Financing Growth
Who I Am <ul><li>David Shore </li></ul><ul><li>Partner, Stirling Mercantile Corporation </li></ul><ul><ul><li>Local Invest...
Topics – A La Carte VC Term Sheets Valuations and Uses of Funds Elevator Pitch Tips Typical Questions Financial Projection...
VC vs. IPO vs. Debt? Prep Debt IPO VC
VC vs. IPO vs. Debt? Horrendous Prep Debt IPO VC
VC vs. IPO vs. Debt? Horrendous Horrendous Prep Debt IPO VC
VC vs. IPO vs. Debt? Not so bad Horrendous Horrendous Prep Debt IPO VC
VC vs. IPO vs. Debt? Not so bad None Horrendous Better Valuation Horrendous Horrendous Prep Dilution Debt IPO VC
VC vs. IPO vs. Debt? Not so bad None Not much Horrendous Better Valuation Reporting, etc. Horrendous Horrendous Control Pr...
VC vs. IPO vs. Debt? Not so bad None Not much Absolutely Horrendous Better Valuation Reporting, etc. Probably not Horrendo...
VC vs. IPO vs. Debt? - Not so bad None Not much Absolutely On your own Horrendous Better Valuation Reporting, etc. Probabl...
What VCs look for <ul><li>A great team </li></ul><ul><li>Market Size of $1 billion + </li></ul><ul><li>Defendable IP </li>...
What you should look for from a VC <ul><li>Board members </li></ul><ul><li>C-level management </li></ul><ul><li>Synergies ...
Resources required for private financings <ul><li>Time – likely 6 to 12 months </li></ul><ul><li>Dedication to the process...
Preparation for the first pitch <ul><li>Make your introductory statement – of what you do – crystal clear (to anybody) </l...
VC Term Sheets <ul><li>Liquidation preference </li></ul><ul><li>Preferred shares </li></ul><ul><li>Veto on fundamental cha...
Valuations and Uses of Funds <ul><li>Valuations are based on ROI of about 40% for the fund (but  one in ten  make up for t...
Elevator Pitch Tips <ul><li>Everyone in the company has to be able to give it to their grandmother </li></ul><ul><li>Start...
Typical Questions <ul><li>Number 10 </li></ul><ul><li>How much funding is required and where will this round get you? </li...
Typical Questions <ul><li>Number 5 </li></ul><ul><li>What is your intellectual property (IP) and barriers to competition? ...
Financial Projections <ul><li>Typically 60 month models with full set financials </li></ul><ul><li>Have all assumptions ea...
One in Ten <ul><li>40% return on a fund, which lasts about 7 to 10 years </li></ul>
One in Ten <ul><li>Some make a break-even or make a modest gain. Others die.  </li></ul>$40m $100m
“Gotcha” questions <ul><li>What is your addressable market size? </li></ul><ul><ul><li>… followed by questions about the r...
 
 
Upcoming SlideShare
Loading in …5
×

Venture Capital Considerations

1,366 views

Published on

Published in: Economy & Finance, Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,366
On SlideShare
0
From Embeds
0
Number of Embeds
25
Actions
Shares
0
Downloads
70
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide
  • Gents-   Thanks for putting this together. My edits, limited to the end of the 2nd sentence and the addition of a new one to follow it, is to open up the topic a bit and to focus on a high-level discussion about if VC is a path to consider. If there is further interest, a &amp;quot;Do and Don&apos;t&amp;quot; topic would be valuable (it could be that no-one wants VC!). Cheers, D.     Business Matters – Obtaining Finance – critical factors for your company. This seminar will present three solutions to the problem of raising capital for your company: venture capital, bank loans and the Canadian Youth Business Foundation (CYBF) loan program. The focus will be on Venture Capital, with David Shore , a partner in Vancouver based investment-banking firm Stirling Mercantile Corporation, bringing his extensive background and expertise regarding financing for growing companies talking about the pros and cons of being funded by venture capitalists and what the process of raising private capital is like in this economy. The talk will be interactive with a choice of topics for the audience to choose from including VC vs. IPO vs. Debt? VC Term Sheets; What VCs look for and what you should look for from a VC; Preparation for the first pitch; Resources required for private financings; Valuations and Uses of Funds; and more. As well, representatives from the Royal Bank of Canada and the Canadian Youth Business Foundation will discuss the different financing options available through their organizations.
  • Investment bankers - misnomer. We don&apos;t take deposits like banks and generally don&apos;t invest. And when we do, we&apos;re not call investment bankers, we become merchant bankers. Don&apos;t ask me to explain, I didn&apos;t come up with it.
  • Venture Capital Considerations

