Venturefest Bristol 2011, Charles Grimsdale, Eden Ventures

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Venturefest Bristol 2011, Charles Grimsdale, Eden Ventures

  1. 1. Early Stage Funding Charles Grimsdale Eden Ventures 3 November 2011Authorised and regulated by the FSA
  2. 2. Eden Portfolio Sold to Nokia/SiemensSold to ORACLE Sold to TESCO Eden Ventures 2011 2
  3. 3. Seed Capital – what is it? First round of capital that you raise – Typically raised from a combination of Friends and Family, Founders and external investors – Typically less than £1m in total – This does depend very much on the type of business How much should you raise? – Enough to fund your plans for 18 months or more – Enough to deliver a first functional version of your product/service – Enough to win your first key customers What will it cost – Assume that you will likely give up 15-30% of your equity Eden Ventures 2011 3
  4. 4. Various Funding Options Bank Loans – Really only viable for businesses that have established trading history, and which are either a) profitable or b) have adequate physical assets to underwrite the loan Grants – Technology Strategy Board and other sources Venture Capital – You issue shares in return for capital – Several sources of capital – Friends and Family – Angel investors – Venture Capital Funds Eden Ventures 2011 4
  5. 5. Who should I approach? Depends on the size of the market opportunity and your Plan? Plan - £10m in Revenue within a 5 – 8 year time frame – Raise less than £1m in total and focus on Angel investors and Friends and Family – Get the business to break even as quickly as possible and use Bank debt to fund growth Plan - £50m in Revenue within 5 – 8 year time frame – Raise £500K - £1m seed round – Assume you will need at least another £5-8m in one or two rounds – Approach Angels and smaller Venture Capital Funds for Seed round – Aim to get at least one VC who can invest >£3m in the next round Plan - >£100m in Revenue within 5 – 8 year time frame – Raise £500 - £1m seed round – Aim to get two VC’s in the seed round who can each invest >£3m in the next round – Assume you will need to raise £10-20m in 3-4 rounds Eden Ventures 2011 5
  6. 6. What do investors look for Market knowledge in the team – Do you really understand the competitive landscape – What will make your product/service stand out – Disruptive opportunities in the market – You need to be “all over” the numbers Experience in the team – Obviously look for experience of successfully building businesses – BUT often the founders are too young to have such experience Good balance of skills and personalities – Really Strong Technology visionary who can build the product – A commercial person who can sell it – A strong operator who can build process – Venture capitalists do not fund one founder operations – Prefer to see equity split at least three ways in the founding team Eden Ventures 2011 6
  7. 7. What do investors look for Ability to attract great people – If you have managed to convince some great engineers to come and start building your vision that helps – Demonstrate you can get some good advisors on board Clear understanding of your target customer – Exactly who are they likely to be and why Very clear and tight Product Proposition - FOCUS – Really well defined launch product/service – What are the key things you need to do to attract customers Marketing Strategy - How will you reach those customers – Obsessive attention to detail Clear Milestones for Seed Funding – In 12 -18 months we will achieve A, B, C Eden Ventures 2011 7
  8. 8. What to look for from your investors More than just money – Can they help you recruit that next key person – Could they help bring your first key customer – Have they got experience of building a business Empathy – Better to have an investor who understands a bit about your business and who has been there so that they can be supportive/sensitive when you are feeling the pain A Long term travelling companion – Investors who will invest in every round – Do you want to find a whole new set of investors for every round? Do your Due Diligence – Ask your investor for references! Eden Ventures 2011 8
  9. 9. Raising capital is like any Sales Process Find the decision makers – Make sure you understand who makes the final investment decision Deliver a blindingly good pitch – You have a maximum of 15 minutes to deliver your pitch Listen and handle objections precisely – Ask investors exactly what they don’t like about your proposal – The bits they like are irrelevant…. Focus on the objections Own the references and Market Background material – Can you help them find other independent sources to validate your proposal…. Own those references Constant communication – Keep feeding your prospective investors with good news and trading updates, try to get multiple meetings Control the time line for a decision – Ask investors for clear milestones Eden Ventures 2011 9

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