How to pitch wow to investors list, 28 may 2013

Startup Heroes ©Copyright 2013 Steve Austin, All Rights Reserved 1

How to Pitch the Wow!

to Investors

By Steve [email protected]

Presented by

http://www.meetup.com/Silicon-Valley-Startup-

Idea-to-IPO/

at Workspring Palo Alto CA

28 May 2013

Startup Heroes

“Whatever you can do

or dream you can,

begin it.

Boldness has genius,

power and magic in it!”

Johann Wolfgang von Goethe

©Copyright 2013 Steve Austin, All Rights Reserved 2

Startup Heroes

WE ARE NOT ATTORNEYS

GET LEGAL ADVICE!

Follow SEC RULES – Stay out of Trouble!


Startup Heroes

Agenda

1st hr

Pitch

What about

Angels?

What Investors

Need

2nd hr

Make it Simple

Pitch to Group


Startup Heroes

4 Steps

1.

“Why”

I believe…

2.

“Wow”

Factor


3.

Business

Model

4.

Simple

Message

Persona of Leadership

Startup Heroes

Act Like a Leader!

People followInspirational

Extra effort

CredibilityHumor

Fair

ListensResponsible

Not defensive

Learns & adjusts


Steve Jobs

Richard Branson

Howard Schultz

Martin Luther King

Anne Mulcahy, Xerox

Indra Noori, Pepsi

Startup Heroes

Pitch Basics

1. Be Confident

2. Don’t apologize

3. No “superlatives”

– Huge market,

– Fastest widget, etc

4. Use facts & numbers

5. Ask


Startup Heroes

Most Important to Investors –

Especially Angels

1.YOU & Team

2.Your ability to make it

happen


Startup Heroes

Pitching

60 Second Pitch

• 20 Sec Pitch– 1 Sentence each point

• 60 Sec Pitch– 2 – 3 sentences/point

– Prioritize

• 5 – 6 Minute Pitch– 10-15 Slides MAX

– No slides


Startup Heroes

20 Second Elevator Pitch

• Name

• Title @ Company Name

• “I believe __ (what is really important to you)

• Problem

• Big Market (optional)

• Our Solution

• Benefit is

• Ask


Say “Awesome” or“Facebook”

an’ You Walk-the-Plank!

Startup Heroes

Angel

Investors


Startup Heroes

Think Like an Angel

Entrepreneur


Startup Heroes

1. Net Worth $1Million +

2. Not including primary

residence, or

3. Income $200,000/yr last 2 yrs

4. $300,000 if married

5. Expect same $ this year

From Securities Act of 1933

What is an Accredited Investor?


Startup Heroes

What’s the 1 Thing Angels

Want Most?


They don’t

want to loose

their money.

Photo used without permission.

http://www.zerohedge.com/article/value

-losing-money

Startup Heroes

Angel Investors

1. Invest their own money

2. Not someone elses $ (like VC)

3. Write you a personal check $

4. Don’t want to loose $!


Startup Heroes

What is Usual Start-up’s ROI?

Its terrible!

About 90/100 fail

Almost anything else is better!©Copyright 2013 Steve Austin, All Rights Reserved 16

Startup Heroes

How Much $ Invest of Total Wealth?

Prudent: Max 5% wealth

Wealth Invest $/Y

$5M $250K $50-100K

$10 M $500K $50-100K+

$25 M $1.25M $100-500K

Wealth Invest $/Y


Startup Heroes

Investment

Stages


Startup Heroeswww.privco.com/knowledge-bank/private-equity-and-venture-capital

Investment Stages


Startup Heroes

Valuation

CEOs Job

Increase Value

$

SeedSeed

Pre-Money Value

+ $ Investment

= Post $

ExampleExample

$1.2M

+ 400K Invest

$1.6 M

ExampleExample

$1.2M = 75%

+ 400K = 25%

$1.6 M =100%Series ASeries A

Pre-Money Value

+ $ Investment

= Post $

Series B (Mid)Series B (Mid)

Pre-Money Value

+ $ Investment

= Post $


Seed

$1.00 /

Share

Series A

$2.50 /

Share

Series B

$4.75 /

Share

Startup Heroes

What if Value Goes Down?

CEOs Job

Increase Value

Series ASeries A

$10 M = 55%

+ 8 M = 45%

$18 M =100%

Series BSeries B

$12 M Pre $

+ 4 M Invest $

$16 M Post $


Series ASeries A

$2.50 /ShareSeries B

$1.60 /Share1. Share price goes down

2. Investor’s “Anti-dilution clause” protection

3. Make “whole” from Founder’s Share

4. CEO / Founder can be washed out

Startup Heroes

Effect of

Anti-Dilution

on Founders


Startup Heroes

What Do Angels

Look For?


Startup Heroes

Mike Levinson, DreamIt VenturesAn angel investor… looks at

http://www.inc.com/guides/2010/10/how-to-pitch-to-angel-investors.html

1

1. Simple to understand

2. Problem / need?

3. Big enough market & customer

base?

4. Right people


Startup Heroes

http://www.youtube.com/watch?

v=mBS0OWGUidc

Jerry McGuire – Movie

“Show Me the Money!”2


Startup Heroes

Angels Need to Know the $ Story2


1.

