VanFUNDING 2016: Capital raising options for startups and scalups (Alixe cormick)

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Information about VanFUNDING 2016: Capital raising options for startups and scalups...

Published on October 27, 2016

Author: CraigAsano


1. #VanFunding RAISING CAPITAL: Capital Raising Options for Start-Ups and Scaleups by Alixe Cormick Angel Investor; Member of: Kieretsu Forum, Vancouver Angel Technology Forum (Vantec), and various advisory boards; and a corporate securities lawyer October 18, 2016

2. Disclaimer • Information purposes only: The materials and information contained in this presentation are intended to provide information (not advice) about equity crowdfunding and related matters. You should not act on this information presented without first consulting with an attorney. • No Attorney-Client Relationship Created: This information on this presentation is not intended to create, and receipt of it does not constitute, an attorney-client relationship having been created by us with you or anyone else. Do not send us confidential information until you speak with us and receive our authorization to send that information to us. The act of talking to us informally or sending an email to us will not create an attorney-client relationship. If you are not currently a client of Venture Law Corporation, your email will not be considered privileged and may be disclosed to other persons. We promise, however, to keep your name confidential unless you tell us otherwise when talking to any regulators or third parties about securities law matters. • No Warranties: The information provided in this presentation is provided “as is”. We make no warranties, representations, or claims of any kind concerning the information presented is complete. We are not responsible for any errors or omissions in the content of this presentation or for damages arising from the use of the information provided under any circumstances.

3. @AlixeCormick #VanFunding Outline of Discussion • Your Initial Capital Structure • Create a Solid Capital Raising Plan • Find Investors • Must Haves for Businesses Looking for Investors • Your Pitch Deck • Deal Breakers • Understanding the Investment Process • Last Minute Tips

4. Your Initial Capital Structure: Pre-Outside Capital • Rough guideline for tech & biotech • Founders: 80%-90% • Team Members: 10%-15% • Advisors: 1%-3% • Compensate for value not hours worked! • Put in writing and use vesting agreements @AlixeCormick #VanFunding

5. Your Initial Capital Structure: Pre-Outside Capital - Pricing • Skin in the game • Shares issued for less than $0.01 makes a Canadian IPO less likely • Effect on pricing when looking for outside capital • Create a cap table: Excel Example @AlixeCormick #VanFunding

6. Your Initial Capital Structure: Outside Capital Rounds • Non-dilutive capital • Common, preferred shares, and debentures • Pre-seed • Seed • Series A and subsequent rounds @AlixeCormick #VanFunding

7. Your Initial Capital Structure: Outside Capital Rounds Round Amount Purpose Pre-$ Valuation $ Sources % of Business Pre-Seed $25,000 to $300,000 Build & test MVP/Proof of Concept/R&D $100,000 to $1M Bootstrap/FFB/ Crowdfunding/Gov Grants 5% to 25% Seed $300,000 to $1M Beta Test/Launch Product/Proof of Product Solution Fit $1M to $3M Angels/Crowdfunding /Seed VCs/Co- investment funds 10% to 50% Super Seed $1M to $2M Working Business Model/ Proof of Product Market Fit/Product Traction $3M to 10M Angels/Seed VCs/Crowdfunding/ Strategic Investors 10% to 50% Series A $2M to $30M Scale customer acquisition and revenue $10M to 100M VCs/Family Offices/ Crowdfunding/Instit- utional/ Strategic Investors/AltFin Platforms 20% to 50% @AlixeCormick #VanFunding

8. Your Initial Capital Structure: Valuation • Geography and investor group dependent • Look for comparable businesses • Ultimately a negotiation between investor and business • Expect 10% to 30% dilution per round • Use convertible debt or preferred shares if uncertain or to avoid significant dilution @AlixeCormick #VanFunding

9. Create a Solid Capital Raising Plan • Determine your key milestones or inflection points that will impact your value • What is the minimum amount you need to get to each point • What non-dilutive sources of capital are available to you at each stage? • Identify what you want to offer investors @AlixeCormick #VanFunding

10. Create a Solid Capital Raising Plan • Make a list of contacts that can help • Old school versus new school capital raises • Identify potential investors or credible market intermediaries • Sample, track, learn, and improve what you are doing to raise capital • Keep all doors open @AlixeCormick #Vanfunding

11. Find Investors: Identification • Friends and family • Angel investor networks • Free or almost free angel investor forums • Pay to play angel investor forums • Online accredited investor portals • Individual angel investors and venture capital firms • Introductions from professional advisors and others • Identification through research • Signaling angel investors and venture capital firms • Third-party finders @AlixeCormick #Vanfunding

12. Find Investors: Approach • Method 1: • Well connected angel/VC assists with introductions • Commitments; • Downstream intros and more commitments • Method 2: • Credible market intermediary streamlines process @AlixeCormick #VanFunding

13. Find Investors: Start-Up Crowdfunding Portals @AlixeCormick #VanFunding AB, BC, SK, MB, QU, NB, NS BC, SK, MB, QU, NB, NS BC, QU, NS, NB QU, NB, NS BC, NB BC BC

14. Find Investors: AI & OM Crowdfunding Platforms @AlixeCormick #VanFunding ONAB, BC, MB, ON, QU AB, BC, ON, QU AB, BC, SK, MB, ON ON ? AB, BC, ON AB, BC, SK, MB, ON, QU, NB, NS ON AB, BC, SK, MB, ON, QU, NB, NS, PEI, NFL AB, BC, ON, QU AB, BC, ON, QU

15. Main Crowdfunding Securities Law Exemptions @AlixeCormick #VanFunding

16. Canadian Small Business Marketplace Lending Portals @AlixeCormick #VanFunding Rates: 9.75% and up Rates: 6% and up Rates: 10% and up Receivable Financing Rates: 9% and up Rates: 15% and up

17. Must Haves for Businesses Looking for Money • Tax credits • Small Business Venture Capital Act • Scientific Research And Experimental Development Tax Incentive Program • Government grants – NRC Concierge Service • Product or service that addresses a large market need versus a want or nice to have • Team that can execute • Solid understanding of business and challenges @AlixeCormick #VanFunding

18. Your Pitch Deck • Bare Essentials: • Description of your company; • Team; • Problem or need (market opportunity); • Solution (make sure your name is on this slide); • Value proposition to investor; • Any traction you have; • Use of proceeds (may use a timeline or roadmap); • Summary & contact information. @AlixeCormick #VanFunding

19. Deal Breakers • Raising $ to replace debt; pay big salaries; develop an idea not a business; or with no clear purpose • One man team • No personal skin in the game • Unrealistic valuations • Serious character flaw(s) @AlixeCormick #VanFunding

20. NDAs – Non-Disclosure Agreements • Exceptions but, seasoned Angel Investors and VCs will not sign • Business plan contains no proprietary information • If you really want an NDA: • narrow coverage • introduce at due diligence stage @AlixeCormick #VanFunding

21. Understanding the Investment Process • Long process • Meet and greet first step • All investment basics must be met • Due diligence review • Terms may be renegotiated • Close in person @AlixeCormick #VanFunding

22. Last Minute Tips • Securing a key investor early will make raising capital significantly easier • In person meeting = 5x more $ than an email and 3x more $ than a phone call • People only invest if they know you, know the business, and like the investment opportunity @AlixeCormick #VanFunding

23. Thank-you and Good-Luck Venture Law Corporation 618-688 West Hastings Street Vancouver, BC V6B 1P1 Phone: 604-659-9188 Fax: 604-659-9178 Email: Website: Blog: Twitter: @AlixeCormick Google+: AlixeCormick @AlixeCormick #VanFunding

24. