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On What Investors Look For
Ziya G. Boyacigiller
This presentation was created and given by Ziya
Boyacigiller who was leadi...
Copyright (c) 2003 Ziya G.
Boyacigiller
What Investors Look For
Based on a Presentation by Andy Rachleff
Copyright (c) 2003 Ziya G. Boyacigiller
Venture Capital Food Chain
INSTITUTIONAL
INVESTORS
(Limited Partners – e.g.
Endowm...
Copyright (c) 2003 Ziya G. Boyacigiller
Asset Allocation for a Limited
Partner
Copyright (c) 2003 Ziya G. Boyacigiller
The Trade-off Between Risk &
Return
Copyright (c) 2003 Ziya G. Boyacigiller
In which of the following
firms would you rather
invest?
Each invests $1 million p...
Copyright (c) 2003 Ziya G. Boyacigiller
Summary of the Investment
Business
Copyright (c) 2003 Ziya G. Boyacigiller
How do you find
Right/Non-Consensus?
Copyright (c) 2003 Ziya G. Boyacigiller
How can you recognize
vision?
•Early insight into technology
inflection point (dis...
Copyright (c) 2003 Ziya G. Boyacigiller
Effect of Management Team
•When a great management team meets
a lousy market marke...
Copyright (c) 2003 Ziya G. Boyacigiller
Capital Intensity
•Least Amount of Money = Most Attractive
Business
•Minimize Capi...
Copyright (c) 2003 Ziya G. Boyacigiller
Term Sheet
TERM SHEET
FOR SERIES A PREFERRED STOCK FINANCING OF
[Insert Company Na...
Copyright (c) 2003 Ziya G. Boyacigiller
How do Valuation & Terms
get established?
•Look at milestones achieved
(aynasi ist...
Copyright (c) 2003 Ziya G. Boyacigiller
Milestones Chart to CF+
Copyright (c) 2003 Ziya G. Boyacigiller
It is all about the pie…
50%
10%
Copyright (c) 2003 Ziya G. Boyacigiller
Copyright (c) 2003 Ziya G. Boyacigiller
Copyright (c) 2003 Ziya G. Boyacigiller
Copyright (c) 2003 Ziya G. Boyacigiller
Who is the ideal funding
source?
Potential Market
Size
Ideal Funding Source
Small ...
Copyright (c) 2003 Ziya G. Boyacigiller
How should you choose
among Venture Capitalists /
Investors
•Industry experience /...
Copyright (c) 2003 Ziya G. Boyacigiller
Who should you ask for
advice?
•Successful Entrepreneurs
•Top deal lawyers
•Invest...
Copyright (c) 2003 Ziya G. Boyacigiller
What VCs Don’t Look For
•Another Microsoft!
•Do you think they care if you
build a...
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What investors look for

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What investors look for

  1. 1. On What Investors Look For Ziya G. Boyacigiller This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com
  2. 2. Copyright (c) 2003 Ziya G. Boyacigiller What Investors Look For Based on a Presentation by Andy Rachleff
  3. 3. Copyright (c) 2003 Ziya G. Boyacigiller Venture Capital Food Chain INSTITUTIONAL INVESTORS (Limited Partners – e.g. Endowments, Pension Funds) VENTURE CAPITALISTS (Finding and Funding Entrepreneurial Companies) ENTREPRENEURS (Starting and Building Companies)
  4. 4. Copyright (c) 2003 Ziya G. Boyacigiller Asset Allocation for a Limited Partner
  5. 5. Copyright (c) 2003 Ziya G. Boyacigiller The Trade-off Between Risk & Return
  6. 6. Copyright (c) 2003 Ziya G. Boyacigiller In which of the following firms would you rather invest? Each invests $1 million per company in 10 companies: 1. One gets 2x their money on all 10. 2. The other loses all their money in 8 and gets >20x their money on the remaining 2.
  7. 7. Copyright (c) 2003 Ziya G. Boyacigiller Summary of the Investment Business
  8. 8. Copyright (c) 2003 Ziya G. Boyacigiller How do you find Right/Non-Consensus?
  9. 9. Copyright (c) 2003 Ziya G. Boyacigiller How can you recognize vision? •Early insight into technology inflection point (disruptive innovation) •The Napkin test
  10. 10. Copyright (c) 2003 Ziya G. Boyacigiller Effect of Management Team •When a great management team meets a lousy market market wins •When a lousy management team meets a great market market wins •When a great management team meets a great market something special happens
  11. 11. Copyright (c) 2003 Ziya G. Boyacigiller Capital Intensity •Least Amount of Money = Most Attractive Business •Minimize Capital Required by High gross margins (Unfair advantage) Rapid escape velocity (Product/Market fit)
  12. 12. Copyright (c) 2003 Ziya G. Boyacigiller Term Sheet TERM SHEET FOR SERIES A PREFERRED STOCK FINANCING OF [Insert Company Name], INC. [ __, 200_]       This Term Sheet summarizes the principal terms of the Series A Preferred Stock  Financing of [___________], Inc., a [Delaware] corporation (the “Company”).  In  consideration of the time and expense devoted and to be devoted by the Investors with  respect to this investment, the No Shop/Confidentiality and Counsel and Expenses  provisions of this Term Sheet shall be binding obligations of the Company whether or  not the financing is consummated.  No other legally binding obligations will be created  until definitive agreements are executed and delivered by all parties.  This Term Sheet is  not a commitment to invest, and is conditioned on the completion of due diligence, legal  review and documentation that is satisfactory to the Investors.  This Term Sheet shall be  governed in all respects by the laws of the [State of Delaware]. 
  13. 13. Copyright (c) 2003 Ziya G. Boyacigiller How do Valuation & Terms get established? •Look at milestones achieved (aynasi istir kisinin, lafa bakilmaz…) (credibility is doing what you promise…) •Look at comparables (It’s like buying a house) •Then it’s up to supply & demand
  14. 14. Copyright (c) 2003 Ziya G. Boyacigiller Milestones Chart to CF+
  15. 15. Copyright (c) 2003 Ziya G. Boyacigiller It is all about the pie… 50% 10%
  16. 16. Copyright (c) 2003 Ziya G. Boyacigiller
  17. 17. Copyright (c) 2003 Ziya G. Boyacigiller
  18. 18. Copyright (c) 2003 Ziya G. Boyacigiller
  19. 19. Copyright (c) 2003 Ziya G. Boyacigiller Who is the ideal funding source? Potential Market Size Ideal Funding Source Small Bootstrap or Angel Unclear Bootstrap or Angel then VC Large Venture Capital
  20. 20. Copyright (c) 2003 Ziya G. Boyacigiller How should you choose among Venture Capitalists / Investors •Industry experience / perspective •Recruiting help (network) •Partnering/Contacts •Brand/Credibility •Price/Stage •Funding Required •Location •Chemistry
  21. 21. Copyright (c) 2003 Ziya G. Boyacigiller Who should you ask for advice? •Successful Entrepreneurs •Top deal lawyers •Investment bankers •Frequent advisors to the VCs - Professors - Angel Investors •Inovent •Endeavor
  22. 22. Copyright (c) 2003 Ziya G. Boyacigiller What VCs Don’t Look For •Another Microsoft! •Do you think they care if you build a long term great company (beyond their holding period)? - No benefit to IRR or distributions - Impacts their reputation

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