Decoding Early Stage Investment Introduction to Fund Raising

  What is Angel - VC funding?          What do investors look for?         What gets funded What does not get funded? 

Start Up Financing

Why do you require funding?

Start Up FinancingPotential Sources of Funding :

Personal funds Friends and

Family Angel Institutional

Strategic Government Public Internal

Accruals

Start Up Financing Equity Capital :

Money for owning a slice of the company Ownership depends on the “valuation” of the

company Founding team will have to welcome other

“partner” Equity partner can add and/or subtract value Management, strategic plan may be impacted New shareholder may have his own demands

for quick scale up, exit, etc.

Equity Funding :Private Equity & Venture Capital

“Private Equity” means capital to companies not quoted on a stock market ,in exchange for an equity participation.

“Venture Capital” (VC) is a sub-class of Private Equity characterized by investments made for the purpose of developing, launching, and expanding new products or service offerings.

Stages of Investment

Start Up Financing :Capital Lifecycle

Seed (< $ 1 mil)Early Stages ($1 - 10 mil)Expansion/ ($ 10+ mil)development

Angels IncubatorsAccelerators Venture Capital Private Equity &Merchant Banks

Source : Angel Resource Institute

Fund Raising Pattern – Life Cycle of a Startup

How VC’s work

Investor

Investor

Investor

VCfund

Investor

Startup

Startup

Startup

What VCs do ... Sift through thousands of (good and bad)

investment propositions Identify a few valid initiatives and finance them Support, Mentor the entrepreneurs -

Financial advice Building Teams Connecting with customers Strategic Direction Focus on Milestones

Decoding the Investment Criteria at VC Funds

The IDEAUnique

InnovativeFeasible

Are you solving an important problem in a unique manner?

The SECTOR

Large Market with Growth

Potential

What is your differentiator

Crowded

space?

Can you be the market leader?

The TEAMExperience

and Background

Demonstrated Ability to

Execute

Loyalty and Commitment to the Idea

Team Structure and

Dynamics

Motivated and Passionate Risk Takers.

FUNDINGAmount of Funding

$$$

Valuation and Equity

ShareUse of Funds

Does your financial model justify the amount of funding asked?

The BUSINESSIs there currently traction?

Strong Revenue model in Place

Accurate Assessment of Technology and Future challenges

Is there a potential profitable exit for the VC???

Why are early stage VC’s Different?

Bet on people not trendsLooking for a winnerBut not afraid of failureFantastic coaches and mentors

Nurturing, Caring but Focused on Milestones

The VC MathAlways

looking for a 10X return!

VC is fundamentally an institutionalized form of finding outliers!

Why 10x?The “Portfolio Effect”

Out of Ten Start-ups Funded 2 successes at 10x or better 5 ‘OK’ returns at 2x to 5x 3 write-offs, total loss of invested money

Assessing Portfolio Risk

Anatomy of a “great” Start Up VC Bets on people not trends Driven by the big idea Looking for a ‘Winner’ Not afraid of failure Understand how to manage a portfolio of risk Serves as a fantastic coach Does her best work outside of the board room Not waiting for validation from other VCs

Most Appreciated VC Contributions

Financial Advice Corporate Strategy & Direction Sounding board for ideas Challenging status quo Contacts or market information Management recruitment Money !!!! So

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VCA

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What to look for in a VC People you LIKE !

Trustworthy & Collaborative Can bring value, not money only !

Do not have to be experts in the sector but have to understand the business.

Good network of contacts. Ask for references

Our Formula :It’s the Chemistry and not just the math that adds up to SUCCESS

Doing a startup isn't easy. Funding one isn't, either. The VC – Entrepreneur relationship isn't

simple. There'll be good times, bad times and incredibly horrible times.

Do we like each other and can we still be friends at the end of it all?

For us, this chemistry is a big deal. A smile is the best yield curve

What’s HOT Ecommerce Mobile VAS/Apps Social Media Transportation Hospitality Data Analytics Healthcare

Health, Nutrition, Fitness

Dating Social Media Online Education Cleantech Technology enabled

consumer businesses

What doesn’t get funded “Me Too” idea Poor Business

model Long gestation Esoteric, R&D

driven plans Huge marketing

spends

Niche “Lifestyle Businesses”

Too many angels, cross holdings

$$$$ for the promoters

“Arrogant” Teams

What VCs are Not Good at• Long term research investments• Sustainability• Evolutionary development• Asset maximization• Billion $ capital requirements

The Start Up MYTH

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THANK YOU