pitchaus_miten_laatia_hyva_startup_yritysesitys_rahoittajille

Miten pitchaan yritystäni rahoittajille? How to pitch my start-up to financiers? Spinnon kehitysohjelmat auttavat lupaavia, kasvuhakuisia start-up-yrityksiä 16.9.2010 16.30 – 18.30 + harjoitus Tuomas Maisala / Spinno

Contents of the Presentation Spinno in a nutshell What to do before fund raising Understand different financiers Pitching to investors Rahoitusfoorumi

Who is Tuomas Maisala? Director of Spinno Enterprise Center Tel. +358 40 5955547 Email: tuomas.maisala@spinno.fi Education: Helsinki University of Technology, M.Sc. (Eng) Start-up & business development experience: 10 years, since 2001 with the team Industries: internet & media, telecom, professional services Specialties: start-up financing, public funding instruments Past Work Experience: • Technopolis Ventures Ltd, 2001-2009, Director of Incubation Services, Deputy CEO • Institute of Strategy and International Business, Helsinki University of Technology, 2000- 2001, Course Assistant & Coordinator of first Venture Cup in Finland • Futuremark Ltd (MadOnion.com), 2000, Analyst, new business development Examples of clients served:

What Spinno offers? Business Idea Development Fundable Business Plan Credible Start-up Track to Growth Free 1-2h meeting with our expert Pre-incubation program with Incubation program to launch Program extension for start-ups in start-up business development. support, training and tools to your business (6-12 months). aiming at fast growth and VC funding Confidential evalution of your help you to build a solid, Sparring, easy access to (6-12 months). peer group, training business idea, initial analysis of presentable start-up case with a funding, practical training, and other events, advice and tips on fundability and suggestions for business plan (1-3 months) contacts to right people, growth and funding. further steps. credibility and a lot more! Result: Understanding of the Result: A fundable and Result: Quick start from plan Result: Smooth transition from a feasibility of your business idea and executable business plan with to real business, with funding Start-Up phase to accelerating main challenges ahead. core elements in place, and other resources in place. international growth, backed by understanding of business and growth funding and partnerships. financial challenges ahead. GROW! LAUNCH! KICK-OFF! QUICK SCAN • Market & competition? • Markets & channels? • Product & Customers? • Access to seed funding? • IPR, patents, trade marks? • PR & communication? • Market size and potential? • Team & best partners? • Incorporation process? • Team & management? • How to make money? • Legal & administration? • Convincible pitch and story? • Internationalization partners? • Overall financing needs? • Risk management? • Implementation plan? • Funding for growth?

What kind of start-ups we serve & work with?

Why start-ups fail in fund raising? They are not perceived to be fundable • It is not possible to measure chances of success, all is based on human interaction and human assessment No understanding of how start-up funding works Not able to get traction and clients (evidence) • Solution for a non-existent / not big enough problem • Not able to present and sell their offering Not able to communicate relevant aspects of the business case from the perspective of financiers

What to do before seeking funding?

Steps towards a fundable business case Business idea founders Business plan / prototype / demo public Pilot client(s) and proof-of-concept angel Real product (price, materials, support etc) Repeatable and scalable business model VC Ability to execute in growth-phase

What you need to start fund raising? Story • an elevator pitch • a slide deck • summary/proposal • maybe a business plan • forget NDAs Traction (evidence) Team

Understand your options (Plan A, Plan B) and related funding needs & rounds € t

Understand Different Financiers and How They Work and Look at You

Start-up financiers and their motives Clients / income / sales Added-value YOUR TARGET! (€) Founder, own pockets Fastest and most motivated? Friends, Fools & Family Relationship, emotional values Keksintösäätiö (Tuoteväylä) Prototypes, IPR, growth, exports ELY-keskus (ent TE-keskus) New jobs, , growth, exports Tekes R&D, innovations, growth, exports Finnvera Complements commercial banks Banks Riskless return € Business angels Emotions, financial return (€) Veraventure/Avera Almost VC-ready to be fundable € Venture Capitalists 5-10 x Exit € (Vigo Accelerators) Quick wins on VC path, Exit) € € = funding that seeks a financial return

