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The Financing Pitch: Raising Capital in a Down Market

The Financing Pitch: Raising Capital in a Down Market. Robert R. Ackerman, Jr. Founder & Managing Director Allegis Capital. SOME CONTEXT. Founder & Managing Director; Allegis Capital Seed and Early-Stage Venture Firm – Founded 1996 Based in Palo Alto, California

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The Financing Pitch: Raising Capital in a Down Market

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  1. The Financing Pitch:Raising Capital in a Down Market Robert R. Ackerman, Jr. Founder & Managing Director Allegis Capital

  2. SOME CONTEXT Founder & Managing Director; Allegis Capital Seed and Early-Stage Venture Firm – Founded 1996 Based in Palo Alto, California Active Investor in IT Security IronPort Systems: Purchased by CISCO for $830M Current Companies: Symplified & Solera Networks Previous Life 17 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

  3. 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 Essential Are 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 Boss Choose Very Carefully Are you and your Company Ready? Timing is Important Preparation Essential

  4. SELECTING POTENTIAL INVESTORS Not all Venture Capitalists are Right for You Location Most Firms Invest Within 100 Miles of Their Offices Sector Preference Firms Invest in Targeted Areas (Expertise) Stage Preference Firms Tends to Focus on Different Stages of Investment Partners Collection of Individuals – Domain Knowledge (Expertise) Portfolio Complimentary or Conflicting Investments (Expertise) Assets Do They Have Sufficient Capital And then the Hard Work Begins

  5. SCREENING YOUR TARGET LIST Not all Venture Capitalists are Equal What 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 Year 1% +/- Will Lead to New Investments You Need to Get to the Top of the Stack of “Possibles”

  6. THINGS TO KEEP IN MIND Invest in Yourself First Putting Your Money Where Your Mouth Is Get to the “Right Time” to Seek Venture Capital Raise Money When you Don’t Need It Raise from a Position of Strength Have Options Convey Scarcity and Build Momentum You are Selling Yourself Ideas are Great, but Success is About People Investors Have Heard it All Before Need 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.

  7. TILTING THE ODDS IN YOUR FAVOR Three Types of Risk for a Start-Up Market Product Execution Ensure You Know Your Customer Better Than Anyone Validation of Problem & Value Proposition Customer References Critical to Conveying an Ability to “PIVOT” Have a Product Address Technical Credibility Brings the VISION to Life Get Traction Connecting Supply and Demand Builds Confidence

  8. BEST WAYS TO MAKE A PITCH The Dance of the Seven Foils The Golden Matrix And…

  9. SEVEN SLIDES TO FUNDING Your Credentials The BFD (Big Fundable Deal) The Market Competition What We Own (IP, Trade Secrets…) Summary Financials Parallel Time Lines Product Sales/Marketing Revenue Financings…

  10. THE GOLDEN MATRIX Not Fundable $$

  11. 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

  12. 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…

  13. 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 Cold Open your meeting by Framing the Conversation Manage your Meeting Time 30 Minutes for the Presentation 10 Minutes for the Demo 20 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 FAIL Engage with Questions – Don’t Become Defensive Don’t Bulls#$% - Building Confidence is Essential Anticipate Due Diligence Requests and BE PREPARED Read http://venturebeat.com/author/scott-weiss/

  14. THANK YOU Q&A ackerman@allegiscapital.com

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