1 / 20

Stages of Growth & Funding

Entrepreneurism-American Style “the art of raising capital” January 25, 2008 Paul A. DeRidder, MD,MBA www.paulderidderMD.com. Stages of Growth & Funding. Liquidity Event.

yonah
Download Presentation

Stages of Growth & Funding

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Entrepreneurism-American Style “the art of raising capital” January 25, 2008 Paul A. DeRidder, MD,MBA www.paulderidderMD.com

  2. Stages of Growth & Funding LiquidityEvent “This venture is ready to grow very, very rapidly” “I have nailed the fundamentals:third-party validation” VCs, customers “I have an idea” Angels, customers Sweat equity, friends, family, fools, customers

  3. Invest own capital Variety of backgrounds CEO’s, Founders, VC’s, Sr. Exec’s, Professionals Active vs. Passive Extensive networks and resources Interested in your business Can devote time and add substantial value Limited financial resources Networks e.g. TCA, CVAN What are Angel Investors?

  4. TCA Overview • Founded in 1997 • One of largest angel groups in US • 270 members • Regional Networks • Individual investors • Organized process for collaboration Los Angeles Orange County San Diego

  5. Searching For: • Management • Track record • Domain expertise • Not necessarily a complete team – at least a CEO • “Big idea” vs. “lifestyle” business • Painkillers vs. vitamins • Clearly defined market and business model • Sustainable competitive advantage • Technology, patents • Relationships • Market position

  6. Searching For: • Third party validation • Customers • Partners • Liquidity event potential in 2 - 5 years • Attractive valuation

  7. Build a great company Retain control Run the company Make a ton of money Change the world Build a great company Make a ton of money Goals and Objectives Of Entrepreneur Of Investor

  8. Merchant Bankers to Emerging Healthcare and Technology Companies Private Placements • SENIOR DEBT
 • PROJECT FINANCE
 • ASSET-BACKED DEBT
 • SUBORDINATED DEBT
 • COMMON EQUITY
 • PREFERRED EQUITY

  9. Merchant Bankers to Emerging Healthcare and Technology Companies Mergers and Acquisitions (M&A) • Sell-Side Advisory • Buy-Side Advisory • Strategic Alternative Analyses • Management Buyouts • Strategic Investments

  10. M&A: Primary Exit Strategy for Private Companies

  11. Valuation of Your Business for A Liquidity Event Making A Grand Exit

  12. Key Factors that Maximize Valuation • Level of day-to-day commitment • Ability to convey a compelling story • Strong understanding of potential buyers and valuation drivers • Ability to create competition among buyers • Quality of overall execution

  13. How Much Is The Business Worth? Depends upon… • Stage of product and customer development • Dominance and defensibility in market • Type of potential buyer identified •Financial • Strategic •Emotional • Appearance of quality in management, accounting and operation • Competition among potential buyers

  14. Methods of Valuation Multiple of revenues (1/2 to 4x) Price / earnings ratio (5 to 30) Free cash flow (5-8x available cash) Book value (1-3x) Liquidation or salvage value (floor value) Replacement value

  15. Methods of valuation (2) • Similar company transactions • Recent same-company transaction price (share sales) • Internal rate of return (discount future to present) • Comparable public company valuations.

  16. Controlled Process • Having a formal process is only true way to know buyer interest • Everyone must be on the same page at all times Investment banker, management, investors • Don’t let buyers dictate pace • Keep process moving quickly to minimize rumors • Give all buyers the same deadlines Avoid Phase I and Phase II, buyer lists • Avoid wasting time with tire kickers • Contact direct competitors last • Avoid exclusivity as long as possible, then give only 3-4 weeks

  17. Driving the Deal to Close • Maintain momentum and urgency • 1 day delay = 1 day longer to close • Anything unexpected can happen in 1 day • Your only leverage left at this point is expiration of exclusivity • Prepare a detailed schedule to close once you go exclusive • Time is now your enemy...

  18. Top 10 List –Negotiation Rules • Hire the best M&A attorney, Investment Banker, not your friends • Momentum is key...take your foot off the gas and the car stops • When bluffing, ask yourself, “How would I act if I had a better offer?” • “Aloof”is more powerful than “Confrontational” • Less is always more when talking to buyers

  19. Top 10 List –Negotiation Rules • If the buyer is truly interested, they won’t walk away • Being friends with the buyer = lower price • Understand each buyer’s worst competitive nightmare • Carefully coordinate and script all communication • Never answer your own phone

  20. Marriage ??? • Are objectives mutual? • Is the price right? • Are the terms right? • Can we make this work? Give Incentive to Management to Close the Deal!

More Related