TEKES Young Innovative Companies Aim is to fund start-ups with high ambition and growth potential Pre-phase for preparing the case and to plan what it takes to grow Phase 2 Max 750 000 € 10 Phases 1 & 2 for commercialization, FAST Expert against milestones 1 - 3 years almost all costs are accepted GROWTH panel Review panel evaluates, but 30…50 Phase 1 in the end Tekes decides GROWTH- Max 250 000 € PHASE 6 mo - 3 years 75% support level, but in Expert panel PREPARATION practise appr 50% of Pre-phase other funding is 100…200 Max 50 000 € de minimis necessary PLAN FOR GROWTH PHASE 2-6 months

What does Tekes look for? Pre-phase – tell an interesting growth opportunity • Promising business ideas backed with good teams • Start-ups after an R&D-project and with some sales • Cases proposed by Vigo Accelerators for Due Diligence Phase 1 – appeal to Tekes by looking like a winner • Some pre-revenue cases w exceptional team/investors • Mostly promising cases: solid team, sales 100…300ke Phase 2 – show that you can keep on the track • Phase 1 cases on their targets, e.g. on # of foreign sales • Normally Phase 2 (750ke) is broken into milestones

Venture Capital – business angels and VCs Categories • Business angels • Governmental VC (Veraventure, Teollisuussijoitus) • Professional VCs High risks = high financial returns Investor becomes an owner and a decision-maker Most expensive funding that you can get, but sometimes the only option for growth If you do not need VC, don’t raise it

How Do Business Angels Operate? Business Angels are investing their own assets • What other options do they have? € € € € • They never have to invest in start-ups Angels may operate individually or in loose or more formal groups They normally want an active role Because investments are risky, they want to see some benefits (profits) Not necessarily exit-driven € Startup Oy Startup Oy Startup Oy

How Business Angels Look at Pitches and Cases Does it appeal to their ”hot buttons” Ability to add value through involvement and own experience and contacts Favourably if the case is referred to them by a trusted colleague Want some financial upside (exit, dividents)

How Do VCs Operate? Venture Capitalists are asset managers • A VC company raises a fund, then invests the money, and then attempts to get more money back from exits • Life-cycle is 7-9 years, 2-4 years for making investments, then exits only The true purpose of a VC company (GP) is to make money to its investors (LPs) If possible, VCs want to avoid all unnecessary risks prior to board VC Firm Oy investing in a start-up member € • technology risks Startup Oy Investor • market risks Fund 1 Ky Startup Oy Investor • team risks Startup Oy Investor €

How VCs Look at Pitches and Cases How fast can we achieve EXIT and how BIG • IPO’s are rare, so typically a trade sale is the target • a typical VC may target 20 – 30 % (or more) portfolio internal rate of return (IRR) 5-10 x value at exit Does it fit in the investment criteria • business sector, phase, valuation, size of VC round Does this case fit in our portfolio Is the funding round big enough to make it big or can we find co-investors for new rounds

Ok, I Understand Different Financiers. How Do I Pitch to Them?

What is pitching? A pitch is nothing more than a verbal presentation of a concept or an idea. Pitching is presenting your business plan and business case.

Verbal Marketing Life is marketing: • Door-to-door salesman • Job interview • Meeting a nice girl/guy in bar... We are marketing • ourselves personally or professionally • our products or services • our ideas... …and we are constantly being marketed to

Different Types of Pitches Two line summary / tag line • ”Facebook for corporations” 5-10 s Elevator pitch • 9 floors to get the job done 30-60 s Short Presentation • 5-10 slides with main messages 5-10 min • Use visuals & easy to read text Full Presentation • Full slide show, 10-20 PPTs 20-30 min • Have back-up materials/references

