ACE Resources: Money, Myths and Mindsets

Money, Myths and Mind-Sets | eCreative | 06.05.2015

Juliane Schulze

Senior Partner

peacefulfish

[email protected]

Derfflingerstr. 18

10785 Berlin

T 030-488 2885 66

www.peacefulfish.com

Money, Myths And Mind-Sets

what investors are looking for and why

06 May 2015


agenda

1. peacefulfish?

2. Myths And Mind-Sets

3. What Investors Want To Know And Why

4. Business Plans?

5. Money: Financing Sources

6. Dealing With Investors


since 2000 consultingoffices in Berlin, Brussels, Cannes, London

audiovisual professionals in financing strategies and fund raising (business planning),

advising public/financial institutions in creating financial instruments, i.e.tax credits, public funds, private investment funds,

develop new private equity funds and work on project due diligence for banks and funds.

• pf community: >7400 a/v pros registered for newsletter on int’l financing• clients: Europe, Scandinavia, USA, Middle East, Asia; working for the European

Commission, MEDIA, State Media Authorities, Media Development Agencies, Film Commissions and, film production companies worldwide;

• training courses: Closing the Gap; ENTER Europe;• lecturing at the Media Business School, FMX Stuttgart, Popakademie Baden-

Württemberg, Maia Workshops; guest speaker at leading business incubators, industry summit, conferences & FU Berlin;

• partners: Media Deals and Just Temptation.

peacefulfish


Myths And Mindsets


Investors are


Investors love


Investors want

TT

FULL


Investors are risk averse


Investors know


Investors are only after one thing


Instead, investors want


Investors put you in chains


Investors understand


Investors only invest in


In reality, investors invest in


Investors need


what investots want to know


1) how sellable is the product/the service?

2) how high is the investment risk?

3) how high is the ROI?

4) when is the money coming back?

5) who else is on board?

6) can the management deliver?

7) will the management deliver?

8) how will the management deliver?

Investors want to know


1) track record

2) defined target clients

3) sales projections

4) revenue projections

5) distribution and marketing

6) any guarantees?

Investors want to know


Investors want to see

traction


skin in the game

Investors want to see


Investors pay attention to

1. business pitch

2. match investment

3. recoupment

4. exit


nothing is

immune

from

improvement.

that leads to

opportunity.

entrepreneurship


entrepreneurship is a process of identifying and

starting a business venture, sourcing and organizing

the required resources and taking both the risks and

rewards associated with the venture.

essential qualities: leadership, initiative and

innovation in manufacturing, delivery, and/or services,

team-building, and management ability.

The entrepreneur is commonly seen as an innovator

— a generator of new ideas and business processes.

entrepreneurship


different expectations

entrepreneurs

• need often project financing

• often focused on public funds

• business model often fee-

based rather than revenue

oriented

• difficult to retain IP rights

• focused on the creative and

production sides more than

sales and distribution

private investors

• traditionally focused on company investment

• scalable market approach

• clear growth objectives

• attractive investment offer with a well-defined exit strategy

• return on investment (ROI)

• balanced risk profile (track record of the company, market size vs. level of investment, etc.)

financing environment


private investors

usually invest in companies, not in projects

often bring many years of experience from IT-sector

follow a portfolio-interest

not interested in income, but in capital growth(within ~5 years)

exit: structural EU problem = lack of mid-sized buyers

trends:

1.) private investors and PE-Funds show an increasing interest in the creative industry

2.) especially young angel investors consider more and more project investment

financing environment


business plans?


you‘re in business

when you can answer

1. who is your customer?

2. what does the

customer value?

3. how do you deliver

value at an

appropriate cost?


the right idea at the right time by the right team

• need

• problem

• solution

• added value

• USP


write it down into a 2-page summary:

• what is the idea?

• why is it a business?

• who is the market?

• what pain points are you solving?

• how is it going to make money?

• how long will it take to prototype?

• how long until it gets to your market?

having a great business idea?

Source: Jay AdelsonBobby Finance


business plans?

Who are you?

Who is in your team?

Which experiences &

competences do you have?

Which resources do you have?

Which networks are you part of?


why business plans?

the point of a business plan isn't

to follow it no matter what,

it's to establish a structure

for smart decision making

that allows you to succeed

no matter

what the future might bring.


business plans?

1. No Maket Need2. Ran Out of Cash

3. Not the Right Team


business plans?

help you with

• deeply understanding your project(s) and company

• identifying project partners and industry allies

• thinking in financing scenarios saving time when things fall apart

• differentiating your projects and company from others

• building trust among industry pros


money: financing sources


financing sources

good old revenuesare often the

best moneyto look for!


