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69 Cards in this Set
- Front
- Back
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NDA
non disclosure agreement |
helps protect IP
large firms seldom sign with startups example: get legal advice |
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proprietary rights agreement
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example emploee contract: get legal adivce
use when hiring employees |
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elevator pitch steps
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1. the grab
2. your solution 3. value/benefits 4. customer: opportunity/ size 5. secret sauce/ IP 6. competitive advantage 7. financials 8. summary |
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the grab
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engage your audience (not just a question, may be a story they can relate to), make them understand the problem
describe why you are valuable to your prospects to someone who does not understand your business |
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elevator pitch
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pitch is first step in the process. goal is not to close but to get opportunity for the next step
next step is getting a longer meeting financials are meaningless unless you've grabbed the investor max 4-6 slides |
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elevator pitch questions
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prepare list of q&a you think the audience will ask
answer questions before they are asked help identify weaknesses in your plan |
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most important things in a pitch
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energy
enthusiasm PASSION |
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elevator pitch mistakes
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-using notes(undermines credibility)
-lack of passion/energy -just asking question as grab, not waiting for answer -not connecting with audience -making pitch about you and your opinions not about the audience -too many slides -using meaningless adjectives (many, large, expensive) |
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audience research
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who is the audience, what do they like/need?
focus on audience needs not giving lots of info presentation must be compelling |
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work starts way before...
(effective presentation) |
-a credible sponsor or proponent
-qualify interest and need -know the competitive situation -study prospect history (if sales presentation) -know the audience |
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always an agenda
introductions |
who's in the room
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always an agenda
proposition |
what will we do for you?
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always an agenda
justification |
how it works, whats required?
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always an agenda
conclusions |
q&a what you just heard
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always an agenda
next steps |
a call to action....
demo? proposal? higher level meeting? |
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slide brevity
effective presentation |
-large text: size 24 or more
-4-6 lines per slide -<30 words per slide -bullets are headlines, not sentences -sentence fragment with key words |
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rule of three three three
effective presentations |
audience remembers three things
three parts to your presentation use lists of three |
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visual aids
effective presentations |
-determine which element would benefit by being presented with visual aids
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preparation
effective presentations |
-proofread several times
-have someone else proofread -use powerpoints notes pages -practice w/ friendly, but critical audience -practice, practice, practice -expect questions and be sure you can give it in the alloted time -have a fallback position if time is shortened |
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presenting
effective presentations |
-educate, don't sell
-be interactive from the start -ask provocative questions -talk to sponsor and decision makers -long eye contact with each audience member |
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what to focus on when presenting
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focus on meeting result you want not on what you want to say
focus on audience needs not on giving audience lots of info |
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the audience hates
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know it alls
non-stop talkers industry jargon slide readers no problem answers presenters that ignore time |
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use slides to....
effective presentations |
emphasize a point
keep you on track explain a point with a graphic |
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using notes
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notes aren't needed if you know your stuff
notes can imply you don't know your stuff |
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money sources
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-entrepreneur's personal resources
-other people's money (OPM) |
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entrepreneur's personal resources
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-credit card
-cash -assets |
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other people's money
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friends and family
angel investor customer financed financial institutions unusual sources (gov) venture capitalists strategic partner/corporate vc public offering |
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accredited investor
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$1 million in assets (not including your principal residence) or $200k income for last 2 years and expectation of that continuing
-most common restriction to be an angel investor |
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qualified investor
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$5 million not including principal residence
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common stock
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equity
friends and family |
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preferred stock
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equity but more like debt
angels or venture capitalists |
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pre-money valuation
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worth of company before investment
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post money valuation
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pre money valuation plus investmetn
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warrants
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kickers
right to buy more shares |
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options
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for key employees
warrants but for special employees |
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dilution
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creating more shares which dilutes current share owner's percentage of ownership
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key steps in raising capital
(after validating the opportunity) |
1. write a feasibility study and then a business plan
2. write a great executive summary 3. get professional advice and help 4. go do it ---starting the business ---raising the capital |
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pre-money valuation sources of value
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-numbers: projections, quality, comp
-product -clients -IP -management: track record, qualifications, team -competition: ability to raise money -VC: life cycle of fund, capital overhang -industry: hot or not, economy |
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sources of funds
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most come from friends and family
then angels then seed funds then venture capitalists |
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friends, family, fools
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-small amounts of $
-lots of investors -do it because they love you -can ruin relationships -not accredited investors -not professional investors -highest price per share (highest valuation) ****assume you'll lose their investment and pray you don't |
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what professional investors are looking for
VCs, angels, institutional |
-unique product that solves a real problem
-product that is scalable (revenue grow 4x as fast as cogs) -defensible product (patents, trade secrets) -excellent business model and plan (10-30x exit potential) -realistic plan of action (leveraged sales strategy) -$1B market opportunity and growing (total market size-can you capture 5+%) -management team that can execute the plan -exit strategy |
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Angels
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-individuals
