Funding Options for CT
Companies
Presented to

Crossroads Venture Group
Boardroom Series
Liddy Karter, Managing Director
H...
Background
●

Enhanced Capital Partners, Inc. (“ECP”) is a diversified, national asset management firm
providing financing...
ECP’s Platform
Office
locations in
10 States
and DC*
Enhanced
Equity Fund
& Sopris
Capital

Berkshire
Hathaway /
Vulcan
Ca...
Connecticut Fund
● Enhanced Capital Connecticut is Certified by the DECD as Fund Manager under

the Connecticut Insurance ...
Connecticut Team
Elizabeth (“Liddy”) Karter - Managing Director, Connecticut
●

Liddy serves as a Managing Director of Enh...
Connecticut Team
Hitesh Shah – Vice President, Connecticut
●

Hitesh serves as a Vice President at Enhanced Capital and fo...
Representative CT Portfolio

6
Confidential
Representative CT Portfolio

7
Confidential
Equity- Early Stage
● Focus on Angels and Funds
● Angel Investor Forum
● Centripetal Capital
● Boston and NY groups
● Fami...
Equity – Early Stage
•Overview
•Know your Investors
•Define the company
•Growth strategy
•Capital plan
•Connections
9
First, we willCompany
clarify
Match Investors tocycle…. the
investment

Company

Seedproduct
development

Early StageBegin...
Angels are not VC’s
What they have in common

How they are different

Play in a similar space on the investment VCs have f...
Pick the Right Business
● Industry Sector- Fast and Hot
● Innovative/Established,
● IT/Green Tech/Manufacturing, Medical D...
Key Features
● Huge Market Need/Value Proposition
● Barriers to Entry
● Patents/Trade Secrets/Capital Advantage

● Team
● ...
PreRev, PreMoney Value ~$1.8M.
● Negotiation

● Capitalization table
● What’s the right number?

● Methods
● Meeting the i...
Sources of Value
• Numbers:

projections, comps, 18m
• Product – High margin, Necessary
• Clients – Recurring? $1B market?...
First Investors Take 10 % – 30%

New money $1m

$1m = 25%
$ 3m = 75%

Pre-money valuation $3m

Post-money
valuation = $4m
...
Exec Summary and Deck

Executive
Summary

Business
Plan

Investor
Deck

Purpose: get them to
read your business plan

Purp...
Know Your Numbers

•Financial Model - Details
•Cash Flow - Don’t be shy
•Potential vs. Risk
•Expect to be wrong
• Know why...
Funding Strategy- Simple
• 2011:

$200,000 invested by founders @$500k pre
• 2012: $100,000 friends and family with a post...
Use of proceeds




Sales & marketing

Big salaries for
management

Distribution partners

Paying off debt

Some p...
Funding Timing

•CEO’s Main Job
•Constant Process
•Networking
•Build LT Relationships
•Create confidence
lkarter@enhancedc...
Start-up to Growth Capital
•CT Tech Council – Innovation Ecosystem
•www.ct.org
•Tech Start, Pre-Seed program
•www.ctinnova...
Corporate VC 40% of Start up $
● The number of CVCs actively

investing is steadily on the rise. In
Q2’13, 66 different CV...
CT Based Fortune 500 Companies
8 General Electric, Fairfield, $147 B
50 United Technologies, Hartford, $59.8 B
84 Aetna, H...
CVC Growing

Confidential
CVC- $7B market

Confidential
CT Investment Highlights
Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

STATE
Deals

Amount

Deals

Amount

Deals

...
CT Investment Highlights

CA
MA
NY
CT

VC $ Invested
$ 12,864,904,100
$
3,005,281,900
$
2,088,210,300
$
149,124,800

VC $/...
CT is in the middle

●CAL
●MA
●NY

●>>>>CT
Confidential
Seed and Early for Corporate VC

40%

Confidential
Matchmaking- Corporate VC Sectors
● Internet

● Mobile
● Life Sciences
● Mostly just looking for a match

Confidential
Late Stage Equity
● Investment bankers and intermediaries
● Private Equity

32
Confidential
Debt
● Banks are back – 5%
● Private Debt a good option – see funds and I-bankers.

8%
● Mezzanine – 14%
● With State Supp...
What is Mezzanine Debt?
● Mezzanine debt or mezzanine capital is a form of hybrid

capital that has been around for 30 yea...
Mezz. Debt benefits
● Mezzanine debt provides the following benefits:
● The company being funded gains capital while incre...
Contact Information
● Liddy Karter
● Email: lkarter@enhancedcapital.com
● Phone: (203) 376-7958

● Hitesh Shah
● Email: hs...
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Enhanced Capital CVG Boardroom Presentation

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Strategic investors are continuing to provide early and later-stage capital to emerging companies. From Intel to Google, we are seeing corporate venture and corporate development teams from large companies making investments in early and growth stage companies. We will discuss the following questions: What are they looking for? What is the impact on valuation? What competitive issues should be considered?

