* 2004 UV Partners 2004 UV Partners


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  • There is no substitute for experience, so align yourself with smart people who have it, and learn everything you can. You will still make mistakes—we all do, and it’s the way we learn, but don’t set yourself up for failure, and take advantage of the wisdom of those who have already made mistakes. Start to build a network of individuals with diverse backgrounds that can add value to your proposition. Know how much money you will need, and what the milestones are that you plan to hit with the money.
  • Angel money is most commonly raised for seed capital, or the first money in that you will need to start building a company that can attract other sources of capital. When friends and family are involved, be extremely careful not to set a pre-money above market. This can lead to a really messy situation and cram down in future rounds. VC—more detail to come PE—later stage private financing generally reserved for co’s with revenue >$10M Just like everything else, it depends on terms. Good for expansion phase, but generally have to have revenues. Non-dilutive
  • How much money you need to raise, and the developmental stage of your company, will determine which capital sources make sense for you.
  • In addition to identifying firms that are in your space, understand who the partner is within the firm who would be most appropriate for you. DO YOUR HOMEWORK! VC’s get hundreds of business plans every year, roughly one every day. There is a very low return for work spent on deals from “unknowns”, and generally they don’t make it very far. It’s always best to approach a fund through a contact that knows them well. There are many different types of brokers, some are useful, some are just plain expensive. Make sure you know which you are talking with. Brokers are good for one thing—their contacts/networks. MAKE SURE THEY HAVE THEM! Do reference checks. Many funds will not consider a deal in which they have to pay a broker, unless there is a very clear reason one was needed. No one likes to see 10% of start-up funding go out the door to someone who has not significantly contributed to the development of the company.
  • Again, VCs are very busy, and look at a number of new deals every week. Approach them with a very clear and concise two page (max) executive summary with the key points described before. Only send a full plan when the fund has stated an interest, and has requested more information. Make sure it has been well thought out (have your business advisors read it!!). There is no sense in having your highly confidential business plan floating around unless 1) you know who has it and 2) you know they are interested Don’t bother with a PPM. They are extremely expensive, and VC’s don’t bother with them. They may be appropriate for other funding sources (angels—less sophisticated, or when there is good reason to use a broker (when you’re going for an acquisition)), but it’s a waste of time and money if venture capital is what you’re after.
  • This is the most time consuming step in financing—make sure your parties have expressed clear interest before entering into this phase. While this is by no means an exhaustive list, these are pretty typical follow-up items any investor will want to see. Again, remember the onus is on the entrepreneur to make sure the investor receives the information they have asked for. Ask for clarification if you’re not sure what their concerns are. Identify what issues they have, and figure out how to resolve them.
  • * 2004 UV Partners 2004 UV Partners

    1. 1. How to Raise Money in Utah March 15, 2006 Heidi L. Huntsman
    2. 2. <ul><li>Starting a company </li></ul><ul><ul><li>What are the considerations? </li></ul></ul><ul><ul><li>Sources of capital </li></ul></ul><ul><ul><li>What is the process </li></ul></ul><ul><li>Private Capital in Utah </li></ul><ul><ul><li>UV Partners—who we are </li></ul></ul><ul><ul><li>Others </li></ul></ul>
    3. 3. So you want to start a company—where do you go from here??? <ul><li>Intellectual Property—file as soon as possible </li></ul><ul><li>Management, management, management </li></ul><ul><li>Vet your ideas with experienced individuals </li></ul><ul><ul><li>There is no substitute for experience—find people who have it! </li></ul></ul><ul><ul><ul><li>Scientific advisors </li></ul></ul></ul><ul><ul><ul><li>Business advisors </li></ul></ul></ul><ul><ul><ul><li>Board members </li></ul></ul></ul><ul><ul><ul><li>Mentors </li></ul></ul></ul><ul><ul><li>Build a solid network </li></ul></ul>
    4. 4. Starting a company Have a well thought through business strategy <ul><li>How do you plan to make money? </li></ul><ul><li>Understand how much money/time it will take to reach profitability, and have a well defined roadmap of how to get there. </li></ul><ul><li>Define the customer </li></ul><ul><li>What is the sales channel? </li></ul><ul><li>Do an analysis on probable exit scenarios </li></ul>
    5. 5. Starting a company What are the sources of Capital <ul><li>Personal leverage </li></ul><ul><li>Angel money </li></ul><ul><li>Venture Capital </li></ul><ul><li>Private Equity </li></ul><ul><li>Debt </li></ul><ul><li>Public Exchanges (NYSE; NASDAQ; AMEX)—Initial Public Offering (IPO) </li></ul><ul><li>Private Investment in Public Entities (PIPE) </li></ul><ul><li>Non-dilutive capital </li></ul><ul><ul><li>SBIR grants </li></ul></ul><ul><ul><li>STTR grants </li></ul></ul><ul><ul><li>NIH grants </li></ul></ul><ul><ul><li>DOD grants </li></ul></ul><ul><ul><li>DOE grants </li></ul></ul><ul><ul><li>Etc. </li></ul></ul>
