“Show Me the $$$$!”…Session 5:
VC’s: What are they investing in? Why?
Thursday, March 20, 2014
General Assembly Seminar Series
An insider perspective on fundraising from active venture investors
and fellow entrepreneurs
Thanks to all who attended the
session at GA last night.
My contact info is on page 19, and
additional resources and
presentations are now available on
www.RosePaul.com
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Agenda
I. Kick-off and Introductions
II. Intro: Start-Up Fundraising
III. VC Presentations / Q&A
• BREAK: Networking and Beverages
IV. More on VCs and Fundraising: Best Practices.
• WRAP-UP: Networking and Beverages
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I. Kick-Off and Introduction
Raising money is difficult…….especially for early stage ventures.
Why? At least part of the answer is:
• The “market” for early stage investment is complex, nuanced
and can be “bewildering”….especially for 1st timers.
• Finding investors is difficult……getting investors to write a check
(can seem) nearly impossible: “1% of start-ups get funded”
• Lots of “noise” no shortage of advice
What will help?
• Understand the marketplace, people and processes that are at
work
• Improve / adapt your venture and approach.
• …..Become a “student” of the art and science of fundraising
Seminar Rationale: Why are we here?
Tonight: Get some insider perspective from VC investors about
•How they operate?
•What they invest in?
•Why? ……………… With some specific examples.
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Better understanding of fundraising and VCs in particular
A set of specific insights that will *change* your approach.
A “to-do” list: starting point(s), actions, things to try.
A set of recommended resources to consult and learn more
from.
A few new relationships with others in the NYC start-
up/fundraising ecosystem: fellow entrepreneurs, investors, etc.
Answers to specific questions about fundraising / VCs that you
might have.
What would I like you to walk away with?
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After B-school: joined a start-up management consulting firm Mitchell Madison
Group; focus on Strategy/Operations/IT for financial services, tech, outsourcing,
private equity/VC clients (1993 to 2000)
Walker Digital: helped set-up and run an early “internet incubator” (2000)
Independent Advisor / Turn-arounds: Advised VC and PE Firms on portfolio
company strategy and new investments; joined the management team of two
companies
Currently:
• Early stage investor and advisor to start-ups
• Investor and advisor to VC and PE funds
• RosePaul Ventures is my proprietary fund
• Member and director at New York Angels
More on me and RosePaul Ventures: www.RosePaul.com
Tom Wisniewski: My background
Born in NYC; grew-up in Montclair, NJ
Physics and Philosophy major undergrad
(Clark University); MBA at Tuck School
(Dartmouth)
1st Job: Programmer at Morgan Stanley then
moved to Investment Banking
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So….what questions do you have about VC’s and Fundraising?
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????
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NYC Venture Activity: Significant Increase
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Source: CB Insights: http://www.cbinsights.com/new-york-venture-capital#vc-and-angel-financing-trends-in-ny
II. Intro Start-Up Fundraising
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NYC Venture Activity: Changing Mix – More Seed
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Source: CB Insights: http://www.cbinsights.com/new-york-venture-capital#vc-and-angel-financing-trends-in-ny
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Sources of Investment: Seed Fundraising, Angels and VC’s
Stage (Pre-Round):
• Expected to
have:
• An idea, initial/rough
b-plan
• Initial founders, key
advisors
• Path to ???
• Detailed b-plan,
• Key founders (bus & tech) full-time
• Prototype/alpha done and tested,
• Some piloting (paying?)
customers, some revenues?,
• All legal documentation in place,
board of directors
• Path to break-even or next funding
• Significant variation among firms
but…. Angel req. +:
- Anchor clients on board, revenue
growth (B2B),
- Growing base of users, with strong
usage trends (B2C)
- …..Growth potential! Credible
path to $100M Rev
• Don’t Expect: • $ Rev, Customers,
Minimum Viable
Product (MVP); full
legal documentation
• Income (e.g. cash flow positive);
all key management ; completely
developed business model (e.g.
understand it will change)
• Income (e.g. cash flow positive)
Who/what are
they?
• People you already
know, that trust
you, and (maybe)
understand your
venture
• Experienced early stage
investors (individuals or a group)
• Accredited Investors.
