Inside guide to vc funding

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Inside guide to vc funding

  1. 1. Inside  Guide  to  VC   Funding   Peter  Jones   General  Partner   But  a  techie  really!   CompSci,  Cambridge;  UNIX/C  Programmer;  wrote  an  RDBMS   from  scratch!  (Why?);  Founder/CTO  of  Metrica;  CTO  of   SignalSoO;    Strategy  Director  of  AcQx;  plus  others  that  didn’t   work  so  well!  
  2. 2. You  have  an  advantage  –  VCs  generally  like   techies!  
  3. 3. Be  brutally  honest  with  yourself  –  is  this   really  a  big  opportunity?   Is  it  a  global  market?   Is  the  potenQal  market  size   measured  in  $1bns?   Is  it  growing  rapidly?   Inside  Track   VC  Blockbuster  Economics...   £90m  fund  with  goal  of  4x;   Return  of  £360m;   25  companies  –  85%  fail  or  low   return,  15%  succeed;   Bulk  of  return  from  4  companies   25%  on  exit,  so  need  £1.4bn  of  exits;   PotenQal  £360m  exit  per  company   =>  Market  must  be  big!  
  4. 4. Be  brutally  honest  with  yourself  –  do  you   have  the  ambiQon  and  is  this  the  right  Qme   for  you  to  do  a  startup?   Is  your  goal  to  create  a  big  business  and  serious   personal  wealth?   You  can’t  create  a  lifestyle  business  with  VC   money   There  are  a  lot  easier  ways  to  make  a  £1m!   Even  with  the  best  product,  huge  market,   compelling  business  case,  it’s  a  massive  task...   ...  But  can  be  incredibly  intellectually,   emoQonally  and  financially  rewarding.  
  5. 5. Be  brutally  honest  with  yourself  –  stress   test  your  idea  really  hard   Can  you  express  the  core  of  the  proposiQon   simply  and  concisely?   Is  it  solving  a  real  problem  where  there  is  real   pain?   Is  it  a  must-­‐have  or  just  discreQonary  for  your   users?   Are  you  really  solving  the  problem  and  adding   value?  
  6. 6. StaQsQcally  the  chances  of  raising  VC   money  are  low...   Inside  Track   Typical  Deal  Flow  Metrics   In  the  current  climate  it  is  probably   harder!   700  Plans/Decks   100+  MeeQngs   You  should  assume  that  it  will  probably   take  six  months  to  a  year  (or  longer)   10    Serious   4   Deals   But  you  can  improve  your  odds  by  working   smart  ...  
  7. 7. Improving  the  odds  –  start  building  the   team   The  best  thing  you  can  do  is  build  a  kick-­‐ass   team  around  you   Ideally  a  balance  of  skills  –  technical,  markeQng,   bizdev   Ideally  a  team  of  peers  –  with  equally  aligned   moQvaQons   Prior  success  (i.e.  Making  money  for  investors   or  yourself!)    in  a  startup  probably  gets  you   through  the  first  filter  in  one  go!   Inside  Track   Bet  on  the  horse  or  the  jockey?   Almost  all  VCs  would  choose  the   jockey  –  despite  Harvard  research!  
  8. 8. Improving  the  odds  –  genng  the  first   meeQng   DON’T  PRESS  THIS!  (cat  >/dev/null)   SHOTGUN  IS  WEAPON  OF  LAST   RESORT   Inside  Track   -­‐  Meet  porqolio  companies   VCs  depend  on  their  networks   -­‐  Go  to  events  like  this   A  warm  introducQon  from  a  trusted  contact   will  probably  get  you  a  meeQng.   -­‐  Find  Angel  investors   “If  X  can’t  find  one  person  in  my  network  and   -­‐  Consider  an  advisor   convince  them  why  would  I  see  them...”  
  9. 9. Improving  the  odds  –  qualify  the  VC   Always  ask,  “Am  I  wasWng   my  Wme?”   1.  Do  they  have  any   money?!   2.  Do  they  invest  in  my   stage  of  company?   3.  Do  they  have  a  specific   interest  in  my  sector?   4.  Have  they  invested  in   Source:  Ben  Holmes,  Index,  Slideshare.net   compeQQve  businesses?   5.  Can  I  get  to  the  right   person?   Inside  Track   Roles  inside  a  typical  VC  –  who  you  have  to  convince   Associates  –  act  as  gatekeepers,  source  and  qualify  deals   Partners  –  champion  the  deal,  make  the  investment  case,  manage  the   investment  subsequently,  you  need  to  like  him/her   Investment  CommiZee/Partnership  –  formally  agree  the  investment  
  10. 10. Improving  the  odds  –  developing  the  pitch/ deck   -­‐  You  don’t  need  a  200   page  business  plan   -­‐  A  slide  deck  plus  demo/ video  is  ideal   -­‐  Keep  it  simple  and   concise   -­‐  Goal  of  meeQng  #1  is  to   get  meeQng  #2   Source:  Dave  McClure  “How  to  pitch  a  VC”,  Slideshare.net  
  11. 11. Secret  sauce  –  the  importance  of   technology   •  Technology  is  one  of  the  key  vectors  of   disrupQve  innovaQon   •  Today  comes  in  lots  of  shapes  and  sizes   –  Scalability  of  a  social  media  or  web  service   –  UX  of  a  mobile  app   –  Deep  tech  of  a  semanQc  search   applicaQon   •  Pproprietary  is  good!   –  At  least  for  the  secret  sauce   –  Standards,  open  source  for  everything  else   •  VCs  like  technology  because  of  the   defensibility  from  compeQQon  it  brings   –  Its  also  something  to  sell  if  things  don’t  go   too  well!  
  12. 12. Making  progress  on  the  business  –   execuQon  is  everything!   “A  good  idea  is  just  a  mulQplier  on  the  value  of   good  execuQon”   -­‐  The  importance  of  numbers   -­‐  Define  key  metrics  (traffic,   retenQon,  conversion)   -­‐  Track  and  show  progress   Idea   ExecuWon   -­‐  The  importance  of  evidence   -­‐  Find  evidence  for  your  market   Poor  =  -­‐1   Poor  =  $0   size   OK  =  1   OK  =  $1m   -­‐  Find  evidence  of  customers   Good  =  5   Good  =  $10m   desire  to  buy  (ideally  sell  it!)   Great  =  10   Great  =  $100m   -­‐  Validity  of  business  model   -­‐  Develop  proof  points   -­‐  What  do  you  need  to  show  to   get  to  the  next  stage   -­‐  Tie  proof  points  to  funding  and   business  plan  
  13. 13. So  am  I  wasQng  my  Qme?   -­‐  Recognising  a  “slow  no”  is  hard!   -­‐  Investors  are  always  “interested”  –   only  valuable  if  they  are  doing  work   -­‐  Don’t  waste  Qme  trying  to  persuade   someone  who  said  “no”  (instead   thank  them  –  see  #1  above)   -­‐  Don’t  take  it  personally!   -­‐  Don’t  drink  your  own  kool  aid!   Constantly  re-­‐assess  your   proposiWon  in  light  of  criWcism   You  can  get  there!    Good  teams  with  good  ideas  and   execuQon  will  get  funded  

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