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B OREALIS V ENTURES

B OREALIS V ENTURES. Venture Capital - its role in financing emerging business Financial Management Association of NH March 2014. Borealis Overview. Active partnership with passionate entrepreneurs pursuing rapid growth. Seed/Early-Stage, primarily North of Boston

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B OREALIS V ENTURES

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  1. BOREALISVENTURES Venture Capital - its role in financing emerging business Financial Management Association of NH March 2014

  2. Borealis Overview Active partnership with passionate entrepreneurs pursuing rapid growth. • Seed/Early-Stage, primarily North of Boston • 3 partners in Hanover and Portsmouth, NH • Invest up to $1-$5 Million per Company • 35 investments across 4 funds totaling nearly $70M • Lion’s share of investments in sectors we know well: • Healthcare IT/medical devices • Design and Engineering Software • The Consumer Internet

  3. Agenda: 4 Questions • What are Your Funding Choices? • What’s Difference Between Angels and VC? • How do you raise venture capital? • What are the implications of equity financing?

  4. Q1: What are Your Funding Choices?

  5. VC Firms Govt.Funding AngelInvestors Customers Banks Startup StrategicPartners Friends & Family Savings & Credit Cards Q1: What are Your Funding Choices?

  6. Grants(SBIR, etc.) Q1: Sequence of Funding Sources Venture Capital (late-stage) Amt. invested $10M Venture Capital (early-stage) $1M Angels $100k Friends & Family Founder time

  7. Agenda: 4 Questions • What are Your Funding Choices? • What’s Difference Between Angels and VC? • How do you raise venture capital? • What are the implications of equity financing?

  8. Q2: Difference Between Angel and VC?

  9. Q2: Putting VC in perspective • 65% of U.S. entrepreneurs use personal credit • Roughly ½ of all external funding is debt • Only 8% of startups raise $$$ from friends & family • Only 1 out 164 startups raises govt funding • Total angel investment is 2-8x the amt. of VC • VC provides <2% of all start-up financing • VC backs ~3,000 companies/year • Only ~500 startups (0.03% of all new businesses)

  10. Q2: Closer Look at VC Ecosystem InstitutionalInvestors Exits VC Funds Start-ups

  11. Q2: The VC Ecosystem (continued) Limited Partners(mostly institutions) $ $$ $ Source Deals Raise $ Select Deals Add Value Exit Venture Capital Firm

  12. Q2: Venture Investors Are Highly Selective AnnualOpportunities 25% 25% 15% 25% 10% Agents Network Proactive Identification “Friendly”Funds Portfolio Company Management LPs 1,500 300 150 50 2515 (~1%) Screening Initial Meeting & Diligence (Illustrative Numbers) Exhaustive Diligence PartnerVote Done Deals

  13. Q2: VC is High-Risk…

  14. Q2: … But High-Return Sample Breakdown of VC Returns

  15. Agenda: 4 Questions • What are Your Funding Choices? • What’s Difference Between Angels and VC? • How do you raise venture capital? • What are the implications of equity financing?

  16. Q3: How to Raise Venture $$$? It Can Be Simple… Have a Team That Has Done it Before Have Rabidly Loyal Customers Have Enough Capital Already Have a Term Sheet in Hand Hope for Another Bubble But for everyone else, it’s hard work

  17. Quality of team • Technology risk • Market risk • Competitive risk • Stage of development The Fears • How likely to get there? • How long to get there? Q3: Tempt Greed, Allay Fears CompanyValue ? • The Greed • Revenue? • Market size • Market share • Profit Margin? • gross margins • cust. acq. cost vs. lifetime cust. value • Growth options? • New markets • Product extensions • New technologies ? ? Time

  18. Q3: The “Fit” Dimension • Fit Investment Profile • Sector, stage, location, follow-on needs • Complement Existing Portfolio • No competing firms, sector & stage balance • Work with Investor’s Timing • Workload, investing pace

  19. Agenda: 4 Questions • What are Your Funding Choices? • What’s Difference Between Angels and VC? • How do you raise venture capital? • What are the implications of equity financing?

  20. Q4: Founder’s Equity Cathy “Finance and Operations” 25% 25% Adam CEO, technical founder 25% 25% Burt VP-Sales/Marketing DudleyVP-Bus. Development

  21. Q4: Initial Cap Table

  22. Q4: Series A Investment VC Invests $5M for50% of Company 7.5% 7.5% VCFirm50% 7.5% 7.5% 20% VC#1 New Option Pool for Future Hires

  23. Q4: Cap Table – Post Series A

  24. Q4: Series B Investment VC #2 Invests $10M for 1/3 of Company Founders 5% 5% 5% 5% 33% 13.3% Option Pool VC #2 33% VC #1

  25. Q4: Cap Table – Post Series B 2x Uptick

  26. Q4: Company Sale Acquired for $100,000,000 VC #1 = 6.7x return VC #2 = 3.3x return

  27. Borealis Advertisement Know Who You Are (and Are Not) “Men wanted for Hazardous Journey. Small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful. Honour and recognition in case of success.”* * Advertisement for Ernest Shackleton’s South Polar Expedition

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