Les Alexander (Advantage Capital) – Unlocking The Da Vinci Code of Venture Capital

877 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
877
On SlideShare
0
From Embeds
0
Number of Embeds
9
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Double Bottom Line Investing - Deal Structuring September 20, 2005 - Kansas City, MO Presenter: Alan Bernstein, Carter, Ledyard & Milburn, LLP
  • Double Bottom Line Investing - Deal Structuring September 20, 2005 - Kansas City, MO Presenter: Alan Bernstein, Carter, Ledyard & Milburn, LLP
  • Les Alexander (Advantage Capital) – Unlocking The Da Vinci Code of Venture Capital

    1. 1. Unlocking The Da Vinci Code of Venture Capital Les Alexander Advantage Capital Partners April 2010 M O N E Y
    2. 2. <ul><li>Financing Business Growth </li></ul>Time Positive Cash Flow Negative Startup Early Stage Growth Stage Personal Savings and Credit Cards Angel Investors Friends & Family IPO Expansion Stage Venture Capital Cash Flow Lenders Recapitalization Merger or Acquisition Sale of Assets
    3. 3. <ul><li>Risk/Return Tradeoff </li></ul>Low High Debt Equity Hybrid Securities Risk Return
    4. 4. <ul><li>Quality management team </li></ul><ul><li>Well thought out business concept </li></ul><ul><li>Identified customer base and plan to reach them </li></ul><ul><li>Meaningful and attainable market opportunity </li></ul><ul><li>Right security with pricing appropriate for the level of risk </li></ul><ul><li>Ability to exit the investment in the future </li></ul><ul><li>Attractive return over a reasonable period of time </li></ul>What Venture Capital Investors Are Looking For
    5. 5. <ul><li>Clear articulation of your product or service </li></ul><ul><li>Clear description of market opportunity with supporting market data </li></ul><ul><li>Address the competitive landscape and how you are unique </li></ul><ul><li>Identify your target customers and why they will pay for your product or service </li></ul><ul><li>Management team with titles/roles and backgrounds </li></ul><ul><li>Realistic financial projections </li></ul><ul><ul><li>Income statement </li></ul></ul><ul><ul><li>Balance sheet </li></ul></ul><ul><li>A plan free from spelling and calculation errors, balance sheets that balance and references that are consistent throughout the plan </li></ul>Elements of a “VC Ready” Business Plan
    6. 6. <ul><li>Comparisons to Google, Ebay or Microsoft </li></ul><ul><li>Projections that are not realistic </li></ul><ul><li>Market share estimates that are not realistic </li></ul><ul><li>Not understanding the size of the market </li></ul><ul><li>Inability to easily explain your product or service </li></ul><ul><li>Management team not fully committed to the venture </li></ul><ul><li>An entrepreneur’s large ego </li></ul><ul><li>Not knowing how much capital you need and how it will be used </li></ul><ul><li>Exit strategy of going public in a few years </li></ul>What “Turns Off” Venture Capital Investors
    7. 7. <ul><li>Do your homework </li></ul><ul><li>Understand their investment criteria </li></ul><ul><ul><ul><li>Industry </li></ul></ul></ul><ul><ul><ul><li>Geography </li></ul></ul></ul><ul><ul><ul><li>Size of investment </li></ul></ul></ul><ul><ul><ul><li>Stage of development </li></ul></ul></ul><ul><ul><ul><li>Other </li></ul></ul></ul><ul><li>What do you need other than capital? </li></ul><ul><li>Do the personalities and cultures fit? </li></ul>Finding the Right VC
    8. 8. <ul><li>Introduction vs. cold call </li></ul><ul><li>Have your act together when you contact them </li></ul><ul><li>Phone call or email </li></ul><ul><li>Be prepared to provide overview materials </li></ul><ul><li>Know how much capital you are looking for and how you intend to spend it </li></ul><ul><li>Follow up, but give them a chance to respond </li></ul>Approaching VCs
    9. 9. <ul><li>Outlines the terms and conditions of the investment (amount, security, etc.) </li></ul><ul><li>Preferred stock, convertible debt or debt with warrants </li></ul><ul><li>Interest rate or dividend </li></ul><ul><li>Board seat(s) </li></ul><ul><li>Rights and preferences </li></ul><ul><li>Affirmative and negative covenants </li></ul><ul><li>Conversion and redemption (put/call) </li></ul>Term Sheets – What to Expect
    10. 10. <ul><li>VC receives materials and does initial review </li></ul><ul><li>Initial meeting with management </li></ul><ul><li>Conduct preliminary due diligence </li></ul><ul><li>Prepare summary memo and present to Investment Committee </li></ul><ul><li>Submit and execute term sheet </li></ul><ul><li>Conduct further due diligence and draft documents </li></ul><ul><li>Prepare detailed memo and present to Investment Committee </li></ul><ul><li>Finalize documents and fund investment </li></ul><ul><li>Manage investment and participate at board level </li></ul><ul><li>Pursue liquidity event and realize return </li></ul>The Investment Process from VC Perspective

    ×