Pitch to Win Get the Edge in Capital Raising

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Finance Human Resources Recruiting

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vcfo: What We Do

IT & Technology Professionals

C-Suite & Board Members

Finance, Accounting, Operations

Interim CFO

M&A

Transaction Support

Cash Flow

Management

Exit Strategy

HR Audits

Payroll

Policies & Procedures

Employee Development &

Training

Strategic HR Plans

Benefits

Carter Freeman Managing Director, Colorado cfreeman@vcfo.com

John Brenneman Practice Manager, Washington jbrenneman@vcfo.com

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Panelists

How would you characterize your current situation?

a) Pre-funding: developing product/service, researching market

b) Early stage: company launched, seeking financing to grow

c) Later stage: received some financing, but seeking more

d) Not currently seeking financing

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Polling Question

• Investor landscape • Six stages of VC funding • Key elements of a successful pitch • Three content pieces to get the edge

– Pitch deck – Executive summary – Business plan

• Top reasons that companies fail to get funding • Q&A

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Agenda

• Very competitive landscape

• Investors funneled $9.5B (951 deals) into U.S. VC deals in Q1 of 2014

• Q1 VC deals are off to a strong start due to a strong pipeline reloaded in 2013

• The percentage of pitches that are funded is low, closing one deal requires VCs to source 80-100 deals

• Pitch needs to be concise and compelling

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Investor Landscape

• Seed Round: Low level financing for early stage firms that need funding for expenses associated with product development needed to prove a new idea, often provided by angel investors. Crowd funding is also emerging as an option for seed funding.

• Growth (Series A Round): Early sales and manufacturing funds

• Second-Round: Working capital for early stage companies that are grabbing market share, but not yet turning a profit

• Expansion: Also called Mezzanine financing, this is expansion money for a newly profitable company

• Exit of venture capitalist: Also called bridge financing, 4th round is intended to finance the "going public" process

• Venture Debt: Between the first round and the fourth round, venture-backed companies may also seek to take venture debt

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Six Stages of VC Funding

• Identify problem/pain the market is experiencing • Offer a solution • Identify unique intellectual property • Describe business model • Understand market viability • Define competitive landscape • Executive team overview • Include financial projections • Explain use of funds • Provide current status and accomplishments 8 7/16/2014

Key Elements of a Successful Pitch

Make sure your slides tell a story and communicate these points:

– You are building a unique product or service addressing some compelling need

– Your market is large enough to sustain long-term growth

– Your target market requires your product or solution

– Your team can successfully execute 9 7/16/2014

The Pitch Deck

Clarify what you are asking for: –Current investment amount

• Specifically state how much money you are looking to raise

–Financing history • Provide details on past investors and the

amounts that you have received

–Use of proceeds • Provide a high‐level breakout on how you

will use the proceeds of the investment

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The Pitch Deck

• Company name

• Presenter’s name

• Contact information

• Explanation of what your company does

– What is the company mantra?

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Pitch Deck: Title Page

What is (or will be) your primary source of funding?

a) Self-funded

b) Friends and Family

c) Angel

d) VC

e) Other or N/A

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Polling Question

• What problem, market pain or unmet need are you addressing?

• Why is your solution needed?

• How big is this market pain?

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Pitch Deck: Problem or Market Pain

Address the solution you are providing. Your goal is to present the following points:

– What do you sell?

– What is your value proposition?

– What is the pain the market is experiencing and how do you alleviate the pain?

– What are your differentiators for your competition?

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Pitch Deck: Solution

Include a simple graphic that shows your product or service in a diagram

– Highlight patents or patent pending technology developed

– Create simplistic diagram and/or graphic should be simplistic that is easy enough to understand by a non‐technical investor

– Highlight anything in your solution unique to the competition or the market in general

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Pitch Deck: The Technology Slide

• How do you make money?

• Who pays you?

• What are the channels of distribution?

• What are the gross margins?

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Pitch Deck: Business Model

• Market size or potential size

– Total addressable market

– Market segmentation by demographics, psychographics, SIC codes, etc.

– Avoid relying solely on a market study

• How you are going to reach your customers?

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Pitch Deck: Market Viability

• Name the competitors and their relative strengths and weaknesses

• Compare the service or product to the competition

• Emphasize the sustainable competitive advantage that will protect the company from existing or future competitive products

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Pitch Deck: Competition

• Team members and experience

– If you are a seasoned team, highlight the obvious things like your career pedigree, companies that you worked for, successes.

– If you are a younger team, emphasize your experience in any relevant field.

• Board members, advisors, major investors

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Pitch Deck: Executive Team

• Revenue (investors prefer bottom-up forecasts)

• Key metrics

• Expenses

• Profit before taxes

• EBITDA

• Cash flow (include burn rate before & after raise)

• Capital investment

• Proceeds from sale of equity

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Pitch Deck: Financial Projections

• Current status of your company

• Company accomplishments

• Awards company has won

• Timeline

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Pitch Deck: Current Status & Accomplishments

• To be used as a one-page introductory piece to potential investors

• Pull from key elements of the pitch deck & business plan (next section)

• Would the executive summary make the reader want have a meeting?

• This should also be the 1st page of your written business plan

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The Executive Summary

• Value is in the process more than the plan itself

• Some investors require, some don’t depending on stage and investor

• Many investors will not proceed without this information

• This section forces the management team to work together to formalize intentions

• Remember that success comes from good execution, not good business plans

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The Business Plan

• Content similar to pitch deck, but with more detail (write the pitch deck first)

• Less than 20 pages in length

• One writer

• Print a hard copy of the .pdf with a staple or simple spiral

• Simplify financial projections to two pages

• Include key metrics and major assumptions

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Business Plan

What has been your biggest challenge so far in the fund raising process?

a) Proving the market viability for my product/service

b) Getting a meeting with the decision maker

c) Articulating my business plan/value proposition

d) Getting the proper level of funding

e) None or other

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Polling Question

• Market size too small • Market timing too late or too early • Doesn’t match investor’s focus • Failure to relate to true pain • Valuation expectations too high • Lack of go-to-market strategy • Not clearly defining competitive landscape • Weak pitch materials • Not adequately addressing risks • Financial modeling mistakes • Execution mistakes (waiting until too late to ask for funding)

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Reasons Companies Don’t Get Funding

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Q&A

Thanks for Attending!

Solutions for Early Stage Companies How to establish the infrastructure and processes necessary to grow your start-up, all while focusing on essential aspects like product development, raising capital, building the team and acquiring customers.

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