BAND Venture Capital Masterclass - Stuttgart - 24.01.2018

© COOPERATIVA Venture Services GmbH, Berlin, München – http://www.cooperativa.vc
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BAND Venture Capital Masterclass
Anja Arnold, Nikolas Samios
KPMG, Stuttgart / 24.01.18
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13:30 #INTRO Dr. Günther, Dr. Chatzis, Dr. Hensel
14:00 #Post-Investment-Erfolgsfaktoren
A. Über Cooperativa
B. Startup/VC Investments: Warum die Arbeit?
--
I. Due Diligence als Brücke von Pre- zu Post-Investment
II. Post-Investment Portfolio Management Best Practises
- Reporting & Controlling
- Governance & Sparring
III. Der Exit: Wann/Wie & typische Fettnäpfe
IV. Schlussgedanken: die Philosophie des “fairen Deals”
16:00 #Q&A
16:30 #Ausklang
Agenda
2

§ We publish all documents on social media later this week
§ Disclaimer: No tax & legal advice! Always ask your lawyer
and/or tax advisor!
§ Questions: always welcome and Q&A at the very end
§ Let‘s go...
Housekeeping
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PART A:
Some words about COOPERATIVA

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PART B:
why the effort?
5
16:15

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§ >3B Internet Users
§ 42% Penetration
§ Y/Y 9% growth steady
6
Internet everywhere !(?)
Source: KPCB Internet Trends 2016

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Source: Mobile Ate the World, a16z
Apple, Google, Gartner
Mobile is eating the world

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The next J-curve? E-Mobility penetration
Source: Zentrum für Sonnenenergie- und
Wasserstoff-Forschung Baden-Württemberg (ZSW)

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The flipside
© angelo Yap / CC BY 2.0

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10Source: Ross Dawson (2010)

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Thank you for the music
Source: the current
RIAA
Nielsen SoundScan

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„Yeah, the media guys have really screwed up...
(those Muppets!)“

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Sectors in Germany based on € invested in 2016 and 2015
Source: Start-up Barometer Deutschland, EY
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“No Startup will just go to
BaFin and get a full
banking license...“
- German bank executive
around 2014

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The other day at Corporate Germany:
„But we are a REAL industry,
what could happen to us?“

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0%
20%
40%
60%
80%
100%
In 2014,
the Top 5
US Tech
companies
became
more
valuable
than the
entire
DAX30.
Source: own research
Market Cap of Top 5 US Tech Companies vs. DAX30
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„Deutschland hinkt England und
Skandinavien mindestens drei Jahre
hinterher. Auch Australien und die USA
sind mindestens drei Jahre weiter.“
- Thomas Birkle, Robert Bosch GmbH
German real estate is lagging behind in digitisation

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The impacts come closer…

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…and closer
Vehicle sales statistics
for Switzerland 2016

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PART II:
VC is the fuel

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Global VC financing on high levels

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§ EU = 23% of US funding
§ EU = 39% of US deals
§ EU = 13% of worldwide
funding
European long-term dynamic not so bad either

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§ Germany = 19% of
European funding
§ Germany = 11% of
European deals
§ Germany = 3% of US
funding
24
Venture financing in Germany

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§ Berlin = 53% of German
funding
§ Germany = 48% of
German deals
§ Germany = 6% of
European funding
25
Venture financing in Berlin

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Source: $1B+ Market Map, CB Insights
183 Global Unicorns, 16 in EU (as of Jan 2017)
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Venture capital is economic rocket fuel:
An increase in VC investments of 1‰ of
GDP is statistically associated with an
increase in real GDP growth of 0.30%.
Early stage investments have an even
bigger impact of 0.96%.
27
Source: NVCA Venture Impact
„Venture capital adds economic spice“, Deutsche Bank Research

