Workshop How to attract investors Andrea Di Anselmo META Group Civitanova Marche June the 5 th
Presentation Index What to understand about investors What to know for presenting a business idea
META Group ur mission Knowledge to Market Shaping Policies Entrepreneurial Regions Investing in start-ups
Consulting Shaping Policies Consulting Entrepreneurial Regions Entrepreneurship Development Investing in start-ups Fund Management Technical assistance in the implementation of programmes and projects in the areas of research & innovation, entrepreneurship and finance. Feasibility studies of intervention tools such as science parks, accelerators and early-stage financing mechanisms; Design and test of novel support tools to boost competitiveness innovation and entrepreneurship at regional level. Design of Strategies and Action plans to foster innovation and entrepreneurship including mapping the process of turning knowledge into market solutions, policy, benchmarking and accessing practices, implementation road mapping, Smart Specialisation Strategies.
Entrepreneurship Development Entrepreneurial Regions Entrepreneurship Development Innovation ecosystem activation through actual challenges based approaches. Solutions driven by entrepreneurship and engaging regional vs. global players. Globe Innovation Platform Training Developing creativity and entrepreneurship through a series of internationally recognised formats.
Entrepreneurship Development Facts and figures Entrepreneurial Regions Entrepreneurship Development Investing in start-ups Fund Management rganization of the 2015 Global Entrepreneurship Conference in Milan European wide partnership with Kauffman FastTrac to deliver NewVenture, TechVenture and GrowthVenture entrepreneurship courses; Worldwide delivery of Investor Readiness format AyR for high growth companies; Supporting European scientists in exploiting their results through the Research Helicopter ; Leading the development of Creativity Camp in Europe. Global Entrepreneurship Week Kauffman Foundation European Business Network Creativity Camp International Association of Science Parks
Fund Management Investing in start-ups Fund Management Ingenium is an early stage risk capital co-investment fund typically built around a Region of a few million inhabitants focusing on Seed and Start-up but also considering expansion phase; Target: companies with high value of intangibles, knowledge intensive companies with high growth potential; Regional coherence of sector of activity. Angel Fund is the co-investment fund for Business Angels Clubs and Networks. Ithas been created on the basis of the experience and results reached in the USA, the Netherlands, France and the United Kingdom. Science Fund represents the missing link between academia and industry, providing the much-needed proof of concept finance and business coaching to academic researchers and would be entrepreneurs. Spark Fund makes it possible for science parks to access venture capital by creating a partnership among a number of them thus reaching the critical mass needed for a fund to be financially successful
Fund Management Facts and figures Investing in start-ups Fund Management 8 seed capital funds (approximately 100M EUR) currently under management across Europe Leveraging on the relationship with international informal investors (members of the BoD of IBAN, BAE and members of AIFI Venture Capital Committee) Unique expertise in implementing public / private seed vehicles (co-investment mechanism, compliance with state-aid rules, the pari passu principle, etc.) Business Angels Europe Italian Business Angels Network Association Ass. Italiana del Private Equity e Venture Capital
Activities with Business Angels Consulting Entrepreneurship Development Fund Management Angel Fund is the Coinvestment instrument for Business Angels Clubs and Networks. It has been designed capitalising the experience gained in the USA, Netherlands, France and United Kingdom. Ingenium is a risk capital co-investment fund typically built around a Region of a few million inhabitants focused on Seed and Start-up stages but also considering expansion, targeting companies with high value of intangibles and high growth potential. Feasibility studies of early-stage financing mechanisms, accelerators and incubators; Design and test of novel tools to support competitiveness, innovation and entrepreneurship. Coaching programme on how to access early stages investors and business angels Investor readiness train the trainers workshops on how to support entrepreneurs in accessing risk capital funds and business angels. Ready to invest programme for business angels
What to understand about investors
Main contents o o o The early stage investing market The investment phases and actors Differences among Early stage and VCs
The early stage investing market
Financial Market segmentation The enterprise finance market can be divided in 4 segments: I Initial and unorthodox sources of funding; II Equity; III Debt finance; IV Combination of equity and debt V Public Finance
I INITIAL & UNRTHDX SURCES F FUNDINGS: entrepreneurs savings; profit reinvestments; friends and family savings; second mortgage; personal credit cards; customer advance; delay of payments; premises sharing; employing relatives at below market salaries. II EQUITY: seed and pre-seed capital; business angels; venture capital; corporate ventures; IP and post IP. III DEBT FINANCE: bank credits: short or long term loan, unsecured or micro loans; commercial debt; public/semi-public loans; bonds; factoring leasing franchising; IV CMBINATIN F EQUITY AND DEBT : MEZZANINE V PUBLIC FINANCE: grants; reimbursable advances; guarantees.
