Russ Wilcox, Backers - Hacking IAP 2012


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Russ Wilcox, Backers - Hacking IAP 2012

  1. 1. Investors Board of DirectorsTech Advisors Input Suppliers Founding TeamBiz Advisors Joint Developers Outsource Lawyers Partners Distributors Bankers Lead Customers Accountants Beneficiaries Headhunters
  2. 2. Early Stage Investors You, Supported By Your Day Job- Go for 4-5 founders; do not split equally; vest; someone with sales experience Loving Parents and Friends- Only what you could afford to lose at Vegas; never put a house on the line 1-3 Angels of Widely Varying Experience // Grants & Consulting- Beware grouches! Look for long history of angel investing, ideally alongside VCs- Take only government grants or consulting projects that go the right direction Seed-Stage Fund or Bigger Angel Group- Often a loan that converts at a discount to a prospective Series A 2-3 Top Tier VCs Invest $5M+ in Series A and Repeated Rounds
  3. 3. Five-Person Board of Directors- Founder/CEO- Professional Investor (great at fund-raising)- Professional Investor (great at your industry)- Experienced CEO who knows operations (*)- One outside person who fills holes, knows customers, oradds luster (*)(*) Give 0.5-2.5% stock options depending on stage. Canbe 5-10% for a highly involved Executive Chairman.
  4. 4. Scientific Advisory Boards- High value when your technology looks risky- Good starting point for a science company- Low actual contribution on tech (IP issues)- Meet once per year - perhaps- Symbolic stock award (e.g. <1% in total)
  5. 5. Business Advisor- High value when you are first time CEO. Help you setstrategy, recruit team, get financed, connect withcustomers, find vendors. Ideally also an angel investor.- Find these by networking, MIT Mentors, entrepreneurshipevents, VC referrals.- Wide variation in effort – talk monthly or weekly or more…- An “advisor” stock award is typically 0-1% to get their namevalue and a few calls; but depends on effort. Think of what youwould pay in dollars, double that, and give that much value atyour initial valuation. If the effort will stay high over time thenconvert to co-founder or director or exec chairman.
  6. 6. Mega Business Advisor: Incubators- A collection of mentors who are well proven and networked- Visibility and some quick credibility as application required- Built in support group with other first-timers- Incubators like Techstars and Y Combinator cost 6% equity;you can access Trust Center for MIT, MIT Mentors for free- Others like Cambridge Innovation Center, Dogpatch, some VCsoffer office space with administrative help- Outstanding for: first-time entrepreneurs who see value inavailable mentors and/or want to delay setting up an office
  7. 7. Lawyers- You need several types: corporate, general, patent, HR- Pick a name-brand firm active in Boston VC area- Find your lead partner. Get trusted referrals then meet 3and pick 1. This person is a critical advisor.- Look for mature business judgment; someone who knowswhen to fight and when to compromise.- Can be good source of angel leads.- Some law firms give a 10% discount for start-ups or willdefer cash payment until you are funded.
  8. 8. Banks- You need a bank account but not much more at first.- Some banks do a lot of business with VC funds and offerventure leasing or other products, for a fee. Useful later.- Get referred to a “relationship manager” from an investor.- Most Boston start-ups use Silicon Valley Bank, Comerica.- Relationship managers will know lots ofVCs, accountants, auditors, CFOs and part-time CFOs.
  9. 9. Accountants and Auditors- You will probably need a bookkeeper or part-time CFO totrack your spending and prepare reports. Ask investor forreferral or look in directories of service providers and shop.- You will always need an outside accountant to file your taxreturns. You probably need an auditor to review your books.Investors insist on this.- Bigger audit firms are more expensive BUT some offerstrong programs for start-ups and have lots of VCconnections. Using a name firm is worthwhile if you mustraise a lot of money or deal with corporate investors. Thetop in Boston are: Deloitte, PWC, Ernst & Young.
  10. 10. Headhunters- Many will call after you post first job.- Common wisdom: avoid this early on, and use personalnetworking and conserve cash.- Exception: do use headhunters for the first hire from anindustry or function where you have no inhouse experience.- Certain headhunters follow a niche industry closely and willknow all available executives personally. That is gold.
  11. 11. Investors Board of DirectorsTech Advisors Input Suppliers Founding TeamBiz Advisors Joint Developers Outsource Lawyers Partners Distributors Bankers Lead Customers Accountants Beneficiaries Headhunters
  12. 12. Lead Customers and Distributors- The BEST kind of financing comes from customers- Ask for the sale: non-binding letter of intent, jointdevelopment project, soft PO, NRE, non-cancelPO, prepayment, loan, investment- Be careful: partners may file over you, or under you.Partners may analyze and publish and issue PR and makedemos. Once you “offer for commercial sale” you lose patentrights!- Delicate art of exclusive arrangements and tie-ups....- If distributors operate in your industry, they are valuable tofind lead customers, but avoid signing a contract too early
  13. 13. Suppliers, Joint Developers, Beneficiaries- E Ink Suppliers: Air Products, Degussa-Huls- E Ink Outsource Partners: Toppan- E Ink Joint Developers: Philips, Epson- E Ink Beneficiaries: Intel, Publishers- Your success is their success. Either financial or PR payoff tothem. They often make investments to secure your allegianceor monitor your progress. Less valuation sensitive.- Beware! These deals are high risk/high reward. Your choiceof partner will permanently alter your fate. Be careful of IP andVC and end customer perception. Be ready for turnover andstrategic shifts. 80% failure in the long run, so prepare.
  14. 14. Closing ThoughtsYou live to your fullest potential when you dedicate yourself toa challenging dream that builds lasting value for others.Look inside and outside for support.Be persistent and you will get there.