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Money Talks: Things You Learn After 77 Investment Rounds

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Over the past 5 years, the UpWest team has invested in dozens of startups and has been involved in 77 financing rounds across multiple stages, both in Israel and the US. In this interactive session, Gil Ben-Artzy, UpWest Labs Partner, will present case studies and provide real world insights on topics such as: investor mindset, startup evaluation, fundraising strategies, and company positioning.

Gil will be drawing from his experience working with dozens of startups from a variety of domains that have successfully raised funds (even in the toughest of times) from VCs and Angel Investors.

Published in: Technology

Money Talks: Things You Learn After 77 Investment Rounds

  1. 1. Money Talks: Things You Learn After 77 Investment Rounds Google Campus (Tel Aviv), December 29, 2016 Gil Ben-Artzy, UpWest Labs
  2. 2. Work Life Edu
  3. 3. Silicon Valley Fund Focused on Investing in Israeli Founders Targeting the US Market
  4. 4. $300M In Follow-On Funding 1000+ average seed round $1.2M>70% People employedraised funding
  5. 5. This is Just the Beginning ... Market Access Mentorship Funding “Phase I”: 4-Month Sprint
  6. 6. “Phase II”: Every Day that Follows… Operations Fundraising Scaling Know-how Follow-on Investing
  7. 7. Case Study: Adapting to the US Market Oz Alon, CEO & Co-founder, 2012 UpWest Invests; Product Pivot 2013 Seed Round, US HQ 2014 Market Expansion, Series A 2015 Series B 2016 Two Acquisitions, 100x Growth
  8. 8. Case Study: Launching and Scaling in the US Tomer Weingarten, CEO & Co-founder, 2013 UpWest Invests; Customers, Advisors, Seed Round 2014 Series A, Exec Hires 2015 Series B 2016 Rapid Growth
  9. 9. Multiple Domains Wide Investment Scope Pre/Post Product Pre/Post Funding
  10. 10. 25 40 55
  11. 11. Context For This Talk No “Truth”; Always Exceptions Focus on Angels and Early Stage VCs Israel-Based Investors, References to US Please Ask Questions Throughout
  12. 12. What Do Investors Look For? What Is Your Story? How Do You Run a Successful Process? Agenda
  13. 13. Pension Funds, University Endowments, Wealthy Families, Corporations, etc Bonds, Stocks, etc. VC Capital Allocation to Venture Capital = 3-10% Who Invests in VCs?
  14. 14. Top 20 VC Funds Other VC Funds <1x 1-2x 2-3x >3x VC ReturnsVC Funds 98% 95% 2% 5% Do VCs Meet Investor Expectations? 50% 35% 10% 5% VC ReturnsVC Funds
  15. 15. Fund Returns Exits $200M $600M $3B 3X 20% Equity * Few Investments per Partner How Do VCs Make Money?
  16. 16. How Do The Best VCs Reach 3x? Option A Option B Exit 1 Exit 2 Exit 3 Exit 4 Exit 5 Exit 1 Exit 2 Exit 3 Imagine you made 30 investments…. Returns = $3B Returns = $3B
  17. 17. * VC could agree to smaller exits if you are not going to be big as they had hoped, IRR & fundraising considerations, founding team really insist, etc. Startup “I need to show potential for $50M in Revenues in Year 5 (or >100M users)” VC Partner “Should I bet part of my career on this startup?” Investors Want To Fall In Love
  18. 18. VC Economics Impacts ALL Investors Large Funds Micro-Funds Angel Investors “I need large exits” “Small exits are unlikely… Need micro- funds to invest in my startups” “Medium-size exits are unlikely… Need large funds to invest in my startups”
  19. 19. VC41.9 7.4 4.4 California New York Israel Venture Capital Investment in 2015 ($B) “Let’s Go Abroad, It’s Easier to Raise Money in Silicon Valley!”
  20. 20. Fund Returns Exits $200M $1B $3B $3B $15B US Funds 3X 20% Equity $600M
  21. 21. Goal: Invest in the Outliers
  22. 22. Thought #1 Aim high No, really: Aim High!
  23. 23. What Do Investors Look For? What Is Your Story? How Do You Run a Successful Process? Agenda
  24. 24. What Investors Look At Market Momentum Team Size Growth Timing Competition Distribution Users Partners Advisors New Hires Investment Aspirations Knowledge Track Record Dynamics “7 Year” Test Though investors differ in investment stage, domain expertise, etc, they look at the same areas
  25. 25. You Are The Investor You made $$$ as startup co-founder that exited You invest $50-500K in one startup a month You meet 10 pre-screened startups / week
  26. 26. Startup #1: Mobile App For Renting Items To/From Your Neighbors Momentum Team CEO, Biz Dev (B2B); CTO, ex-8200; Friends since Univ. Demo; MVP in 3 Months; Launch 6 months Other Raising $150K for 6 months Market Mobile Apps, Sharing Economy; Any investments?