The investment phases and actors
Knowledge intensive companies need (a lot of) money! Different stages of business idea development require different source of funding!
Early stage risk finance (and more) Early Stage Financing Turnover Cumulative Cash Flow Pre-seed up to 0,5 $ Mln Seed up to 1-2 $ Mln Expansion Capital 10/50 $ Mln Proof of concept funds Business Angels Seed funds Product definition No turnover Venture Capital Start up 5/10 $ Mln Product Completion Initial commercial feedback Second Round 10/12 $ Mln Venture Capital Product Consolidation Structuring of commercial channels Strategic Partnerships Continuous ideas/concepts/ products innovation Consolidation of the organisation Partnerships and acquisitions
FINANCIAL CYCLE (and more) Early stage (Proof of concept funds, BAs, Seed Funds, Venture Capitalist) Later stage (Venture Capitalist) Pree-Seed Seed Start up Second round Expansion Capital Scope Identification of Market potential Prototyping And product development Commercialscale manuf. And sales Structuring commercial channels Continuous ideas/concepts/ products innovation Company life-cycle Prebusiness plan Business plan Company established but not invoicing Building up turnover Making Profits
Differences between Early Stages and VC investors
All money is not the same!!! (Christian Saublen, Eurada)
Different forms of finance do not have the same aims. Motivations and criteria of funding parties vary according to i) the life cycle of the business idea and ii) the level of risk linked to it. This explains the Anglo-Saxon expression «All money is not the same».
Need to Know Each financial partner has its own expectation and Its own requirements and evaluation criteria (see paper All money is not the same EURADA pg 16)
Financial tools (early stage financing) for knowledge based ventures o Proof of concept funds o Business Angels o Seed funds
Early stage investors evaluation approach Proof of concept Innovativeness (+) IPR Valorisation of research results Entrepreneurial spirit
Early stage investors evaluation approach Business Angels (informal investors and Spin-off corporate venturing) Atmosphere of trust between positive feeling, confidence (+) individuals and Possibility of hands on intervention Credible business plan in the eyes of the Business Angel Availability of exit route Return on investment (capital gain)
Seed capital fund Early stage investors evaluation approach Team (+) Clear, defendable Business model Intellectual capital Growth potential (High) Availability of exit route Return on investment (capital gain)
Private equity evaluation approach Venture Capitalist o A young, small venture, still needing money o A well run-in team o Fast growing markets o Scalable products o Client list & track record (+) o Return on investment (capital gain) o Minority shareholding position
Private equity evaluation approach Buy-out o Consolidated companies with a well defined portfolio of clients and products o Assets (+) o Well known sectors o RI: 2-3X o Control position Mainly debt capital
What to know to present a business idea to investors
What we need to understand for successfully presenting a business idea What early stage investors look at (requirements for investment ready businesses) How to pitch Tips for successfully presenting the business idea to risk capital investors
Need to Know Key elements seed investors look at You need to be an entrepreneur You need to have a business not an invention You need to have a core team You need to have a clear view of financial resources needed Make money is not the only motivation but is how shareholders measure success
Need to Know Issues of concern for an investor (to be well understood by investor ready entrepreneurs) Want their money back Want more (much more) than they put Want to know when Want to measure the opportunity/risk
Need to Know 5 keys to succeed Team Team Team Product Market A poor team ruins a great project
Need to Know The team (A manager is not an entrepreneur) Requirements Ability to deliver Ambitions Expectations Serial entrepreneurs (If new have the proper board )
TIPS Have a simple and transparent structure (this is why universities can represent a problem, they are never simple and transparent, better a license agreement) Have milestones
Common weaknesses Too little market ambition (no willingness to go global from day 1) People think too small (be ambitious but do it by milestones) A Business is different from an R&D project
Need to Know VCs invest in 1% of what they see 20% results in a total loss 20% succeed 60% survive
Need to Know Main evaluation criteria of fund managers
Need to Know The Fund screening criteria o o o Formal screening criteria Strategic screening criteria Qualitative screening criteria
