The document discusses what investors look for when deciding whether to fund a startup. It explains that there are different types of investors, including VC/private funds, angels, strategic investors, public markets, incubators, and crowdfunding. All investors want to see a large market opportunity, a great management team, and a compelling product or service. However, each investor type has different motivations. VC/private funds seek huge returns from just a few companies and aim for 10x returns within 10 years. Angels consider their personal interests. Strategic investors worry about competition. Public markets and incubators focus on following rules and putting on a good show. Crowdfunding appeals to the crowd. The document uses Yelp as

1. Startup Fundraising
What do investors look for and why?
Maher Hakim, Ph.D.
mhakim@qstp.org.qa
www.maherhakim.com
Managing Director, Qatar Science and Technology Park
Professor of Entrepreneurship, Carnegie Mellon University
Serial Entrepreneur & Angel Investor

2. Agenda
Do you need to raise money? Why?
Multi-stage financing 101
Not all investors are created equal
So, what do investors look for?

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Types of “Startups”

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Innovation Startup
Stages

5. Multistage Financing 101

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Yelp’s Story 2004
0 revenue
No Web site
No employees
2
FOUNDERS!
1 IDEA!
TODAY
$700M Annual
Revenue
150M Monthly
Visitors
Five Continents
~$2.6B Market
Cap

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Simple Scenario
$1M $4M
Founders: $4M EACH
A Investors: 10X
B Investors: 2X
Employees: Ferraris
Series A Price: $0.125
Series B Price: $0.57
Step-up: 4.5X
Year 0: 2 Founders 50/50 with 25% for employees
Year 1: Raised $1M for 50%
Year 3: Raised $4M for 30%
Year 5: $30M exit vs. $10M exit

8. Types of Investors
m/pulse/startup-investors-good-bad-ugly-why-do-some-tech

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Investors Types
VC/Private
Funds
Angels
Strategic
Public
Incubators
The Crowd

10. So, what do they look
for?

11. ALL
1.
2.
3.
Copyright @ 2016. Maher Hakim. All Rights Reserved

12. Versus
ALL
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13. ALL
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14. ALL
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VC/Private
Funds
Success Rate

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It’s About Big Winners
VC/Private
Funds

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IRR, Multiples & Time
Years 2x 3x 4x 5x 6x 7x 8x 9x 10x
1 100% 200% 300% 400% 500% 600% 700% 800% 900%
2 41% 73% 100% 124 % 145% 165% 183% 200% 216%
3 26% 44% 59% 71% 82% 91% 100% 108% 115%
4 19% 32% 41% 50% 57% 63% 68% 73% 78%
5 15% 25% 32% 38% 43% 48% 52% 55% 58%
6 12% 20% 26% 31% 35% 38% 41% 44% 47%
7 10% 17% 22% 26% 29% 32% 35% 37% 39%
8 9% 15% 19% 22% 25% 28% 30% 32% 33%
9 8% 13% 17% 20% 22% 24% 26% 28% 29%
10 7% 12% 15% 17% 20% 21% 23% 25% 26%
VC/Private
Funds

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The 10X Rule
Fund size $100M
15% IRR in 10 years 4X
Capital returned to investors $400M
Capital invested in companies $80M
25% Bust $20M
25% “Sideways” $20M
Expected invested in good deals $40M
Multiples of good investments ~10X
VC/Private
Funds

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My Money?Angels
The Good The Bad The Ugly

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Looking Good!!
Public
Incubators
Rule 1 - Follow
the Rules
Rule 2 - Put On
A Show

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What IF?Strategic
Fear #1
Fear #2

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The Herd!The Crowd

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Yelp’s ROI?
We Paid $0.1 Per
Share in 2004
We Paid $0.45 Per
Share in 2005
We Paid $4 Per Share in 2008
Share
Price
Today =
$32

24. Q&A