• Angel investing is not their “job”;
may not be F/T endeavor
• E.g.: NY Angels, GoldenSeeds
• Firm with multiple professionals that
raises, invests and manages
individual funds (other people’s $)
• Working F/T (this is their job…)
• E.g.: Greycroft, ffVC, Union Square
Angel InvestmentFriends and
FamilyVenture Capital
“You”
aka Bootstrapped
Earlier Stage Later Stage
Round Size $: • $10’s of K
to $100K
• $100’s of K
to $1M+
• $500K to
$1.5M
Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K
Valuation (Pre-
Mon):
• < $1 M • $1 – 5 M • $5-10 M
“Seed” VC “Traditional Series A” VC
• $5M-$15M
• $3M – $5M
• $10 – 25 M
“Seed”
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III. VC Presentations / Q&A
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John Frankel, ff Venture Capital
Ellie Wheeler, Greycroft Partners
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IV. More on VCs and Fundraising: Best Practices
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Sources of Investment: Seed Fundraising, Angels and VC’s
Stage (Pre-Round):
• Expected to
have:
• An idea, initial/rough
b-plan
• Initial founders, key
advisors
• Path to ???
• Detailed b-plan,
• Key founders (bus & tech) full-time
• Prototype/alpha done and tested,
• Some piloting (paying?)
customers, some revenues?,
• All legal documentation in place,
board of directors
• Path to break-even or next funding
• Significant variation among firms
but…. Angel req. +:
- Anchor clients on board, revenue
growth (B2B),
- Growing base of users, with strong
usage trends (B2C)
- …..Growth potential! Credible
path to $100M Rev
• Don’t Expect: • $ Rev, Customers,
Minimum Viable
Product (MVP); full
legal documentation
• Income (e.g. cash flow positive);
all key management ; completely
developed business model (e.g.
understand it will change)
• Income (e.g. cash flow positive)
Who/what are
they?
• People you already
know, that trust
you, and (maybe)
understand your
venture
• Experienced early stage
investors (individuals or a group)
• Accredited Investors.
• Angel investing is not their “job”;
may not be F/T endeavor
• E.g.: NY Angels, GoldenSeeds
• Firm with multiple professionals that
raises, invests and manages
individual funds (other people’s $)
• Working F/T (this is their job…)
• E.g.: Greycroft, ffVC, Union Square
Angel InvestmentFriends and
FamilyVenture Capital
“You”
aka Bootstrapped
Earlier Stage Later Stage
Round Size $: • $10’s of K
to $100K
• $100’s of K
to $1M+
• $500K to
$1.5M
Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K
Valuation (Pre-
Mon):
• < $1 M • $1 – 5 M • $5-10 M
“Seed” VC “Traditional Series A” VC
• $5M-$15M
• $3M – $5M
• $10 – 25 M
“Seed”
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Early L
ate
Venture Capital
Mostly later stage
3,400 deals
$0.5-1.0B per
YearAngel Capital
49,000 deals
Mostly early-stage
$20B per Year
Deal Volume and Stage: VC’s vs. Angels
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Investor Profile: RosePaul Ventures, Tom Wisniewski www.rosepaul.com
Direct “Angel” Investor in Companies
• $25K-250K investments; Typical valuations: $1-5 Million,
• Typical Stage: at least some “product” done, some customer/sales traction
• Sector focus: Opportunistic generally within internet/software space;
- fair amount of Saas B2B, and consumer “marketplace” models, ecommerce enablers.
- NOT (or not much?): hardware, heathcare/ pharma, cleantech
• NYC based: 50% investments in NYC area companies; total of ~80% NE overall (e.g
Boston, DC), 20% West Coast.
• Examples:
- Sociocast (social/behavioral big data analytics)
- LiveLook (Saas, live collaboration sales/service platform)
- Anvato (Ad insertion to live video streaming via proprietary machine vision)
- Moveline (Uber for the moving industry)
- Bizodo (Saas, paperwork automation; “Adobe 2.0” internet document sharing)
- Movio (Digital “RedBox”; content delivery via “last 100 ft” of wifi internet)
- HeTexted (Relationship advice forum generating content, media opportunities)
- Wanderu (Kayak for ground transportation)
- DealFlicks (a “Priceline” or “Hotel.com” for movie theater tickets)
- iCharts (tool that enables engaging, sharable, embedible chart content)
Investor in Funds
• In addition to direct investments in start-ups, invest in VC and PE funds.