Formal screening criteria some examples o Location. o Sector o Age of the company o Level of investment
Need to Know Strategic screening criteria some examples o presence of an intellectual capital management strategy (IPR.) o presence of a market ready product/ service o a good percentage of IRR
Qualitative screening criteria some examples o verall Clarity and coherence of the Business plan o presence of all the main section of the business o o plan coherence in between the sections; the way each section is presented (clarity)
Need to Know The main elements of the Business Plan are: Business idea and Business model Company Product/service Market, customers, competitors Company strategy rganization and management Financial forecast
Screening Questions Nice to Know 1) Is the team of sufficient breadth, balance and quality to make its ideas happen? 2) What roles will the team members play in the venture? 3) Are the team members fully devoted to the venture and their roles in the group? 4) Will the ego of the founder(s) get in the way of success? 5) Is the team focused on its target market? 6) How long will it take from the current stage of development to bring this to market? 7) Can this venture achieve a leadership position in its market? 8) What is the business model? 9) Is the business defensible from competitors? 10) Is the business opportunity as presented both highly attractive and clearly realistic? 11) What is the amount of up-front capital investment required? 12) Does the team have a clear plan for using the investment money received? 13) What is the expected time and amount of pay-off to investors? 14) Why is this business going to be around and a real world winner in 5 years?
How to pitch Tips for successfully presenting the business idea to risk capital investors
PITCHING: to clearly and convincing present your business proposition in a few minutes
A good pitch is As important as the technology or the solution you are proposing Why is it so difficult?
Entrepreneurs and investors have different points of view and interests Entrepreneur: Loves his business idea ( The best business ideas in the world ) Knows very well the product but not so much investor expectations Aims at developing a successful product «There are not enough investors willing to finance businesses» Investor: Looks at the business idea as a project Does not care about the product/technology but about doing a profitable investment! Wants to get the a 10x exit «There are not enough investment ready projects»
a) Message & Structure b) Visual story c) Delivery
MESSAGE What did we learn at the elementary school?
A good composition (presentation) contains: Introduction Key content Conclusions
Message - Get Prepared 1) Why are you pitching What is your objective?
Message - Get Prepared 2) Who is the audience? Whoare they? Whyare they here? What do they look for (screening criteria)? Howcan you best reach them?
Message - Get Prepared 3) What are you looking for? how much to do what
PITCHING Structure 10 slides (10 minutes pitch) containing all is needed to : Let a third person understand the business (no science: what, not why) Explain the business model and exit strategy Convince the audience that what is offered is what is asked for
STRUCTURE - Need to Know PITCHING Structure Introduction to the business opportunity Achievement to date Team Product / Service Target Market Business Model Economic and Financial objectives Investment plan Why investing in us?
Visual story Delivery
Need to Know The first 30 seconds are crucial you have to make an impact by presenting What problem you are going to solve Your value proposition (how does you solve such problem?) Why you are the right team to achieve the result Why your company is the best deal for investors
Investors want Passion Perseverance Profits Ability to deliver Ambitions
Remember An effective communication is based on: 7% What you say (Content) 38% How do you say it (Style+Voice+Attitude) 55% Body Language
Key elements Voice Body language Eye touch Attitude Presence Use of the space
Need to Know Avoid slow start (first 30 seconds are crucial) Say only key things Do not speak too fast Use short clear sentences Use pauses Talk to the audience Respect time
Exercise!!!
An example of pitch http://www.youtube.com/watch?v=kzcqtxa5gc8 http://www.youtube.com/watch?v=mhkxpn_g_40
City of Šibenik DISCLAMER: This document has been produced with the financial assistance of the IPA Adriatic Cross-Border Cooperation Programme. The contents of this document are the sole responsibility of META Group Company, service provider of Marche Regione, and can under no circumstances be regarded as reflecting the position of the IPA Adriatic Cross-Border Cooperation Programme Authorities. utput identification code: LP_supporting_guide_how-to-pitch_WP6.3