CUE  Tech Venture Market & Executive Summaries Grant J.D. Warrell, BA, MA cantab University of Cambridge November 2008
Introduction <ul><ul><li>My Bio </li></ul></ul><ul><ul><li>Former University of Cambridge Math and Computer Science (Here ...
Topics <ul><li>An overview of the Venture Capital market </li></ul><ul><li>How to write a powerful Executive Summary </li>...
… But before we begin <ul><li>How many of you are? </li></ul><ul><ul><li>Students </li></ul></ul><ul><ul><li>Engineers </l...
Why raise Venture Capital? <ul><li>“ To develop technology or start a company”? </li></ul><ul><li>Ultimately, It’s about m...
Know  your  Investors <ul><li>This is a relationship business first.  And a business relationship in the end: </li></ul><u...
Types of money <ul><li>Friends Fools and Family (FFF) </li></ul><ul><li>Government and University Initiatives </li></ul><u...
Market  conditions <ul><li>Currently a lot of capital sitting on the side-lines </li></ul><ul><li>Deal processes can take ...
What do VCs want? <ul><li>Big market </li></ul><ul><li>The new “hot thing” </li></ul><ul><li>Chance of investing in the ne...
What do VCs need? <ul><li>Return: 3-5x their investment in 3-5 years </li></ul><ul><li>Some “downside protection”  </li></...
What do VCs like? <ul><li>A company they believe they can add value to (with money or otherwise) </li></ul><ul><li>Somethi...
A note on Strategics <ul><li>Many small companies view large corporations (Strategics) as their worst enemy and biggest th...
I suggest  asking  yourselves <ul><li>What is our vision? </li></ul><ul><li>What is our go-to-market strategy? </li></ul><...
What kind of company are you? <ul><li>Widgets </li></ul><ul><li>Services </li></ul><ul><li>Products  </li></ul><ul><li>Alg...
Additional suggestions <ul><li>Focus on Volume (e.g. users, traffic or units), Revenue AND Profits </li></ul><ul><li>Work ...
When to raise Venture Capital? <ul><li>Should raise money as late as possible </li></ul><ul><li>But well before you run ou...
How many stages? <ul><li>Google had 13 before IPO </li></ul><ul><li>Some companies have only 2-3 </li></ul><ul><li>Avoid t...
How much should I raise? <ul><li>As much as you can get at the right price </li></ul><ul><li>The amount which enables you ...
What about pricing? <ul><li>Market sets the pricing – look at other deals </li></ul><ul><li>Most deals involve selling 33%...
The approach <ul><li>Use the “salesperson” in your team </li></ul><ul><li>Contact many 20+ at once </li></ul><ul><li>Run a...
Key documents <ul><li>Executive Summary </li></ul><ul><li>Business Plan </li></ul><ul><li>Management Presentation </li></u...
Process <ul><li>Start with sending the Executive Summary and three bullet intro email </li></ul><ul><li>Contact the VC to ...
Types of Exit <ul><li>Sale to a Large“Strategic” </li></ul><ul><li>IPO/Aim Listing </li></ul><ul><li>Mergers </li></ul><ul...
What is an Executive Summary? <ul><li>Summary information about your business and business plan </li></ul><ul><li>A “marke...
Start with a business plan <ul><li>SWOT Analysis </li></ul><ul><li>Executive Summary </li></ul><ul><li>Market Opportunity ...
Style and presentation <ul><li>Two “styles” of writing a business plan </li></ul><ul><ul><li>Section Headings and “Talking...
Write the Executive Summary last <ul><li>And write the first paragraph of the Executive Summary Last </li></ul><ul><li>Kee...
The Executive Summary <ul><li>Top of Page </li></ul><ul><ul><li>Name (Grant Warrell), Sector (Digital Media Venture Capita...
The Executive Summary <ul><li>Description of the Vision/Opportunity of the Firm </li></ul><ul><ul><li>This is the Elevator...
The Executive Summary <ul><li>Customers and “go-to-market strategy” </li></ul><ul><ul><li>How are you going to do it </li>...
The Executive Summary <ul><li>Description/Pictures of the Product and/or Technology  </li></ul><ul><ul><li>Show off the go...
