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  • Confidential - Here’s how our phases relate to financing and revenue - We have completed the design phase including the business logic and a comprehensive technical feasibility. - We are raising $3 million to build out an Alpha version that can generate revenue, host stored value accounts, showcase inter-device transactions, provide scalable content acquisition, offer third party affiliate tools and hook into popular social networks A Series A financing will follow for the launch and scaling phase

Avoid The High Valuation Trap To Bcit Nov 09 Beta Draft Avoid The High Valuation Trap To Bcit Nov 09 Beta Draft Presentation Transcript

  • Entrepreneurship & Strategy Class
  • My Bio
    • Entrepreneur – 3 meaningful startups
    • Corporate Finance – negotiated over 100 transactions, CIBC Investment Banking
    • Boards
      • Chair of a pre-revenue start-up
      • Founding director of MetroBridge, recent IPO
      • Director of award-winning local VC, BCAF
  • About Stirling Mercantile Divestitures M&A Advisory Expansion Capital Fairness Opinions Early-Stage Finance FAIRNESS OPINIONS Director comfort & legal protection from independent, expert valuation EXPANSION CAPITAL Multiple industry experience Seasoned corporate financiers EARLY-STAGE FINANCING Full-service approach throughout process Aligned interests likely to secure funding DIVESTITURES Corporate financier involvement can improve price, simplify process M&A ADVISORY Sage advice in times of need or growth opportunity .
  • About Stirling Mercantile Divestitures M&A Advisory Expansion Capital Fairness Opinions Early-Stage Finance FAIRNESS OPINIONS Director comfort & legal protection from independent, expert valuation EXPANSION CAPITAL Multiple industry experience Seasoned corporate financiers EARLY-STAGE FINANCING Full-service approach throughout process Aligned interests likely to secure funding DIVESTITURES Corporate financier involvement can improve price, simplify process . M&A ADVISORY Sage advice in times of need or growth opportunity
  • Experience
  •  
  • www.stirlingmercantile.com
  •  
  •  
  •  
  • Diverse Portfolio - Successful Exits 7 Technology IRR 342% 23x Cash 5x Cash 3x Cash Life Science
  • Perspectives Advisor Investor Exit Transactions . Founder
  • Funding Road Map Confidential F, F & E Seed, Angel Series A Series B Year 1 2 3 4 5 Early Adopters Crossing the Chasm Mainstream Growth Develop Scale Expand Phases Funding Roadmap Investor Exit Revenue today Launch .
  • What happens when you bring in equity investors?
    • Dilution
    • More governance and oversight
    • Additional management
    • Capital to accelerate development
    • Access to broader network
    • Added business insight
    Background .
  • What Do VCs Need?
    • Strong team, with integrity
    • Clear, lucrative and sustainable value proposition
    • Large market opportunity and the ability to scale into it
    • Realistic valuation and deal terms
    .
  • What Do VCs Want?
    • Traction from the target market
    • 2 or 3 independent board candidates
    • Appropriate deal size for their fund
    • Appropriate market sector for their fund
    • Transaction ready due diligence binder/site
    • Close proximity
    .
  • What Should You Look For in a VC?
    • More than money
    • Strong team, with integrity
    • “Been there, done that” management
    • Exit strategies
    .
  • What Should You Look For in a VC?
    • More than money
    • Contacts
      • for additional management
      • for customers
      • for partnerships
    .
  • Why VCs Need ‘Home Runs’
    • 40% return on a fund, which lasts about 7 to 10 years
  • One in Ten
    • Some make a break-even or make a modest gain. Others die.
    $40m $100m
  • Objectives
  • Murphy’s Law
  • High Valuation Trap
    • Problem:
    • Follow-on investors value lower than last
    • Forced to “cram down” last investors or no deal
    • Solution:
    • Understand downstream valuations
    .
  • Valuation
    • Consider the post $ cap table for the next round
    • And subsequent rounds to the exit
    .
  • Exit Valuations
    • Multiple of
      • Revenue (eg. $10m x 2 = $20m)
      • Profit or EBITDA (eg. $3m x 6 = $18m)
    • Discounted Cash Flow (can be lame)
    • All are better when company is growing
      • (Importance of timing)
    .
  • Relative Valuations
    • Big Co
    • Experienced management, board
    • Large revenues
    • Diversified customer base
    • Scaled Infrastructure
    • Worth 3 x Revenues
    • Small Co
    • Great founder, some holes on team
    • Small growing revenues
    • Concentrated customer base
    • Scalable infrastructure
    • Worth 1.5 x Revenues
    .
  • Deal Drivers
    • Accretive acquisitions
      • You must add to buyer’s valuation
      • For example:
        • Buyer: $100m Revenues x 3 = $300m market cap
        • Buys $10m Revenues x 1.5 = $15m
        • Adds $10m x 3 to valuation or $30m
          • Accretive value is 2x cost
    .
  • Deal Drivers
    • Strategic
      • Add value to other products or assets
      • Adds customers
      • Keep away from competitors
      • Product or geographic expansion
    .
  • Marketing the Exit
    • Plan the exit from the outset
    • Get to know your potential buyers early
    • Get to know your service providers early
    .
  • Think Like A Buyer
    • Strategic
      • Market share, keep away from competitor
    • Financial
      • Earnings, valuation multiples, accretive value to a stock price
    • Entrepreneur
      • Lifestyle
    .
  • Think Like A Buyer
    • Spend money to…
    • … make money, or
    • … save money
    .
  • Reading
    • Fred Wilson www.avc.com
    • Brad Feld www.feld.com
    • Chris Dixon www.cdixon.org
    • Mark Suster www.bothsidesofthetable.com
    • Legal www.startupcompanylawyer.com
    • Bootup Labs http://blog.bootuplabs.com/
    • News www.techcrunch.com
    .
  • Thank you
    • A copy of this presentation is available at:
    • www.stirlingmercantile.com/ speakers.htm
    [email_address] [email_address] davidshore