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Data as of
December 31, 2015
Index 1-Quarter 1-Year 3-Year 5-Year 10-Year 15-Year 20-Year 25-Year 30-Year
Cambridge Associates LLC U.S. Venture Capital Index®1 1.59 12.90 21.18 16.23 10.90 4.21 31.07 25.00 18.15
Barclays Government/Credit Bond Index -0.74 0.15 1.21 3.39 4.47 5.01 5.32 6.20 6.74
Dow Jones Industrial Average Index 7.70 0.21 12.66 11.30 7.75 5.80 8.77 10.47 11.28
Nasdaq Composite Index* 8.38 5.73 18.37 13.55 8.55 4.82 8.11 10.94 9.55
Russell 1000® Index 6.50 0.92 15.01 12.44 7.40 5.25 8.34 10.05 10.40
S&P 500 Index 7.04 1.38 15.13 12.57 7.31 5.00 8.19 9.82 10.37
U.S. Venture Capital: Fund Index Summary: Horizon Pooled Return
Net to Limited Partners
U.S. Venture Capital Index and Selected Benchmark Statistics
The Cambridge Associates LLC U.S. Venture Capital Index® is a horizon calculation based on data compiled from 1,619 U.S. venture capital funds (1,030 early stage, 185 late & expansion stage, 398 multi-
stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2015.
1Pooled horizon return, net of fees, expenses, and carried interest.
Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc.
*Capital change only.
28
Priority I for non-strategic investors:
earning risk-adequate returns

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Germany: place to be or Rote Laterne
© Appenzeller Bahnen / Froilein S.

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The German VC market is teeny-tiny
German wealth
Invested in VC
30
around 7 trillion €
around 80 billion € in
alternative investments
thereof 2-3 billion €
in VC

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Venture Capital investments as % of GDP of European countries
In comparison: 0.30% of
US GDP is invested in VC
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Really such a bad place to start up?
36
Source: U.S News

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Source: The Global Startup Ecosystem Ranking 2015, Compass
Berlin among the world‘s startup hotspot

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Significant trend of emerging fund managers
& first ever German (Internet) VC funds >250M€
Cherry
Ventures
2016:
new 150 M€
VC fund
Holtzbrinck
Ventures
2018:
new 306 M€
VC fund
Point9
2015:
new 60 M$
VC fund
Project A
2017:
new 180 M€
VC fund
Lakestar
2016:
new 350 M€
VC fund
Rocket Internet
Capital Partners
2017:
new 1,000 M€
VC fund
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already pre-BREXIT

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Opposing
reactionary trends
will be a decisive
locational factor
40
© Rytis Daukantas / first published on
POLITICO.EU

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1. Due Diligence als Brücke von Pre-Investment
zu Post-Investment
16:00
14:30
41

§ Nur eine gute Due Diligence gibt Informationen
darüber, worauf in der Post-Investment-Phase geachtet
werden muss
§ Analyse der bedeutendsten Risiken going forward:
Gesellschaftsrecht, Finanzen, Vermögens-gegenstände
(IPR, Patente)
§ Aber verleiht ebenso eine Vorstellung davon, wie die
Kommunikation (bspw. Kritikfähigkeit) mit den
Gründern in Zukunft verlaufen wird
Vor dem Investment ist nach dem Investment
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§ Vor jedem Investment, besonders also auch Follow-
on-Investments, um nicht in einen Investment-
Automatismus zu verfallen, um mit allen Mitteln die
Gesellschaft über Wasser zu halten
§ Neu dazustoßende Investoren können sich an die
DD „dranhängen“ und Folgerunden somit erleichtern
In welchen Situationen ist eine DD ratsam?
43

§ Bei wenig Erfahrung als Angel ist es unbedingt
ratsam, sich mit den anderen Angeln aus dem
Syndikat (und auch dem eigenen Branchennetzwerk)
abzustimmen oder ein informelles Konsortium zu
bilden
§ Zum Zwecke eines tatsächlichen Überblicks über die
Gesellschaft, was post-Investment von
unschätzbarem Wert ist, sollte so wenig wie möglich
an Anwälte, Wirtschaftsprüfer und Steuerberater
ausgelagert werden
Was habe ich als Angel zu beachten?
44

§ 360-Grad-Ansatz – Gründer auch dazu animieren,
selbst statt nur auf Anfrage potentiell problematische
Aspekte auf den Tisch zu legen
§ Abfrage aller Daten per E-Mail, Bitte um Bereitstellung
eines Online-Datarooms durch die Gründer
§ Besonderer Fokus auf die “Must Win Battles”
Welche Themenfelder sind abzufragen?
45

§ Gründer achten bei Anstellungs- oder Beratungs-
verträgen nicht auf Rechte (z.B. bei Source Code),
Vergütung, Überstunden oder gar Erlös- oder
Exitbeteiligungen
§ Klärung von „vergessenen” Verbindlichkeiten ggü.
Gründern und Altgesellschaftern, bspw. durch explizit
oder implizit (z.B. durch „Stehenlassen“ von Gehalt)
eingeräumte (Gesellschafter-)Darlehen
Typische Situationen aus der Praxis
46

Typische Situationen aus der Praxis
47
§ Aufnahme von Gesellschaftervereinbarungen
(Vinkulierung, Vorkaufs-, ggf. Drag-Along- und Tag-
Along-Rechte/Pflichten und Founder Vesting)
§ Entdecken geschönter Verbindlichkeit-Situationen
§ Potentiell verspätete Jahresabschlüsse oder schwache
Buchhaltungsqualität geben Aufschlüsse für ToDos in
der Post-Investmentphase
§ Plausibilitätscheck hinsichtlich Abwertungsbedarf
oder notwendige Rückstellungen im Jahresabschluss

§ DDs sind kein Ballast und für die weitere Zusammen-
arbeit mit dem Startup unerlässlich
§ Eine verhältnismäßige – nicht ausufernde – DD
schützt beide Seiten oftmals vor späteren
Diskussionen auf Gesellschafterebene und vor Unmut
Fazit
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II. Portfolio Management Best Practises
16:00
15:00
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§ Die Investment-Entscheidung mag >50% des Erfolges/
Misserfolges ausmachen, aber die richtige Arbeit geht es nach dem
Investment los
§ Post-Investment-Prozesse sind ein großer Teil der Due Diligence
von LPs (= Fondsinvestoren) in Venture-Capital-Fonds
§ Entsprechend können wir uns dort mal ein paar Beispiele ansehen
und deren Anwendbarkeit für Business Angels diskutieren
§ Hierzu folgen auch ein paar LP-orientierte Slides aus einem
aktuellen Fondsprojekt von uns
Portfolio Management Best Practises
50

§ Schriftliches Reporting:
§ Klassische finanzielle (GuV/Cashflow) und Business-Modell-spezifische KPIs
erfassen (Business Modell und Stage-abhängig)
§ Kurze Zyklen (lieber monatlich als quartalsweise, lieber am 10. als am 20. des
Folgemonats)
§ In hoher, konsistenter Qualität
§ Zeitnahe Abschlüsse, spätestens ab Growth Stage auch testiert
§ Between the lines:
§ Persönlicher Abgleich unverzichtbar, mindestens in monatlichen Calls, besser
persönliche Treffen auch abseits formeller Raster
Reporting Basics / Best Practise
51

§ Analyse
§ Sobald Unstimmigkeiten oder Soll/Ist-Abweichungen auftreten, intensiver
recherchieren, nachfragen, verstehen
§ Nicht jede Planabweichung ist ein Problem
§ Aber viele Probleme kündigen sich mit einer Planabweichung an
§ Zügiger Abgleich der Eindrücke mit den Gründern und Co-Investoren führt zu einem
gefestigten Eindruck, ob Handlungsbedarf besteht oder nicht
§ Action!
§ Schnell und konsequent, stets mit Zielstellung Unternehmen (ggf. mit verändertem
Team – „all issues are people issues“) schnell wieder alleine handlungsfähig zu machen
§ Durch Abstimmung mit Co-Investoren „Distraction“ und “5 CEOs in einer Firma“-
Situationen vermeiden
Analyse & Eingriff / Best Practise
52