October 2, 2013 8:30AM – 10AM – Stamford
March 5, 2014 8AM – 9:30AM – Hartford
April 16, 2014 8AM – 9:30AM – New Haven

Published in: Economy & Finance, Business
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  • 40% of CVC deals re ed and early stage
  • Enhanced Capital CVG Boardroom Presentation

    1. 1. Funding Options for CT Companies Presented to Crossroads Venture Group Boardroom Series Liddy Karter, Managing Director Hitesh Shah, Vice President 2013
    2. 2. Background ● Enhanced Capital Partners, Inc. (“ECP”) is a diversified, national asset management firm providing financing to small-business in U.S. markets that have been underserved by traditional sources of capital ● Founded in 1999 by former Welsh Carson Managing Partner Andrew Paul, ECP has gained experience in targeted investing through years of participation in numerous state and federal public-private partnerships ● Working with small businesses for over 12 years has allowed ECP to develop an investment approach that combines innovative structures and conservative investment principles to provide a dual bottom line return for our collective partners ● Our collaboration with marquee investment partners like Berkshire Hathaway and Vulcan Capital provides our portfolio companies with a variety of funding options ● Office Locations in 10 States and Washington DC (Alabama, Colorado, Connecticut, Florida, Louisiana, Mississippi, New York, Oregon, Tennessee, Texas, Wyoming) 1 Confidential
    3. 3. ECP’s Platform Office locations in 10 States and DC* Enhanced Equity Fund & Sopris Capital Berkshire Hathaway / Vulcan Capital ECP Federal & State New Market Tax Credits 19 State Focused Funds National Middle Market SBIC Fund 2 Confidential
    4. 4. Connecticut Fund ● Enhanced Capital Connecticut is Certified by the DECD as Fund Manager under the Connecticut Insurance Reinvestment Fund (“IRF”) Act Program pursuant to Public Act 10-75, Sec. 14 ● Investment Criteria: ● Headquartered in Connecticut ● Less than 250 employees ● Less than $10M in Net Income in previous fiscal year ● At least 80% of employees are CT residents or at least 80% of payroll is paid to CT residents ● 3% Preseed investments – target met ● 25% Green technology ● ECP’s investment profile – Debt investment in $500,000 to $5,000,000 range 3 Confidential
    5. 5. Connecticut Team Elizabeth (“Liddy”) Karter - Managing Director, Connecticut ● Liddy serves as a Managing Director of Enhanced Capital and is responsible for overseeing investment activity in Connecticut. She brings experience in clean tech venture capital, corporate finance, and early stage company management. ● Prior to joining Enhanced Capital, she was a Managing Partner at IRON Ventures, a venture fund investing in sustainable business ventures enabling symbiotic reuse of energy, industrial material and water. ● Prior to IRON Ventures, Liddy was CEO of Resource Recovery Systems, Inc., a nationwide recycling company and CFO of Netkey, Inc., an ecommerce software company. Prior to that, she was Vice President of the Financial Services Group at Morgan Stanley. ● Liddy is active in angel investing and serves on the Board of the Angel Capital Association. She is Executive Director of the Connecticut Venture Group, a statewide trade association for venture funds in Connecticut and serves as a Mentor at the Yale Entrepreneurial Institute. ● Liddy received an MBA from Yale University and a BA in from Columbia University. 4 Confidential
    6. 6. Connecticut Team Hitesh Shah – Vice President, Connecticut ● Hitesh serves as a Vice President at Enhanced Capital and focuses on investment activities in Connecticut. ● Prior to Enhanced Capital, he was an Analyst at Connecticut Center for Advanced Technology’s (CCAT) Entrepreneur Center, a physical and virtual incubator for technology led small businesses. ● Prior to CCAT, he was an Analyst at Connecticut Technology Council’s (CTC) statewide virtual incubation program for small businesses. Prior to CTC, he was a Financial Analyst at a small ceramics manufacturing company in India. ● Hitesh graduated with an MBA from University of Hartford and a BS in Accounting from University of Pune. 5 Confidential