    1. 1. Financing Growth
    2. 2. Who I Am <ul><li>David Shore </li></ul><ul><li>Partner, Stirling Mercantile Corporation </li></ul><ul><ul><li>Local Investment Bank </li></ul></ul><ul><ul><li>Mid market M&A, financings </li></ul></ul><ul><ul><li>My focus is on private equity for growing companies </li></ul></ul><ul><li>Formerly with CIBC, a few startups </li></ul><ul><li>BCAF investment committee, ASI BAB </li></ul>
    3. 3. Topics – A La Carte VC Term Sheets Valuations and Uses of Funds Elevator Pitch Tips Typical Questions Financial Projections One In Ten VC vs. IPO vs. Debt? What VCs look for and what you should look for from a VC Resources required for private financings Preparation for the first pitch
    4. 4. VC vs. IPO vs. Debt? Prep Debt IPO VC
    5. 5. VC vs. IPO vs. Debt? Horrendous Prep Debt IPO VC
    6. 6. VC vs. IPO vs. Debt? Horrendous Horrendous Prep Debt IPO VC
    7. 7. VC vs. IPO vs. Debt? Not so bad Horrendous Horrendous Prep Debt IPO VC
    8. 8. VC vs. IPO vs. Debt? Not so bad None Horrendous Better Valuation Horrendous Horrendous Prep Dilution Debt IPO VC
    9. 9. VC vs. IPO vs. Debt? Not so bad None Not much Horrendous Better Valuation Reporting, etc. Horrendous Horrendous Control Prep Dilution Change Ops? Debt IPO VC
    10. 10. VC vs. IPO vs. Debt? Not so bad None Not much Absolutely Horrendous Better Valuation Reporting, etc. Probably not Horrendous Horrendous Control Maybe Prep Dilution Change Ops? Profitable? Debt IPO VC
    11. 11. VC vs. IPO vs. Debt? - Not so bad None Not much Absolutely On your own Horrendous Better Valuation Reporting, etc. Probably not On your own Horrendous Horrendous Control Maybe Whatever is needed Prep Dilution Change Ops? Profitable? Management Debt IPO VC
    12. 12. What VCs look for <ul><li>A great team </li></ul><ul><li>Market Size of $1 billion + </li></ul><ul><li>Defendable IP </li></ul><ul><li>World class domain expertise </li></ul><ul><li>Motivation </li></ul>
    13. 13. What you should look for from a VC <ul><li>Board members </li></ul><ul><li>C-level management </li></ul><ul><li>Synergies with other investees </li></ul><ul><li>Sales to other investees </li></ul><ul><li>Money </li></ul>
    14. 14. Resources required for private financings <ul><li>Time – likely 6 to 12 months </li></ul><ul><li>Dedication to the process </li></ul><ul><li>Complete business plan, model , HR plan </li></ul><ul><li>Due diligence binders </li></ul>
    15. 15. Preparation for the first pitch <ul><li>Make your introductory statement – of what you do – crystal clear (to anybody) </li></ul><ul><li>Have a concise PPT that would take about 20 minutes to run through without interruptions </li></ul><ul><li>Have tight answers to typical questions and “Gotcha” questions </li></ul>
    16. 16. VC Term Sheets <ul><li>Liquidation preference </li></ul><ul><li>Preferred shares </li></ul><ul><li>Veto on fundamental changes </li></ul><ul><li>No shop </li></ul>
    17. 17. Valuations and Uses of Funds <ul><li>Valuations are based on ROI of about 40% for the fund (but one in ten make up for the rest). $2 to $5 million, pre money is typical today </li></ul><ul><li>Funds for marketing - 50%, development -30%, working capital - 20% </li></ul><ul><li>Not to take out debt or management </li></ul>
    18. 18. Elevator Pitch Tips <ul><li>Everyone in the company has to be able to give it to their grandmother </li></ul><ul><li>Start with a pain statement, like “The [target market] is suffering from an inability to do [something], because of [this and that].” </li></ul><ul><li>Follow that with a value proposition, like “Our team, with x0 years of experience in this have developed a solution that will be much better/faster/cheaper than existing solutions”. </li></ul><ul><li>Finish with a result like “We are confident we can build a company with $x million in sales in five years. </li></ul><ul><li>Focus on why the customer will need to buy </li></ul>
    19. 19. Typical Questions <ul><li>Number 10 </li></ul><ul><li>How much funding is required and where will this round get you? </li></ul><ul><li>Number 9 </li></ul><ul><li>How many clients do you need to get to profitability? What is your sales cycle? </li></ul><ul><li>Number 8 </li></ul><ul><li>Who is your competition and why will you do better than them. (Don’t simply say we are smarter than them!) </li></ul><ul><li>Number 7 </li></ul><ul><li>How big is your market? What do you project sales to be in your 5th year? </li></ul><ul><li>Number 6 </li></ul><ul><li>What are your key financial assumptions like price, take-up, client ROI, use of investment capital, etc? </li></ul>
    20. 20. Typical Questions <ul><li>Number 5 </li></ul><ul><li>What is your intellectual property (IP) and barriers to competition? How will you sustain your competitive advantages? </li></ul><ul><li>Number 4 </li></ul><ul><li>What are your greatest risks and how do you plan to mitigate them? </li></ul><ul><li>Number 3 </li></ul><ul><li>What problem are you solving and how does the client measure the value of that solution? </li></ul><ul><li>Number 2 </li></ul><ul><li>Who are your clients? (The only one with a vote as to whether or not a product has merit is the client.) </li></ul><ul><li>Number 1 </li></ul><ul><li>Who is on your management team – who has “been there and done that”? </li></ul>“Gotcha” questions
    21. 21. Financial Projections <ul><li>Typically 60 month models with full set financials </li></ul><ul><li>Have all assumptions easy to find and test </li></ul><ul><li>Show prior actuals if you have them </li></ul><ul><li>Focus on first 2 years – from a cash flow perspective </li></ul><ul><li>Example </li></ul>
    22. 22. One in Ten <ul><li>40% return on a fund, which lasts about 7 to 10 years </li></ul>
    23. 23. One in Ten <ul><li>Some make a break-even or make a modest gain. Others die. </li></ul>$40m $100m
    24. 24. “Gotcha” questions <ul><li>What is your addressable market size? </li></ul><ul><ul><li>… followed by questions about the revenues of competitors. Does it add up? </li></ul></ul><ul><li>Who’s your competition? </li></ul><ul><ul><li>Don’t say “we don’t have any” </li></ul></ul><ul><ul><li>How will you eat their lunch? </li></ul></ul><ul><li>Are you willing to step aside when the time is right? </li></ul><ul><ul><li>Plateaus, delegation, priorities </li></ul></ul>

    ×