1. High-Tech Tuesday Webinar: Best
Practices in Raising Venture Capital
to Grow Your Business
David Mitchell, Research Director
david.mitchell@gartner.com
This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other
authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied,
distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.
© 2012 Gartner, Inc. and/or its affiliates. All rights reserved.

2. "A bank is a place that will lend you money if you can prove
that you don't need it." — Bob Hope (1903-2003)
"Everybody likes a kidder, but nobody lends him money." —
Arthur Miller (1915-2005)
"Lack of money is no obstacle. Lack of an idea is an
obstacle." — Ken Hakuta
"The safest way to double your money is to fold it over and
put it in your pocket." — Kin Hubbard (1868-1930)
1

3. Key Issues
1. The why, when, who and where of raising
capital to fund growth
2. Avoiding the common mistakes and reducing
the investment risk
3. Telling a compelling story
2

4. Poll
• What use has your company made of external
funding?
- Received multiple rounds of external investment
- Received a single round of external investment
- Currently seeking external investment
- No external investment plans
3

5. The why, when, who and where of
raising capital to fund growth
4

6. Transition Is the Major Reason Why
Companies Seek External Capital
Ownership Private Private
Public Public
Product Idea Prototype
Prototype Product
Product Volume Production
Sales Initial Sale Segment Strength
Segment Strength Global Strength
Unable to be funded organically via operating cash flow
5

7. Venture Capital Is Not the Only Funding
Source
Friends and
Government Crowdfunding
Family
Angel Venture
Investors Capital
Each different source has a different
fingerprint — money amount, risk appetite,
desired returns, investment stage
6

8. Matching Your Transition to Stages of the
Investment Cycle
Seed Stage Startup Stage First Stage Second Stage Third Stage Bridge Management
• Company is still in • Initial prototypes • Go-to-market • Growth has • Continued Financing Buyout
the ideation phase, or early products activities have begun to growth has • Interim funds • Typically a
with no product have been begun, and initial accelerate, and started to create being raised to debt-based
having yet been developed. sales have the company is profitable revenue prepare for a acquisition of
developed. started to be becoming an streams, and later equity equity, in an
generated. established international event, such as LBO transaction.
player. expansion is an IPO.
being
considered.
Potential Investment
Amount Risk Return Stage
Government funding Small to medium Low to medium Medium to high Any
Crowdfunding Small to medium Medium to high Any Early
Angel investors Early to
Medium to large High High intermediate
Friends and familiy Small Any Any Early
Venture capital Large High High Any
7

9. Crowdfunding Is an Emerging Alternative
Source: http://www.nucocochocolate.co.uk/crowdfund/
8

10. Matching Your Needs to the Right VC
Fund
Potential Venture Funds
Filters
Geography
Growth Strategy
Technology Type
Skills
Investment Horizon
Candidate Venture Funds
9

11. When You Seek External Funding Is
Important
• Timing impacts several important facets:
- Ability to execute your business plan
- Valuation and negotiation
- Market sentiment and valuation
10

12. Summary
Understand
Your
Transition
Match
Shortlist Transitions
and to
Present Investment
Stages
Filter and
Qualify
Sources
11

13. Avoiding the Common Mistakes
and Reducing the Investment Risk
12

14. Reducing Perceived Risk Increases Value
as Well as Improving the Odds
13

15. Some Mistakes Come Down to the
Calculations That You Make
Headroom
Large x Small
Compound
Calculations
14

16. Other Mistakes Are Based on Poor
Planning and Analysis
Wrong
Wrong Investor
Valuation
Poor Poor
Documentation Presentation
Poor Market Poor Business
Knowledge Plan
15

17. Business Plan Mistakes Are the Most
Common and Damaging
Inadequate business plan
Management Competitive
Opportunity Finance
Team Landscape
• Description • Resumes • Companies • P&L
• Size and • Products • Cash Flow
Growth • Alternatives • Capitalization
• Enduring Table
Advantage
Not showing investors how you will spend their money
and how you will generate returns for them
16

18. Telling a Compelling Story
17

19. A Commonly Used Story — In Five
Chapters
Size of the prize
Runners and riders
Motorcycle cheats
Advice to the jockey
Selling the horse
18

20. A Commonly Used Story — In Five
Chapters
Size of the prize
Runners and riders
Motorcycle cheats
Advice to the jockey
Selling the horse
19

21. A Commonly Used Story — In Five
Chapters
Size of the prize
Runners and riders
Motorcycle cheats
Advice to the jockey
Selling the horse
20

22. But Never Forget One of the Most
Powerful Influencers That You Have
21

23. The Simple Formula to Remember …
Show that you have a good idea that solves a
problem and that addresses an unmet need; i.e.,
there is an identifiable market.
Show that this translates into a commercially viable
product, with a business model that can generate
revenue and margin; i.e., that it is commercially
viable.
Show the investor that your team has the skills and
expertise needed to deliver.
Show the investor that your early advantage can
be sustained long enough to be able to generate
growth that can continue to expand.
Everything after that is down to execution.
22

24. Recommended Reading
 Marketing Essentials: Five Best Practices When
Seeking Venture Capital Investment
David Mitchell (G00232191)
 Crowdfunding Needs Marketing
David Mitchell (G00234050)
 Predicts 2012: Marketers Must Adapt to a World That
Rewards Speed
Richard Fouts, Jennifer S. Beck, David Mitchell and Neil
McMurchy (G00226310)
 Marketing Essentials: Four Changes Successful
Emerging Providers Make to Enable Long-Term
Growth
Neil McMurchy (G00211128)
23

25. High-Tech Tuesday Webinar: Best
Practices in Raising Venture Capital
to Grow Your Business
David Mitchell, Research Director
david.mitchell@gartner.com
This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other
authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied,
distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.
© 2012 Gartner, Inc. and/or its affiliates. All rights reserved.