Thank You Very Much
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Grant Warrel - Venture Funding.ppt

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Grant Warrel - Venture Funding.ppt

  1. 1. CUE Tech Venture Market & Executive Summaries Grant J.D. Warrell, BA, MA cantab University of Cambridge November 2008
  2. 2. Introduction <ul><ul><li>My Bio </li></ul></ul><ul><ul><li>Former University of Cambridge Math and Computer Science (Here  ) </li></ul></ul><ul><ul><li>Lehman Brothers, Inc! (London & NY) </li></ul></ul><ul><ul><li>Omnicom Group, Inc (NY, NY) </li></ul></ul><ul><ul><li>Pegasus Capital, LLP. (Cos Cobb, CT) </li></ul></ul><ul><ul><li>Manticore Partners, LLP. (Greenwich, CT) </li></ul></ul><ul><ul><li>Cambridge Worldwide, Inc. (Greenwich, CT) </li></ul></ul><ul><ul><li>GP Bullhound, Ltd. (London, UK) </li></ul></ul>
  3. 3. Topics <ul><li>An overview of the Venture Capital market </li></ul><ul><li>How to write a powerful Executive Summary </li></ul>
  4. 4. … But before we begin <ul><li>How many of you are? </li></ul><ul><ul><li>Students </li></ul></ul><ul><ul><li>Engineers </li></ul></ul><ul><ul><li>Business Folks </li></ul></ul><ul><ul><li>Entrepreneurs </li></ul></ul><ul><ul><li>Investors </li></ul></ul><ul><ul><li>Other? </li></ul></ul>
  5. 5. Why raise Venture Capital? <ul><li>“ To develop technology or start a company”? </li></ul><ul><li>Ultimately, It’s about making money which ultimately means selling things AND making a profit </li></ul><ul><li>For VC’s too, it’s about them making money (i.e. a return on their investment) </li></ul><ul><li>If you understand them they can be your best friends </li></ul>
  6. 6. Know your Investors <ul><li>This is a relationship business first. And a business relationship in the end: </li></ul><ul><ul><li>Venture Investors invest by size (amount), stage, geography, sector and trend </li></ul></ul><ul><ul><li>Look at the Bios of the Investors </li></ul></ul><ul><ul><li>Look at deals they’ve done </li></ul></ul><ul><ul><li>Look at the successful exits of the fund </li></ul></ul><ul><ul><li>Compare with their “competitors” </li></ul></ul><ul><ul><li>See who they know </li></ul></ul>
  7. 7. Types of money <ul><li>Friends Fools and Family (FFF) </li></ul><ul><li>Government and University Initiatives </li></ul><ul><li>Venture Angels (£100-£500k) </li></ul><ul><li>Seed Funds (up to £1m) </li></ul><ul><li>Early Stage (Series A) Venture Funds (up to £5m) </li></ul><ul><li>Series B Venture Funds (£5m-£50m) </li></ul><ul><li>Series C and beyond Venture Funds (£5 and above) </li></ul>
  8. 8. Market conditions <ul><li>Currently a lot of capital sitting on the side-lines </li></ul><ul><li>Deal processes can take as much as 2x longer (6-12 months) to complete </li></ul><ul><li>But lower and more realistic valuations will be seen as an “opportunity” for some investors </li></ul><ul><li>It is also a good time in the economic cycle to start a business to catch the “growth cycle” as it occurs </li></ul>
  9. 9. What do VCs want? <ul><li>Big market </li></ul><ul><li>The new “hot thing” </li></ul><ul><li>Chance of investing in the next Google </li></ul><ul><li>Scalable product </li></ul><ul><li>A global strategy </li></ul><ul><li>Fast growing profitable companies </li></ul>
  10. 10. What do VCs need? <ul><li>Return: 3-5x their investment in 3-5 years </li></ul><ul><li>Some “downside protection” </li></ul><ul><li>A sustainable “business model” </li></ul><ul><li>Defensible business strategy </li></ul><ul><li>An Exit </li></ul>
  11. 11. What do VCs like? <ul><li>A company they believe they can add value to (with money or otherwise) </li></ul><ul><li>Something they understand and believe in </li></ul><ul><li>Something that fits their investment profile </li></ul><ul><li>A strong management team </li></ul><ul><li>People they could and want to work with </li></ul><ul><li>Something they haven’t already got </li></ul>
  12. 12. A note on Strategics <ul><li>Many small companies view large corporations (Strategics) as their worst enemy and biggest threat </li></ul><ul><li>However, most successful venture backed technology companies are bought by global leaders in their segment </li></ul><ul><li>And, most Strategics only end up buying companies that they have existing long standing commercial relationships with </li></ul>
  13. 13. I suggest asking yourselves <ul><li>What is our vision? </li></ul><ul><li>What is our go-to-market strategy? </li></ul><ul><li>How are we going to execute upon it? </li></ul><ul><li>Do I have a clear path to break-even? </li></ul>
  14. 14. What kind of company are you? <ul><li>Widgets </li></ul><ul><li>Services </li></ul><ul><li>Products </li></ul><ul><li>Algorithms </li></ul><ul><li>Frameworks </li></ul>
  15. 15. Additional suggestions <ul><li>Focus on Volume (e.g. users, traffic or units), Revenue AND Profits </li></ul><ul><li>Work with not against the world </li></ul><ul><li>Build a strong management team </li></ul><ul><li>And establish a strong Board </li></ul>
  16. 16. When to raise Venture Capital? <ul><li>Should raise money as late as possible </li></ul><ul><li>But well before you run out </li></ul><ul><li>When there is a clear and present opportunity </li></ul><ul><li>While it is available </li></ul>