Common mistakes in pitching Not understanding at all what the case is about • You are not able to explain, what problem you are solving or what you are offering to your clients • Your position on the market / in the value chain Boring/slow start of a presentation and no ”story” • Too much technology (or jargon or abbreviations) Afraid of revealing facts / lack of prior homework • Leaving out all relevant information: clients, pricing • E.g. ”we have no competition”, ”unique idea” Not realistic funding proposal, ”just trying out” Running out of time

What can you accomplish in 7 minutes? Investors hear a number if pitches in a day • Save them from bad pitches, a good first impression! • You can deliver 2-4 main messages (arguments with evidence) to show that your start-up is interesting • Make sure that you have time for feedback/questions Your goal is that • they remember your start-up case • you are invited for a meeting to show rest of the slides • you can raise sense of urgency to act if you can get several investors interested

Building the slide deck Plan the content and main messages separately • ABC is interesting investment opportunity: • First clients and sales (evidence of market demand) • Experienced team, ability to execute • Big players are active in acquisitions in this field Draft slides and content under topics/placeholders Use visuals (graphs, pictures, screenshots) Convert topics / placeholders into messages • Team -> A strong team with 40+ years of experience Add back-up slides for questions

Focus on the content (not on the order) Model 1 Model 2 cover Problem / summary Challenge + team Solution problem Market Potential / solution Customers technology Business model marketing Company and sales the team competition Technology milestones Implementation conclusion plan financing Financial plan and needs

Examples of business models / value chains XYZ service offering SIM cards Service SIM card revenue Supplier XYZ Customer Service fee Client application Server Client application License fee components Service fee SIM cards with solution XYZ Operator & tech partner service channel SIM cards License revenue Cell & Battery Cell and Battery OEM / design Testing ODM Raw Cell & Battery Battery materials manufct . Distributor & Professional Battery Pack user Manufacturer Small Retailer Company X operations Big Consumer Retailer

What you have done and plan to do 2010 2011 2012 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Company established Business planning Product Version 1.0 Pilot projects First customers Product Version 2.0 First international reference VC round Significant market penetration

Example Back-up Slide - Funding Plan of ABC 2009 2010 2011 2012 kehitys Tuote- T&K-hanke Jatkohanke: tuoteversio 2 12kk (n 200ke, 50%) 12-14kk (n 250ke, 50%) VaRa Liiketoiminnan (15ke) Tuoteväylä (30ke) -IPR-selvitys NIY Kehittämistuki-kv (50ke, 50%) - proto esivaihe - Markkinatut. (US) kehitys -Markkinakart. 3kk - KV-viestintästrategia (66ke) - Messut ja matkat DesignStart, PK-LTS, Kasvuvalmennus pääoma Käyttö- Käynnistysav. 15ke Perustajat 30ke Avera n200ke rahoitus Tulo- 0ke 120ke 300ke 800ke

How to make your pitch to stand out Attach your start-up to something everybody speaks of or knows (that is in their minds) • Start with a joke, show an article, ask a question Use visuals (graphs, pictures, screenshots) Demonstrate if possible Be compelling • be passionate of your opportunity and start-up • external validation is best for all of the facts

Not Just Deck, Build Your Elevator Pitch Assume short buildings Put a tag on it (one sentence to remember) Solve a problem Lay out the benefits Conclude with a call to action Show Your Passion (Tips from a list of Bill Joos, Garage.com)

Last Pitching Tip Rehearse, rehearse, rehearse… Only practise makes a master

Ohjeita rahoitusfoorumiin

Rahoitusfoorumi – 6.10. Kalastajatorppa Osana Kasvufoorumia, järjestää Ohjelmistoyrittäjät ry • Spinno apuna toteutuksessa Lyhyitä 15 tai 20min face-to-face/many-faces tapaamisia • Voi pitchata eri ryhmille, 2-3 neuvotteluhuonetta rinnakkain • Julkisia rahoittajia, enkeleitä, pääomasijoittajia Yhteinen avaus Avaus Esityksiä kumppaneilta Tauko 20min tapaamisslotti 20min tapaamisslotti sekä julkisia pitchejä Esityksiä 20min tapaamisslotti 20min tapaamisslotti 20min tapaamisslotti 20min tapaamisslotti Tauko 20min tapaamisslotti 20min tapaamisslotti Esityksiä 20min tapaamisslotti 20min tapaamisslotti 20min tapaamisslotti 20min tapaamisslotti Networking 20min tapaamisslotti 20min tapaamisslotti 20min tapaamisslotti 20min tapaamisslotti

