vc 101: tame the mythical creatures

TAME THEMYTHICAL CREATURES

KNOW YOUR INVESTORS

@DawnUmlah

vc 101:

@DawnUmlah

DAWNUMLAH

Entrepreneurial finance + corp dev junkee turned early-stage tech VC @Innovacorp

I love tea, hiking, kayaking and everything tech & start-up

Wife and mother of 2

@DawnUmlah

WHAT ARE WETALKING ABOUT?

What is venture capital?1

Investment Process3

2

The Game is changing4

Tame the mythical creatures5

Get to know the VCFollow the money

Stalk Lightly

@DawnUmlah

01

WHAT ISVENTURE CAPITAL?

@DawnUmlah

SOURCES OFFINANCING

Pro

fita

bili

ty

Idea

Prototype

Early Growth

Expansion

Maturity

Time

IPO

Debt Instruments

Debt Instruments

Strategics / Corporate VC

High growth potentialLifestyle

Private Equity

Mezzanine Financing

Venture Capital

@DawnUmlah

3F’s, Angels

CUSTOMERS

Source: Adapted from Venture-Financing, 2005

We get invested.

@Dawnumlah

VENTURE CAPITAL IS FINANCIAL CAPITAL

FOR MINORITY OWNERSHIP IN HIGH

POTENTIAL, HIGH GROWTH STARTUP

COMPANIES WHERE THERE IS HIGH RISK

AND OPPORTUNITY FOR A HIGH REWARD.

@DawnUmlah

We get invested.

@Dawnumlah

Venture Capital vs. Private EquityVenture Capital vs. Private Equity

”

“ IN PRIVATE EQUITY, YOU START WITH THE

NUMBERS, AND THEN TRY TO FIT EVERYTHING

INTO THE NUMBERS. IN VENTURE CAPITAL, YOU

START WITH THE PEOPLE, AND THEN YOU TRY TO

FIGURE OUT WHAT NUMBERS YOU CAN MAKE.

--Mark Kachur - former CEO of CUNO

@DawnUmlah

@DawnUmlah

Late stage VC or Private Equity

We get invested.

@DawnUmlah@DawnUmlah

Early stage VC and Angels

@DawnUmlah

Follow the money & Stalk lightly

02GET TO KNOW

THE VC

@DawnUmlah

@DawnUmlah

We get invested.

@Dawnumlah

role of venture Capitalist

MANAGE A POOL OF OTHER PEOPLE’S CAPITAL BY PROVIDING HIGH RISK FINANCING TO EARLY-STAGE, HIGH POTENTIAL, GROWTH STARTUPS IN EXCHANGE

FOR EQUITY, WITH THE HOPES OF MAKING AN OVERALL FUND RETURN OF 20% OR 3-4X

@DawnUmlah

Follow the money

02

@DawnUmlah

@DawnUmlah

VC returns are not normally distributed

VCs will not invest in something that doesn’t start out with the potential for 10x ROI

Most likely return is 3-4x

RETURN EXPECTATIONS

@DawnUmlah

VCs Try to Capture Unicorns

@DawnUmlah

VCs Open Themselves To Black Swans

@DawnUmlah

General Partners (GPs)

Limited Partners (LPs) > $$

high net worth individuals, family offices, fund-of-funds, large corporations, endowments, foundations, pension funds, insurance companies, sovereign wealth

funds

Venture Capital Fund

Fund/Investment Management

Investment in a startup

Investment in a startup

Investment in a startup

99%1%Capital Calls

WHERE THE CAPITAL COMES FROM

HOW THEY EARN MONEY

@DawnUmlah

General Partners (GPs)

Limited Partners (LPs) > $$

high net worth individuals, family offices, fund-of-funds, large corporations, endowments, foundations, pension funds, insurance companies, sovereign wealth

funds

Venture Capital Fund

~2% Annual Management Fee

Investment in a startup

Investment in a startup

Investment in a startup

80%20%

Carried Interest

@DawnUmlah

First 3-4 years> Seed NewCos

Next 6-7 years> Follow ons & Harvest

Fund 1 ($100M)

Fund 11 ($120M)

Fund 111 ($150M)

FUND LIFECYCLE

@DawnUmlah

VCs Turn Into Pumpkins

@DawnUmlah

VCs Turn Into Zombies

@DawnUmlah

First 3-4 years> Seed NewCos

Next 6-7 years> Follow ons & Harvest

Fund 1 ($100M)

Fund 11 ($120M)

Fund 111 ($150M)

FUND LIFECYCLE

We get invested.