§ Zeitnahe, konsistente und richtige Information über den Status des
Startups als Grundvoraussetzung für alles weitere
§ Dabei sind sowohl harte Fakten als auch menschliche Zwischentöne
wichtig, selbst die besten schriftlichen Reportings werden stets nur einen
Teil der Geschichte erzählen
§ Intime Kenntnis des Systems ist essentiell um wichtig von unwichtig zu
unterscheiden (>> Learnings aus der DD)
§ Nicht jede Fehlentwicklung ist es wert, (vom Business Angel) bearbeitet zu
werden, Fokus auf die „Must Win Battles“
§ Schulterschluss mit anderen Gesellschaftern und Investoren suchen
§ Strukturierte, stetige Form des Sparrings (>> Boards) schlägt Aktionismus
Zwischenfazit (ohne Exit >> im nächsten Abschnitt)
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Von Governance & Handlungsfähigkeit
Oder: Wieso Boards viel Sinn machen
16:00
54

55
Control

§ (only) Managing Directors in the driver seat
§ reasonable thresholds for board/shareholder
authorisations
§ proper board structure once cap tables grow
§ better: also include outside board members
§ (not much else)
Control Best Practise
56

Logistics
57

§ post-funding round is pre-funding round
§ limited number of parties in the cap-table
§ proper pooling for early/smaller investors
§ agile mechanisms for decision making
§ no blocking / veto position for anyone
Keeping the company capable of acting...
58

§ not speaking about keeping managers busy reporting to 20+ shareholders…
§ although corporate law has mechanisms in place to avoid a company gets out of
control when single shareholder boycott (shareholder meetings with majority
votes), the situation in a typical VC funded company looks different
§ thanks to the additional shareholder agreement terms and new investors or
buyers requiring guarantees from previous shareholders in most financing or exit
situations, ALL existing shareholder will need to cooperate and sign documents,
worst case in front of a German notary
§ also (new) investors are not willing to negotiate with many previous investors
and/or many co-founders (especially not dead equity)
§ last but not least: how many shareholders need to be asked by the MDs for
approval of specific actions, budgets and so on?
Challenges from growing cap tables
59

§ 41.7% of Seed companies with pooling
§ 71.4% of Early companies with pooling
§ 41.18% of Growth companies with pooling
Challenges from growing cap tables
Seed
9
Early
20
Growth
26
Average number of shareholders
60

§ a single party should never have a veto/blocking right
§ work with intelligent majorities instead
§ MDs should act freely within the approved budget
§ MDs should have sole representation („alleinvertretungsberechtigt“),
4-eye process still can be implemented in rules of procedure („Geschäftsordnung der
Geschäftsführung“)
§ boards are only useful in larger cap tables and/or if outside board members join in
§ outside board members need to be properly incentivised, best by ESOs
How to manage governance aspects
61

§ Voting pools
§ PoAs
§ Trust/(„Treuhand“)
§ GbRs
§ GmbHs/UGs
§ GmbH & Co. KGs
Shareholder pooling / how?
62

Shareholder pooling / best practice / full scope
Startup
Pool-Entity
Pooled (indirect) shareholders
Pooled
participation
Direct shareholders
63

§ in a trust structure, the trustor is delegating his shareholder role (almost
completely) to the trustee, who is the sole representative towards the company
and also registered in the company register
§ best pragmatic solution: reasonable but not perfect
§ usually tax transparent if done correctly (ask your tax advisor!)
§ but be careful: if the contracts take away all voting rights from the trustor
(„Treugeber“), tax transparency might lapse, creating double taxation
§ as trust contracts can always be cancelled by the trustor under German law,
some lawyers will insist on integrating the trustors as parties in the shareholder
agreement
§ typical work-around: a cancellation will lead to a new trust structure with another
shareholder
Shareholder pooling / best practice / pragmatic
64

