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The Financing Pitch: Raising C apital in a Down Market

The Financing Pitch: Raising C apital in a Down Market. Robert R. Ackerman, Jr. Founder & Managing Director Allegis Capital. SOME CONTEXT. Founder & Managing Director; Allegis Capital Seed and Early-Stage Venture Firm – Founded 1996 Based in Palo Alto, California

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The Financing Pitch: Raising C apital in a Down Market

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  1. The Financing Pitch:Raising Capital in a Down Market Robert R. Ackerman, Jr. Founder & Managing Director Allegis Capital

  2. SOME CONTEXT • Founder & Managing Director; Allegis Capital • Seed and Early-Stage Venture Firm – Founded 1996 • Based in Palo Alto, California • Active Investor in IT Security • IronPort Systems: Purchased by CISCO for $830M • Current Companies: Symplified & Solera Networks • Previous Life • 17 Years Operating Executive Experience • Founder and Chairman – InfoGear Technology Corporation (VC Funded) • The iPhone • President & CEO – UniSoft Corporation (Self Funded) • Leading Unix Systems House • B.S. Computer Science

  3. IS VENTURE CAPITAL RIGHT FOR YOU? • Venture Capitalists are Looking for Large Opportunities • Is Your Target Market Large Enough to Warrant Attention? • Are You a Feature? A Product? A Company? • Differentiation – Barriers to Entry are Essential • Are You Ready to Surrender Total Control? • “Investor” Means “Partner” • Most Companies Will Raise Capital “4” Times • You Will Likely See Dilution with Each Round • When You Have a Venture Board – You Have a Boss • Choose Very Carefully • Are you and your Company Ready? • Timing is Important • Preparation Essential

  4. SELECTING POTENTIAL INVESTORS • Not all Venture Capitalists are Right for You • Location • Most Firms Invest Within 100 Miles of Their Offices • Sector Preference • Firms Invest in Targeted Areas (Expertise) • Stage Preference • Firms Tends to Focus on Different Stages of Investment • Partners • Collection of Individuals – Domain Knowledge (Expertise) • Portfolio • Complimentary or Conflicting Investments (Expertise) • Assets • Do They Have Sufficient Capital • And then the Hard Work Begins

  5. SCREENING YOUR TARGET LIST • Not all Venture Capitalists are Equal • What is the Firm’s Reputation – With Entrepreneurs • Do They “Add Value”? • When Things get “Tough” – How Do They Respond? • Are They Helpful in Fund Raising? • Would Entrepreneurs Work with the Firm Again? • Where is the Firm in Their Fund Cycle? • Do They Have the Capital to Support You Through Your Growth? • Do Your Due Diligence • Can You Get a “Warm” Introduction to “the” Partner • Firms Will Look at 1000+ Opportunities in a Year • 1% +/- Will Lead to New Investments • You Need to Get to the Top of the Stack of “Possibles”

  6. THINGS TO KEEP IN MIND • Invest in Yourself First • Putting Your Money Where Your Mouth Is • Get to the “Right Time” to Seek Venture Capital • Raise Money When you Don’t Need It • Raise from a Position of Strength • Have Options • Convey Scarcity and Build Momentum • You are Selling Yourself • Ideas are Great, but Success is About People • Investors Have Heard it All Before • Need to Build Credibility and Confidence • For Most Entrepreneurs – Success is About Persistence • A Lot like Dating • The Money is not raised until it’s IN THE BANK.

  7. TILTING THE ODDS IN YOUR FAVOR • Three Types of Risk for a Start-Up • Market • Product • Execution • Ensure You Know Your Customer Better Than Anyone • Validation of Problem & Value Proposition • Customer References • Critical to Conveying an Ability to “PIVOT” • Have a Product • Address Technical Credibility • Brings the VISION to Life • Get Traction • Connecting Supply and Demand Builds Confidence

  8. BEST WAYS TO MAKE A PITCH • The Dance of the Seven Foils • The Golden Matrix • And…

  9. SEVEN FOILS TO FUNDING • Your Credentials • The BFD (Big Fundable Deal) • The Market • Competition • What We Own (IP, Trade Secrets…) • Summary Financials • Parallel Time Lines • Product • Sales/Marketing • Revenue • Financings…

  10. THE GOLDEN MATRIX Not Fundable $$

  11. THE BEST • Just show up, no foils • We’ll give you a marker and a white board • You’ll show your command of your BFD

  12. FAMOUS COUNTER EXAMPLES • Just to keep (some) perspective • Jobs and Wozniak: Who will fund these unbathed hippies? • What? A third search engine? • WebVan: Big Idea, Big Names (Investors, CEO), Big Crater…

  13. A FEW HINTS • Even with Screening – Don’t assume your Audience are Experts • You should be the “subject matter expert” in the room • Make Sure you have Your Elevator Pitch down Cold • Open your meeting by Framing the Conversation • Manage your Meeting Time • 30 Minutes for the Presentation • 10 Minutes for the Demo • 20 Minutes for Questions • The Objective of the First Meeting is to Get to a Second Meeting • Don’t try to convey everything you know – You will FAIL • Engage with Questions – Don’t Become Defensive • Don’t Bulls#$% - Building Confidence is Essential • Anticipate Due Diligence Requests and BE PREPARED • Read http://venturebeat.com/author/scott-weiss/

  14. THANK YOU Q&A ackerman@allegiscapital.com

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