@DawnUmlah

VC Economics >10x possible return

Return is relative

No safety with first cheque - you must execute

GPs answer to LPs

GPs’ upside is a large exit

GPs need to raise more than one fund - watch out for pumpkins and zombies

KEY ITEMS TOUNDERSTAND

STALK LIGHTLY

02

@DawnUmlah

We get invested.

PERMISSION TO STALK LIGHTLY

butSTALKING COMES WITH RULES:

1. STALK LIGHTLY, DON’T BE CREEPY2. TACTFUL PERSISTENCE, DON’T

BE ANNOYING

@DawnUmlah

@DawnUmlah

STALKLIGHTLY

@DawnUmlah

STALKLIGHTLY

marriage without the romance

03

INVESTMENT PROCESS

@DawnUmlah

INVESTMENT PROCESS =MARRIAGE WITHOUT THE ROMANCE

@DawnUmlah

First date - Deal sourcing

Courtship - Light Evaluation

Going steady - Pitch

The proposal - Term sheet

Engagement period - Deeper Evaluation

Private investigator - Due diligence

Prenup - Closing

Wedding day - Cash in hand

Honeymoon - Capital to execute plan

Married life - Board meetings, updates, relationships, management

@DawnUmlah

DATING ADVICE

➔ Don’t be creepy➔ Fools rush in – take your time, get to know us➔ The best intro to a VC is through:

◆ successful exit◆ existing portfolio company◆ investor they have a relationship with

➔ Use tactful persistence➔ It’s not going to happen quickly

@DawnUmlah

DATING ADVICE

➔ If it’s not a yes, it’s a no➔ Work to increase your say:do ratio➔ Be prepared and confident, but don’t be an ass➔ Be open and honest - it’s all about relationships➔ Marry for fit, not money - you can’t break up with your VC➔ Due diligence sucks for everyone

TRENDS YOU SHOULD KNOW

04

THE GAME IS CHANGING

@DawnUmlah

We get invested.

Dawn Umlah@Dawnumlah

BY ITS NATURE, THE INTERNET UNDERMINED ANYONE WHOSE

STATUS DEPENDED ON PRIVILEGED ACCESS TO INFORMATION--Michael Lewis - Author Moneyball: The Art of Winning an Unfair Game

@DawnUmlah

“

”

We get invested.

Dawn Umlah@Dawnumlah

VENTURE CAPITAL IS A BUSINESS &

IS OPEN TO ATTACK BY STARTUPS WITH

DISRUPTED NEW BUSINESS MODELS

& TECHNOLOGY

--Naval Ravikant - CEO & Co-founder, AngelList (@naval) Recommended viewing: http://www.youtube.com/watch?v=tjzDY9Z3HF0

@DawnUmlah

“

”

THE GAME IS CHANGINGTRENDS YOU SHOULD KNOW ABOUT

@DawnUmlah

AngelList - set up your profile

Transparency - access to more info

Unbundling of advice, control & money

More noise - increase in incubators & accelerators

Angel groups - inc in size and $$

Unicorns, Black Swans and Zombies

05TAME THE

MYTHICAL CREATURES

@DawnUmlah

Think like a unicorn

@DawnUmlah

Chase Black Swans

@DawnUmlah

@DawnUmlah

Think like a unicornKnow When the Magic Wears Off

@DawnUmlah

Chase Black SwansRun From Zombies