Ohjeita rahoitusfoorumiin 20minuuttia on lyhyt aika, osa menee small talkiin Esittäydy ja esitä yrityksesi tiiviisti (n 7min) Kerää palaute esityksestä ja rahoitettavuudesta Vaihda käyntikortteja Selvitä oikea yhteyshenkilö / sovi tapaaminen Varaa aikaa follow-upiin tapahtuman jälkeen • Soita: ”Hei, tapasimme 6.10 rahoitusfoorumissa…” • Meilaa: Rahoitusfoorumi/ABC Oy – Facebook yrityksille

Some of Finnish Business Angels Most angels do not want to make noise of themselves Only a few professional business angels, more “random experiments” Trade sale / IPO: Micheal “Monty” Widenius / Open Ocean Capital (MySQL) Risto Siilasmaa (F-Secure) Ilkka Hiidenheimo (Stonesoft) Hannu Turunen / Magnolia Ventures (Stonesoft) Micki Honkavaara (Hybrid) Ari Korhonen / Lagoon Capital Oy (Komartek) Several wealthy families: Herlin, Ehrnrooth, Fagernäs, Seppälä, Hartwall Who else has made money recently? Option programs of large corporations, FIM Group, eQ, Formula1 stars… You need networks to find the angels! VeraVenture angel track, a couple of new, merging www-services

Venture Capitalists 1/2 Funds Portfolio Typical Investments Aloitusrahasto Vera Oy 150+ investments, 250ke, max 500ke, (Avera) 96Me (69M inv.) 30 exits Finnish start-ups Conor Technology Fund II 7 listed, a couple Nordic, 0,5M-1,5Me Ky 46Me 2010 of write-offs? Conor Technology Fund I Ky 16Me 2006 Inventure Fund Ky 42Me 12 listed, exits incl Nordic, 1-3Me 2008, old Holtron fund MySQL 7Me 2000 (?) Several, old small funds 20+, some old, Finnish, small (Ky and Oy), total 30Me many small exits Nexit Infocom 67Me 2000 18 listed, several Global, 1-10Me Nexit Infocom II 85Me successful exits, 2008 e.g. Hybrid, Hantro

Venture Capitalists 2/2 Funds Portfolio Typical Investments Eqvitec Technology Fund Appr 30, many old, Old focus 2-5Me, III 140Me 2006, II 133Me good and bad exits new focus? 2001, Fund I 68Me 1998 from funds I and II Total 650Me, mostly Direct investments Only Finnish, co- invested in other VC funds 73 listed, 73 exits investor, 1-5Me CapMan Technology 20 listed, 48 exits Nordic, 5-15Me into 2007, 120Me invested, from old funds , growth companies VC funds since 1995 4,3 yrs on average with sales of >5Me Over 1000Me, old Nokia 30+ Global, 1-5Me, funds staff China, US, one person in Finland

Appendices Liitteet

Kasvufoorumin rahoitusryhmässä 2008: yleiskuva rahoituksesta ohjelmistoalalla Pre-seed / Seed / Early VC VC Ideavaihe Käynnistys Varh.kasvu Kasvuvaihe 10-100ke 100ke-1Me 1-3Me >3Me Rahoitus / Paljon: TE-keskus, Useita: Tekes NIY, Harvoja: Eqvitec Vähän: CapMan, Tekes, FV, Avera, FV, Avera, Conor, CapMan, ulkomaiset rahoittajat enkelit, alueelliset Inventure, Nexit, ulkomaiset rahastot muutama enkeli Rajallinen Rajallinen Saisi olla lisää Tulisi olla uusia hankevirta, ei hankevirtaa, ei bisnesenkeleitä VC:tä tai isompia rahoituspulaa rahoituspulaa fundeja ja [super]enkeleitä Yritykset / Paljon hakijoita: Melko paljon Vähän, puuttuu Harvoja yrityksiä, ongelmaksi hakijoita: puutetta osaamista puuttuu osaamista yrittäjät koetaan julkisten käyttöpääomasta, kasvaa instrumenttien rahoittajilla korkea Osa ei halua ottaa hajanaisuus, kynnys rahoittaa VC-rahoittajaa Osa ei halua ottaa riskirahoituksen Rahoittajan mukaan VC-rahoittajaa kärsimättömyys, näkökulmasta mukaan valuaatio, puutetta ongelma tiimien lt- käyttöpääomasta / kasvuosaamisen puute, varovaisuus

