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What VCs Want, What Companies Want In A VC For UBC Ace

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  • F, F & EEs can be in the form of debt Best financing is still revenue from target customers
  • Should help all buyers understand your business and it’s value to them
  • PDF, available for download
  • PDF, available for download
  • Transcript

    • 1. What VCs Look For What You Should Look For In A VC UBC Advancing Canadian Entrepreneurship Sauder School of Business March 3, 2006
    • 2. About Stirling Mercantile
      • Sectors
      • Mid market financings
      • Early-stage VC financings
      • Mergers and acquisitions
      • Valuations
      • Public market advisory services
    • 3. About Stirling Mercantile
    • 4.  
    • 5. Sources of Financing
      • Equity – friends, family & employees, angels & VCs
      • Debt – banks, subordinated lenders & others
      • Grants – governments and government supported agencies
      Background .
    • 6. The Financing Map F, F & E Seed, Angel Series A Series B Year 1 2 3 4 5 Beta Customers Early Adopters Crossing the Chasm Mainstream Growth Design Beta V. 1 V. 2 IP Roadmap Funding Roadmap Background .
    • 7. VC Activity Background
    • 8. 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 .
    • 9. Standard Terms
      • Preferential treatment:
        • First payment upon exit (acquisition or IPO)
        • Protection against dilution
        • Right to purchase more
        • Varying levels of control over business
      • Motivated solely by return on investment
      Background
    • 10. 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
      .
    • 11. 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
      • Close proximity
      .
    • 12. Business Plan
      • Executive Summary
      • Product or Service Description
      • Industry and Opportunities
      • Marketing and Sales Plans
      • Competition, Competitive Advantages
      • Management and Board Members
      • Financials and ProFormas
      VCs Want
    • 13. Executive Summary
      • “ Put it at the beginning but write it at the end”
      • Start with a simple description of who your clients are and why they will buy from you
      • Keep it down to about 2 pages – just enough to stimulate questions of interest
      . Background
    • 14. Position Value to Customer Sales Unit Volume You Comp Comp VCs Want
    • 15. Pro-Formas VCs Want
    • 16. Keep It Concise!
      • Use grade 8 English, and test it
      • Ask yourself if each paragraph helps to explain why this company has value
      . VCs Want
    • 17. Avoid Saying…
      • Our projections are conservative
      • We have no competition
      • We have a first mover advantage
      • We only need to capture x% of the market share
      . VCs Want
    • 18. Presentation
      • A picture tells a thousand words, but…
      • … don’t spend time or money on graphics and eye-candy
      • Docs in PDF, available for download from your site
      . Background
    • 19. Due Dilly Binder
      • All material contracts
      • Details of financials
        • Inventory and valuable assets
        • HR tables and analysis
        • Comments on liabilities or notes to the Financials
      • Don’t leave out anything salient
      . VCs Want
    • 20. What Should You Look For in a VC?
      • More than money
      • “Been there, done that” management
      • Corporate governance
      • Exit strategies
      .
    • 21. What Should You Look For in a VC?
      • More than money
      • Contacts
        • for additional management
        • for customers
        • for partnerships
      .
    • 22. Summary
      • There are subtle yet important differences between all investors
      • Research their website, then ask them and their references what they prefer
      • Compare that to your list of what you think is important from a VC
      .
    • 23. Thank you
      • A copy of this presentation is available at: www.stirlingmercantile.com/speakers.htm
      David Shore [email_address] 604 484-0070

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