What Investors Look For - An Insider's Guide to Raising Capital [Webinar]
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The document is a guide for businesses on how to raise capital, outlining what investors look for when considering funding. It includes insights on financial analysis, fundraising strategies, and essential documentation needed for due diligence. Key areas covered include funding options, investor alignment, and preparation for investor presentations.
What Investors Look For - An Insider's Guide to Raising Capital [Webinar]
- 1. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 An Insider’s Guide to Raising Capital What Investors Look For August 7th, 2014 Sirk Roh, COO – Early Growth Financial Services Rob Belcher, Vice President – Lighter Capital
- 2. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Lighter Capital › Based in Seattle, WA › Serial entrepreneurs, technologists, angels and ex-VCs › Tech-enabled specialty finance company › Direct business lender › Not a bank, not aVC › Employs an innovative revenue- based finance model › Uses technology to speed up and simplify loan underwriting and servicing processes p2 Rob Belcher Vice President Lighter Capital
- 3. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Sirk Roh COO Early Growth Financial Services Early Growth Financial Services › Outsourced financial services firm providing finance, accounting, valuation, and tax support to small to mid-sized companies at all stages of the development process › Services include: transactional accounting, strategic finance, CFO services, valuations, and tax services. › Clients includeTechShop, Klout, Indiegogo, Zendesk, and 400+ small to mid-sized clients nationwide › Operations in SiliconValley, San Francisco, Los Angeles, Seattle, LasVegas,Austin, Boulder, Chicago, and NewYork City › #5 SiliconValley Business Journal’s Fastest Growing Private Company Award 2013 p3
- 4. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Today’s agenda Reflection: Analyzing the Business Projection: Business / Fundraising Game Plan Preparation: Pulling It All Together Documentation: Required Documents and Information Q&A p4
- 5. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Reflection: Analyzing the Business Essential questions for analyzing your business model and economics FINANCIALS › What stage is the company? Pre-revenue? Cash Flow Positive? › What is revenue / cash / pricing model? › How much / what kind of financing have you taken in to-date? CUSTOMERS › Who is target customer? › How many customers do you have? How many others exist? › Customer acquisition cost, LTV, renewal rate, attrition rate? SALES & MARKET › What percent of revenue is from your largest customer? Largest 5? What does your sales pipeline look like? › How long is sales cycle? › How big and where is your target market? How do you reach them? TEAM › What is make-up of current team? › Where, if any, are gaps? p5
- 6. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Projection: Business / Fundraising Game Plan Whenyou’rereadytoraisefunds,clarityiskey › How much money do you need to raise? › What’s that money going to be used for? › At what cost and with what terms and conditions? › What type of capital is the best fit for your company, and why? › Where do you find the type of financing you need? › Milestone financing p6
- 7. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Projection: Business / Fundraising Game Plan A snapshot of funding options by stage p7 EstablishedIdeation Launch & Traction Growth & Scale Breakout Bootstrap/Self Family & Friends Angels and Incubators Revenue-Based Financing VC (less pre-product/revenue than in the past, more at later stages) Banks (w/o VC investor) Strategic Investors Note: These are tendencies, NOT hard and fast rules. Many financings happen outside these bands! $MMs$0 $0-$1M $1M-$5M $5M+
- 8. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Projection: Business / Fundraising Game Plan Funding Options: How Do They Compare? Bank / Debt Revenue-Based Finance Venture Capital Guarantees & Controls Financial Covenants Sometimes Personal Guarantees No Financial Covenants No Personal Guarantees Partner in the Business (Board Seat, voting shareholder) Added Value Low / None Medium High Dilution None / Low Low: Small Upside Participation High Payment Flexibility Low: Fixed Payments Medium: Variable Payments High: No Payments Speed 4-8 months 4 weeks Highly variable. Typical 3-6 months focused effort p8
- 9. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Projection: Business / Fundraising Game Plan RevenueLoan: how does it work? p9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Period Loan payments are based on a percent of the company’s revenue. Company revenue Loan payment
- 10. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Preparation: Pulling It All Together What you need to impress potential investors › Elevator Pitch › Executive summary › Financial model / budget › Product demo › Pitch deck p10
- 11. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Preparation: Pulling It All Together Key slides in your pitch deck Include elements that are most relevant for your company › Who are you? › Venture concept / problem to be solved › Market opportunity › Market strategy › Competitive advantages and risks › Technology › Manufacturing/Production › Management team › Financials › Funding requirements p11
- 12. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Preparation: Pulling It All Together Business Plan › Current business plan & financial projections p12 Top-Down Projection 1. Start with market size 2. Identify particular segment 3. Extrapolate to calculate total potential revenue Bottom-Up Projection 1. Project revenue growth over next 1-3 years 2. Calculate spending necessary to achieve revenue/development 3. Headcount/milestone funding 1 2 3 1 2 3
- 13. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Preparation: Pulling It All Together The Fundraising Process How to tackle fundraising as a business development exercise › Business development process › Determine your funding round › Build your value proposition › Identify the right investors given your stage, size, industry, and focus › Target key players › Rely on your ecosystem p13 Recommended reading: Art of Start, Insider's Guide to Silicon Valley, Early Exits
- 14. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Documentation: Required Documents Necessary documentation and information for due diligence Corporate Records Security Issuances Material Agreements Intellectual Property Disputes & Litigation Other Information p14 ©
- 15. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Corporate records and charter documents › Certificate of Incorporation › Articles of Incorporation (and amendments) › Certificates of Designations, Rights, etc. › Bylaws › Minutes of directors' and shareholders' meetings › Written consents of directors and shareholders p15 Documentation: Required Documents
- 16. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Security issuances › Company shareholders and option holders (showing vesting & security exemptions) › Outstanding options, warrants, rights › Registration rights for company's securities › All voting trust instruments, buy-sell agreements, voting proxies or other shareholder agreements › All permits and filings regarding securities issued by company p16 Documentation: Required Documents
- 17. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Material agreements › Obligations / payments in excess of $10,000 › Personal property leases › Company liabilities › Property / asset related documents › Loan or advance documents › Employment agreements › Insurance policies › Employee benefit plans › Any judgment by which company is bound › Form of Proprietary Information and Invention Agreements p17 Documentation: Required Documents
- 18. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Intellectual property › Foreign and domestic patents and patent applications › Trademarks, trade names, service marks, domain names or copyrights Proprietary processes › Licensing agreements (to and from) › Third-party correspondence regarding potential infringement of IP rights p18 © Documentation: Required Documents
- 19. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Disputes and litigation › Pending action, suit, proceeding, investigation › Allegations of company's infringement of proprietary rights of others › Labor agreements or actions p19 Documentation: Required Documents
- 20. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Other essential documentation › Securities or ownership interests in other companies › Certificates of qualification from all states or foreign countries in which company is qualified to do business › All licenses, permits or government authorization › Company’s bank accounts, lines of credit, etc. › Current or past officers, directors, or key employees who own direct beneficial interest in any competitor › Powers of attorney executed by company p20 Documentation: Required Documents
- 21. EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014 Learn More: earlygrowthfinancialservices.com www.lightercapital.com Apply / Contact: earlygrowthfinancialservices.com/contact-us/ secure.lightercapital.com Questions: sroh@earlygrowthfinancialservices.com rbelcher@lightercapital.com Q&A and next steps p21 @LighterCapital @EarlyGrowthFS