Startup fundraising 2012

A S h o r t I n t r o d u c ti o n t o S t a r t u p F u n d r a i s i n g

@ a l l i o tt

Octopus Investments

• We back TALENTED TEAMS rather than sectors• We invest in businesses that can be BIG • We invest from £100k to £5m• £3bn FUM (£300m in high risk, fast growth)• Follow me: @alliott & alliott.co

Learning Objectives

• Financing landscape for UK startups• The UK EIS, SEIS and Angel Co-Fund• When to raise equity finance• How to prepare for fundraising• How to identify Angels• How to engage with Angels• How to negotiate with Angels

UK Financing Landscape

IDEA PROTOTYPE REVENUE BREAK EVEN GROWTH

VALUE

0

UK Financing Landscape

IDEA PROTOTYPE REVENUE BREAK EVEN GROWTH

VALUE

0FFF ANGELS VCs VCs – Series B VCs – Series C

UK Financing Landscape

IDEA PROTOTYPE REVENUE BREAK EVEN GROWTH

VALUE

0FFF ANGELS VCs VCs – Series B

£50k+ £250k+ £1m £3-5m+

VCs – Series C

£5-30m+

UK Financing Landscape

IDEA PROTOTYPE REVENUE BREAK EVEN GROWTH

VALUE

0FFF ANGELS VCs VCs – Series B

£50k+ £250k+ £1m £3-5m+

% EQUITY

15%

33%

VCs – Series C

£5-30m+

UK Financing Landscape

IDEA PROTOTYPE REVENUE BREAK EVEN GROWTH

0FFF ANGELS VCs VCs – Series B

£50k+ £250k+ £1m £3-5m+

% EQUITY

15%

33%

£250kPOST MONEYVALUE

£1m £4m £12-20m+

VCs – Series C

£5-30m+

£25-120m+

Know the UK Angel Landscape

• Enterprise Investment Scheme– Income Tax Relief?– Loss Relief?– Criteria?

• Seed Enterprise Investment Scheme (+++)• Angel Co-Fund• Angel Networks (UKBAA)• Mentor Lists (Accelerators and Incubators)

When to Fundraise?

• Every CEO should know three numbers:– Cash in Bank– Monthly burn rate– … [#] of months

• Allow 12 months• Nominate one person• Fundraising is a 24/7 activity • C.f. Paul Graham “Equity Equation”

How to prepare for Fundraising

• Website is your Shop Window– Biographies– Mission

• Uniform Message – LinkedIN, Twitter, AngelList, Facebook

• Slide Deck (<10!) (c.f. www.alliott.co)• Practice, Practice, Practice

How to Identify Angels

• You know your first Angels – ex Boss, Uncle Bob, Room mate Bill

• Act like a Head hunter– Identify which skills above £££?– Leverage LinkedIN Pro to create long list– Ask everyone you meet who they recommend?

• Identify who is investing in competitors• Reach out to Entrepreneurs

How to Engage with Angels

• Most angels do not shout about investments• Warm introductions critical• Ask for advice (not money)• Start relationship EARLY• Give potential investors gentle, regular updates• Imbue sense of excitement, mission and fun.• Be respectful of their time and advice

How to Negotiate with Angels

• Set expectations – do not over promise• Align Interests (e.g. no Anti Dilution, Ratchets)• Keep it SIMPLE• Keep it SWIFT :: momentum counts• Legals: <£3-5k• Valuation: angels can be exception to 25% rule

Resources

• Mark Suster – “Lines Not Dots”

• Paul Graham – “Surviving Fundraising” – “Equity Equation”

• Fred Wilson (AVC.com)

Q&A

Thank you!

@Alliottacole@octopusventures.com

Octopus Investments

• We back TALENTED TEAMS rather than sectors• We invest in businesses that can be BIG • We invest from £100k to £5m• £3bn FUM (£300m in high risk, fast growth)• Follow me: @alliott & alliott.co