BUILDING GREAT COMPANIES WITH COMMITTED ENTREPRENEURS

The Financing Pitch:Raising Capital in a Down

Market

Robert R. Ackerman, Jr.Founder & Managing Director

Allegis Capital

SOME CONTEXTFounder & Managing Director; Allegis Capital

Seed and Early-Stage Venture Firm – Founded 1996Based in Palo Alto, CaliforniaActive Investor in IT Security

IronPort Systems: Purchased by CISCO for $830MCurrent Companies: Symplified & Solera Networks

Previous Life17 Years Operating Executive Experience Founder and Chairman – InfoGear Technology Corporation (VC Funded)

The iPhone

President & CEO – UniSoft Corporation (Self Funded)Leading Unix Systems House

B.S. Computer Science

IS VENTURE CAPITAL RIGHT FOR YOU?

Venture Capitalists are Looking for Large Opportunities

Is Your Target Market Large Enough to Warrant Attention?Are You a Feature? A Product? A Company?Differentiation – Barriers to Entry are EssentialAre You Ready to Surrender Total Control?“Investor” Means “Partner”Most Companies Will Raise Capital “4” Times

You Will Likely See Dilution with Each Round

When You Have a Venture Board – You Have a BossChoose Very Carefully

Are you and your Company Ready?Timing is ImportantPreparation Essential

SELECTING POTENTIAL INVESTORS

Not all Venture Capitalists are Right for YouLocation

Most Firms Invest Within 100 Miles of Their Offices

Sector PreferenceFirms Invest in Targeted Areas (Expertise)

Stage PreferenceFirms Tends to Focus on Different Stages of Investment

Partners Collection of Individuals – Domain Knowledge (Expertise)

PortfolioComplimentary or Conflicting Investments (Expertise)

AssetsDo They Have Sufficient Capital

And then the Hard Work Begins

SCREENING YOUR TARGET LIST

Not all Venture Capitalists are EqualWhat is the Firm’s Reputation – With Entrepreneurs

Do They “Add Value”?When Things get “Tough” – How Do They Respond?Are They Helpful in Fund Raising?Would Entrepreneurs Work with the Firm Again?

Where is the Firm in Their Fund Cycle?Do They Have the Capital to Support You Through Your Growth?

Do Your Due Diligence

Can You Get a “Warm” Introduction to “the” Partner

Firms Will Look at 1000+ Opportunities in a Year1% +/- Will Lead to New InvestmentsYou Need to Get to the Top of the Stack of “Possibles”

THINGS TO KEEP IN MIND

Invest in Yourself FirstPutting Your Money Where Your Mouth IsGet to the “Right Time” to Seek Venture Capital

Raise Money When you Don’t Need ItRaise from a Position of Strength

Have Options

Convey Scarcity and Build Momentum

You are Selling YourselfIdeas are Great, but Success is About People

Investors Have Heard it All BeforeNeed to Build Credibility and Confidence

For Most Entrepreneurs – Success is About Persistence

A Lot like Dating

The Money is not raised until it’s IN THE BANK.

TILTING THE ODDS IN YOUR FAVOR

Three Types of Risk for a Start-UpMarketProductExecution

Ensure You Know Your Customer Better Than Anyone

Validation of Problem & Value PropositionCustomer ReferencesCritical to Conveying an Ability to “PIVOT”

Have a ProductAddress Technical CredibilityBrings the VISION to Life

Get TractionConnecting Supply and Demand Builds Confidence

BEST WAYS TO MAKE A PITCH

The Dance of the Seven Foils

The Golden Matrix

And…

SEVEN SLIDES TO FUNDING

1. Your Credentials

2. The BFD (Big Fundable Deal)

3. The Market

4. Competition

5. What We Own (IP, Trade Secrets…)

6. Summary Financials

7. Parallel Time LinesProduct

Sales/Marketing

Revenue

Financings…

THE GOLDEN MATRIX

Features, Benefits Better Impossible Unthinkable

Form Factor x

Battery Life

UI x x

Network Coverage

Application x x

… x…

Not Fundable$$

THE BEST

Just show up, no foils

We’ll give you a marker and a white board

You’ll show your command of your BFD

FAMOUS COUNTER EXAMPLES

Just to keep (some) perspective

Jobs and Wozniak: Who will fund these unbathed hippies?

What? A third search engine?

WebVan: Big Idea, Big Names (Investors, CEO), Big Crater…

A FEW HINTS

Even with Screening – Don’t assume your Audience are Experts

You should be the “subject matter expert” in the room

Make Sure you have Your Elevator Pitch down ColdOpen your meeting by Framing the Conversation

Manage your Meeting Time30 Minutes for the Presentation10 Minutes for the Demo20 Minutes for Questions

The Objective of the First Meeting is to Get to a Second Meeting

Don’t try to convey everything you know – You will FAILEngage with Questions – Don’t Become DefensiveDon’t Bulls#$% - Building Confidence is Essential

Anticipate Due Diligence Requests and BE PREPAREDRead http://venturebeat.com/author/scott-weiss/

THANK YOU

ackerman@allegiscapital.com