An Introduction to Venture Capital

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About The VC

J. Skyler Fernandes- VC @ Centripetal Capital Partners,

invests $1-3M across industry sectors- VC Mentor @ ER Accelerator- Entrepreneur, co-founded a number of

internet startups- Leads Missing Middle Initiative,

launched at World Economic Forum

Connect With J. Skyler Fernandes:

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Why We’re HereI’m not here for you to pitch me your investment (unless you’re the next Google!)

I’m here to:- Answer questions on Venture Capital- Help you be a more successful entrepreneur

The VC world looks complicated and closed. Can seem scary and feel you’re in the dark.

Purpose of event: To be very open with questions and answers with entrepreneurs

Tonight, let me be your VC sherpa!

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When To Seek Funding?It Depends…

Ideal Time For VC Could Be After Initial Testing & Proof Of Concept

Or Even After You’ve Been Around For A Few Years!

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Do You Need VC Funding?

$(2,000,000.00)

$-

$2,000,000.00

$4,000,000.00

$6,000,000.00

$8,000,000.00

$10,000,000.00

$12,000,000.00

$14,000,000.00

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue Expenses EBITDA

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Size Matters: Your Funding Options

Friends & Family

Debt

Bootstrap

Angel Capital

Venture Capital

Private Equity($50M-100M+)

($3M-50M)

Missing Middle($1M-3M)

(up to $1M)

(up to $1M)

Current Company Valuation:Angels: $1-5M VC: $5-100M

PE:100M+

Know the type of capital you need to execute your plan:

Sources & Uses

Negative EBITDA vs. Cumulative Negative EBITDA

Value of the $: Ownership (5-50%+) + Relationships + Experience

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The Two Most Important Words

IRRAngels: >50%+

VC: 30-50%PE: 10-30%

Return MultipleAngels: 20x+

VCs: 5-20xPE: 2-5x

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Value of the $ / BrandRaise more than you need

…Takes Longer / Costs More

Angels Advisors: 0.10%-1%

Capital = 5-20%+ OwnershipIntro to VCs

Intro to Customers / PartnersOperational Experience

Test the demand

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Value of the $ / BrandRaise more than you need

…Takes Longer / Costs More

VCs: Board Seat

Capital = 10-50%+Ability to do follow on rounds

Intro to larger capitalIntro to Customers / Partners

Operational ExperienceEarly Stage growth capital

Scare Away Competition / Protect Company

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How To Find The Right VC For You

Do Your Research & Find A Fund That…

- Invests in your sector- Invests at your stage - Not invested in a

competitor- Invests your needed $ size- Is located in your area

First Choice Is To Find A VC You Have Connections To!

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Working With A VC

It’s Like A Marriage…

Keys To A Successful VC Relationship:

- Compatibility- Honesty - Communication- Effort- Understanding- Faithfulness- Ability To Change

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The Goal!…But unlike a successful marriage a

successful VC relationship is temporary.

Goal is to part ways in 3-5 years

Assets are split

Entrepreneur Investor

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What Do VCs Really Invest In?

Or

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Pitching To A VCKey Elements For Success:• Be Introduced, Don’t E-mail/Call• You Are The Brand: so own that and be the

“best you” you can be for your company• NDA: Not needed until 2nd/3rd meeting• Business Plan vs. Pitch Deck • A Way To Get Rich: Emphasize how to make

a lot of money and quickly• Don’t Do Their Job: Don’t come to the table

with your own term sheet• Know The Financial Return Potential• Capital Raise Strategy: Round 1, 2, 3

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Common Missing ItemsKey Elements For Success:• General Market Size vs. Target Market Size• Large & Growing or Strong Niche / High $• Market Gap: Why does gap exist?• We Have No Competition

– Direct / Indirect Competition?

• Reaction of entry into marketplace?• Proprietary = Patents & Relationships• These Are Conservative Projections

– Show low case/ base case / high case

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Key Elements For Success:• Personal Investment: Skin in the Game

– Size doesn’t matter, but how meaningful to you

• Full-Time Commitment: Don’t half ass– No side projects!

• Don’t just be looking to create a job because you lost yours– Even after funded could be no salary

• Not looking to stay forever– Desire to sell in 5 yr

Dedication

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Key Elements For Success:• Be Respectful / Don’t Be Fearful

– VCs see lots of business pitches

• Don’t Be Overly Emotional / Be Passionate– Don’t take anything too personal

• Don’t sell the house / all assets– Take care of family first

• Spend time really vetting your idea • Gather the right team / Cut people quick

Be Smart

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Advice:80/20 Rule – Don’t get bogged down in development

Focus On Customer Not Technology

Test Market Well To Find

Your Achilles Heel

Be Prepared to PivotPivoting Failure

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Questions?