    7. 7. Representative CT Portfolio 6 Confidential
    8. 8. Representative CT Portfolio 7 Confidential
    9. 9. Equity- Early Stage ● Focus on Angels and Funds ● Angel Investor Forum ● Centripetal Capital ● Boston and NY groups ● Family Offices ● Funds ● Launch ● Vital ● Elm street 8 Confidential
    10. 10. Equity – Early Stage •Overview •Know your Investors •Define the company •Growth strategy •Capital plan •Connections 9
    11. 11. First, we willCompany clarify Match Investors tocycle…. the investment Company Seedproduct development Early StageBegin sales Series A or BRamp up sales Collateral Common/ Founders Stock Common, Preferred or Bridge Preferred Convertible Players Founders 3Fs, SBIR, University Angels, VC Boutique VC Series C or DProduct extension Preferred, Mezzanine, Debt IPO/M&A Listed Equity Investment Private Eq managers, Inv. Banker Hedge funds 10
    12. 12. Angels are not VC’s What they have in common How they are different Play in a similar space on the investment VCs have fiduciary responsibility to continuum their Limited Partners Look for similar things in a business plan Angels risk their own capital – no need to invest Only invest if outlook is for > 10X return minimum VC’s invest larger $ ~10x more than angels. Expect to invest in multiple rounds VCs may require control. Define control Portfolio approach: 2+ 7+ 1 Fund cycle affects VC investing Time horizon is 5+ years Angels 50k deals/yr - VC 4k deals/yr: Both ~$20B+ 11
    13. 13. Pick the Right Business ● Industry Sector- Fast and Hot ● Innovative/Established, ● IT/Green Tech/Manufacturing, Medical Device ● Model- Capital light ● Product/Service, ● Direct/Indirect ● Market – Addressable ● B-B/B-C, Size 12 Confidential
    14. 14. Key Features ● Huge Market Need/Value Proposition ● Barriers to Entry ● Patents/Trade Secrets/Capital Advantage ● Team ● Experienced/friends? ● Collateral ● Building/Standard equipment/PG 13 Confidential
    15. 15. PreRev, PreMoney Value ~$1.8M. ● Negotiation ● Capitalization table ● What’s the right number? ● Methods ● Meeting the investors needs 14 Confidential
    16. 16. Sources of Value • Numbers: projections, comps, 18m • Product – High margin, Necessary • Clients – Recurring? $1B market? • Intellectual Property • Management: track record,, team • Competition: ability to raise money • VC: life cycle of fund • Industry: hot or not, economy 15 Confidential
    17. 17. First Investors Take 10 % – 30% New money $1m $1m = 25% $ 3m = 75% Pre-money valuation $3m Post-money valuation = $4m 16
    18. 18. Exec Summary and Deck Executive Summary Business Plan Investor Deck Purpose: get them to read your business plan Purpose: get them to meet with you Purpose: get them to invest in you • Must grab attention • Must be brief • Must be comprehensive • Must be professional Must be brief Must be expandable 17
    19. 19. Know Your Numbers •Financial Model - Details •Cash Flow - Don’t be shy •Potential vs. Risk •Expect to be wrong • Know why •Use Comparables 18
    20. 20. Funding Strategy- Simple • 2011: $200,000 invested by founders @$500k pre • 2012: $100,000 friends and family with a postmoney valuation of $1.5M • Currently looking to raise $500,000 with a premoney valuation of $2M •Revenues $800k • Expect to do a $10M VC round early 2014 @$10M pre. •TTM EBITDA - $1M 19
    21. 21. Use of proceeds   Sales & marketing Big salaries for management Distribution partners Paying off debt Some product development Too much product development 20
    22. 22. Funding Timing •CEO’s Main Job •Constant Process •Networking •Build LT Relationships •Create confidence lkarter@enhancedcapital.com 21 Equity Financing in CT
    23. 23. Start-up to Growth Capital •CT Tech Council – Innovation Ecosystem •www.ct.org •Tech Start, Pre-Seed program •www.ctinnovations.com •Angel Investor Forum • www.angelinvestorforum.com • Crossroads Venture Group •www.cvg.org •DECD Express Loans •http://www.ct.gov/ecd/cwp •Enhanced Capital •www.enhancedcapital.com lkarter@enhancedcapital.com 22 Equity Financing in CT