How much $

do you

need?

2.

What will you do with it? Use of funds -

milestone

3.

When will I

get my

money back?

4. What Co. will buy yours?

Exit

Startup Heroes

INVESTOR

CONCERNS


Startup Heroes

What Entrereneur Sees


Photos used withut permission with URLS on each

Our

Solution for Problem

Startup Heroes

What Investor Sees: Alternatives


Our

Solution for ProblemOur

Solution

To Problem

Alternative

AlternativeAlternati

ve

alt

Alterna

tive

alt

alt

alt

alt

alt

alt

Alterna

tive

alt

alt

alt

Alterna

tive

Startup Heroes

Why So Much Return?

5 investments

2 Fail

1 Walking dead

1 Maybe

1 Great return!

20 X

Needs 5-20 X

to cover

High RISK of

Failures


Startup Heroes

Slide Deck TemplateFrom

angelsforum.com


Startup Heroes

Company Name

“One Line Mission Statement”

Before you start presentation, introduce yourself and

the general concept

From

angelsforum.com

Startup Heroes

1. The Problem

• Clearly define the problem

– Who is this a problem for?

– The problem(s) should be unserved by

competition

From

angelsforum.com

Startup Heroes

2. Solution

• How do you solve the problem ?

• Tie solution to specific pain point

• Create continuity in the story

Product = 15% of time

From

angelsforum.com

Startup Heroes

3. The Product

• 1 or 2 product slides

• Screen shots or pre-recorded video

• Show product meets the specifications

• Add detailed product features in appendix

From

angelsforum.com

Startup Heroes

4. Leadership Team

• CEO – Include company name & job title

• CFO

• CTO

• Relevant experience

From

angelsforum.com

Startup Heroes

5. Advisory board

• Who is on the advisory board

– What do you rely on them for ?

– (i.e. advisor for CEO coaching)

• CFO

• Relevant experience

Startup Heroes

6. Market

• How “big” is market – investors want to see in $

– Convince me this is a big opportunity for my investment.

– What market dynamics

• What are key market segments (if appropriate)?

• What is TAM and SAM? For SAM make bottoms up

analysis

• Have detail on TAM & SAM analysis - appendix

Startup Heroes

6a. TAM > SAM > SOM

TAMTAM

Total Available Market– Ex: Total LED Market

SOM: Serviceable SOM: Serviceable Obtainable Market

– Realistic market share

SAMSAM

Served/Serviceable Available Market

– Ex: Living colors LED segment

TAM

SAM

SOM

Startup Heroes

7. Competition

• Direct and indirect

• Highlight how your solution fills gaps

• Recommend use a graphic on this slide

– Put competition on X axis title and key features on Y axis

– Highlight how your solution provides the right key features

– Alt: 2 prime points on X & Y; develop scatter plot of competitive

landscape

• Have back-up slide – competition details

Startup Heroes

8. Business Model

How do you make money?

From

angelsforum.com

Startup Heroes

9. Go-To Market Strategy

How will you launch this?• How will you launch this?

– Target customer now, - 12 months, 36 months?

– Direct vs. Indirect sales

– Leverage existing channels

• Having an advisor a plus

• How acquire customers in cost-effective manner?

• “SEO” is not a strategy

From

angelsforum.com

Startup Heroes

10. Financial Projections

• Five year pro-forma

• Revenue

• COGS

• Gross Margin ��

• Key Opex (3-4 line items)

• EBITDA

• Cash

• In Appendix - detailed five year if needed

From

angelsforum.com

Startup Heroes

11. Capital Raise

• How much $ so far?– What form, if priced round what was post-$

• How much $ Raising?– Convertible note or equity?

– Valuation

– How much soft-circled?

– Specific milestones (i.e. use of funds)

– Milestones should be tied to value creation for company.

From

angelsforum.com

Startup Heroes

12. Future raises

• Sample chart below – show what $ you will need in the

future. Highlight CFP point (not on graph).

• Be ready to talk to exit points and drivers for exit

From

angelsforum.com

Startup Heroes

13. Exit

• Who are potential acquirers?

• What are comparable transactions?

– Seller

– Buyer

– Valuation

– Multiples, (revenue and EBITDA)

– Key driver

• Most likely exit?

From

angelsforum.com


The Wheel This is

where

you pivot!

Startup Heroes

Difference Between Loan & Equity

Banker• Loans $500K

• Wants LOW risk

• Does NOT want huge returns

• Wants avg interest ~ 10%

• Pay back from SALES Margin

DEMANDS PRINCIPAL BACK

InvestorInvestor• Invests $500K

• Accepts risk

• Wants BIG returns

• Will risk $ - more fear =

• 5 – 40 X Return

EXPECT BIG FAT RETURN FOR EARLY $ IN



Thank You!Thank You!

Steve [email protected]

www.linkedin.com/pub/steve-austin/1/ba2/35b/

email for Start Up Support!

Follow our meetups at

http://www.meetup.com/Startup-Heroes-Silicon-Valley/

How to pitch wow to investors list, 28 may 2013

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