1. Masterclass Investments
Startup Festival – Friday 22 November 2013

3. Agenda (1)
14:00 – Introductions
14:30 – About investments: technical and practical
- Pecking order of Finance
- Type of investors
- Investment process
- Some advice

4. 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

5. Introductions

6. 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

8. What is finance?
• Verb: “provide funding for a person or organization”

9. Who needs investment?

10. Pecking order of finance
• Own money
• Gift / subsidy
• Loan
– Normal loan
– Subordinate loan
– Convertible loan
• Equity

11. Trust driven funders

12. 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:
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A working product
A growing market
A launching customer
An experienced team

13. Funding stages
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Pre Seed:
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€100k to €500k (angels, crowd)
Prototype stage, first customers, first employees
Series A/B/C: €500k to €5M (VC)
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Idea stage, searching for business model, founding team only
Seed:
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€10k to €50k (own money, FFF)
Scaling stage, growing revenue, growing team
Exit:
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€.. (IPO, acquisition)
Serious challenger in the market

14. Funding stages

15. 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?

16. 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!

17. Making the deal: Term Sheet
• Negotiate the terms for funding
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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!!

18. Making the deal: Due Diligence
• Due diligence
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Product
Market
Team
Financial
• Do your own due diligence!

19. Making the deal: Bring in the lawyers!
• Paperwork
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Participation agreement
Shareholders agreement
Guarantees and disclosing
Management agreement
Company constitution
Representations
Warranties
Etc. etc. etc.

20. Making the deal: Champagne!!
• Closing
– Day at the notary!
– Lot of signatures!
– Don’t forget to celebrate!!

21. 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.

22. 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.

23. Substantive Terms
• Valuation / equity percentage
• Type of stock
– Common
– Preferred: convertible or redeemable (also callable)
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Dividends
Anti Dilution Rights / First right of refusal
Board Members
Vesting of Shares
CEO Replacement Provision
No Shop Provision