Shareholder pooling / trust / example contract
65

Shareholder pooling / trust / example contract
66

§ hard pool using a corporate entity, usually a GmbH & Co. KG, maybe even with
add-on trust relation or a GmbH/UG
§ similar to a VC fund structure
§ usually tax transparent (KG) or very little taxation on pool level (GmbH/UG when
§8b KStG can be applied – ask your tax advisor!)
§ but might be an AIF that needs to be registered with BaFin
§ if done right, using a pool entity is the best solution, but a bit complex and more
expensive than trust, so it might only make sense with larger investments
§ only practical way to completely separate (sub) shareholders from the company‘s
cap table
Shareholder pooling / best practice / full scope
67

§ Voting pools YES
§ PoAs YES
§ Trust/(„Treuhand“) NO
§ GbRs NO
§ GmbHs/UGs MAYBE
§ GmbH & Co. KGs NO
Shareholder pooling / INVEST 2.0 compliant?
68

§ growing cap tables create the need to decouple the managing directors - at least in day to
day business - from direct contact to each and any shareholder by using a (supervisory/
advisory) board similar to a German stock based corporation („Aktiengesellschaft“)
§ a good board can therefore streamline communication, offload management and pool,
validate and filter request from a growing base of shareholders
§ where the German supervisory board (“Aufsichtsrat”) is very control-oriented, the US
corporate boards are more advice/support-oriented
§ as most German startups will be limited liability companies (“GmbHs”), the duties and
rights of the board can be drafted between these two poles rather freely
§ the best boards also include at least some outside directors that do not represent the
interest of single shareholders, but only support the whole company without conflict
Board structures / why?
69

§ “real” boards in GmbH entities need to be created in the articles of association (“Satzung”
or “Gesellschaftsvertrag”), basically taking over some of the shareholder rights (e.g. voting
on the budget, approving actions of the MDs etc.)
§ usually the shareholder agreement will govern how a board is elected - shareholders will be
bound to vote, e.g. for one board member according to the proposal of the pool of Series-A
investors, another one might be suggested by the MDs and so on
§ boards should have their own rules of procedure, governing how decisions are made and
which quotas are necessary
§ outside board members should be incentivied via ESOP/VSOP
§ oberserver seats are usually added for additional shareholders or if (German) VC funds are
afraid of trade income tax (“Gewerbesteuer”)
Board structures / how?
70

Board structures / statistics from our Sample
Yes
64%
No
36%
Supervisory/Advisory Board Present?
3
34%
4 - 5
47%
6 - 7
16%
8 - 9
3%
Number of Board Members
Yes
25%
No
75%
Outside Board Members?
71

Hey! It’s pay day:
1. How to trigger the sale
2. Typical exit logistics
3. Distribution of exit proceeds
4. Liquidation preferences
5. ESOP & VSOP
6. Warranties & Escrow
7. Earn-Outs
8. Conclusion: The Angel Perspective
73

Most contracts provide several ways to trigger exits, most typical ones:
§ one/many shareholder(s) intend(s) to sell, others execute tag-along rights
§ one/many shareholder(s) intend(s) to sell and execute(s) drag-along rights
§ explicit exit process clause defining how and when an M&A advisor will be
selected to sell the company
§ IPO clause
In most cases, the exit process is triggered by the founders and/or the board as a
joint exercise more or less regardless what was negotiated in the SHA
Triggering the sale
74