Julkisen rahoituksen erityispiirteitä Rahoituspäätöksillä on yhteiskunnallisia/poliittisia tarkoitusperiä Rahoitus on yleensä avustusta tai lainaa ja vaatii omarahoituksen Hakeminen vie aikaa ja vaatii erilaisia hakemuksia Rahoitus kohdistuu tyypillisesti projektille (alku ja loppu, tavoitteet) Huomioi eri kustannusten kelpoisuus vaihtelee instumenteittain Hyvä yhteyshenkilö on kultaa kalliimpi; auta häntä myymään projekti! Yksi kustannus vain yhdelle projektille (aina oma kustannuspaikka!) Jos yli 50% julkinen tuki hankintalaki ostojen kilpailuttaminen Kustannusperusteinen maksatus aiheuttaa aina kassarasitteen • Esim. TEKES-projekti 50% avustus vaatii n 75% rahoituksen projektin läpivientiin Vähämerkityksisen, kilpailua vääristämättömän De minimis –tuen max 200ke/3v ja säännöstön noudattaminen on yhtiön vastuulla

Keskeiset julkiset rahoitusinstrumentit Käynnistysavustus (10-15 k€) ELY-keskus, 100%, hautomoyrityksille Yrittäjälaina (20-100 k€) FV, laina _yrittäjille_ osakepääomaa varten Pienlaina/-takaus (3-35 k€) FV, pienen yrityksen käyttöpääomaksi Tuotteistetut as.tun.pal. (1-10 k€) ELY, tuettuja konsulttipalveluita rajatusti Keksintösäätiö/tuoteväylä (5-25 k€) KS, 100%, Innov. liikeidean selvitykset, IPR Valmistelurahoitus (10-15 k€) ELY, 70%, hankevalmistelu, tuotestrategia Tekesin T&K-rahoitus (50-1000 k€) Tekes, 35-70%, tuotekehityshankkeet ja –kulut Avustus innov.palveluihin(50-150 k€) Tekes, 75%, innov. liittyvät _ostopalvelut_ Kehittämisavustus kv:een (20-50 k€) ELY, 50%, messut, matkat, partnerit, vienti NIY Esivaihe (25-50 k€) Tekes, 75%, Nuoret innovatiiviset yritykset NIY 1. ja 2. vaihe (250-1000 k€) Tekes, 75%

Very rough scale of start-up valuation Business idea 10ke Business plan / prototype / demo 100ke Pilot client(s) and proof-of-concept Real product (price, materials, support etc) 1Me Repeatable and scalable business model Ability to execute in growth-phase 10Me IPR may increase valuation Credible, competent team increases much more!

The Process of Closing VC Funding Pitching Paper work Initial contact Discussions & evaluation Term sheet Due diligence Final negotiations Closing 2 – n weeks 2 – 4 weeks 1 – 2 weeks 3 – 5 weeks 1 – 2 weeks 1 – 2 weeks 500 100 15 10 8 7 (Statistics by Gearshift Group, 2008)

pitchaus_miten_laatia_hyva_startup_yritysesitys_rahoittajille

by Spinno Enterprise Center on Sep 23, 2010

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pitchaus_miten_laatia_hyva_startup_yritysesitys_rahoittajille — Presentation Transcript