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Startup investing 101

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Startup Investing 101 - Learn how to invest in startups.

As one of the leading online startup investing marketplaces, Onevest's vision is to make investing in privately held companies easy by providing a gold standard in deal flow that matches your specific areas of interest. You tell us what you like, and we deliver just that.

Webinar Agenda
Top four most asked questions by newbie startup investors.

1. How do I compare startups to determine most attractive opportunity?
2. What type of due diligence should I do before making an investment?
3. What happens after I invest in the startup?
4. What type of return on investment can I expect?

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Startup investing 101

  1. 1. STARTUP INVESTING 101 Webinar July 2015
  2. 2. ONEVEST PUTS DESERVING ENTREPENEUR PITCHES AT INVESTORS’ FINGERTIPS. IT’S CLEARLY THE FUTURE OF STARTUP INVESTING. “ ”BARBARA CORCORAN, SHARK TANK, REAL ESTATE MOGUL & ANGEL INVESTOR ONE OF THE HOTTEST STARTUPS TO WATCH... “ ” BARBARA CORCORAN, SHARK TANK, REAL ESTATE MOGUL & ANGEL INVESTOR ONE OF THE BEST CROWDFUNDING PLATFORMS OUT THERE. “ ” ONE OF THE BEST DIGITAL TOOLS FOR ENTREPENEURS…“ ONEVEST as seen in… ”
  3. 3. Alejandro Cremades, Co-Founder & Executive Chairman of Onevest • Master in International Business & Trade Law • Associate at King & Spalding • Involved in the largest investment arbitration case in history with $133B at stake • Guest lecturer professor at Wharton, NYU, Columbia University • Ranked #1 in the Top 30 under 30 list by Vanity Fair 1 MEET TODAY’S HOST
  4. 4. Our vision is to democratize access to CAPITAL and empower individuals to make INFORMED INVESTMENT DECISIONS
  5. 5. DISCLAIMER Onevest.com is a website operated by Onevest "Company", which is not a registered broker-dealer. "Company" does not give investment advice, endorsement, analysis or recommendations with respect to any securities. All securities listed here are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. "Company" has not taken any steps to verify the adequacy, accuracy, or completeness of any information. Neither "Company" nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy or completeness of any information on this site of the use of information on this site. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. All securities are offered by North Capital Private Securities Corporation (NCPS), a registered broker-dealer, and member FINRA/SIPC, located at 2825 E Cottonwood Parkway, Salt Lake City, UT 84121. NCPS does not make investment recommendations and no communication, through this website or in any other medium should be construed as a recommendation for any security offered on or off this investment platform. This website is intended solely for accredited investors. Investments in private placements and startup investments in particular are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest in start-ups. Companies seeking startup investments tend to be in earlier stages of development and their business model, products and services may not yet be fully developed, operational or tested in the public marketplace. There is no guarantee that the stated valuation and other terms are accurate or in agreement with the market or industry valuations. Additionally, investors may receive restricted stock that may be subject to holding period requirements. Investments in early-stage private companies should only be part of your overall investment portfolio. Furthermore, the allocation to this asset sub-class may be best fulfilled through a balanced portfolio of different start-ups. Investments in startups are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest. Testimonials may not be representative of the experience of all clients. Testimonials are not a guarantee of future performance or success.
  6. 6. Onevest is a startup investing platform that connects investors with startup investment deals EARLY-STAGE STARTUPS SOURCED FROM TOP PROGRAMS/ORGANIZATIONS VETTED ENTREPRENEURS AND BUSINESSES VARIETY OF INDUSTRIES SECURE AND EFFICIENT TRANSACTIONS In this photo: Founders of ZUM XR who raised $1.5 million in less than 90 days.
  7. 7. PORTFOLIO COMPOSITION ON Onevest TECHNOLOGY 56% CONSUMER 23% OTHER 21% Internet, mobile, hardware, software, high tech Consumer goods, fashion, retail, B2C Healthcare, B2B, energy, art 40% Seed-stage companies 30% early stage (generating some revenue) 30% growth stage (ready to scale)
  8. 8. Onevest startups are among the best out there, backed by prominent investors and top programs UNIVERSITIES and others ACCELERATORS/INCUBATORS and others EARLY INVESTORS and others
  9. 9. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  10. 10. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  11. 11. STARTUP INVESTING MARKET IS LARGE AND GROWING Angel investing INDUSTRY $24.1 billion STARTUPS FUNDED 73,400 startups AVERAGE INVESTMENT $85,435 AVERAGE VALUATION $2.67 million GROWTH Individual investments up 36% (2008-2012) Venture Capital investing INDUSTRY $48 billion STARTUPS FUNDED 4,356 deals funded in 2012 MEDIAN INVESTMENT Approx. $14.7 million AVERAGE VALUATION $40 million 540,000 COMPANIES LAUNCH EACH MONTH Sources: Angel Market Analysis by the Center for Venture Research at the University of New Hampshire, 2014 Year-End Global Venture Capital Data report by PitchBook, Report by PricewaterhouseCoopers LLP and the National Venture Capital Association
  12. 12. STARTUP INVESTING BASICS Questions Answers WHAT What is startup investing? WHO Who typically invests in startups? WHY What are the benefits of investing in startups? A GREATER MOVEMENT Investors feel like they are contributing to society while also receiving uncorrelated returns on their portfolios HIGH GROWTH INVESTMENTS Investing in a privately owned business that has high growth potential HIGH NET WORTH INDIVIDUALS Now mostly accredited investors, but soon that will change. DIVERSIFICATION Alternative asset class that provides uncorrelated returns* EXPERIENCE Each investor’s interests and portfolio are unique. So is their experience on Onevest * Investing in startups is highly risky and may result in the total loss of your principals. Returns are not guaranteed