-accredited investor -often successful entrepreneurs -invest individually or in groups -invest locally -invest own capital -$10k-$250k each -often want involvement -seed and early stage -want exit plan -higher price per share -less aggressive at changing management |
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Venture capitalists
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-aka vulture capitalists
-lowest price per share (lowest valuation) -professional managers -partnership (VC is general partner) -limited partners are institutional investors(pensions, insurance, university) -funds typically $100-$900mm -max 10year life -typical $1mm-$20mm investments -syndicated investments -focus on specific areas -more aggressive at changing management -always board seats -were largest source of investment dollars -from $30billion in 2007 to $8billion in 2009 -small number recipients |
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goals of venture capitalists
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-investment return for their limited partners
-make money for general partner ---investment fee up to 10% or annual asset fee 1-3% ---typical 20% carry -look for entrepreneurs with track record |
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similarities between angels and VCs
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-look for similar opportunities (angels may invest sooner)
-look for similar things in business plan -only invest if outlook is for >10x return -expect to invest in multiple rounds -portfolio approach: 2+7+1 -time horizon is 5+years |
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differences between angels and VCs
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-VCs have fiduciary responsibility to their limited partners
-angels risk their own capital -diligence on due diligence varies -VCs may require control and board seat -fund cycle affects VC investing -decision time frames vary |
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investor success
(tech business) |
-last 30yrs: 9% of investment created 91% of value
-tech business is business of exceptionalism |
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typical investment process
seed-product development phase |
type: common/founders stock, $25k-$100k
players: founders, 3Fs, SBIR, university |
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typical investment process
early stage-begin sales phase |
type: common/preferred or bridge, $100k-$1M
players: angels, boutique, VC |
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typical investment process
series A or B-ramp up sales phase |
type: preferred/convertible, $1M-$10M
players: VC |
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typical investment process
series C or D-product extension phasee |
type: preferred/mezzanine debt, >$10M
players: private equity, investment banker |
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typical investment process
IPO/M&A phase |
type: listed equity
players: investment bankers, hedge funds |
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time frames in raising capital
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1. screening: 3 months
2. due diligence: 2 months 3. closing: 1 month 4. monitoring investment: forever 5. exit: within 8 years -most potential investments fall apart, takes a looong time |
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dream management team
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-led by industry superstar
-experienced head of technology marketing -technology guru on staff -CFO with start-up experience -complementary skill sets -high integrity |
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partners in a business
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-skills needed in the team: vision, sales, finance, product, team players
-recognize individual differences -friends: probably a necessity -choose friends based on capability not friendship -agree on rules of operation (in writing in advance0 -agree on how to manage individual exits (in writing in advance) -mentors and board of advisors |
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10 signs of a dysfunctional team
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-there is one member who never speaks
-there is one member who won't stop talking -there are several ideas the team is thinking about but you can't make a choice -there is one member stuck on using their idea but the rest of the team doesn't like it -your ream has 2 good ideas and two of you are working on one idea and the others are working on their idea -there is one member who's gone AWOL and none of their work gets done -your team is so excited about your HOT idea that you can't hear any feedback -your team has no ideas your excited about and you can't see your way to the finish line -your mentor thinks their the CEO -the team thinks the mentor is the CEO |
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employee/founder equity
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- founders split- depends on contribution
-never 50/50 split with two founders -options for employees (or grants- tax/accounting implications) -vesting- typically 4-5 years -percent of company ---outside CEO-up to 10% ---outside C level executives 1-5% ---employees( including non CEO C level) up to 20% -dilutes investors, but understood ---ensure goals are perceived as attainable |
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legal forms of business organizations
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-sole proprietorship
-general partnership -limited liability partnership -c corporation -s corporation -limited liability company |
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C corporation
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a legal business entity that is separate from its owners and mangers
-advantage: limited liability -disadvantage: double taxation |
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S corporation
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has the regular characteristics of a C corporation, but the owners are taxed as a partnership as long as certain criteria are met
-legal criteria for being an S corporation: 1. must be domestic corporation 2. cannot have a nonresident alien as a shareholder 3. can issue only one class of common stock |
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limited liability company
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offers the liability protection, tax benefits, and no restrictions as those on an S corporation
-advantage: gives flexibility to the owners -disadvantage: no different classes of stock (no stock) |
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articles of incorporation
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a document that describes the business and is filed with the state in which the corporation is formed
-main tasks involved in writing the articles of incorporation: 1. naming a board of directors 2. adopting bylaws 3. electing corporate officers 4. issuing stock |
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most likely for us to choose
(legal form of business) |
-limited liability company
-c corporation |
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sole proprietorship
why choose |
-taxes: no specific business taxes paid by company, owner pays taxes on income from business as part of personal income tax payments
-legal liability: sole proprietor can be held personally liable for debts and obligations of business -shareholder types: none -options: none -financing: usually through loans -exit strategy: at discretion of sole proprietor, death of owner -corporate governance |
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general partnership
why choose |
-taxes: file on each personal income tax return
-legal liability: unlimited liability for debts of the business -shareholder types -options -financing: raise capital quickly, combine resources -exit strategy: death, selling, contract for dissolving -corporate governance |
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limited liability partnership
why choose |
-taxes: each partner files on personal tax return
-legal liability: personal assets protected, owners not held accountable to acts of other owners, held accountable for debts and losses of personal careless actions -shareholder types -options -financing: investors more willing to join since liability is limited -exit strategy: should have contract -corporate governance |
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c corporation
why choose |
-taxes: double taxation, corporate income taxes and dividends to shareholders taxed
-legal liability: personal assets protected, separate business and tax identity than owners -shareholder types: shareholders have ownership in corporation, must be US citizens -options: available -financing -exit strategy: board of directors must approve (vote0 -corporate governance |
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s corporation
why choose |
-taxes: file personal taxes and sometimes also as a business
-legal liability: limited personal liabilty -shareholder types: yes -options -financing: easier to raise as a corporation -exit strategy: must vote upon it, contract -corporate governance |
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limited liability company
why choose |
-taxes: no corporate taxes as a separate entity
-legal liability: personal liability protection -shareholder types: don't need shareholders -options -financing: usually personal -exit strategy: form own contract -corporate governance |
