Les Alexander (Advantage Capital) – Unlocking The Da Vinci Code of Venture Capital

Unlocking The Da Vinci Code of Venture Capital Les Alexander Advantage Capital Partners April 2010 M O N E Y

Financing Business Growth
Time Positive Cash Flow Negative Startup Early Stage Growth Stage Personal Savings and Credit Cards Angel Investors Friends & Family IPO Expansion Stage Venture Capital Cash Flow Lenders Recapitalization Merger or Acquisition Sale of Assets

Risk/Return Tradeoff
Low High Debt Equity Hybrid Securities Risk Return

Quality management team
Well thought out business concept
Identified customer base and plan to reach them
Meaningful and attainable market opportunity
Right security with pricing appropriate for the level of risk
Ability to exit the investment in the future
Attractive return over a reasonable period of time
What Venture Capital Investors Are Looking For

Clear articulation of your product or service
Clear description of market opportunity with supporting market data
Address the competitive landscape and how you are unique
Identify your target customers and why they will pay for your product or service
Management team with titles/roles and backgrounds
Realistic financial projections
Income statement
Balance sheet
A plan free from spelling and calculation errors, balance sheets that balance and references that are consistent throughout the plan
Elements of a “VC Ready” Business Plan

Comparisons to Google, Ebay or Microsoft
Projections that are not realistic
Market share estimates that are not realistic
Not understanding the size of the market
Inability to easily explain your product or service
Management team not fully committed to the venture
An entrepreneur’s large ego
Not knowing how much capital you need and how it will be used
Exit strategy of going public in a few years
What “Turns Off” Venture Capital Investors

Do your homework
Understand their investment criteria
Industry
Geography
Size of investment
Stage of development
Other
What do you need other than capital?
Do the personalities and cultures fit?
Finding the Right VC

Introduction vs. cold call
Have your act together when you contact them
Phone call or email
Be prepared to provide overview materials
Know how much capital you are looking for and how you intend to spend it
Follow up, but give them a chance to respond
Approaching VCs

Outlines the terms and conditions of the investment (amount, security, etc.)
Preferred stock, convertible debt or debt with warrants
Interest rate or dividend
Board seat(s)
Rights and preferences
Affirmative and negative covenants
Conversion and redemption (put/call)
Term Sheets – What to Expect

VC receives materials and does initial review
Initial meeting with management
Conduct preliminary due diligence
Prepare summary memo and present to Investment Committee
Submit and execute term sheet
Conduct further due diligence and draft documents
Prepare detailed memo and present to Investment Committee
Finalize documents and fund investment
Manage investment and participate at board level
Pursue liquidity event and realize return
The Investment Process from VC Perspective

Les Alexander (Advantage Capital) – Unlocking The Da Vinci Code of Venture Capital

by Chris Schultz on May 03, 2010

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Les Alexander (Advantage Capital) – Unlocking The Da Vinci Code of Venture Capital — Presentation Transcript