Investor presentations hf_12november2012


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Investor presentations hf_12november2012

  1. 1. Investor Presentations Gigi Wang Managing Partner, MG-Team LLC Board Member & Chair Emeritus, VLAB HappyFarm Start-Up Workshops 12 November 2012
  2. 2. Different Types of Investors Silicon Valley has the most developed start- up funding eco-systems in the world Different types of funding include venture capitalists (aka institutional investors), strategic/corporate investors, angel investors, friends & family, and some governmental grants/loans Many players in the eco-system provide intros into investors – bankers, lawyers, etc
  3. 3. Friends & Family In addition to themselves, founders often look to Friends & Family for initial seed funding Amounts typically from $10K - $100K Valuation is usually deferred until a round with professional valuation
  4. 4. Angel Funding - Individuals  Individual angel investors invest their private money into start-ups directly  Best are super angels who have a lot of experience investing in and mentoring successful start-ups. o includes Ron Conway (PayPal), Jeff Clavier (Yahoo), and Mike Maples (Twitter)  Angel investors often required a PPM (private placement memorandum)
  5. 5. Group Angel Funds Some angel investors prefer to invest with others --> Angel Investor Groups Collaborative due diligence Valuation method varies: 1) setting valuation and taking % of company (preferred), usually 10- 20% of early stage 2) convertible debt with preference at Series A valuation
  6. 6. Venture Capital Venture Capital is the most well-known source of funding in Silicon Valley Scores of VC’s in Silicon Valley VC’s vary in the stage of focus (early, late stage companies, and industry focus) Tier 1 VC’s include Kleiner-Perkins, Sequoia Partners, Mayfield Partners, Norwest Venture Partners, and DFJ. Many want 25 – 40% of company and board seat to have control.
  7. 7. VC: Money Going Into Fund G GP GP LP PLP LP LP GP G GP P GPLP LP LP GP 99% of 1% of total totalLP = Limited Partner GP = General Partner
  8. 8. VC: Profits Coming Out LPLP LP LP GP GP G P LP GP GLP LP GP GP P GP80% or 20 - 30%less of of total total often based on reputation of VC
  9. 9. Operating a VC Fund ~2.5% annual management fee o Pays for office space, salaries, other G&A o Incentive implications for small v. large funds All capital is repaid to LP before any profit is shared o ~80% of profit goes to LPs o ~20% of profit goes to GPs An individual VC’s share of the total GP profit share is called “carried interest”
  10. 10. VC Investment Cycle Deal sourcing and qualification: finding good opportunities Evaluation: deciding if there’s a good fit with investment parameters; company history, business characteristics, finances, business plan analysis, comparative analysis, pro forma return model Term sheets: a nonbinding letter of intent Due diligence: ensuring that everything we believe to be true, is true; research, references, financials, transaction summary/approval, investment memo Closing: final signature and LP announcement Value offered: capital, relationships, management support
  11. 11. Strategic Investors Many corporations have Investment Funds – they are called Strategic Investors Invest for two primary reasons: o Aligns with business unit objectives (Motorola) o To get a ROI on funds (Itochu Technology)
  12. 12. What Investors Want to Hear About1. What is the BIG Need or Opportunity ?2. What is your unique solution and why is itspecial? (Technology may be secondary.)3. Who is the team that is going to make yourcompany a success? Who are we betting on?4 Who are the competitors?5. What are the revenue, business andfinancial models? How much do you need?
  13. 13. 1. The BIG Need or Opportunity Different ways to illustrate  Show size of the Total Addressable Market (TAM) – big numbers  If showing global need/opportunity, numbers on map are good  If showing an need in the market, graphics + numbers would be good (ex: clean drinking water in India)Be creative, catch their attention (video, skit/acting, demo)
  14. 14. 2. Compelling Unique Solution What is your solution? Make sure they understand its value proposition Why is it so unique and compelling about?  It can be a really new technology that disrupts they way things are being done (location based service)  It can be a new business model for distribution (eBay)  It can create new ways for social interaction (Facebook)
  15. 15. 3. The Team The investor has to believe that the team can take his/her money and successfully grow a business that provides huge returns. A team that has passion and energy which is inspiring is a must. Investors look for teams which have most of the necessary skills for that company and its product to succeed especially to adapt to change. The CEO is most important since he/she is leading the team. A team with a track record of successfully starting up companies has a BIG advantages over others
  16. 16. 4. Who Are the Competitors It’s necessarily to identify competitors. If you don’t, the investor thinks you don’t know your market, OR that the market doesn’t have enough potential for others to be in the business Look at both indirect and direct competitors User charts, tables, graphics and more to show competitors and how they compare to your company
  17. 17. 5. Financials – Business & Investments Finally, it’s about how much money you aregoing to return to the investorThe revenue model and the financialprojections give them insights on what you aretrying to achieve and how (Note: too manyrevenue models is NOT good.)If it’s a serious investor meeting, and it seemslike the investor is interested, have number readyon what you want them to invest and for whatpost-money valuation
  18. 18. The Three “T”’s Investors Really Look At TEAM – a leadership that has a record of experience and successes TRACTION – customers that have paid and thus generated revenue TIER 1 INVESTORS – other investors which are have good reputation in investing in winning companies (minimizes risk)*Investment guidelines according to Tim Chang, Managing Director of Mayfield Partners
  19. 19. Accessing Silicon Valley Very rare that Silicon Valley investors invest in companies outside of US unless they have investment office there (ie China, India) They want to invest in things they are familiar with and people they know and trust – remember the 3 T’s Need to understand SV ecosystem and develop network – start with Cultural Tourism – and have deep meaningful meetings
  20. 20. Know Your Investor CHECK OUT WEBSITE –  What are their areas of emphasis? Ex: Shasta Ventures focuses on wireless, consumer, retail UNDERSTAND WHO IS IN THE MEETING –  Background of who is attending  Observe who connects with which member of your team ASK AROUND ABOUT VC–   Feedback from other startup companies
  21. 21. Falling In Love Getting an investor to invest you is like getting a guy or gal to first go out with you, and then perhaps get MARRIED …
  22. 22. THANK YOU! Gigi Wang Managing Partner, MG-Team LLCBoard Member & Chair Emeritus, MIT/Stanford Venture Lab <>