Source: Go Beyond

Seed Start –Up Round A & B Expansion Established< €50T < €500T €500T - €1Mio €750T + 50Mio +

3 F: Founders, Family, & Friends

Venture Capital Private EquitySuppliers, Awards (Competitions),Grants, Government-grants

Commercial Banks

Equity market

Business Angels

Equity,Crowdfunding

Family Offices & Strategic Investors

Suppliers and/or Clients

Commercial Banks

Equity,CrowdfundingEquity,Crowdfunding

investment stages & financing sources in Europe


Source Financing for Timing Benefits Risiks

Founders, Family & Friends

• Research• Prototype• Process for business

model

Seed Start-up

• Speed• Credibility: they know

you• Investors drive based

not only on financial returns

• Relationships• Over-priced in the

market• Defaults

Industry partners: Suppliers and/or Clients

• Purchase product & service

• Give credit

SeedStart-up

Series A & BExpansion

Established

• Cheap financing• Investors with strategic

insight• Force entrepreneurs to

be business oriented

• Relationships• Conflict of interest• Lose freedom

7

sources of financing

Source: Go Beyond



Bank Loans• Business & operational

development• Further product

development

SeriesA & B

Expansion

• No equity• Push

entrepreneurs to make sales

• Credit rating• Banks reluctant to

lend to small & risky firms that lack a collateral

Awards of Startup Competitions, Grants, Governments

• Product, business and operational development

• Market survey

Seed Startup

• No equity• High visibility/ free

press• Free coaching

• Paperwork/time consuming

• Entrepreneur commits to tasks that deviate from core business

• Bureaucracy

8


Source: Go Beyond



Crowdinvestment*

• Product development

• Working capital• Defining the process

for the business model

SeedStart-up

• Peer Effect: collective intelligence

• strong marketing-instrument

• Access to larger number of investors

• Significant differences in company valuation (generous)

• Lacl of regulation• Lack of

information on investors

Business Angels**

• Development of product, service & operability

• Strategic Alliances• Marketing

SeedStart-up

Series A & B

• Smart money• Lead investor in board

of directors• Network

• Time • High capital

returns• Exit in medium

term

7

• Online platforms allow everybody to acquire small shares in unlisted or private companies • ** Private Individuals, Ex. Entrepreneurs, Pensioner, Managers/ Professionals


Source: Go Beyond



Strategic Investors, Families and Funds

• Operational and product development

• Hire top talent• Move company into a

significant position of the industry

Series A & BExpansion

• Families are often entrepreneurial focused

• Exposure

• Hard to reach unless there is a personal introduction

Venture Capitalists (VC’s)

• Move company into a significant position of the industry

• Achieve profitability• Prepare company for an

exit

Series A & B Expansion

• Shared risk• Network

• Priority VC may be to invest fastMuch capital

• Pressure or delay on time to exit

• Loss of control

10


Source: Go Beyond


Source Where to find them

Business AngelsVenture Capitalists (VCs)

• Investment community/forums and trade bodies e.g. EBAN; EVCA• Major industry network events, for CI e.g. Int’l Games Week Berlin, Zinc Shower• Sector specific yearly trade fairs• Business Angel Networks: european, national, regional; Go Beyond Investing• Platforms like F6S, Gust, Angelist, ProSeeder, GoBeyond, EuroQuity• Chambers of Commerce

Start-up competitions, grants and government funds

• Venture competitions e.g. Venture• Conference meetings/working groups• Yearly trade fairs• Multilateral banks e.g. Inter-American Development Bank (IDB)• Government promotion agencies and regional development banks in every

country/state

Equity crowdfunding platforms with focus mainly on European projects/ companies

• Crowdcube ● SoWeFund• Seedrs ● Innovestment• Wiseed.fr ● oneplanetcrowd• Kickstarter, Indiegogo (international) ● many many more …

where to find the money?

Source: Go Beyond


dealing with investors


how to deal with investors?

core questions

what type of financing makes sense? Business angels? Other sources?

what kind of business angel or VC?

novice or experienced investor?

expert in your sector or rather a generalist?

passive or active shareholder?

key assessment criteria and deal terms

one/ several investors? If several, in what relationship?

investors should get to know each another

investors should be complementary to each other


other considerations

#1 focus should be growing your company

be realistic on the size of your funding round

raise enough to execute your plan; not more

fast growing and profitable companies may also have

an option for current shareholder liquidity



addressing questions with investors swiftly and openly

directly stating where your team/business proposition shows

weaknesses

willingly sharing historic data on the company (transparency)

investors can add enormous value as members of the board of

directors or as advisors

regularly communicating with investors through reports/

newsletters

building an intensive working relationship with investors



prepare for doing a due-diligence on the investor:

o is the investor active or passive?

o has the investor engaged in similar companies like yours before?

o where previous investment amounts similarly high to what

you’re negotiating now?

think about the exit from the outset

o most financing is temporary

o investors want to see their returns after 3-5 years

regularly review the business, financing and exit strategies for all

shareholders

o consistentaly align with the goals of both, the founders and the

investors



fundraising = time consuming + emotionally encumbering

investors are allies, available for the founder clearly communicating +

listening well opinion of outsiders = valuable gift

carefully analyse investors: which other contribution can they make additionally to financing your company?

enthusiasm& trust

to conclude

socialise & cultivate contacts:

financing your company on a

cold call is almost impossible building


… btw, here is an interesting EU-project

ACE Creative accelerator launched its call for companies to select 2015’s TOP 50 ICT driven Creative start-ups in Europe.

• win a customised support package to grow your business internationally.

• benefit from targeted coaching and tailored advice with a specially assigned experienced mentor.

• you are a creative start-up or SME reusing technologies and ICT in your products or services? Intensive customised one-to-one support will ensure that you rapidly gain entry and grow into international markets.

• call for candidates is open until 15 June 2015.

• http://acecreative.eu/


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ACE Resources: Money, Myths and Mindsets

Economy & Finance

Transcript of ACE Resources: Money, Myths and Mindsets