    6. 6. Venture Capital as a source of funding
    7. 7. Venture is competitive <ul><li>Roughly 1% of deal flow gets funded per firm </li></ul><ul><ul><li>Do your research; target VC firms appropriately—don’t waste your time or theirs </li></ul></ul><ul><li>The average deal takes anywhere from 3-12+ months to complete funding </li></ul><ul><ul><li>Be patient—it won’t happen overnight </li></ul></ul><ul><ul><li>Be diligent—as the entrepreneur the onus is on you to provide supporting information </li></ul></ul><ul><ul><li>Listen critically—VC’s see a lot of companies and can shed light on strategy, markets, management, etc. </li></ul></ul>
    8. 8. Why Venture Capital and what to look for <ul><li>Generally early stage companies in high growth industries </li></ul><ul><ul><li>Very high risk investing </li></ul></ul><ul><ul><li>Generally look for high returns—”home run” investments </li></ul></ul><ul><ul><li>Large market opportunities (>$500 Million) </li></ul></ul><ul><li>Networks </li></ul><ul><li>Industry knowledge and domain expertise </li></ul><ul><li>Deep pockets; syndicate formation </li></ul><ul><li>Active vs Passive </li></ul><ul><ul><li>Which partner will join the board? </li></ul></ul><ul><ul><li>What other resources will they add? </li></ul></ul><ul><li>Remember—this individual will become your partner going forward; a good working relationship is critical </li></ul>
    9. 9. What is the process? Getting a foot in the door <ul><li>Identify what sources of capital are appropriate for your company </li></ul><ul><li>Identify specific firms who have expertise in your space </li></ul><ul><li>Verify whether the fund is actively investing in your space </li></ul><ul><li>Try to network for an introduction to the firm—”over the transom” is an extremely difficult way to get in the door </li></ul><ul><li>Brokers? Many people use them, can be very expensive and not recommended </li></ul>
    10. 10. What is the process? Business description <ul><li>Start with an executive summary </li></ul><ul><li>Include any short publications that may validate your technology or business strategy </li></ul><ul><li>Send a full business plan only when it has been requested. </li></ul><ul><li>Private Placement Memorandum (PPM)—don’t waste your time or money if you go the VC route </li></ul>
    11. 11. What is the process? Due diligence <ul><li>Be proactive—have documents at your finger tips and ready to go </li></ul><ul><ul><li>Intellectual Property (IP) </li></ul></ul><ul><ul><li>Contact list—scientific advisors, business advisors </li></ul></ul><ul><ul><li>Detailed sales model and projections </li></ul></ul><ul><ul><li>Employee contracts </li></ul></ul><ul><ul><li>Prior funding documentation </li></ul></ul><ul><ul><li>Capitalization table </li></ul></ul><ul><ul><li>Back-up data & information—this will vary greatly by industry </li></ul></ul><ul><li>Be tenacious </li></ul><ul><li>Follow-up promptly when asked for something you may not have already prepared </li></ul><ul><li>Listen carefully to feedback </li></ul>
    12. 12. <ul><li>Tough terms are becoming a thing of the past </li></ul><ul><ul><li>Ratchets, liquidation preferences, warrants, etc. mostly gone </li></ul></ul><ul><ul><li>“Plain vanilla” tends to be the terms de jour. </li></ul></ul><ul><li>Insider Rounds </li></ul><ul><li>Increased competition for quality deals </li></ul><ul><ul><li>Driving up valuation </li></ul></ul>Balance is shifting—more favorable for the entrepreneur
    13. 13. Valuation <ul><li>Stage of development </li></ul><ul><li>Market size </li></ul><ul><li>Maturity of management team </li></ul><ul><li>Strength of IP </li></ul><ul><li>Positioning within market </li></ul><ul><li>Development of market </li></ul><ul><li>Likely exits—possibilities and time frame </li></ul>
    14. 14. Sources of private capital in Utah
    15. 15. UV Partners <ul><li>Established in 1986 </li></ul><ul><li>Offices in Salt Lake City and Los Angeles </li></ul><ul><li>Early Stage Investments </li></ul><ul><ul><li>Information Technology </li></ul></ul><ul><ul><li>Life Sciences </li></ul></ul><ul><li>Raised 3 Funds </li></ul><ul><ul><li>UV I in 1986 - $10 Million </li></ul></ul><ul><ul><li>UV II in 1998 - $67 Million </li></ul></ul><ul><ul><li>UV III in 2001 - $120 Million </li></ul></ul>
    16. 16. UV Partners <ul><li>Active Investors </li></ul><ul><li>Early – Seed or Series A </li></ul><ul><li>$100K to $4M in First Round </li></ul><ul><ul><li>Reserve $8 – 10M Per Deal Total </li></ul></ul><ul><li>Regional Focus </li></ul>
    17. 17. Other sources of Private Capital in Utah <ul><li>Angel Groups—no single large network </li></ul><ul><li>vSpring—early stage venture capital focused in IT and Life Sciences </li></ul><ul><li>Wasatch Venture—all stages venture capital generalists </li></ul><ul><li>Sorenson Capital—later stage private equity </li></ul><ul><li>Peterson Capital—later stage private equity </li></ul><ul><li>Ridgeview Capital—later stage private equity </li></ul><ul><li>DW Healthcare—Life Sciences private equity </li></ul>
    18. 18. for more information contact us at: www.uvpartners.com Thank you for your time