Triggering the sale / typical SHA exit clause
75

76

77

§ roughly half of exits are managed with the help of an M&A advisor
§ roughly 2/3 of exits happen to buyers with whom the company already had
operational contacts before
§ approaching potential buyers, term sheet negotiation, due diligence happens
similar as in a funding round
§ the exit agreement will usually include a distribution agreement sorting out the
waterfall and might contain escrow and earn-out elements
§ still active founders have a strong position as buyers will most likely require both
comprehensive business and title guarantees and require them to remain in their
jobs for 2-3 more years
§ this asymmetry can easily lead to tensions between investors and still active
founders that get a potentially better deal via an earn-out
Typical exit logistics
78

§ as multiple liquidation preference levels, ESOP, warrants and other
dilutive instruments can create great complexity, it is advisable to draft
and execute a distribution agreement that translates previous relative
SHA terms into absolute numbers
§ most buyers will require a certain amount of the transaction volume to
be held back on an escrow account until certain pending risks have been
settled
§ in any transaction with a larger (fully-diluted) cap table, it is good
practice to install a central escrow account (notary, lawyer) for
dispatching the exit proceeds (buyer to pay only to escrow agent, agent
to distribute further)
Distribution of exit proceeds / how?
79

§ active founders will always have a strong position regardless of SHA
terms
§ remember that in any exit contract guarantees need to be given by
everybody (scope varies between active/passive shareholders)
§ if done wrong (e.g. without hard pooling): ANY individual party in the
SHA can boycott the exit process or create significant headaches
§ buyers might have internal timelines to meet, e.g. before end of their
fiscal year or in time for board meetings
§ any delay or friction in the process can therefore lead to break-up
§ full alignment of interest will not be possible in a lot of cases due to earn-
out deals that create asymmetric distribution
Exit process learnings
80

§ liquidation preferences „bend“ the pro-rata exit proceed distribution in
preference of investors (last in / first out)
§ Non-Participating („mit Anrechnung“) is the softer form, should be the norm
§ Participating („ohne Anrechnung“) still seen often, should be the exception
§ factors above 1 are usually only used in turnaround deals and should not be used
otherwise, will also always signal tension in the system
§ liquidation preferences with interest are seen sometimes, but should be avoided,
if possible, to keep things simple
§ US structures terminate liquidation preferences at a certain valuation watermark
and/or require investors to chose between liquidation preferences proceeds and
pro-rata via conversion from preferred to common shares
Liquidation preferences / basics
81

Liquidation preferences / contract example
82

83

84

Liquidation preferences / impact on distribution
85

Liquidation preferences / statistics from our sample
No
22%
Yes
78%
Liquidation preferences
existing?
n = 50
Particpating
26%
Non-participating
72%
Both
2%
Particpating vs. non-
participating
1x investment LP
97%
More than 1x LP
3%
1x investment LP vs. >1x LP
Yes
10%
No
90%
Interest on liquidation
preference?
1
2
3
4
Average number of LP levels
86

§ keep it simple!
§ any deviation from 1x non-participating liquidation preference should
only be done when there is a strong reason and consequences are clear
to everybody
§ ”optimized” liquidation preferences will also turn against (early stage)
investors in the next round
§ multi-level liquidation stacks can lead to severe lack of aligned interest
between shareholders
§ recently more (US) experts discuss getting rid of multiple preference
levels, too
Liquidation preferences / main take-away
87

§ more and more required early-on by professional (seed) investors including
super angels
§ Germany: bottleneck in structuring is tax law - almost impossible to optimize,
proceeds for employees will be taxed like salary
§ main structuring goal: avoid a tax event when granting options, only produce
taxes at exit when cash is available for distribution
§ as the company does not get exit proceeds, shareholders need to assign parts of
their exit proceeds via the company to the ESOP/VSOP
§ optional strike price will lead to more complex calculation, but can be used to
incentivise “late joiners” above a certain baseline
§ interplay with liquidation preferences can create headaches if not defined
precisely upfront
Employee participation / basics
88

