How to Attract Venture Capital 10 24 09


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How to Attract Venture Capital: What Every Start-up Should Know

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How to Attract Venture Capital 10 24 09

  1. 2. how to attract venture capital <ul><li>Draft a business plan with detailed supporting information </li></ul><ul><ul><li>Executive Summary </li></ul></ul><ul><ul><li>Power Point Presentation </li></ul></ul><ul><ul><li>Full Business Plan </li></ul></ul><ul><li>Understand how much money you need, why you need it and what you will accomplish with it before you need to raise more capital (milestones) </li></ul><ul><li>Have a realistic understanding of valuation and customary terms & conditions </li></ul><ul><li>Know where you are on the funding continuum and seek capital from those investors who fund companies at your point of development </li></ul><ul><li>Identify investors who have a knowledge of your value proposition and/or your target markets </li></ul><ul><li>Enhance your credibility with a good board and outside advisors </li></ul><ul><li>Be prepared to demonstrate your own commitment to your company by being persistent – funding is a full-time job </li></ul><ul><li>Understand that you are not the company and the company is not you (be selfless) </li></ul><ul><li>Be open-minded </li></ul>Proprietary and Confidential - ©2005 Glengary LLC
  2. 3. funding phases Friends, Family, Angels & Validation Funds Liquidity Event Later-Stage Institutional Investors Early-Stage Funds Funding Void Existing Environment Proprietary and Confidential - ©2005 Glengary LLC Validation Risk Execution Risk (Including Financing Risk) Financial Risk
  3. 4. tips on your business plan <ul><li>Answer Three Questions: </li></ul><ul><ul><ul><ul><li>1) What do you do? </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>This defines your “value proposition” of your product and/or service from your customers’ perspective </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>for example: “We allow our customers to save money on their electric bills.” </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Clearly describe why your customer will “need” to have what you are offering </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Ideally, have an “early-adopter” who will validate the value proposition </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>2) Why do you do it? </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>This describes the market </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>for example: “Total annual commercial, industrial and residential electric bills total $$$$$ per year, or $$$$$ per unit. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Be clear on the addressable market </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Understand the market dynamics that work for or against </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Have a very good understanding of your competitors, direct/known or potential </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>This describes your solution to the above and specifically </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>for example: “We provide a patented product that …………resulting in a three-month payback to the customer.” </li></ul></ul></ul></ul></ul>Proprietary and Confidential - ©2005 Glengary LLC
  4. 5. tips on your business plan <ul><ul><li>How do you do it? </li></ul></ul><ul><ul><li>Discuss how you enable your customer to gain its value proposition </li></ul></ul><ul><ul><ul><li>For example, do you offer a product, software, a system, a process, etc. </li></ul></ul></ul><ul><ul><li>Clearly identify how you will protect yourself from others </li></ul></ul><ul><ul><ul><li>Intellectual property (patents) </li></ul></ul></ul><ul><ul><ul><li>Trade secrets </li></ul></ul></ul><ul><ul><ul><li>First mover advantage/brand value </li></ul></ul></ul><ul><ul><li>Discuss your operations, including: </li></ul></ul><ul><ul><ul><li>Marketing & Sales </li></ul></ul></ul><ul><ul><ul><li>Pricing model & margins </li></ul></ul></ul><ul><ul><ul><li>Staffing requirements </li></ul></ul></ul><ul><ul><ul><li>Cash Burn: operating budget, working capital and timing and amounts of additional funding </li></ul></ul></ul>Proprietary and Confidential - ©2005 Glengary LLC
  5. 6. what to expect after vc funding <ul><li>FOCUS on achieving milestones </li></ul><ul><li>Make presentations/reports and updates in a highly credible manner </li></ul><ul><li>Build a high level of trust with your investors and board members </li></ul><ul><li>Be open-minded, expose strengths and weaknesses and ask for help </li></ul><ul><li>Expose other members of your team to the board </li></ul><ul><li>Know the answers to questions or, if you do not, follow-up quickly </li></ul><ul><li>Be prepared to provide a great deal of information to your board and investors </li></ul><ul><li>Engage your board and investors to build a “team” effort NOT a “we vs. them” dynamic </li></ul>Proprietary and Confidential - ©2005 Glengary LLC