Published on March 5, 2010
Ready for VC? A short check list.
First seek to understand,then to beunderstood. Stephen Covey, The SevenHabits of Highly Effective People, Habit 5 Galileo Venture Academy - Olivier Witmeur ©2010 2
The name of the game The VC business is to make money with equity position in non listed firms: Invest and sell (exit) Make 3 to 10 times the investment over 3-7 years Growth potential and timing are mission critical. Money is invested to support growth: R&D, S&M, internationalization… VC help/support entrepreneurs to grow their business (partner) Main VC criteria (beyond a strong BP): Management team Uniqueness Growth potential Exit Galileo Venture Academy - Olivier Witmeur ©2010 3
1. Do yourHomework. From BP To Pitch Formal Aspects Mantra Pitch Executive Summary Investor Presentation Key Success Factors FinancialPlan Production / SCM Milestones / Stages Sales & Marketing R&D Financings Risk & sensibility Analysis Organization Team IPPosition Board Partnerships Business Model Vision (Exit incl.) MarketResearch Environment Analysis (Competition incl.) Benchmarking Networking Proof ofConcept 4 Galileo Venture Academy - Olivier Witmeur ©2010
2. Understandthatitis a people business! Experience Competences Passion YOU Commitment Vision Trustworthy Adaptable Open Mind 5 Galileo Venture Academy - Olivier Witmeur ©2010
What makes you (truly) unique Team, know-how… Partnerships, exclusivity… ? Business model Technology, secrets, patents… Brand, location… First Mover Advantage 6 Galileo Venture Academy - Olivier Witmeur ©2010
4. Scalability, Growth, and Speed Speed Internal capabilitiesvs outsourcingDirectvs indirect salesSales process durationRepeated businessGrowth Focus on a nicheMarket diversification (international)Product diversificationUpstream & downstream integrationScalability Production constraintsSales & Marketing constraintsInvestment requiredAdditional developments7 Galileo Venture Academy - Olivier Witmeur ©2010
Internal capabilitiesvs outsourcing
Directvs indirect sales
Sales process duration
Focus on a niche
Market diversification (international)
Upstream & downstream integration
Sales & Marketing constraints
5. The exit route Main exit routes : Trade sales IPO Buy-out (Convertible Debts) Multiple aspects to take into consideration when analyzing exit path and timing: Management / Founders Personal life impact! Company Development stage Investor Funding cycle Market Market conditions 8 Galileo Venture Academy - Olivier Witmeur ©2010
6. Focus on the deal (not on entry valuation) Critical Negotiation Items GovernanceUse of fundsKey PeopleMilestonesOptionsExit organization Contingent valuation 9 Galileo Venture Academy - Olivier Witmeur ©2010
Use of funds
About Valuation VCs value the future performance, not the past. V = F (future cash-flows, value @ exit, exit time, expected return) Typical expected return: Seed 60-100% Start-up 50-60% Early development 40-50% Growth 30-40% VC are not looking for majority position as such, especially during first rounds. Current valuation are on the (very) low side … … but valuation correction mechanisms can be very important. Galileo Venture Academy - Olivier Witmeur ©2010 10
7. Pitch (again and again) Having a mantra helps The problem or ‘the pain’ (must be obvious) Your solution (is unique and ready) Market size (is big) (A little bit on) Competition Business model (value creation is for sure) Team (is great) Achievements to date (are impressive) Credentials You need … € and a meeting! Be:Smiling (fun is OK!)Humble but not modestPassionate …… but realisticAvoid:Too technicalToo much numbersToo much namesJargon (Argh!)Prepare and rehearseI WANT IT NOW! 11 Galileo Venture Academy - Olivier Witmeur ©2010
Smiling (fun is OK!)
Humble but not modest
… but realistic
Too much numbers
Too much names
Prepare and rehearse
Where to go? VCs organize multiple financial rounds: Seed & Start-up stage: <500k€ with Business Angels and local investors Early growth: 1M€-2M€ with national VC firms Fast growth: >2M€ with international VC syndicate, often lead by A national VC National VC association in most countries BVA in Belgium: www.bva.be AFIC in France : www.afic.asso.fr BVK in Germany: www.bvkap.de BVCA in UK: www.bvca.co.ok … EVCA atEuropeanLevel: www.evca.com Galileo Venture Academy - Olivier Witmeur ©2010 12
Final thought You never get a second chanceto make a first impression. Galileo Venture Academy - Olivier Witmeur ©2010 13
Thankyou CONTACT: Olivier Witmeur Solvay Brussels School Of Economics and Management Université libre de Bruxelles email@example.com www.olivierwitmeur.net 14 Galileo Venture Academy - Olivier Witmeur ©2010
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