  17. 17. How many stages? <ul><li>Google had 13 before IPO </li></ul><ul><li>Some companies have only 2-3 </li></ul><ul><li>Avoid the down-round pit-falls </li></ul><ul><li>Learn about Preference Shares, Employee Stock Options, Common Stock and other sorts of finance </li></ul><ul><li>Be careful with Venture Debt, use it as a last resort </li></ul>
  18. 18. How much should I raise? <ul><li>As much as you can get at the right price </li></ul><ul><li>The amount which enables you to maximize your rate of growth </li></ul><ul><li>Enough to last at least 2-3 years </li></ul>
  19. 19. What about pricing? <ul><li>Market sets the pricing – look at other deals </li></ul><ul><li>Most deals involve selling 33% of the post-money company </li></ul><ul><li>Therefore the amount they’re willing to invest suggests a price </li></ul><ul><li>Don’t be greedy – Google’s founders sold 50% of the company to start </li></ul>
  20. 20. The approach <ul><li>Use the “salesperson” in your team </li></ul><ul><li>Contact many 20+ at once </li></ul><ul><li>Run a process time-line </li></ul><ul><li>Stay in regular and frequent communication during their evaluation </li></ul><ul><li>Get a “Term-sheet” in front of you before negotiating too hard </li></ul>
  21. 21. Key documents <ul><li>Executive Summary </li></ul><ul><li>Business Plan </li></ul><ul><li>Management Presentation </li></ul><ul><li>Financial Summary </li></ul><ul><li>Financial Model (NDA first please) </li></ul>
  22. 22. Process <ul><li>Start with sending the Executive Summary and three bullet intro email </li></ul><ul><li>Contact the VC to follow up </li></ul><ul><li>Schedule a time to meet to go through the Management Presentation </li></ul><ul><li>Invite them to a “site visit” at your office </li></ul><ul><li>Set a time-line for completion </li></ul><ul><li>Ask them for a term-sheet (with valuation, amount, structure and pricing) </li></ul><ul><li>Enter into “diligence” </li></ul><ul><li>Close the transaction </li></ul>
  23. 23. Types of Exit <ul><li>Sale to a Large“Strategic” </li></ul><ul><li>IPO/Aim Listing </li></ul><ul><li>Mergers </li></ul><ul><li>Secondary investors </li></ul>
  24. 24. What is an Executive Summary? <ul><li>Summary information about your business and business plan </li></ul><ul><li>A “marketing tool” to open doors and get meetings </li></ul>
  25. 25. Start with a business plan <ul><li>SWOT Analysis </li></ul><ul><li>Executive Summary </li></ul><ul><li>Market Opportunity </li></ul><ul><li>Products & Services </li></ul><ul><li>Business Model </li></ul><ul><li>Financial Projections </li></ul><ul><li>Technology & IP </li></ul><ul><li>Competitive Landscape </li></ul><ul><li>Company Description </li></ul><ul><li>Management Bios </li></ul><ul><li>Transactions & Valuations </li></ul>
  26. 26. Style and presentation <ul><li>Two “styles” of writing a business plan </li></ul><ul><ul><li>Section Headings and “Talking” Headings </li></ul></ul><ul><li>Also two approaches to presenting your business: </li></ul><ul><ul><li>The usual presentation and the independent research presentation </li></ul></ul><ul><li>Don’t be too “salesy” </li></ul><ul><ul><li>VCs like to Buy they don’t like being Sold to </li></ul></ul>
  27. 27. Write the Executive Summary last <ul><li>And write the first paragraph of the Executive Summary Last </li></ul><ul><li>Keep it short </li></ul><ul><li>Keep it simple </li></ul><ul><li>Deliver a clear message </li></ul>
  28. 28. The Executive Summary <ul><li>Top of Page </li></ul><ul><ul><li>Name (Grant Warrell), Sector (Digital Media Venture Capital) and Location of Company (London, UK New York, NY) </li></ul></ul><ul><ul><li>Revenue and EBITDA figures </li></ul></ul><ul><ul><li>Capital Requirements </li></ul></ul><ul><ul><li>Time to Break-Even (i.e. Q4, 2008) </li></ul></ul><ul><ul><li>Key contact persons (number, grantwarrell@msn.com) </li></ul></ul>
  29. 29. The Executive Summary <ul><li>Description of the Vision/Opportunity of the Firm </li></ul><ul><ul><li>This is the Elevator Pitch </li></ul></ul><ul><li>Size of the Market </li></ul><ul><ul><li>How big is it? </li></ul></ul><ul><ul><li>Show charts </li></ul></ul><ul><li>Quote and reference research sources </li></ul>
  30. 30. The Executive Summary <ul><li>Customers and “go-to-market strategy” </li></ul><ul><ul><li>How are you going to do it </li></ul></ul><ul><li>Track-record other demonstration of ability to Execute </li></ul><ul><ul><li>Prove you can do it </li></ul></ul><ul><li>Description of unique/disruptive business model and/or offering </li></ul><ul><ul><li>Why are you different/special/better </li></ul></ul>
  31. 31. The Executive Summary <ul><li>Description/Pictures of the Product and/or Technology </li></ul><ul><ul><li>Show off the goods! Sell them on your wares </li></ul></ul><ul><li>Positioning in the market </li></ul><ul><ul><li>Tell them where you fit </li></ul></ul><ul><li>5 Year Financial Forecast in Chart-form (Revenue and EBITDA) </li></ul><ul><ul><li>Show them what doing it will achieve </li></ul></ul>
  32. 32. Thank You Very Much
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