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ACG Regarding Common Share Term Sheets


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ACG Regarding Common Share Term Sheets

  1. 1. “ New” VC Common Share Term Sheets Presentation begins at 8am
  2. 2. Agenda About Stirling Mercantile VC Activity BC Seed Financings Financings Can Be Smaller The Funding Chasm Terms Comparison Similar Terms Closing and Timing Summary
  3. 3. About Stirling Mercantile <ul><li>Sectors </li></ul><ul><li>Mid market financings </li></ul><ul><li>Early-stage VC financings </li></ul><ul><li>Mergers and acquisitions </li></ul><ul><li>Valuations </li></ul><ul><li>Public market advisory services </li></ul>
  4. 4. About Stirling Mercantile
  5. 6. VC Activity
  6. 7. BC Seed Financings <ul><li>In 2003, Thomson Macdonald reported no seed financings in BC * </li></ul><ul><li>In 2004, $8m was invested into 5 companies plus $10m into 1 * </li></ul><ul><li>Since early 2004 there have been at least 5 companies funded by common share seed deals </li></ul><ul><li>* Source: Thomson Macdonald and Associates http:// =stats </li></ul>
  7. 8. Financings Can Be Smaller <ul><li>It generally takes less money to launch companies today than it did 5 years ago, so financings can be smaller to get companies to scale </li></ul><ul><li>Easier for competitors to start up too, so the VCs and the companies must move faster </li></ul>
  8. 9. Release early and release often, get traction If you build it, they will come GoTo Market Philosophy Open, APIs and data sharing Closed Philosophy LAMP, open source, Ajax and ruby on rails , JBOD Sun, Oracle, EMC =   Big $$$ Tech platform Proven Unproven Business Models VC - $5m or trade sale VC - $10 - 20m Second Round Funding Angels - $0.1 - 2m VC - $5 - 10m First Round Funding Scaling back end, adding more features/functionality Building product, marketing $ to acquire users $ used for Lots of users and rich interaction No users, great idea Milestone for VC Funding Channel partners and viral marketing Spend $$$, advertising Customer acquisition 200,000 users 10,000 users Critical Mass Web 2005 Web 1999/2000
  9. 10. “ Web 2.0”
  10. 12. The Funding Chasm F, F & E Seed, Angel Series A Series B Year 1 2 3 4 5 Beta Customers Early Adopters Crossing the Chasm Mainstream Growth Design Beta V. 1 V. 2 IP Roadmap Funding Roadmap Funding Chasm
  11. 13. Terms Comparison Conversion to same class as others (prefs) in future financings Conversion to commons for sale or IPO Usually none. Occasionally ROI minimum of 2x Liquidation preference Common shares Preferred shares New Seed Terms Typical Series A Terms
  12. 14. Terms Comparison Drag-along provision Comprehensive shareholder agreement Usually none Retraction and redemption Board representation Control of fundamental changes New Seed Terms Typical Series A Terms
  13. 15. Similar Terms Anti-dilution and price protection Anti-dilution and price protection Usually board representation Board representation ESOP and Vesting ESOP and Vesting Right to participate in future financings and RoFR Right to participate in future financings and RoFR New Seed Terms Typical Series A Terms
  14. 16. Closing and Timing $10,000 legals $40,000 legals Typically 2 months to close Typically 6 months to close New Seed Terms Typical Series A Terms
  15. 17. Summary <ul><li>Momentum is shifting back to early stage activity </li></ul><ul><li>The market has changed </li></ul><ul><li>Deal terms are changing with the market </li></ul><ul><li>Early stage deals are back, which provides a stimulus and supply for all stages of financings </li></ul>
  16. 18. Thank you <ul><li>A copy of this presentation is available at: </li></ul><ul><li> </li></ul>