  13. 13. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  14. 14. HOW DOES MY INVESTMENT INCREASE IN VALUE? Friends & Family Angel Investors Venture Capitals M&A / IPO GROWTHCAPITAL NEEDS TIME HIGH RISK LOW RISK $25K $2 Million $5 Million $20 Million Seed Start-up Early growth Sustained growth Disclaimer: The chart below is for illustrative purposes and is not intended to represent actual performance. Credits: European Business Angel Association
  15. 15. CHARACTERISTIC OF THIS ASSET CLASS 5-8 yrs On average until there is ROI $ Highly Illiquid 0%-? ROI expectation Cannot access that capital until liquidity event It varies greatly and depends on many factors ROI is not guaranteed
  16. 16. HOW CAN I MINIMIZE MY RISK? 3 Key Points 1. USE 5-7% OF INVESTMENT PORTFOLIO It’s important to use discretionary funds so in the event of a total loss, you can bear the hit 2. CREATE A BASIC INVESTMENT FRAMEWORK Don’t need to have a PHD to do this, but determine what sectors you like and stick to what you know or are passionate about. 3. CO-INVEST WITH TRUSTED INDIVIDUALS Gather a few trusted people with different expertise backgrounds and co- invest together in deals
  17. 17. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  18. 18. WHAT ARE THE BEST PRACTICES BEFORE INVESTING? 3 Tips 1. DUE DILIGENCE Look at team, market size, competitive advantage, product/service, traction 2. BE WILLING TO LOSE YOUR PRINCIPAL Look at this like a pastime that may return nice profits or not. 3. BE RESPECTFUL OF EVERYONE'S TIME The industry is small and reputation is everything
  19. 19. HOW TO JUDGE THE ACCURACY OF VALUATIONS
  20. 20. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  21. 21. CONVERTIBLE NOTE VS. EQUITY ROUNDS CONVERTIBLE HYPOTHETICAL SCENARIO DISCOUNT RATE Percentage off of the valuation in next round INTEREST RATE Rate of interest you receive CAP Highest valuation your investment converts BONE FIDE ROUND An event that triggers debt conversion MATURITY DATE The date when the note becomes due to investors $10,000 USD This is your investment 8% INTEREST The interest you earn annually 20% DISCOUNT The discount you receive off of the valuation when your convertible note converts into equity $5 MILLION CAP The maximum valuation your investment turns into equity
  22. 22. HOW EQUITY ROUNDS WORK Acquire a lead investor Set valuation Investors join the syndicate Share price and negotiated fair terms All Onevest investors join the pre-negotiated equity round Before Onevest, startups find a lead investor
  23. 23. DO I QUALIFY TO INVEST? INCOME NET WORTH $200,000 USD The last 2 years of either income tax statements or W2 $300,000 USD Income tax statements when filed jointly with spouse for last 2 years ways to qualify as an accredited investor $1,000,000 USD Individually excluding primary residence $5,000,000 USD If investing from an entity
  24. 24. STEPS TO INVEST ON Onevest 1 32 PICK Find startups you want to invest in INVEST Click on the invest button CLOSE Fill out the required paperwork
  25. 25. WHAT DOCUMENTS WILL I NEED TO SUPPLY? Publicly Fundraising Privately Fundraising • Self-accreditation form • Affidavits • W9 • Identity check • Bad actor/Suitability questionnaire • Documents proving your accreditation status 1. W2 2. Income tax statements 3. Letter from lawyer/accountant/broker/financial advisor 4. Brokerage statements 5. Proof of participation in previous rounds in the same startup when investing in a startup • Self-accreditation form • Affidavits • W9 • Identity check • Bad actor/Suitability questionnaire
  26. 26. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  27. 27. WHAT HAPPENS AFTER I INVEST IN A STARTUP? 1 32 ADD VALUE Help to open doors if you’re able BUILD RELATIONSHIP It’s like a marriage without the love SET EXPECTATIONS Establish framework
  28. 28. “I raised 2x the money on Onevest than on AngelList in ¼ the time. That’s what I call magic. I am one happy entrepreneur!” - Kyle Samani, CEO of Pristine Disclaimer: Testimonials here may not reflect individual experience and are not a guarantee of future performance.
  29. 29. "Onevest played a vital role in helping Züm XR reach our funding target. Their platform provided all the tools and support necessary for us to connect with accredited investors throughout the U.S. Onevest has a great team, an easy to use platform, and quickly generates exposure to a vast amount of active investors that can expedite the funding process for small businesses." - Brett Waxler, VP of Sales at Zum XR Disclaimer: Testimonials here may not reflect individual experience and are not a guarantee of future performance.
  30. 30. $680,000 RAISED Funded January 2014 ABOUT THE STARTUP - Startup founder & advisor matching portal & in person meet up groups - First startup to generally solicit on 9/23/13 ROCKTHEPOST PARTICIPATION - Digital Demo Day (November) - Barbara Corcoran’s Startup Tips & Picks Feature - Newsletter feature RESULTS - Investors from geographies beyond own market - Crowdfunded for ~3 months - Significant press: Wall Street Journal, TechCrunch, CNN Money, Washington Post, DowJones Case Study: CoFoundersLab hit $680k target in early January with RockThePost’s help Disclaimer: Testimonials here may not reflect individual experience and are not a guarantee of future performance.
  31. 31. AGENDA • Basics of startup investing • Startup investing vs. other investment options • Choosing a startup investment • Terminology and technical details • What happens after making a startup investment • Q&A
  32. 32. UPCOMING INVESTOR WEBINARS • August 4th at 1pm Digital Demo Day
  33. 33. STARTUP INVESTING 101 Webinar July 2015 THANK YOU!

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