Mentoring Presentation
Pros of Cons of Accessing Venture
Capital too Early
&
Some of the Pitfalls to Avoid
Agenda
• Meet & Greet
• Introductions
• 90 Second Company Elevator Pitch
• Pros and Cons of Accessing Venture Capital
• So...
Superhero of the Modern World
Equity Capital Life Cycle
Cash flow
Salesand
profit
Introduction Growth Maturity Decline
Time
R & D Pre-Seed
& Seed
Start-...
Financing Alternatives
• Personal Financing
• Business Loans
• Government Grants
• Accelerators
• Angel Investors
• Asset ...
Venture Capital Investment
• Cdn VC’s invested $460 mm in Q1‘13 is up 55%
from Q1’12
• Disbursements to 137 companies up 1...
Venture Capital Investment
• Q1’ 2013 Clean Tech 180m, IT 150m & Life Sci 40m
• Q1’ 2013 had 15 exits with 2 doing IPO’s a...
Venture Capital Investment
• For entrepreneurs, choosing the best
financing model for their start-up isn’t a
luxury – it i...
Venture Capital Pros
• Small piece of a big company is better than a large
piece of a small company
• Their goal is to gro...
Venture Capital Cons
• You have to qualify
• Often looking for exit in short time frame
• Negotiations tend to be one side...
Venture Capital Cons
• Your business is exposed to the VC’s funding
cycle and market uncertainties
• One author referred t...
Pitfall’s
• Complex covenants based on performance metrics
• Inordinately thick documents
• May replace management
• Liqui...
Do it Your Way - Parting Thoughts
• Over 90% of all businesses are started and
grown with no equity financing
• VC is the ...
Profit Magazine’s Hot 50
Profit Magazine’s Hot 50 2012 Top Performers
Future Topics
1. Bootstrapping a Company & Exec Summary
2. Preparing a Pitch for Investors
3. Terms to expect from an Inve...
Gerard Buckley, BBA, FICB, ICD.D
President and CEO
Jaguar Capital Inc.
(C) 416-884-9522
(W) 416-646-6789
g.buckley@jaguarc...
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Incubes presentation accessing venture capital too early 2013 08 21

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This presentation is being given to Cohort 4 of Incubes, an accelerator to Canada's leading internet companies. This presentation is the 6th in a series of 6 presentations delivered on subjects related to accelerating your business for entrepreneurs.

Published in: Economy & Finance, Business
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Incubes presentation accessing venture capital too early 2013 08 21

  1. 1. Mentoring Presentation Pros of Cons of Accessing Venture Capital too Early & Some of the Pitfalls to Avoid
  2. 2. Agenda • Meet & Greet • Introductions • 90 Second Company Elevator Pitch • Pros and Cons of Accessing Venture Capital • Some Pitfalls to Avoid • Q & A • Future Topics
  3. 3. Superhero of the Modern World
  4. 4. Equity Capital Life Cycle Cash flow Salesand profit Introduction Growth Maturity Decline Time R & D Pre-Seed & Seed Start-Up Sales Round 1 Round 2 Grants / Love Money $ Angel $ VC $ VC $ Exit Angel $ Concept and product development Profit
  5. 5. Financing Alternatives • Personal Financing • Business Loans • Government Grants • Accelerators • Angel Investors • Asset Backed or Receivables Lending • Venture Capital • Bank Debt
  6. 6. Venture Capital Investment • Cdn VC’s invested $460 mm in Q1‘13 is up 55% from Q1’12 • Disbursements to 137 companies up 17% ‘13 vs. ‘12 • Ave investment increased to 3.4m Q1’13 from 2.5m in Q1’12 which is only 49% of that seen in the US in Q1’13 for like firms • VC investment in Cda is DN fr 5.9b in ‘00 to 1.5b in ’12 which was similar to ‘11.
  7. 7. Venture Capital Investment • Q1’ 2013 Clean Tech 180m, IT 150m & Life Sci 40m • Q1’ 2013 had 15 exits with 2 doing IPO’s and the remainder seen as been strategic. In 2012 there were only 30 exits for the entire year • Fundraising is DN 44% in Q1’13 to 381m of which 178m from retail investors, 100m from single fund entity & 78m foreign • Only 3% of the universe of venture capital firms generate 95% of the industry returns
  8. 8. Venture Capital Investment • For entrepreneurs, choosing the best financing model for their start-up isn’t a luxury – it is a necessity • The terms you will be offered will be commensurate with the value you have created. Sales = Higher Valuation • VC’s money comes from LP’s which is mostly institutional
  9. 9. Venture Capital Pros • Small piece of a big company is better than a large piece of a small company • Their goal is to grow the company quickly and exit. • Deep pockets for follow on financing • Allows you to focus on the business rather than constantly raising $ • VC firm name helps & signaling positive • It is their FT Job to help you succeed • Industry expertise
  10. 10. Venture Capital Cons • You have to qualify • Often looking for exit in short time frame • Negotiations tend to be one sided • Legal costs of documentation are high • Equity has a higher cost than debt +30% • Staff & time commitment for due-diligence • Reduced control or determination of business • VC’s ask for and get better terms than Angels
  11. 11. Venture Capital Cons • Your business is exposed to the VC’s funding cycle and market uncertainties • One author referred to VC’s as a last resort • May control board decisions • Follow on Financing requires higher valuations to support VC’s valuation • Funding is down and VC’s are taking less risk. • Series A crunch
  12. 12. Pitfall’s • Complex covenants based on performance metrics • Inordinately thick documents • May replace management • Liquidation preference • Anti-dilution clauses • Loose control of the direction of your company • May hold veto rights or rights to sell company • Signaling effect (VC in seed rnd & passes nxt rnd)
  13. 13. Do it Your Way - Parting Thoughts • Over 90% of all businesses are started and grown with no equity financing • VC is the OPM (Other Peoples Money) drug of Start-ups • Oct’12 Profit Hot 50 - Seed Financing – 98% Founders own capital, Growth Capital – 62% Founders own Capital • Control your destiny until you create sales • Eyes Wide Open and be well researched
  14. 14. Profit Magazine’s Hot 50
  15. 15. Profit Magazine’s Hot 50 2012 Top Performers
  16. 16. Future Topics 1. Bootstrapping a Company & Exec Summary 2. Preparing a Pitch for Investors 3. Terms to expect from an Investors Term Sheet 4. Accessing Capital from a Angel Network 5. Forming an Advisory Board 6. Pros of Cons of accessing Venture Capital too early & some of the pitfalls to avoid
  17. 17. Gerard Buckley, BBA, FICB, ICD.D President and CEO Jaguar Capital Inc. (C) 416-884-9522 (W) 416-646-6789 g.buckley@jaguarcapital.ca www.jaguarcapital.ca @jaguarcapital @gerardbuckley
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