ROUNDTABLE 2015: Tim McDougall
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ROUNDTABLE 2015: Tim McDougall
- 4. tim@builtbylocal.com BUT Competing Needs For Cash “Too Small To Be Sexy” Making Too Few Bets =
- 5. tim@builtbylocal.com Meanwhile: Marketing-centric, locally-oriented startups face an early stage FUNDING CHASM.
- 6. tim@builtbylocal.com “AD SPEND IS SCARY.” “It’s not a something early stage startups are skilled at.” “Nobody wants to be Pets.com.” “Rate cards are fiction. Negotiating good rates is labor intensive. The process is wasteful and too risky.”
- 7. tim@builtbylocal.com “All funding is hard, but getting investment for developers or salespeople is relatively easy compared to getting investment for marketing spend.”
- 8. tim@builtbylocal.com “Umm, we’re just going to use free social media.” -every pre-funded startup ever
- 9. tim@builtbylocal.com Large local audiences Startups GET: Virtuous Circle Invest Media Directly into Early Stage Startups Cross chasm Aligned media partners Media expertise Non-cash way to invest Media Companies GET: Value for perishable inventory Innovation/ ”Next New” Build future advertisers
- 10. tim@builtbylocal.com “So instead of wondering if I got screwed on the negotiation or I got the ‘good’ inventory – the media company only wins if I win? Oh. Light bulb.”
- 11. tim@builtbylocal.com Not the first to think of this. But implementing in the U.S., for local media companies, creates big challenges.
- 12. tim@builtbylocal.com “Oh, that’s a great idea! Makes total sense! It is also completely impossible.” - 1st Big Giant Law Firm
- 13. tim@builtbylocal.com “The Taxable Event” Cash Invest: Taxed when and if there are profits. Non-Cash: Taxed at the time of the investment. Challenge#1:
- 15. tim@builtbylocal.com Media Planning 1. Not something early stage startups are skilled at. 2. Need to plan across dozens of publishers, properties. Challenge#2:
- 16. tim@builtbylocal.com Standard Venture Firm MDDF DDDF DD Deal Flow Due Diligence Deal Flow Due Diligence Media Desk
- 17. tim@builtbylocal.com 1 2 3 4 Exchange Rate Challenge#3: Startups need exchange rate in ADVANCE. Rate cards are complex, vary dramatically, and are NOT trusted. “Make it not a headache.” Keep it simple, fast to market. + + =
- 18. tim@builtbylocal.com Fair Market Exchange Rate Card 1 2 Pass Acid Test Standard exchange pricing
- 19. tim@builtbylocal.com “You’re not national.” “Startups looking to roll out nationally won’t be interested!” Challenge#4:
- 20. tim@builtbylocal.com Target startups with market-by-market expansion strategy. 1 2 We help startups get from market #1 to market #6 … or #10. What matters: largest local media presence in each market. It’s all about local.
- 22. tim@builtbylocal.com MANAGES Media Companies: 1 2 3 Media Services (investment) Capital Contribution (operations) Input and Guidance (local expertise)
- 23. tim@builtbylocal.com MANAGES Deal Flow Due Diligence Media Planning Startup Mentoring Legal Tax/Accounting
- 25. tim@builtbylocal.com On-Demand Services Market places Ecommerce * Examples of potential portfolio companies only – while BuiltByLocal has held discovery conversations with all of these companies, is not currently invested in any of them and does not have agreements in place with any, either.
- 27. tim@builtbylocal.com Model for 1st Fund 12-25 Markets Members 5-10 5-8 Startups Invest $1.5M+
- 29. tim@builtbylocal.com Standard Total Invested Invested in Portfolio Cos. Mgmnt Fee/ Cap Cont. $200,000 $250,000 $50,000 $200,000 $265,000 $65,000 COST of Investment $125,000$250,000 Assume for illustration: 3.5 Yr Exits, 2.5X Multiple CAGR 40.8%18.3% Incremental Cost of $200K Invested$200,000 $60,000 For illustration purposes, not to imply actual results.
- 30. tim@builtbylocal.com Advisors Stephen Straus Kauffmann Fellow, Correlated Magnetics, Founder @ Barfly Interactive Formerly of Austin Ventures Venture Capital Jim Haddad CFO, M&A for McLeod Communications, Yellow Pages Due Diligence Greg Osberg Founder @ Revlyst, formerly publisher @ Newsweek & Philadelphia Media Network Media Industry Media Planning Kalyn Asher Founder/President Asher Media and Avalanche Media Lora Funderburke Director of Media Planning Avalanche Media Group Eric Mathews Founder & Investor, StartCo Accelerators, formerly Fedex Labs Accelerators Chuck Peters Gazette Company President/CEO Paul Staman Gazette Company Senior Director Corporate Projects Strategic & Structural Guidance
- 31. tim@builtbylocal.com 1 2 3 4 Invest non- cash assets. Turn perishable inventory into an asset. Potential for leveraged returns. Virtuous circles with startups & investors.