roundtable 2015: tim mcdougall

LEAP RoundtableTim McDougall

tim@builtbylocal.com8/20/15

tim@builtbylocal.com

tim@builtbylocal.com

Startup Investing

Long-TermReturn

Innovation

“Next New”

=

tim@builtbylocal.com

BUT

Competing Needs For Cash

“Too Small To Be Sexy”

Making Too Few Bets

=

tim@builtbylocal.com

Meanwhile:

Marketing-centric,locally-oriented startups

face an early stageFUNDING CHASM.

tim@builtbylocal.com

“AD SPEND IS SCARY.”“It’s not a something early stage startups

are skilled at.”

“Nobody wants to be Pets.com.”

“Rate cards are fiction. Negotiating good rates is labor

intensive. The process is wasteful

and too risky.”

tim@builtbylocal.com

“All funding is hard, but getting investment for

developers or salespeople is relatively easy compared to

getting investment for marketing spend.”

tim@builtbylocal.com

“Umm, we’re just going to use free

social media.”-every pre-funded startup ever

tim@builtbylocal.com

Large local audiences

Startups GET:

Virtuous CircleInvest Media Directly into Early Stage

Startups

Crosschasm

Aligned media partners

Media expertise

Non-cashway to invest

Media Companies GET:

Value for perishable inventory

Innovation/ ”Next New”

Build future advertisers

tim@builtbylocal.com

“So instead of wondering if I got screwed on the

negotiation or I got the ‘good’ inventory – the media

company only wins if I win?

Oh. Light bulb.”

tim@builtbylocal.com

Not the first to think of this.

But implementing in the U.S., for local media companies,

creates big challenges.

tim@builtbylocal.com

“Oh, that’s a great idea!Makes total sense!

It is also completely impossible.”

- 1st Big Giant Law Firm

tim@builtbylocal.com

“The Taxable Event”Cash Invest: Taxed when

and if there are profits.

Non-Cash:Taxed at the time

of the investment.

Challenge#1:

tim@builtbylocal.com

300+Pages

29Documents

5+Months

Tax-Deferred Investment Solution

tim@builtbylocal.com

Media Planning1. Not something early stage

startups are skilled at.2. Need to plan across dozens of

publishers, properties.

Challenge#2:

tim@builtbylocal.com

StandardVenture Firm

MDDF DDDF DD

Deal Flow

Due Diligence

Deal Flow

Due Diligence

MediaDesk

tim@builtbylocal.com

1 2 3 4Exchange RateChallenge#3:

Startups need exchange rate in ADVANCE.

Rate cards are complex, vary dramatically, and are NOT

trusted.

“Make it not a headache.”

Keep it simple, fast to market.

+ + =

tim@builtbylocal.com

Fair Market Exchange Rate Card

1

2 Pass Acid Test

Standard exchange pricing

tim@builtbylocal.com

“You’re not national.”

“Startups lookingto roll out nationally won’t be interested!”

Challenge#4:

tim@builtbylocal.com

Target startups with market-by-market expansion strategy.

1 2

We help startups get from market #1 to market #6 … or #10.

What matters: largest local media presence

in each market.

It’s all about local.

tim@builtbylocal.com

MANAGES

tim@builtbylocal.com

MANAGES

Media Companies:

1

2

3

Media Services(investment)

Capital Contribution(operations)

Input and Guidance(local expertise)

tim@builtbylocal.com

MANAGESDeal Flow

Due DiligenceMedia Planning

Startup MentoringLegal

Tax/Accounting

tim@builtbylocal.com

Potentialfor Explosive

Growth

Marketing-Centric

Market-by-market growth

tim@builtbylocal.com

On-Demand Services

Marketplaces

Ecommerce

* Examples of potential portfolio companies only – while BuiltByLocal has held discovery conversations with all of these companies, is not currently invested in any of them and does not have agreements in place with any, either.

tim@builtbylocal.com

Outbound

Inbound

Affiliative

Deal FlowProgression & Evolution

tim@builtbylocal.com

Model for 1st Fund

12-25Markets Members

5-10

5-8Startups Invest

$1.5M+

tim@builtbylocal.com

Media Services (Investment)

INOUT

Capital Contribution (Operations)

Capital Contribution

+5%

Profit

1

2

80%Members

20%

Portfolio Companies

tim@builtbylocal.com

Standard

Total Invested

Invested in Portfolio Cos.Mgmnt Fee/ Cap Cont.

$200,000

$250,000$50,000

$200,000

$265,000$65,000

COST of Investment $125,000$250,000

Assume for illustration:3.5 Yr Exits, 2.5X Multiple

CAGR 40.8%18.3%

Incremental Cost of $200K Invested$200,000 $60,000

For illustration purposes, not to imply actual results.

tim@builtbylocal.com

Advisors

Stephen StrausKauffmann Fellow,

Correlated Magnetics, Founder @ Barfly

InteractiveFormerly of Austin

Ventures

Venture Capital

Jim HaddadCFO, M&A for

McLeod Communications,

Yellow Pages

Due Diligence

Greg OsbergFounder @ Revlyst,

formerly publisher @ Newsweek &

Philadelphia Media Network

Media Industry Media Planning

Kalyn AsherFounder/PresidentAsher Media and Avalanche Media

Lora FunderburkeDirector of Media

PlanningAvalanche Media

Group

Eric MathewsFounder & Investor,

StartCo Accelerators, formerly Fedex Labs

Accelerators

Chuck PetersGazette Company

President/CEO

Paul StamanGazette Company

Senior Director Corporate Projects

Strategic & Structural Guidance

tim@builtbylocal.com

1 2 3 4Invest non-cash assets.

Turn perishable inventory

into an asset.

Potential for leveraged returns.

Virtuous circles with startups & investors.

tim@builtbylocal.com

1 2 3Build

FoundationLegal

Tax/Structure

Create Footprint

Media Companies

Invest & DeployStartups

tim@builtbylocal.com