grant

Early stageEquity /

impact debt

Expansion stageImpact & commercial

debt

Scale-up / mezzanine stage

Structured / syndicated /

commercial debt

Lower risk

Higher risk

Source: SunFunder, adapted from Lighting Global / GOGLA / BNEF 2016

Agenda

Confidential. Please do not distribute. 10

Industry debt financing needs

Loan process

What we look for

Pitfalls

Term sheet review

Confidential. Please do not distribute. 11

2.1. SunFunder loan process

1. Initial fit test

2. Approval to start diligence (from deals committee)

3. Full diligence (terms and structuring, credit committee approval)

4. Signing loan agreement, security registration (where applicable) and disbursement

5. Post disbursement monitoring

2–4 weeks

1–3 months +

Confidential. Please do not distribute. 12

2.2. SunFunder fit test

● Registered for-profit/non-profit entity in a legally sound geography that employs commercial approach to providing solar products

● Demonstrated growth (potential for repeat loans)

● Proven technology

● Needs within SunFunder’s capacity – amounts and tenor

● Management team – is it experienced?

● Are you ready (able) to provide diligence materials

Agenda

Confidential. Please do not distribute. 13

Industry debt financing needs

Loan process

What we look for

Pitfalls

Term sheet review

Confidential. Please do not distribute. 14

3. What we look for

Business model

Track record

Capital structure

Governance

Confidential. Please do not distribute. 15

3.1. Business model

Capital structure

Track record

How do you make your

money?

Governance

Confidential. Please do not distribute. 16

3.1. Business model

Key partners

Key activities

Key resources

Value proposition

Customer relationships Target

customer segmentDistribution

channels

Cost structure Revenue streamsProfit

What? How? To whom?

For how much?

Confidential. Please do not distribute. 17

3.1. Business model

Key partners

Key activities

Key resources

Value proposition

Customer relationships Target

customer segmentDistribution

channels

Cost structure Revenue streamsProfit

What? How? To whom?

For how much?

Path to profits

Confidential. Please do not distribute. 18

3.2. Capital structure

Business model

Track record

How do you fund your business?

Governance

Confidential. Please do not distribute. 19

3.2. Capital structure

Senior debt

Subordinated debt (e.g. mezzanine debt)

Hybrid financing (e.g. convertible debt, convertible equity)

Preferred equity

Common equity

Lowest riskLowest cost

High priority in liquidation

Highest riskHighest cost

Lowest priority in liquidation

Confidential. Please do not distribute. 20

3.2. Capital structure

Senior debt

Subordinated debt (e.g. mezzanine debt)

Hybrid financing (e.g. convertible debt, convertible equity)

Preferred equity

Common equity

Lowest riskLowest cost

High priority in liquidation

Highest riskHighest cost

Lowest priority in liquidation

Cash is king!

Confidential. Please do not distribute. 21

3.3. Track record

Business Model

Capital structure

Has the business

demonstrated growth?

Governance

Confidential. Please do not distribute. 22

3.3. Track record

● Proven business model?

● Proven technology?

● Revenue growth

● Team / capacity growth

● Portfolio health (PAYG or other leasing models)

Confidential. Please do not distribute. 23

3.3. Track record

● Proven business model?

● Proven technology?

● Revenue growth

● Team / capacity growth

● Portfolio health (PAYG or other leasing models)

Potential for scaling from past growth

Confidential. Please do not distribute. 24

3.4. Governance

Business Model

Capital structure

Do you have the right team?Track record

Confidential. Please do not distribute. 25

3.4. Governance – team and management

● Qualified?

● Sufficient?

● Is there segregation of duties?

● Is there separation of ownership and management?

● Capable team in place

Confidential. Please do not distribute. 26

3.4. Governance – team and management

● Qualified?

● Sufficient?

● Is there segregation of duties?

● Is there separation of ownership and management?

● Capable team in place

No one man shows!

Agenda

Confidential. Please do not distribute. 27

Industry debt financing needs

Loan process

What we look for

Pitfalls

Term sheet review

Confidential. Please do not distribute. 28

4. Red flags – missing information

● Financial informationLacking financial and accounting policies and systems, which can lead to delays, unsatisfactory presentation and/or incomplete financial information

● Team gapsLacking mid-level managers, and often depending on a single individual

● Timely responseTaking too long to respond to debt providers

● VisionNo clear long-term (competitive) strategy for the business

Confidential. Please do not distribute. 29

4. Red flags – missing information

● Financial informationLacking financial and accounting policies and systems, which can lead to delays, unsatisfactory presentation and/or incomplete financial information

● Team gapsLacking mid-level managers, and often depending on a single individual

● Timely responseTaking too long to respond to debt providers

● VisionNo clear long-term (competitive) strategy for the business

Some flexibility to help early stage companies...

Agenda

Confidential. Please do not distribute. 30

Industry debt financing needs

Loan process

What we look for

Pitfalls

Term sheet review

Confidential. Please do not distribute. 31

5. Term sheet

● What is a term sheet? Initial vs final

● What gets negotiated?

○ Key terms – pricing, amount, tenor, payment structure,

○ Core conditions

○ Flexible conditions

○ Security / collateral

● Any questions?

shelmith@sunfunder.com