    24. 24. Corporate VC 40% of Start up $ ● The number of CVCs actively investing is steadily on the rise. In Q2’13, 66 different CVC investors participated in at least one investment which was up 40% versus the number of participating CVCs in Q3’11. Confidential
    25. 25. CT Based Fortune 500 Companies 8 General Electric, Fairfield, $147 B 50 United Technologies, Hartford, $59.8 B 84 Aetna, Hartford, $36.6 B 103 Cigna, Bloomfield, $29.1 B 112 The Hartford Financial Services Group, Hartford, $26.4 B 131 Xerox, Norwalk, $22.4 B 241 Praxair, Danbury, $11.2 B 245 Stanley Black & Decker, New Britain, $11.1 B 340 Charter Communications, Stamford, $7.5 B 351 Terex, Westport, $7.3 B 399 EMCOR Group, Norwalk, $6.3 B 400 Starwood Hotels & Resorts, Stamford, $6.3 B 438 W.R. Berkley, Greenwich, $5.8 B 473 Priceline.com, Norwalk, $5.3 B 489 Pitney Bowes, Stamford, $5 B 492 Frontier Communications, $5 B Confidential
    26. 26. CVC Growing Confidential
    27. 27. CVC- $7B market Confidential
    28. 28. CT Investment Highlights Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 STATE Deals Amount Deals Amount Deals Amount Deals CT 13 60,168,000 12 18,644,200 10 24,952,100 16 Rank 12 13 13 23 20 23 10 Amount Deals 51,363,000 12 15 11 Amount Deals 32,374,700 Amount 18 40,435,000 19 10 17 27 Confidential
    29. 29. CT Investment Highlights CA MA NY CT VC $ Invested $ 12,864,904,100 $ 3,005,281,900 $ 2,088,210,300 $ 149,124,800 VC $/Capita 1 job/$25k VC $ 338 514,596 $ 452 120,211 $ 107 83,528 $ 42 5,965 28 Confidential
    30. 30. CT is in the middle ●CAL ●MA ●NY ●>>>>CT Confidential
    31. 31. Seed and Early for Corporate VC 40% Confidential
    32. 32. Matchmaking- Corporate VC Sectors ● Internet ● Mobile ● Life Sciences ● Mostly just looking for a match Confidential
    33. 33. Late Stage Equity ● Investment bankers and intermediaries ● Private Equity 32 Confidential
    34. 34. Debt ● Banks are back – 5% ● Private Debt a good option – see funds and I-bankers. 8% ● Mezzanine – 14% ● With State Support – 12% all in with equity kicker 33 Confidential
    35. 35. What is Mezzanine Debt? ● Mezzanine debt or mezzanine capital is a form of hybrid capital that has been around for 30 years and which can be structured as either preferred equity or unsecured debt. It is generally referred to the layer of debt that sits between senior debt and equity. Mezzanine debt lays claim to a corporation’s assets, yet also incorporates equity-based security options in its structure. It is senior only to common shares and is often a more expensive form of financing because of its positioning and inherently higher level of risk to the lender. And unlike Venture Capital, Mezzanine debt is used for adolescent and mature companies who are cash flow positive that need capital for a number of growthrelated uses. Confidential
    36. 36. Mezz. Debt benefits ● Mezzanine debt provides the following benefits: ● The company being funded gains capital while increasing their leverage ● The senior secured lender sees an injection of new opportunity equity ● ● ● ● ● ● and reduced leverage The mezzanine debt provider can put its capital to use at an attractive rate Shareholders avoid unnecessary dilution from new equity (which is also the most expensive form of capital) The company sees a lower cost of capital when compared to equity The company receives less rigid terms when compared to senior debt The company's weighted average cost of capital (WACC) can be reduced The company's return on equity (ROE) can be increased Confidential
    37. 37. Contact Information ● Liddy Karter ● Email: lkarter@enhancedcapital.com ● Phone: (203) 376-7958 ● Hitesh Shah ● Email: hshah@enhancedcapital.com ● Phone: (203) 614-8771 Enhanced Capital Connecticut: 1055 Washington Blvd, 8th Floor Stamford, CT 06901 Phone: (203) 614-8770 Fax: (203) 614-8769 Website: www.enhancedcapital.com 36 Confidential
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