What Investors Want Vancouver, January 2017 Boris Mann, Founding Director, Open Angel
About Open Angel Connecting Founders & Funders We measure success by cheques written First event Startup Week November 2014 Formalized as non-profit BC society November 2015 Investment dinner events 3x per year 6-8 companies presenting 30-40 active investors About 50% of presenting companies receive at least one investment Open Angel Portfolio 80% IRR if someone had invested in all presenting companies, Nov 2014 to Aug 2016
Ideal Presenting Companies Early stage digital / tech company First or second funding round Traction pre-product is probably too early, pre-launch is OK for strong teams Raising up to $1M
Investable Businesses Are you building an investable business? All businesses are not a candidate for venture investment Big idea, big market, big growth, big outcomes At the angel investor stage, venture-sized outcomes are not the only good outcomes
Bootstrapping Not all companies are right for the venture funded path Recurring revenue SaaS companies are a great fit to grow organically Our guideline at Open Angel is that you should be making $5K MRR as a B2B SaaS company before you look for investment Early bootstrapping can still lead to later venture funding
Big Hairy Audacious Goal You need a BHAG Vision and purpose that form core passion & true north for the company & team You also need an execution plan: What can you build and sell today? Prove you can ship Charge money so you don t die in the short term
Early Stage Funding Pre Seed: < $500K Working code & customers Seed: > $500K to $1.x M Paying customers or significant traction Day job F&F $30K prototype Cofounder Accelerators Futurpreneur Series A: $1M++ At least one known, repeatable sales channel / distribution model
What Investors Want Investment Deck Team / Market / Solution (+ Proprietary Tech or Distribution) Use of Proceeds (aka Budget for 12 months) Hiring plan, sales & marketing hypotheses User Model Bottom up growth model Cap Table including scenario for next round
Investment Deck An investment deck should be standalone and can be sent by email and make sense without you live talking about it Market: who are the customers? what are their pains? Solution: how are you solving the pain? have you developed novel technology or marketing channels? Traction: customers? revenue? what proof points do you have to share? Distribution: how do you think you will sell it to customers? Team: why you, why now, why this?
Use of Proceeds / Budget The 5 year proforma is not very useful A 12 month budget is fiction. A 5 year plan is science fiction Hiring: who will be working on it full time, who do you need to hire? Marketing: what marketing experiments will you run? How many customers? Which methods of marketing work better than others? What are the end goals? Customer adoption, revenue, building out product features
How much? Your plan determines how much you need If you ask for too little, investors won t take you seriously You re saying this isn t a BHAG, or you re saying you don t know how to budget 5 people at $5K per month + some monthly expenses = ~$30K per month, $360K for 1 year People are likely your main cost for any tech / software business
User Model A bottom up model of how you add customers, lose customers, and bill customers Self serve: we do marketing, drive traffic to our website, and users sign up / trial / pay us Enterprise: we phone a lot of people, have a lot of meetings, and spend 1-3 months+ to sign up a customer In reality: trying lots of things to beg anyone to use your product, so at least you can get feedback
References How to Create an Early Stage Pitch Deck, Ryan Spoon http://www.slideshare.net/ryanspoon/how-to-create-anearly-stage-pitch-deck 11 Startup Pitch Archetypes, Jason Shen http://www.jasonshen.com/2012/eleven-compelling-startuppitch-archetypes-with-examples-from-yc-companies/ Pitch Deck Template http://www.slideshare.net/pitchdeckcoach/the-ultimatepitch-deck-template-by-pitchdeckcoach
Pitch Structure (Ryan Spoon)
11 Pitch Types (Jason Shen) #1 Traction #7 Service at Scale #2 X for Y #8 Wouldn t it be cool if #3 Personal Story #9 Insane Tech #4 Pivot / Offshoot #10 The Dream Team #5 Evolution Next #6 Painting the Future #11 Consumerification of Enterprise
Pitch Deck Coach
What is a cap table? aka capitalization table Record of all the major shareholders of a company, percentage ownership, and what people paid for various shares over time Your lawyer keeps an official version, you ll want to have an easily updatable one for doing what if scenarios related to investment captable.io is a great tool for managing your captable, including great scenario builders