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Tsh masterclass winning the hearts & minds of venture capitalists


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• About Octopus:
o Growth & early stage focus
o Invests £250K-5M
o Every Wednesday they run ‘open office’- message
o Looks for companies with: product, route to market, team, ability to validate customer acquisition costs with traction
• VC or Angel?
o If you have traction and want to fund growth, go for VC funding. Go for angel if you are pre-product or pre-traction.
o Choose your initial seed investor wisely. 20-25% for £500K-1M is a good rule of thumb. Be careful that they do not give you too high a valuation that will make it unattractive to the VC in the next round.
• Preparing the approach:
o Ensure you understand the VC that you are going to meet, and ensure your business is a good fit. Find out what the VC is looking for and do your homework on what value they might be able to add to your business
o Your chances of getting an investment: 12K business plans sent each year, see 200 company meetings per year, then make a single deal every 6-8 weeks
o Get a referral from someone in their network (one option is through the portfolio companies)
• Meet up with the VC
o Send presentation in advance
o Bring the two execs from your team, but ask first
o impress the VC right away with who you are and why you are special
o Communicate the business plan in simple terms
o If you don’t know answers to the questions, don’t wing it, just say that you will come back to them with the answer
• It’s all about the team
o This is more important than the product or business plan!
o Be proud to talk about what makes you and your team special
o Ensure that there is one clear leader
o Ensure that there is a blend of complementary skills. If there are gaps, say so and ask the VC for help finding that person
• How big can you grow?
o At minimum, VCs want a 10x exit
o Businesses worth £100M is the minimum
o Under promise your investors in terms of returns
o Consider getting the money that you need in chunks based on hitting milestones. Milestones could be something like: 1) breakeven 2) get 10% growth per month and 3) get to exit.
• Strike Zone
o It takes 8-12 weeks to close a deal including negotiating.
o Remember that you will sign a warranty that what you told the VC is true about your business
• Get married (make the deal)
o Most VCs look for an exit after 3-5 years. A corporate finance advisor will be appointed to help sell the business. Know what valuation you want over what time period. VCs do not want lifestyle businesses (i.e. high salaried staff, ongoing low returns)
• What we say & what we mean:
o “send us a short message” means “keep your deck or email SHORT.”
o “we need to see customer validation” means “we’re not sure your solving a market need”
o “we need help understanding your market” means :we don’t believe you will get the market traction you forecast”
o “we want to talk about valuation” means “we’re interested but be realistic”
o “sorry- it’s not for us” means “it’s a no today, but do come back to us in the future.

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Tsh masterclass winning the hearts & minds of venture capitalists

  1. 1. Winning the Hearts and Minds of Venture Capitalists Alan Wallace
  2. 2. 2 Octopus Investments £2.5bn FUM Octopus Venture Partners Invest £250k to £5m [Always] Open Office
  3. 3. Entrepreneurs’ view of VCs?
  4. 4. WE CAN HEAR YOU Change slide to difernetiation Our challenge
  5. 5. What makes you special?
  6. 6. Plan your approach
  7. 7. Meeting up
  8. 8. It’s all about the team
  9. 9. A blend of complementary skills
  10. 10. Your advantage in property
  11. 11. How big can you grow?
  12. 12. Strike
  13. 13. …Just for now!
  14. 14. Means: “Send us a short deck/email” We say: “Send us a short deck/email”
  15. 15. Means: “We’re not sure you’re solving a market need” We say: “We need to see customer validation”
  16. 16. Means: “We don’t believe you will get the market traction you forecast” We say: “We need help understanding your market”
  17. 17. Means: “We’re interested but please be realistic” We say: “We want to talk about valuation”
  18. 18. Means: “It’s a no today but do come back to us in the future” We say: “Sorry - It’s not for us”
  19. 19. Means: “We really, really like you!” We say: “We’re excited by the opportunity”
  20. 20. Thank you Any questions? Alan Wallace awallac e@oc top u ventu 21