VSOP / contract example / SHA
89

VSOP / contract example / general terms
90

VSOP / contract example / general terms
91

VSOP / contract example / allocation
92

VSOP / statistics from our sample
ESOP/VSOP
71%
No
ESOP/VSOP
29%
Companies with ESOP/VSOP
Pro rata
80%
Asymetric
20%
Pro-rata vs. asymetric contribution
5,8
0
25
50
75
100
Average ESOP/VSOP % of nominal
capital
21,5
0,0
25,0
50,0
75,0
100,0
Average allocation in %
93

§ beware of tax pitfalls! Always talk to your tax advisors!
§ the best ESOP is real co-founders in the cap table
§ ESOP is more and more expected early-on
§ ESOP should be implemented in a professional and flexible way, allowing different
vestings, cliffs, strike prices
§ also a good tool for board members and other forms of advisors
§ rule of thumb: initial founders pay for completing the starting team
(= they pay for first ESOP), everything thereafter is borne by all shareholders pro-rata
§ best governance: Granting ESOP/VSOP out of n once agreed pool, happens by the MDs
with board approval
VSOP / key take-aways
94

§ ALL shareholders will have to give guarantees at an exit
§ in a seller-optimized case, passive shareholders (e.g. angels, VCs) will only give
title guarantees and founders will also give business guarantees, BUT
§ all buyers will negotiate hard to extend the guarantees, also for the (“cash-rich”)
investors instead of solely relying on the funds of the (“oh-so-poor”) founders
§ in any case: guarantees will be usually capped, exceptions could be
indemnification
§ in many cases, the full exit amount is not distributed at once but kept on an
escrow account (e.g. from the notary or a lawayer) until certain milestones are
met
Guarantees & Escrow
95

§ in most cases, especially in early exits, the buyer will insist that the active
founders stay active for e.g. 1-4 years after the transaction
§ to motivate (and penalize) the founders, they will get a different exit valuation
based on milestones or KPIs (> earn-out)
§ example: investors sell at a valuation of 50M EUR, active founders stay MDs for
three more years and sell for a valuation of between 50M and 100M
§ sellers must be well aware of the fact that in an exit process, the negotiation
positions between investors and (active) founders therefore will differ FOR SURE
§ therefore, the exit negotiation should never be exclusively in the hands of the
founders but rather in the hands of an exit committee and/or a corporate finance
advisor
Earn-Out Structures
96

§ As soon as the discussion about a potential exit process starts, angels need to be
wide awake and present in these discussions to ensure their position is taken into
account
§ Exit is not just about valuation!
§ As substantial guarantees might now (for the first time) be given by all parties,
angels also need to familiarize themselves with the risks that might be in the system
§ Due to different liquidation preferences, positions between later stage VCs and
angels might differ, too
§ Even if 50%+ of buyers are already known by the startup before the transaction,
mandating a good corporate finance advisor (and lawyer) can be a very good
decision even beyond finding the buyer
§ A dual track is always a good idea (exit or financing option on the table)
Conclusion: The Angel Perspective
97

§ unless there are no strong arguments for a deviation, stick with plain vanilla
terms as long as possible
§ only “bad” investors try to optimize themselves via contractual terms and small
print
§ abnormal terms will work against all parties in later rounds
§ spend less time discussing downside risks & protection, focus on increasing
upside potentials instead
§ not maxing short term valuations but rather keeping a steady trajectory
§ understanding and selecting (co-)investors carefully to ensure best possible
alignment of interest, especially around all exit questions
§ setting up professional structures in legal, accounting/finance, reporting,
pooling early-on
The appeal for “Plain Vanilla”
99

§ thanks to BAND, KPMG and our COOPERATIVA team
§ presentation and excel on Slideshare later this week (yay, you
found your way here!)
§ follow us on Facebook, Twitter, Instragram
§ register to win a copy of our book at www.dealterms.vc
§ feel free to contact us at:
Mail: anja@cooperativa.vc
nikolas@cooperativa.vc
Twitter: @BerlinVC
It‘s a wrap!
101

BAND Venture Capital Masterclass - Stuttgart - 24.01.2018

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