Masterclass Investments
Startup Festival – Friday 22 November 2013
Agenda (1)
14:00 – Introductions
14:30 – About investments: technical and practical
- Pecking order of Finance
- Type of i...
Agenda (2)
15:15 – Case part 1: preparation
15.45 – Case part 2: negotiation
16:30 – Case part 3: evaluation
17.00 – Wrap ...
Introductions
Niek Huizenga
Founder of startups
Advisor strategy & investments
Lecturer entrepreneurship
Traveller (South Africa, Benin,...
What is finance?
• Verb: “provide funding for a person or organization”
Who needs investment?
Pecking order of finance
• Own money
• Gift / subsidy
• Loan
– Normal loan
– Subordinate loan
– Convertible loan

• Equity
Trust driven funders
Fact driven funders
• They manage money of others and have ROI as the main goal

• Focus on evidence:
– Business opportuni...
Funding stages
1.

Pre Seed:
–

2.

3.

€100k to €500k (angels, crowd)

Prototype stage, first customers, first employees
...
Funding stages
The search for funding (1)
• Do you have the ambition?

• Can your startup become a real business?
• What stage you are in...
The search for funding (2)
1. Make your materials: one pagers, slide deck, business plan

2. Make a list of potential fund...
Making the deal: Term Sheet
• Negotiate the terms for funding
–
–
–
–
–
–
–
–
–
–
–

Valuation
Type of stock
Dividends
Ant...
Making the deal: Due Diligence
• Due diligence
–
–
–
–

Product
Market
Team
Financial

• Do your own due diligence!
Making the deal: Bring in the lawyers!
• Paperwork
–
–
–
–
–
–
–
–

Participation agreement
Shareholders agreement
Guarant...
Making the deal: Champagne!!
• Closing
– Day at the notary!
– Lot of signatures!
– Don’t forget to celebrate!!
Some advice
• The investment process will take 6
to 18 months.
• Put everything on paper and assume
worst case scenarios.
...
Case: Aerospace Investment
Part 1: Preparation (20 minutes)
- Form groups of 2 (founders versus investors)
- Choose your c...
Substantive Terms
• Valuation / equity percentage
• Type of stock
– Common
– Preferred: convertible or redeemable (also ca...
Guide to startup investment
Guide to startup investment
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Guide to startup investment

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Guide to startup investment

  1. 1. Masterclass Investments Startup Festival – Friday 22 November 2013
  2. 2. Agenda (1) 14:00 – Introductions 14:30 – About investments: technical and practical - Pecking order of Finance - Type of investors - Investment process - Some advice
  3. 3. Agenda (2) 15:15 – Case part 1: preparation 15.45 – Case part 2: negotiation 16:30 – Case part 3: evaluation 17.00 – Wrap up and drinks at the bar
  4. 4. Introductions
  5. 5. Niek Huizenga Founder of startups Advisor strategy & investments Lecturer entrepreneurship Traveller (South Africa, Benin, Uganda, Tanzania, Silicon Valley) Contact: niek@yeah.eu http://about.me/niekhuizenga
  6. 6. What is finance? • Verb: “provide funding for a person or organization”
  7. 7. Who needs investment?
  8. 8. Pecking order of finance • Own money • Gift / subsidy • Loan – Normal loan – Subordinate loan – Convertible loan • Equity
  9. 9. Trust driven funders
  10. 10. Fact driven funders • They manage money of others and have ROI as the main goal • Focus on evidence: – Business opportunity – Tractions – Team, team, team • The ideal investment has: – – – – A working product A growing market A launching customer An experienced team
  11. 11. Funding stages 1. Pre Seed: – 2. 3. €100k to €500k (angels, crowd) Prototype stage, first customers, first employees Series A/B/C: €500k to €5M (VC) – 4. Idea stage, searching for business model, founding team only Seed: – €10k to €50k (own money, FFF) Scaling stage, growing revenue, growing team Exit: – €.. (IPO, acquisition) Serious challenger in the market
  12. 12. Funding stages
  13. 13. The search for funding (1) • Do you have the ambition? • Can your startup become a real business? • What stage you are in? • Define your risk profile? • How much funding you need? • What are you willing to share / give away? • What do you need besides funding?
  14. 14. The search for funding (2) 1. Make your materials: one pagers, slide deck, business plan 2. Make a list of potential funders (desk research) 3. Visit events where you can meet potential funders (field research) 4. Approach the least appealing funders first and practice 5. When you have enough feedback and confidence, approach the most appealing funders Be critical to yourself, if you do not find investor’s interest maybe it is because of you!
  15. 15. Making the deal: Term Sheet • Negotiate the terms for funding – – – – – – – – – – – Valuation Type of stock Dividends Anti Dilution Rights Governance Vesting conditions Management and CEO replacement Ambition for exit Confidentiality Termination conditions Other…. • If no experience: always get an advisor!!
  16. 16. Making the deal: Due Diligence • Due diligence – – – – Product Market Team Financial • Do your own due diligence!
  17. 17. Making the deal: Bring in the lawyers! • Paperwork – – – – – – – – Participation agreement Shareholders agreement Guarantees and disclosing Management agreement Company constitution Representations Warranties Etc. etc. etc.
  18. 18. Making the deal: Champagne!! • Closing – Day at the notary! – Lot of signatures! – Don’t forget to celebrate!!
  19. 19. Some advice • The investment process will take 6 to 18 months. • Put everything on paper and assume worst case scenarios. • Never sign anything until you fully understand. • Do not give away too much in the pre seed / seed stage. • Negotiate fair and respectful, the investor will be your future partner. • Remember: you can only give away shares once.
  20. 20. Case: Aerospace Investment Part 1: Preparation (20 minutes) - Form groups of 2 (founders versus investors) - Choose your counterpart - Each group discusses their own targets and negotiation strategy Part 2: Negotiation (45 minutes) - Start negotiating. - All substantive terms need to be negotiated. - No deal when BATNA is below 45 points. - Do not forget to evaluate the process. Part 3: Evaluation (45 minutes) - Each groups shares their Score Sheet and Process Evaluation. - Scores are evaluated. - Practical experiences are shared.
  21. 21. Substantive Terms • Valuation / equity percentage • Type of stock – Common – Preferred: convertible or redeemable (also callable) • • • • • • Dividends Anti Dilution Rights / First right of refusal Board Members Vesting of Shares CEO Replacement Provision No Shop Provision

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