  27. 27. Thought #2 For Consumer Startups, Be Ready With a Post-Launch Story Around Key Metrics
  28. 28. Startup #2: Cloud Security Momentum Team 3-Person Team, all tech, Currently at CheckPoint Concept; No Demo/Product Other Raising $3M Market Cyber Security; Hot?
  29. 29. Thought #3 For “Heavy Tech” Startups, Have a Strong Full-Time Team with Early Prototype
  30. 30. Startup #3: Web Analytics Momentum Team 3-Person team, ex-Google, full time Beta ready (after 6 months of work), 3 pilots Other Raising $2M; Tried for 6 mths Previously raised $500K (cap Table) Market Analytics; crowded space?
  31. 31. Other & Future employees CEO CTO VP R&D Pre-seed & Seed investors 50% 12.5% 12.5% 12.5% 12.5% Startup #3: Cap Table
  32. 32. Thought #4 Don’t Waste Time; Understand Your Status, Raise at The Right Time
  33. 33. Audience Small Scale Promise Revenues Source: David Beisel, NextView Ventures 4 Strategies For Raising Series A
  34. 34. 4 Strategies For Raising Series A Audience Small Scale PromiseRevenues Raised Most Money? Raised Quickest? PromiseRevenues Promise
  35. 35. Thought #5 Explicitly define your fundraising strategy, work backwards to set milestones
  36. 36. What Do Investors Look For? What Is Your Story? How Do You Run a Successful Process? Agenda
  37. 37. 1-2 months 3-6 months 1. Craft Your Story 2. Finalize The “Details” Finding the Right Investor For You 3. Approach Investors 4. Manage The Process
  38. 38. 12.5% Team: Why you, why this team Market: Why this venture, why now Momentum: Current proof? Goals? Deck Verbal pitch (7, 30, 120) 1. Your story Unique Story Materials Existing investors and entrepreneurs Who speaks? CEO >70% Focus on weak points Practice
  39. 39. 50% 12.5% 12.5% 12.5% 1. Your Story: The Deck Source: https://medium.com/@michaelrwolfe/what-should-be-in-my-fundraising-slides-eca162d14d2a Problem: What are they trying to solve?1 Vision: Does this matter? Is this interesting/big enough?2 Product/Demo: What are they doing? How does it work?3 Tech: Is there anything unique here?4 Momentum: Do they have any proof that this is working?5 Market: Is this a big enough opportunity?6 Competitors: Do they know them? Are they different?7 Biz Model: How will they make money?8 Distribution: Is this credible? Do they have proof?9 Team: Why them?10 Milestones/Ask: Will they be in a good place in 1 year?11
  40. 40. 2. The “Details” Feb June Sep Nov Enough for 15-18 months (until next round) Pick one number, not a range $ Needed % Equity Valuation = % Equity = { negotiations, # of offers,…}f Timing Amount Equity
  41. 41. 2. The “Details”: Investor List Fund Name Relevant Investments Contacts First intro Notes Next Steps? Priority Money VC Mary Smith Ring, Flippr, ReStore Mike M John R 1/1/14 …. Reach out Q2 High … Identify & Prioritize Relevant Investors Tracking investor engagement - Domain expertise - Partners vs. Non-Partners - Lifecycle of fund - Completion of a recent deal
  42. 42. If all meet you once and say “No” Wait! Before Beginning the Process Identify 3-4 investors: If 2 meet you multiple times and only then say “No” Reconsider the round Kickoff the round
  43. 43. Intros via trusted connections Parallel-process, begin with “second priority”, escalate with traction Focus on lead investor; Keep “follow-on” list Iterate on your pitch and materials Reach potential customers 3. Approach Investors
  44. 44. = Everything else = Signed term sheet = Meeting other partners asap “Amazing Meeting!” “Great Meeting” “INYIM Meeting” “Bad Meeting” = “We really like you…” = “This is cool stuff…” = “Give us a few days to think about it” 3. Is the Meeting Going Well?
  45. 45. 4. Manage The Process • Force a decision (be careful!): Parallel processing, momentum updates • Not a Yes is a No • Commitment? (joining a round) • Get a good lawyer! • Negotiations & terms signals on how it will be like working with this investor • Money in the bank only!
  46. 46. 4. Process: Interview The Investors Will they care about investment? (size of fund) Do they know the market, customers, etc? What is their follow-on record? What is their reputation with their founders? (failed & successful ones) Given their style, do you want to work with them?
  47. 47. 5 - Not knowing your story or market 4 - Badmouthing/dismissing the competition 3 - “Mr/Miss-know-it-all” 1 (Tie) - Overly transactional/Valuation-focused 1 (Tie) - Not being positive and upbeat Top 5 Mistakes Israeli Entrepreneurs Make
  48. 48. Thank You gil@upwestlabs.com

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