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Investment and fundraising for startups

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Everything you need to know about an investment and fundraising for start-ups. The presentation covers all different sources of financing for high growth companies:

- Bootstrapping and the four Fs
- Angel investors
- Startup accelerators
- Venture capital funds
- Investment documentation
- Alternative funding sources (crowdfunding, etc.)
- Grants and incentives

In the presentation you will also find some basics how to prepare your investment documentation and how to pitch to venture capital investors.

Published in: Business

Investment and fundraising for startups

  1. 1. MASTER OF STARTUPS SERIES FUNDRAISING FOR STARTUPS www.geekhouse.si/en
  2. 2. BLAZ KOS • 10+ years working with start-ups • Management of university incubator, technology park and business angel network • Management of two start-up accelerators and co-working space • PODIM Conference – one of the biggest conferences in Alps-Adriatic region • 600+ lectures in CEE • Mentored over 300 start-ups • Two handbooks about startups, 1500+ pages on two blogs I am on a life mission to make the world a more innovative, organized and transparent place to be by helping individuals, organizations and communities achieve their peak potential and an entirely new level of performance.
  3. 3. www.AgileLeanLife.com An entirely new level of personal performance.
  4. 4. Investors will smell uncertainty on you.
  5. 5. Bootstrapping / Retained Earnings • Internally Generated Funds • You reinvest money in growth of the business Grants and support on offers • Tenders • Incubators, technology parks, … Debt financing • Credit, leasing, factoring, franchising… Equity financing • The investors becomes co-owner Crowd funding
  6. 6. Personal Bootstrapping • Personal savings • Maximize credit cards • Keep the day job (until first customers) • Use personal computer, car and offices • Minimal salary when you start a business
  7. 7. Company Bootstrapping • Side projects • Consulting services • Partnerships • Understaff / Volunteer Help • Guerrilla Marketing & PR • Trade credits • Advanced payments • Lease Don‘t Buy
  8. 8. Grants and support on offers Infrastructure Incubators Technology parks Business plan competitions Tenders Municipality level National level Regional level EU level
  9. 9. Debt financing • Banks look at the company history • Cash flow • Insurance (assets, surety) • No added value • Influences your cash flow • Start-ups • No history • No assets
  10. 10. Crowd funding • Reward • Donation • Investment • Loan • Pre-order
  11. 11. Equity financing • 4F - founders, friends, family, fools • Startup Accelerators • Business Angels • Venture Capital Funds • Private Equity Funds • Stock Exchange
  12. 12. FFFF Founders • Put your money where your mouth is • Sweat and tears Friends • Not always wise • Don’t mix business with pleasure Family • Financial and moral support • Big difference between US and EU Fools • You can probably always find a fool ;) Oh, really?
  13. 13. Startup Accelerators • Competition • Micro Funds for small equity • 10.000€ – 50.000€ / 5% - 10% • Training and mentoring • Pitching for bigger investment
  14. 14. Business angels • High net worth individuals • High emotional incentive • Smart money • Business / sector know how • Experiences • Social capital • Drive to create companies • Not all angels are alike • Industry • Business background • Active / Passive MVP / Traction 50k€ - 500k€
  15. 15. Venture Capital Funds • It’s a FUND with hired management team • Management team are usually also partners in the fund • Strict Investment policy • Investments in later stages (in CEE region) • Expansion capital • Higher investment size: 1 mio € to 3 mio € • Different type of funds: Sector, Geography, Stage of development
  16. 16. What do they look for? • Innovative idea: Problem, pain, solution • Business model: Scalability, profit margins etc. • Big market: Potential for Explosive Growth • Top executive team with strong leadership • Exit strategy Enthusiasm: Spark in the eye Expertise: Sector and business knowledge
  17. 17. What do they look for? Good signs • Unfair advantage • Disruptive technology • High profit margins • Short sales cycle • Repeated sales • Recession proof Sectors • IT and telecommunications • Web startups • Medical • Clean tech Bad signs • No core competence • Dominant players on the market • Price driven competition • Low profit margins • Long sales cycles Sectors • Retail • Restaurants • Services
