Fundraising thoughts for Endeavor Entrepreneurs

1. 2016 Investment Outlook – and other thoughts for Endeavor…
ARIEL POLER @ariel

2. Ariel’s Background
 Founder: IPRO (94), Topica (98) & TextMarks (06).
 Board Member: Kana, LinkExchange, Freedom Financial, Odeo,
StumbleUpon, Scan, Strava, Returnly.
 Investor: AdMob, Flixster, Slideshare, BrightRoll, Instructables,
VivaReal, Optimizely, Thumbtack, Viki, Pantheon,
ApartmentList, Kueski, Kongregate, LendingHome, NexTag,
Thync, Cornershop and more…
 Personal: From Venezuela. BS at MIT (math), MBA at Stanford.
Lives in San Francisco. Is a kitesurfer.

4. The Sky is not Falling –
at least not for everybody
There has been a “correction”. Valuations were very
high and discipline was very low.
Draught of IPOs & adjusted public valuations trickles
down – particularly to late stage rounds
Series A crunch becoming Series B crunch…
Financings are taking longer – on average
Yet, VCs are not opening restaurants. They still have
their funds to invest!

5. The Sky is not Falling –
recent financings in my portfolio
Cornershop (Mexico & Chile)
$6.7MM Series A
Accel, Jackson Square, ALLVP, Endeavor Catalyst, Creandum
Kueski (Mexico)
Great Series A to be announced soon…

6. A Pause: You can’t follow all
the advise that you get
Silicon Valley is very diverse and there are many
philosophies and approaches that co-exist here
You must find the approach that works for you
Advise should help you gain insights and to experiment
It is the same for competitive athletes…

7. Silicon Valley is Another Planet
It is not the US. It is not California. It does not include
Sacramento or Los Angeles.
Most of us are from “out of town”. Whether you come
from Salt Lake City or from Lima, you are a “foreigner”
If your company is here, it doesn’t matter where you
came from. If your company is not here, most Silicon
Valley investors are not interested. But some are…

8. Back to the Financing
Outlook…
The “bar” is higher than it was a year ago
But none of you care because you have great
companies, right? .
Valuations remain “healthy” if a bit lower
During uncertain times there is a flight to “quality”
Very high valuations for the most desirable companies
Very large “seed” rounds -> $5MM-$7MM

9. Source: Pitchbook for CA, NY and MA, non-healthcare

10. Source: Pitchbook for CA, NY and MA, non-healthcare

11. Source: Pitchbook for CA, NY and MA, non-healthcare

12. What are sophisticated
investors looking for?
Product market fit
Engagement
A cost effective marketing plan that scales, and, ideally,
has been validated
Attractive unit economics
Plenty of runway
A team that can scale for a while
No “rising tide” plays

13. Fewer Exits Put Pressure
on the System
Lower late stage valuations that trickle down
VCs are less willing to take new board seats
Some investors slowing down waiting for liquidity
Slowdown in the influx of new angel investors
Long term players are happy – flippers, less so
Fewer Seeds mean a better A environment

14. Buy Yourself Time

15. Keys to Successful Financings
Obviously the company
team
market
product
traction
Pitching to the right investor -> fit
A presentation that doesn’t get in the way
Getting the investors excited
Don’t chase the metrics
Don’t get greedy

16. Try to control the
timing of the financing
Yes, on average they are taking longer… But
Once you have one term sheet, even a crappy one from
a third rate investor, you have leverage
Three weeks or three months? Same outcome. Give
investors a deadline! I’ve seen deals done in a week
If you don’t have a term sheet, try to create some other
forcing function
Avoid a permanent state of fundraising. Focus on the
business and fundraise when you are ready

17. Silicon Valley Investors will Remain
Cautious if they Can’t
Uber to your company
Be careful about market schizophrenia
Be careful about company location schizophrenia
Get the local support
Explore other geographies for investors, e.g., London,
New York, LA, Boston.
Consider getting Silicon Valley investors later

18. Silicon Valley companies are
expanding globally much
faster
Used to focus on the US market for years
But…
International fast followers, e.g., Rocket Internet
Uber showed it can be done – and with a “physical”
product
So…
International companies have less time to react

19. "You are too early” and other excuses
Most investors do deals when they get excited by them. But
they don't like to say “I am not excited", so instead they use an
easy excuses, such as:
- You are too early
- The deal is too small
- I want to see more customers/revenues/technology
Be careful about trying to solve address their excuses, because
once you do they are likely to find others. Instead, figure out
how to get them excited.
Investors like to keep their options open.

20. How I choose
my entrepreneurs?
Did I have fun during the meeting?
Do I want to have him over for dinner?
Is the opportunity & market large & worthwhile?
Will the project have a meaningful impact?
Can I help?

21. Help Us Help You
We have a very supportive culture in Silicon Valley.
Relationships rather than transactions.
Do your homework
The right people to talk to
The topics you want to discuss
Be Specific
Add value

22. LESSONS FROM SILICON VALLEY
ARIEL POLER @ariel