• Recirculating $20m seed fund

• 80% of all early tech investment in SA

• 8-10 investments

So What Do VC’s Do?

• Raise money

• Seek & screen opportunities

• Structure opportunities, deals

• Invest

• Work investments

• Seek exit and distribute returns

Investment Strategy

• Seed Stage

• Risk elimination at lowest possible cost is key variable

• What must ‘be in hand’ for next round?

• Series A and up

• Market/Execution risk

• Build business or build to exit

Staged Investments• Optionality

• Funding linked to arrival of new information

• Prod dev

• Market acceptance

• Competition

• Team

• Preserve the option to abandon or invest

Build Product & Validate Customer Use• Structure

• 1-3 founders

• Incubation environment: heavy mentor/advisor assistance

• Test Functional Prototype• Beta prototype in ~3-6 months

• Develop minimal critical feature set => get to “It works, somebody uses it!”

• Improve design and usability, set up conversion metrics

• Test small-scale customer acquisition strategy

• Demonstrate Concept, Reduce Product Risk, Test Functional Use• Develop Metrics & Filter For Stage 2 Investment

$100-$300k Round

Focus & Grow Market• Structure

• 2-10 person team

• Syndicate with Angel Investors / Seed Funds

• Improve Product, Expand Customers, Test Revenue Model• Beta+ prototype in ~6-12 months

• Scale customer adoption => “Many people use it & they pay!”

• Testing marketing campaign, customer acquisition channels + costs

• Test revenue generation, find profitable customer segments

• Prove Benefit of Solution, Assess Real Market Size• Test Channel Cost, Revenue Opportunity• Determine Org Structure, Key Hires

$750k - $1.5m Round

Maxamize Revenue Growth• Structure

• 5-25 person team

• Syndicate with Seed & Venture Investors in Exit Market

• Make Money (or Go Big), Get to Sustainability• Production version in ~12-24 months

• Revenue/Growth => “We can make lots of money!”

• Marketing plan => predictable channels/campaigns + budget

• Scalability & Infrastructure, Customer Service & Operations

• Connect with Distribution Partners, Expand Growth

• Expand Market, Operationalize Business• Optimize for Sustainability / Exit Opportunity

$2m - $10m Round

3. Is it a good investment? Valuation is key

•  What can we sell the company for in x years if it achieves its goals?

•  What is the probability of achieving this ‘success’?

•  How much $$$ will be needed to achieve ‘success’?

•  What % does this round need to own to get target portfolio return?

3. Is it a good investment? •  What does success look like? •  Revenue in year 6 $25m •  Enterprise Value 3x

Revenue •  Enterprise Value $75m •  Plus Cash at Bank $2m •  Less Debt $0m •  Equity Value at exit $77m

3. Is it a good investment? What return do I need on my money? First round investment $1.5m Probability of success 10% Portfolio target return 2x investment Success target at exit $1.5m x 2 / 10% = $30m Percentage held at exit $30m / $77m = 39%

Assuming no follow on rounds Investors willing to pay $1.5m for 39% of the company Post money valuation $1.5m / 39% = $3.9m Pre money valuation $3.9m – 1.5m = $2.4m