ACE Resources: Money, Myths and Mindsets

Money, Myths and Mind-Sets | eCreative | 06.05.2015
Juliane Schulze
Senior Partner
peacefulfish
juliane@peacefulfish.com
Derfflingerstr. 18
10785 Berlin
T 030-488 2885 66
www.peacefulfish.com
Money, Myths And Mind-Sets
what investors are looking for and why
06 May 2015

agenda
1. peacefulfish?
2. Myths And Mind-Sets
3. What Investors Want To Know And Why
4. Business Plans?
5. Money: Financing Sources
6. Dealing With Investors

since 2000 consulting
offices in Berlin, Brussels, Cannes, London
 audiovisual professionals in financing strategies and fund raising (business
planning),
 advising public/financial institutions in creating financial instruments, i.e.
tax credits, public funds, private investment funds,
 develop new private equity funds and work on project due diligence for banks
and funds.
• pf community: >7400 a/v pros registered for newsletter on int’l financing
• clients: Europe, Scandinavia, USA, Middle East, Asia; working for the European
Commission, MEDIA, State Media Authorities, Media Development Agencies, Film
Commissions and, film production companies worldwide;
• training courses: Closing the Gap; ENTER Europe;
• lecturing at the Media Business School, FMX Stuttgart, Popakademie Baden-
Württemberg, Maia Workshops; guest speaker at leading business incubators,
industry summit, conferences & FU Berlin;
• partners: Media Deals and Just Temptation.
peacefulfish

Myths And Mindsets

Investors are

Investors love

Investors want
TT
FULL

Investors are risk averse

Investors know

Investors are only after one thing

Instead, investors want

Investors put you in chains

Investors understand

Investors only invest in

In reality, investors invest in

Investors need

what investots want to know

1) how sellable is the product/the service?
2) how high is the investment risk?
3) how high is the ROI?
4) when is the money coming back?
5) who else is on board?
6) can the management deliver?
7) will the management deliver?
8) how will the management deliver?
Investors want to know

1) track record
2) defined target clients
3) sales projections
4) revenue projections
5) distribution and marketing
6) any guarantees?
Investors want to know

Investors want to see
traction

skin in the game
Investors want to see

Investors pay attention to
1. business pitch
2. match investment
3. recoupment
4. exit

nothing is
immune
from
improvement.
that leads to
opportunity.
entrepreneurship

entrepreneurship is a process of identifying and
starting a business venture, sourcing and organizing
the required resources and taking both the risks and
rewards associated with the venture.
essential qualities: leadership, initiative and
innovation in manufacturing, delivery, and/or services,
team-building, and management ability.
The entrepreneur is commonly seen as an innovator
— a generator of new ideas and business processes.
entrepreneurship

different expectations
entrepreneurs
• need often project financing
• often focused on public funds
• business model often fee-
based rather than revenue
oriented
• difficult to retain IP rights
• focused on the creative and
production sides more than
sales and distribution
private investors
• traditionally focused on
company investment
• scalable market approach
• clear growth objectives
• attractive investment offer with a
well-defined exit strategy
• return on investment (ROI)
• balanced risk profile (track
record of the company, market
size vs. level of investment, etc.)
financing environment

private investors
usually invest in companies, not in projects
often bring many years of experience from IT-sector
follow a portfolio-interest
not interested in income, but in capital growth
(within ~5 years)
exit: structural EU problem = lack of mid-sized buyers
trends:
1.) private investors and PE-Funds show an increasing interest in the creative industry
2.) especially young angel investors consider more and more project investment
financing environment

business plans?

you‘re in business
when you can answer
1. who is your customer?
2. what does the
customer value?
3. how do you deliver
value at an
appropriate cost?

the right idea at the right time by the right team
• need
• problem
• solution
• added value
• USP

write it down into a 2-page summary:
• what is the idea?
• why is it a business?
• who is the market?
• what pain points are you solving?
• how is it going to make money?
• how long will it take to prototype?
• how long until it gets to your market?
having a great business idea?
Source: Jay Adelson
Bobby Finance

business plans?
Who are you?
Who is in your team?
Which experiences &
competences do you have?
Which resources do you have?
Which networks are you part of?

why business plans?
the point of a business plan isn't
to follow it no matter what,
it's to establish a structure
for smart decision making
that allows you to succeed
no matter
what the future might bring.

business plans?
1. No Maket Need
2. Ran Out of Cash
3. Not the Right Team

business plans?
help you with
• deeply understanding your project(s)
and company
• identifying project partners and industry
allies
• thinking in financing scenarios
 saving time when things fall apart
• differentiating your projects and
company from others
• building trust among industry pros

money: financing sources

financing sources
good old revenues
are often the
best money
to look for!