  18. 18. It Matters Whom You Marry • You have to be 100% sure you want to get married • Meeting point • Networks, conferences (20%) • People you already know (80%) - Trust • Good sales pitch • Chemistry (!) • Same vision • Trust • Contribution into relationship • Signing the contract • Divorce
  19. 19. Syndication • More angels/VCs invest in one company • Lower risk for the investors • Lead investor and co investors • Lead investor should speak for the whole syndicate Cons • Coordination • Too many shareholders • Passive investors • It takes longer to make key decisions Pros • More added value and help • More contacts and reputation • More money and less pressure
  20. 20. FUNDRAISING MATERIALS
  21. 21. Short Description of Your Business • Elevator Pitch • Few paragraphs you can e-mail or explain to potential investor in a few minutes • What does your company do? • So what? • Example… • What do you want?
  22. 22. Business Plan PPT Presentation COMPANY PURPOSE • Define the company/business in a single declarative sentence. PROBLEM • Describe the pain of the customer (or the customer’s customer). • Outline how the customer addresses the issue today. SOLUTION • Demonstrate your company’s value proposition to make the customer’s life better. • Show where your product physically sits. • Provide use cases. WHY NOW • Set-up the historical evolution of your category. • Define recent trends that make your solution possible. MARKET SIZE • Identify/profile the customer you cater to. • Calculate the TAM (top down), SAM (bottoms up) and SOM. COMPETITION • List competitors • List competitive advantages PRODUCT • Product line-up (form factor, functionality, features, architecture, intellectual property). • Development roadmap. BUSINESS MODEL • Revenue model • Pricing • Average account size and/or lifetime value • Sales & distribution model • Customer/pipeline list TEAM • Founders & Management • Board of Directors/Board of Advisors FINANCIALS • P&L • Balance sheet • Cash flow • Cap table • The deal
  23. 23. Key things for investor • The problem • The size of the opportunity • Strength of the team • Level of competition • Your competitive advantage • Plan of attack • Current status • Milestones • Financials
  24. 24. 20 min presentation to VC on a meeting 3 min presentation to super angel 7 min presentation on conference
  25. 25. • Business Plan • No one reads them • Investors prefer demos, MVPs, prototypes, traction • Necessary document for some investors • Executive Summary • One to three page description of your business • Private placement memorandum (PPM) • For investment bankers not VCs Other Fund-Raising Materials
  26. 26. • 100% of them are wrong • Nevertheless you must understand the financial dynamics of your business • Think innovation accounting and key metrics • Assumptions underlying the revenue forecast • Monthly burn rate Detailed Financial Model
  27. 27. MVP, DEMO, PROTOTYPE, BETA,… + TRACTION
  28. 28. Best way to get to the VC is with help of your fellow entrepreneurs or ask for an advice.
  29. 29. General Advice • Decide what you want • Do your homework - RESEARCH • Prepare all the necessary documentation • Make awesome first impression • Network, network, network • Do the follow up • Get the lead investor • Push, push, push • Listen to your gut instinct
  30. 30. Disadvantages of VC Financing • It’s the most expensive sort of money • The cheapest is the one you can get from your customers • All the shareholders have rights • You will rarely hear NO • Nobody know what’s going to be next big thing • But NO really means NO • It takes a lot of energy & time • Getting an investor is a hard work
  31. 31. Biggest mistakes • Hiding your idea or having more than one idea / Don‘t ask for NDA • Having just an idea / Being solo founder • No fundraising materials • No competition attitude • To technology oriented (on patent for example) • Just top down analysis (1% of Chinese market) • Having to much faith in viral marketing • No focus or no full commitment • Financial forecasts are really conservative • Not telling the truth (we have contracts etc.) • Expecting too much too fast
  32. 32. Due Diligence Investigation of the business Technical: Intellectual property, risks, etc. Financial: Debt, past financials, etc. Legal: Contracts Sales: Talking with potential clients People: Track record Time spend on due diligence is in strong connection with the quality of the deal

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