M Farmer - Business funding in tough time

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BEN Event - Business funding in tough times - 9th Feb 2010

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M Farmer - Business funding in tough time

  1. 1. Mark Farmer – Founder, General Partner Business Funding in Tough Times
  2. 2. It’s no different <ul><li>Less capital available </li></ul><ul><li>Competition tougher </li></ul><ul><li>Bar is higher </li></ul><ul><li>Work harder & smarter </li></ul>
  3. 3. The innovation pipeline <ul><li>Most ideas don't make it to a start up company </li></ul><ul><li>Most start up companies don't make it to profitability </li></ul><ul><li>Most profitable companies don't make it to exit </li></ul><ul><li>Most exits are not big exits </li></ul><ul><li>What’s special about your idea? </li></ul>
  4. 4. AM I WASTING MY TIME? <ul><li>Be honest </li></ul><ul><ul><li>Glass half empty or half full? </li></ul></ul><ul><ul><li>Put your idea on the table and push it around </li></ul></ul><ul><ul><ul><li>Is it really a good idea? </li></ul></ul></ul><ul><ul><ul><li>Is the customer in pain? </li></ul></ul></ul><ul><ul><ul><li>Can I really help? </li></ul></ul></ul><ul><ul><ul><li>Will customers buy it? </li></ul></ul></ul><ul><ul><ul><li>Will there be enough of them? </li></ul></ul></ul><ul><ul><ul><li>Does the customer have good alternatives </li></ul></ul></ul><ul><ul><li>Beware self delusion & self referential criteria </li></ul></ul><ul><li>What is the magnitude of the opportunity </li></ul><ul><ul><li>What is the scale of your ambition? </li></ul></ul><ul><ul><li>Does it match your partner’s / investor’s </li></ul></ul><ul><li>What are you prepared to do, to sacrifice, to make it happen? </li></ul><ul><ul><li>Are all the conditions right for success (sequoia) </li></ul></ul>
  5. 5. Angels or Demons?
  6. 6. Run a process <ul><li>Create an edge </li></ul><ul><li>Beware the slow no </li></ul><ul><li>Create a compelling event </li></ul><ul><li>Aim to get multiple offers in at the same time </li></ul><ul><li>AM I WASTING MY TIME? </li></ul><ul><li>Consider an advisor </li></ul>
  7. 7. Qualify Qualify Qualify <ul><li>1000 – 100 – 10 – 1 to offer means lots of scope to waste time </li></ul><ul><li>How big is the fund </li></ul><ul><li>How many investments will they make? </li></ul><ul><li>How much capital do they reserve for each company? </li></ul><ul><li>Where are they in the fund life cycle? </li></ul><ul><ul><li>How many investments? </li></ul></ul><ul><ul><li>How much capital deployed? </li></ul></ul><ul><li>What criteria do they use to decide? </li></ul><ul><li>What process do they go through </li></ul><ul><ul><li>Understand where you are </li></ul></ul><ul><ul><li>Who is your competition </li></ul></ul><ul><li>What’s the proposition for the investor – does it work? Is it the best deal they are looking at? </li></ul><ul><li>Should I really be talking to these guys </li></ul><ul><li>AM I WASTING MY TIME? </li></ul>
  8. 8. The investment committee
  9. 9. Can you work with these guys?
  10. 10. Eden <ul><li>£90m fund </li></ul><ul><li>£450m return target (5x) </li></ul><ul><li>25 investments </li></ul><ul><li>We know that 80% will fail </li></ul><ul><li>5 companies will generate 95% of our return </li></ul><ul><li>Each investment must be capable of returning the fund </li></ul><ul><ul><li>And some </li></ul></ul><ul><li>Targeting </li></ul><ul><ul><li>ownership at exit of 20%-40% </li></ul></ul><ul><ul><li>Exit valuations of £200-£400m </li></ul></ul>
  11. 11. What do we look for? <ul><li>Big markets </li></ul><ul><ul><li>$1bn + </li></ul></ul><ul><ul><li>global </li></ul></ul><ul><li>Massively disruptive propositions </li></ul><ul><li>Uncertain competitive landscapes </li></ul><ul><li>Stand out teams </li></ul><ul><ul><li>Drive </li></ul></ul><ul><ul><li>Focus </li></ul></ul><ul><ul><li>Persistence </li></ul></ul><ul><ul><li>Realism </li></ul></ul><ul><ul><li>Attraction factor </li></ul></ul><ul><ul><li>Experience </li></ul></ul><ul><li>Ambition </li></ul><ul><li>Can we work with these guys? </li></ul>
  12. 12. So remember <ul><li>Its no different – just harder </li></ul><ul><li>the sequoia </li></ul><ul><ul><li>The odds of success are very low </li></ul></ul><ul><ul><li>the conditions must be right? </li></ul></ul><ul><ul><li>Be brutally honest </li></ul></ul><ul><ul><li>Are you wasting your time </li></ul></ul><ul><li>Angels or demons? </li></ul><ul><li>Run a process & create a compelling event </li></ul><ul><li>Qualify qualify qualify </li></ul><ul><li>Can I work with these guys? </li></ul><ul><li>AM I WASTING MY TIME? </li></ul>
  13. 13. A parting shot <ul><li>It can work </li></ul><ul><li>We have created : </li></ul><ul><ul><li>A lot of tears </li></ul></ul><ul><ul><li>44 companies </li></ul></ul><ul><ul><li>2000 jobs </li></ul></ul><ul><ul><li>$750m in enterprise value </li></ul></ul><ul><ul><li>25 multi – millionaires </li></ul></ul><ul><li>If you are truly honest with yourself </li></ul><ul><ul><li>And you think you are onto something </li></ul></ul><ul><ul><li>DONT GIVE UP! </li></ul></ul>

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