Nov. 5, 2009 Perspectives on the Term Sheet www.startupcfo.ca

THE GOOD OLD DAYS (?)… Copyright © 2009 – StartupCFO Enterprises Inc.

NOW Copyright © 2009 – StartupCFO Enterprises Inc.

THE PATH TO A TERM SHEET Copyright © 2009 – StartupCFO Enterprises Inc. Image: http://www.flickr.com/photos/philwirks/2219686874/

The Process Copyright © 2009 – StartupCFO Enterprises Inc. New Deal Received Deal Team Formed (Sponsor + 1) Interesting + Fit? Deal Memo to Partners Company Presents to Partners Questions Raised Due Diligence Company Meetings + Term Sheet Investment Memo Investment Decision Legals & Cash Out NO: feedback to company + deal tracking YES Interesting YES NO: feedback to company + deal tracking NO: feedback to company + deal tracking YES YES

The Process (Cont.) Know your Business – what makes you unique? Industry – key factors, motivations for buying your stuff Numbers – metrics, financials, cash burn Comparables – competition, relevant exits Strengths & weaknesses – Don’t hide them Strategy – how will you build a big, valuable business quickly? Audience – why are you pitching me? Needs – how much money till exit? Copyright © 2009 – StartupCFO Enterprises Inc.

Know your

Business – what makes you unique?

Industry – key factors, motivations for buying your stuff

Numbers – metrics, financials, cash burn

Comparables – competition, relevant exits

Strengths & weaknesses – Don’t hide them

Strategy – how will you build a big, valuable business quickly?

Audience – why are you pitching me?

Needs – how much money till exit?

The Process (cont.) A sample timeline: Weeks -4,- 2: Prep your deck, exec summ, pro formas. Assemble your hit list Week -1: Practice Week 1: Launch your attack – parallel, not serial. Send out your teaser. Book 1 st meetings. Week 2, 3: 1 st meetings Week 4, 5: 2 nd meetings – in person. > 1 partner Weeks 6 – 8: Early diligence Week 9: ALL PARTNERS MEETING Week 10: Term sheet Weeks 11 – 15: Docs & closing Week 16: Sleep! Copyright © 2009 – StartupCFO Enterprises Inc.

A sample timeline:

Weeks -4,- 2: Prep your deck, exec summ, pro formas. Assemble your hit list

Week -1: Practice

Week 1: Launch your attack – parallel, not serial. Send out your teaser. Book 1 st meetings.

Week 2, 3: 1 st meetings

Week 4, 5: 2 nd meetings – in person. > 1 partner

Weeks 6 – 8: Early diligence

Week 9: ALL PARTNERS MEETING

Week 10: Term sheet

Weeks 11 – 15: Docs & closing

Week 16: Sleep!

Fundraising tips & truisms Love at 1 st sight Go for the “no” Local first Be prepared! Time is not on your side - Create urgency Time around something that generates momentum / buzz Get good advisors You will be rejected – a lot! 6 months – maybe more these days Know who you’re pitching and why Copyright © 2009 – StartupCFO Enterprises Inc.

Love at 1 st sight

Go for the “no”

Local first

Be prepared!

Time is not on your side - Create urgency

Time around something that generates momentum / buzz

Get good advisors

You will be rejected – a lot!

6 months – maybe more these days

Know who you’re pitching and why

Fundraising today… Takes longer Flat is the new up. Down is the new flat VC alphabet: B level traction to raise an A round Smaller amounts Angels are your friend Get to revenue faster Funding landscape (in Quebec) will be changing next year Copyright © 2009 – StartupCFO Enterprises Inc.

Takes longer

Flat is the new up. Down is the new flat

VC alphabet: B level traction to raise an A round

Smaller amounts

Angels are your friend

Get to revenue faster

Funding landscape (in Quebec) will be changing next year

Where fundraising derails… Opportunity size No competition Don’t know the game Valuation Copyright © 2008 - Mark MacLeod

Opportunity size

No competition

Don’t know the game

Valuation

Term sheets that suck Too complex Premature Incomplete or orphans The babysitter Copyright © 2009 – StartupCFO Enterprises Inc.

Too complex

Premature

Incomplete or orphans

The babysitter