• Examples:
- Social Starts (Seed fund for start-ups leveraging the Social Web)
- Brooklyn Bridge Ventures (Charlie O’Donnell’s fund)
- Entrepreneurs Roundtable Accelerator (ERA Fund)
- Greycroft Partners (Venture Fund)
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Who are these “Angels”? What do they look like?
Experienced, successful entrepreneurs: frequently multiple exits
• Some from “tech-start-ups” some from other businesses
• Usually some link to
Successful “corporate” business people: CEO or CxO-types
Older: most are in the 40-60 age group. But there are also notable angels
in their 20’s and 30’s e.g. newly minted start-up millionaires
3 – 10+ Angel Investments
~10% of investible capital in Angel Investments
Differ *widely* in: Industry/Functional Experience, Investment Expience,
Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal
do’s/don’ts and hot buttons.
Lists? Not many. All are partial. AngelList? Gust? Other?
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NY Angels Profilewww.newyorkangels.com
Member Profile: ~100 investor/members; several early-stage funds; Member
backgrounds are generally representative of the tech / entrepreneurs / industries in NYC:
software, e-commerce, ad-tech, finance, media
Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC
Area.
Stage. Mostly early stage (with some customers/revs), some pre-revenue
Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M – 4M;
investments tend to range from $250K to $1M+;
• For larger rounds, NYA often leads the deal and helps find the rest of the capital by
sharing/syndicating the deal with other Angel Groups
Group Structure / Investment Decisions. NYA core structure is as a group of individual
investors. Individual investors “opt in” to deals and make their own investment decisions.
• Typical member invests $25-50K in a deal.
• In addition to the core “opt-in” model, NYA has just closed a small seed fund that will
operate in parallel (using a “democratic model” for investment decisions)
History/Background. NYA has invested $45M+ in 70+ companies.
• We are very active in the NYC entrepreneurial / early-stage ecosystem
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Who are the “right” investors? Where is there a “fit”?
Just do it? Just go pitch some investors? …..Nope. Fit is critical.
• Wrong question: How do I pitch “investors”?
• Right question: Who are the “right” investors? ….*then*…. How do I pitch this
specific, individual investor?
Reality Check. As a general rule, “people invest in things that they
understand and have experience with”
• Find investors that come from industries, sectors, business models etc. that
are same/similar to your venture and the customer markets it serves.
• If I have never invested in Caribbean real estate, oil wells….or communication
hardware, it is very unlikely that I will do it with you.
• For Angels/Angel Groups: use online bio’s / LinkedIn / AngelList to identify
likely “good fit” Angels
• For VCs: Find the right person at the fund; Individuals at the fund focus on
different sectors. The web site often spells it out.
Thought Exercise:
• “What would the “perfect” investor look like?”
• …he/she probably doesn’t exist but this will help you :
- target, prioritize, know one when you see them”
- To be specific (and effective!) when asking for referrals
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How to “get” a pitch meeting?
Why?
• Pitching by its very nature can be awkward. “This guy wants
something from me.”
• Having a pitch be the first thing someone hears from you can be
off-putting. “Do I know you?”
• Most investors mean-well, and would like to help…but
- they are real busy
- its very challenging to understand new ventures quickly
- Its tough to say “no” (easy to avoid, or say maybe)
Solution: Build a relationship before you need to pitch. OK,
How?
• Give, don’t Ask: what can you do for them?
• “Ask for advice, not money” . Turn people into advisors…..then
investors.
• Debate / Discuss a topic, Ask opinion about X.
• Find ways to “show” rather than “tell”: show me your smart, don’t
tell me your smart 17
How do I build a relationship first?
Wrong Question…
Right Question:
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III. Additional Q&A, Feedback Welcome
Feedback on this class:
What did you like most about this seminar?
What could be added and improved to make it better?
What other topics would you like to see a seminar conducted on ?
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Thanks!
Thomas Wisniewski
Contact Info
Email: [email protected]
RosePaul Ventures: www.rosepaul.com
This presentation and previous ones are accessible on www.rosepaul.com
New York Angels www.newyorkangels.com
New York Angels Educational Meetup: http://www.meetup.com/NY-Angels/
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