Venture Capital Basics

Space Coast Tech Council February 19, 2015

Is it a “vent

ure deal”

What is “Venture Capital”

Larger $ (>$2.5MM)

Early to Growth Stage

Scalable Opportunities

($100MM revenues in 5 yrs)

•  VCs Invest “OPM” •  Typically Not Seed •  Minority Position •  Preferred Stock •  Veto not Control •  Fixed fund life

Check out the Annotated NVCA Model Series A Term sheet

VC Terms Tech startup – Seed Stage Equity Priced (not a convertible debt round)

Modified from AVC Blog: www.avc.com

Milestone

Build Product Product Market Fit

Series A Expand Team Establish Market

Series B Penetrate Market

$100-800k $2-$5MM $15-$20MM

DO: Have a credible team. Most Investors Invest Foremost

in the Team

DO: Have a Robust Financial Model (era of the spreadsheet jockey)

DON’T: have a 35 Page Business Plan

DON’T: expect an NDA

DO: Have what the Investor wants to see

Executive Summary

The “One Pager” I’ll send template

The Deck 20 Slides or Less

•  Intro: Define the company, business, service or product in a single sentence. “We’re AirBNB for Office Space”

•  Team: Identify a core group of talent that can execute on the next set of milestones. The further from revenues, the more team matters

•  Opportunity: Establish the need for your company’s solution and the size of the market.

•  Solution: Demonstrate how you will solve the problem and validate your differentiation.

•  Competition: Identify your competitors, validate your differentiator. •  Revenue Model: Explain how you will generate revenue, and •  make future forecasts. •  The Ask: Really just a reasonable idea of pre-money valuation

Canaan Partners Pitch Deck Workbook (I can send) Reid Hoffman’s Series B Annotated Pitch deck: http://reidhoffman.org/

linkedin-pitch-to-greylock/

Common Early Mistakes !  Cap Table Errors (too many investors; bad terms)

!  Undocumented deals

!  Paying for unnecessary legal documents (PPM, Closing Documents)

!  Unrealistic expectations of valuation

!  Appearing inflexible/uncoachable

!  Failure to understand competitive landscape

!  Failure to subject to vesting; unreasonable acceleration

!  Putting a $ value on time

!  Field of Dreams Business Model

Knowledge is Power

There is no good reason to make an out-of-market deal… Know what is market and customary

(don’t count on your lawyer to know)

Fred Wilson’s Blog & Archives: www.avc.com

Mark Suster: www.bothsidesofthetable.com

Brad Feld: www.feld.com/wp/

Build relationships Before you need them

Thanks

Mark Mohler mmohler@corridorlegal.net