Decoding Early Stage Investment

Introduction to Fund Raising

What is Angel - VC funding?

What do investors look for?

What gets funded

What does not get funded?

Start Up Financing

Why do you require

funding?

Start Up FinancingPotential Sources of Funding :

Personal funds

Friends and

Family

Angel

Institutional

Strategic

Government

Public

Internal Accruals

Start Up Financing

Equity Capital :

Money for owning a slice of the company

Ownership depends on the “valuation” of the company

Founding team will have to welcome other “partner”

Equity partner can add and/or subtract value

Management, strategic plan may be impacted

New shareholder may have his own demands for

quick scale up, exit, etc.

Equity Funding :

Private Equity & Venture Capital

“Private Equity” means capital to companies not

quoted on a stock market ,in exchange for an

equity participation.

“Venture Capital” (VC) is a sub-class of Private Equity

characterized by investments made for the purpose

of developing, launching, and expanding new

products or service offerings.

Stages of Investment

Start Up Financing :

Capital Lifecycle

Seed (< $ 1 mil) Early Stages ($1 - 10 mil) Expansion/ ($ 10+ mil)

development

Angels Incubators Accelerators Venture Capital Private Equity &

Merchant Banks

Source : Angel Resource Institute

Fund Raising Pattern – Life Cycle of a Startup

How VC’s work

Investor

Investor

Investor

VC

fund

Investor

Startup

Startup

Startup

What VCs do ...

Sift through thousands of (good and bad) investment

propositions

Identify a few valid initiatives and finance them

Support, Mentor the entrepreneurs -

Financial advice

Building Teams

Connecting with customers

Strategic Direction

Focus on Milestones

Decoding the Investment Criteria at VC Funds

The IDEA

Unique

InnovativeFeasible

Are you solving an important problem in a unique manner?

The SECTOR

Large Market with Growth

Potential

What is your differentiator

Crowded space?

Can you be the market leader?

The TEAM

Experience and Background

Demonstrated Ability to Execute

Loyalty and Commitment to

the Idea

Team Structure and Dynamics

Motivated and Passionate Risk Takers.

FUNDING

Amount of Funding

$$$

Valuation and

Equity Share

Use of Funds

Does your financial model justify the amount of funding

asked?

The BUSINESS

Is there currently traction?

Strong Revenue model in Place

Accurate Assessment of Technology and Future challenges

Is there a potential profitable exit for the

VC???

Why are early stage VC’s Different?

Bet on people not trends

Looking for a winner

But not afraid of failure

Fantastic coaches and mentors

Nurturing, Caring but Focused on Milestones

The VC Math

Always looking

for a 10X return!

VC is fundamentally an institutionalized form of finding

outliers!

Why 10x?

The “Portfolio Effect”

Out of Ten Start-ups Funded

2 successes at 10x or better

5 ‘OK’ returns at 2x to 5x

3 write-offs, total loss of invested

money

Assessing Portfolio Risk

Anatomy of a “great” Start Up

VC Bets on people not trends

Driven by the big idea

Looking for a ‘Winner’

Not afraid of failure

Understand how to manage a portfolio of risk

Serves as a fantastic coach

Does her best work outside of the board room

Not waiting for validation from other VCs

Most Appreciated VC Contributions

Financial Advice

Corporate Strategy & Direction

Sounding board for ideas

Challenging status quo

Contacts or market information

Management recruitment

Money !!!! So

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en

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What to look for in a VC

People you LIKE !

Trustworthy & Collaborative

Can bring value, not money only !

Do not have to be experts in the sector but have

to understand the business.

Good network of contacts.

Ask for references

Our Formula :It’s the Chemistry and not just the math that adds up to

SUCCESS

Doing a startup isn't easy.

Funding one isn't, either.

The VC – Entrepreneur relationship isn't simple. There'll be good times, bad times and incredibly horrible times.

Do we like each other and can we still be friends at the end of it all?

For us, this chemistry is a big deal.

A smile is the best yield curve

What’s HOT

Ecommerce

Mobile VAS/Apps

Social Media

Transportation

Hospitality

Data Analytics

Healthcare

Health, Nutrition,

Fitness

Dating

Social Media

Online Education

Cleantech

Technology enabled

consumer businesses

What doesn’t get funded

“Me Too” idea

Poor Business

model

Long gestation

Esoteric, R&D

driven plans

Huge marketing

spends

Niche “Lifestyle

Businesses”

Too many angels,

cross holdings

$$$$ for the

promoters

“Arrogant” Teams

What VCs are Not Good at

• Long term research investments

• Sustainability

• Evolutionary development

• Asset maximization

• Billion $ capital requirements

The Start Up MYTH

+ +

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THANK YOU