approaching vc's

Approaching VCs: Basics, DO’s and DON’Ts

Berlin, 23.7.2013

Early-stage Venture Capital firm based in Berlininvesting internationally (focus Europe)

SaaS

Network effects

Commerce

Current key investment themes and examples:

Currently Point Nine Capital Fund II (40m Euro)

• PNC I - 6m Euro (launched 2009/10)

• PNC II - 40m Euro (launched 2012)

• Investment size: 100k - 1m Euro + follow-on

• Stage: seed / series-A

Early stage investment landscape (largely simplified)

Angels / Accellerators / Incubators

VCs

VC investment landscape looking from Berlin(super simplified, based on perception and not exhaustive :-)

Stage

Investment size

Seed Series A Series B

€100k

Business Angels

€500k

€1-5M

€5M+

F&F

Accel-erators

Grants

Other investor types / financing sources:

•BANKS (need collateral / cash flow / history)

•CORPORATES (can make sense, support, but issues with exit)

•STATE SUPPORT (varies over time / by region)

Good reasons to raise VC money

Do you really need VC?

VC ≠ SalesDilution is your

enemy!

Investors = bosses?

?Lifestyle business

Forced to grow

When not to raise VC money

What a good VC can give you

VCs tend to specialise, but in general they look for:

• Amazing teams

• Great products

• Huge / fast growing / not very competitive market opportunities

• Great unit economics

• Traction

• Exit

VCs look at a lot of companies

Point Nine Capital in 2012:- 2500 business plans

- 10 investments=> we invested in 0.4% of business we have seen in 2012. other

investors will have a similar rate

The VC process

Startup

First Screening

Intro

Outgoing

Due Diligence

Deal Memo Term Sheet Legal DD

Deal

Support

Exit

Pass

Negotiation

How do you get on the radar screen?

... and network...

Approach - have a Deck!

+/- 10 slides - be visual + numbers

english only

no paper

no 50 page business plan

no NDAs

=> the initial info needs to grab attention and explain basics, not everything!

NDAs are bad for you

1000s of projects / year => admin Many similar projects, we do compare “backend of the idea” is the value + execution Too lazy to copy your idea anyway

Slow downNo feedbackLayman

„We invest into lines, not dots“Mark Suster

Stay in touch & be persistant

The termsheet

• Price - X% shares for Y$

• Liquidation Preference (who gets the money when)

• Anti-Dilution

• Controlling rights

• Future rounds (pro-rata, right of first refusal)

• Drag Along

• Vesting (when founders can lose some of their shares)

• Board

• Information rights (what to tell your investor)

• Costs

• Exclusivity

• Binding (Legal)

Negotiations

Competitive pressure + high quality (traction, product, team) win

Contract (lawyers make money)

Can be smoothCan be longNot done until done

Quick case study 1

• Berlin based

• One founder - coded - simple, but first users

• Co-founder in the pipeline

• Approached referring to SaaS

• Spent quite some time educating us on the space

• Ended up investing with a London based fund

Quick case study 1I

• New Zealand based

• We approached proactively, while reviewing the global POS space

• Best product, some traction

• Small company - 5 guys, tens of paying users

• We invested in NZ without having been to NZ

Get prepared!

Read (blogs > books):

Good luck!

@pawell

www.pawel.ch

pawel@pointninecap.com