Source: Go Beyond
Seed Start –Up Round A & B Expansion Established
< €50T < €500T €500T - €1Mio €750T + 50Mio +
3 F:
Founders,
Family, &
Friends
Venture Capital Private EquitySuppliers, Awards
(Competitions),
Grants, Government-
grants
Commercial Banks
Equity market
Business Angels
Equity,
Crowdfunding
Family Offices & Strategic
Investors
Suppliers and/or Clients
Commercial Banks
Equity,
Crowdfunding
Equity,
Crowdfunding
investment stages & financing sources in Europe

Source Financing for Timing Benefits Risiks
Founders,
Family
& Friends
• Research
• Prototype
• Process for business
model
Seed
Start-up
• Speed
• Credibility: they know
you
• Investors drive based
not only on financial
returns
• Relationships
• Over-priced in the
market
• Defaults
Industry partners:
Suppliers and/
or Clients
• Purchase product &
service
• Give credit
Seed
Start-up
Series A & B
Expansion
Established
• Cheap financing
• Investors with strategic
insight
• Force entrepreneurs to
be business oriented
• Relationships
• Conflict of interest
• Lose freedom
7
sources of financing
Source: Go Beyond

Bank Loans
• Business & operational
development
• Further product
development
Series
A & B
Expansion
• No equity
• Push
entrepreneurs to
make sales
• Credit rating
• Banks reluctant to
lend to small & risky
firms that lack a
collateral
Awards of Startup
Competitions,
Grants,
Governments
• Product, business and
operational
development
• Market survey
Seed
Startup
• No equity
• High visibility/ free
press
• Free coaching
• Paperwork/time
consuming
• Entrepreneur
commits to tasks that
deviate from core
business
• Bureaucracy
8
Source: Go Beyond

Crowdinvestment*
• Product
development
• Working capital
• Defining the process
for the business
model
Seed
Start-up
• Peer Effect: collective
intelligence
• strong marketing-
instrument
• Access to larger
number of investors
• Significant
differences in
company
valuation
(generous)
• Lacl of regulation
• Lack of
information on
investors
Business Angels**
• Development of
product, service &
operability
• Strategic Alliances
• Marketing
Seed
Start-up
Series A & B
• Smart money
• Lead investor in board
of directors
• Network
• Time
• High capital
returns
• Exit in medium
term
7
• Online platforms allow everybody to acquire small shares in unlisted or private companies
• ** Private Individuals, Ex. Entrepreneurs, Pensioner, Managers/ Professionals
Source: Go Beyond

Strategic Investors,
Families and Funds
• Operational and product
development
• Hire top talent
• Move company into a
significant position of the
industry
Series A & B
Expansion
• Families are
often
entrepreneu
rial focused
• Exposure
• Hard to reach unless
there is a personal
introduction
Venture Capitalists
(VC’s)
• Move company into a
significant position of the
industry
• Achieve profitability
• Prepare company for an
exit
Series A & B
Expansion
• Shared risk
• Network
• Priority VC may be to
invest fast
Much capital
• Pressure or delay on time
to exit
• Loss of control
10
Source: Go Beyond

Source Where to find them
Business Angels
Venture Capitalists (VCs)
• Investment community/forums and trade bodies e.g. EBAN; EVCA
• Major industry network events, for CI e.g. Int’l Games Week Berlin, Zinc Shower
• Sector specific yearly trade fairs
• Business Angel Networks: european, national, regional; Go Beyond Investing
• Platforms like F6S, Gust, Angelist, ProSeeder, GoBeyond, EuroQuity
• Chambers of Commerce
Start-up competitions, grants
and government funds
• Venture competitions e.g. Venture
• Conference meetings/working groups
• Yearly trade fairs
• Multilateral banks e.g. Inter-American Development Bank (IDB)
• Government promotion agencies and regional development banks in every
country/state
Equity crowdfunding platforms
with focus mainly on European
projects/ companies
• Crowdcube ● SoWeFund
• Seedrs ● Innovestment
• Wiseed.fr ● oneplanetcrowd
• Kickstarter, Indiegogo (international) ● many many more …
where to find the money?
Source: Go Beyond

dealing with investors

how to deal with investors?
core questions
 what type of financing makes sense? Business angels? Other sources?
 what kind of business angel or VC?
 novice or experienced investor?
 expert in your sector or rather a generalist?
 passive or active shareholder?
 key assessment criteria and deal terms
 one/ several investors? If several, in what relationship?
 investors should get to know each another
 investors should be complementary to each other

other considerations
 #1 focus should be growing your company
 be realistic on the size of your funding round
 raise enough to execute your plan; not more
 fast growing and profitable companies may also have
an option for current shareholder liquidity

 addressing questions with investors swiftly and openly
 directly stating where your team/business proposition shows
weaknesses
 willingly sharing historic data on the company (transparency)
 investors can add enormous value as members of the board of
directors or as advisors
 regularly communicating with investors through reports/
newsletters
 building an intensive working relationship with investors

 prepare for doing a due-diligence on the investor:
o is the investor active or passive?
o has the investor engaged in similar companies like yours before?
o where previous investment amounts similarly high to what
you’re negotiating now?
 think about the exit from the outset
o most financing is temporary
o investors want to see their returns after 3-5 years
 regularly review the business, financing and exit strategies for all
shareholders
o consistentaly align with the goals of both, the founders and the
investors

fundraising = time consuming + emotionally encumbering
investors are allies, available for
the founder clearly communicating +
listening well  opinion of outsiders = valuable gift
carefully analyse investors: which other contribution
can they make additionally to financing your company?
enthusiasm
& trust
to conclude
socialise & cultivate contacts:
financing your company on a
cold call is almost impossiblebuilding

… btw, here is an interesting EU-project
ACE Creative accelerator launched its call for companies to
select 2015’s TOP 50 ICT driven Creative start-ups in
Europe.
• win a customised support package to grow your business
internationally.
• benefit from targeted coaching and tailored advice with
a specially assigned experienced mentor.
• you are a creative start-up or SME reusing technologies
and ICT in your products or services? Intensive
customised one-to-one support will ensure that you
rapidly gain entry and grow into international markets.
• call for candidates is open until 15 June 2015.
• http://acecreative.eu/

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