approaching vc's

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Approaching VCs: Basics, DO’s and DON’Ts Berlin, 23.7.2013

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Basic's, DO's and DON'Ts from the perspective of an early stage VC.

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Page 1: Approaching VC's

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

Berlin, 23.7.2013

Page 2: Approaching VC's

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

SaaS

Network effects

Commerce

Current key investment themes and examples:

Page 3: Approaching VC's

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

Page 4: Approaching VC's

Early stage investment landscape (largely simplified)

Angels / Accellerators / Incubators

VCs

Page 5: Approaching VC's

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

Page 6: Approaching VC's

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)

Page 7: Approaching VC's

Good reasons to raise VC money

Page 8: Approaching VC's

Do you really need VC?

VC ≠ SalesDilution is your

enemy!

Investors = bosses?

?Lifestyle business

Forced to grow

Page 9: Approaching VC's

When not to raise VC money

Page 10: Approaching VC's

What a good VC can give you

Page 11: Approaching VC's

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

Page 12: Approaching VC's

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

Page 13: Approaching VC's

The VC process

Startup

First Screening

Intro

Outgoing

Due Diligence

Deal Memo Term Sheet Legal DD

Deal

Support

Exit

Pass

Negotiation

Page 14: Approaching VC's

How do you get on the radar screen?

... and network...

Page 15: Approaching VC's

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!

Page 16: Approaching VC's

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

Page 17: Approaching VC's

„We invest into lines, not dots“Mark Suster

Stay in touch & be persistant

Page 18: Approaching VC's

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)

Page 19: Approaching VC's

Negotiations

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

Page 20: Approaching VC's

Contract (lawyers make money)

Can be smoothCan be longNot done until done

Page 21: Approaching VC's

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

Page 22: Approaching VC's

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

Page 23: Approaching VC's

Get prepared!

Read (blogs > books):

Page 24: Approaching VC's

Good luck!

@pawell

www.pawel.ch

[email protected]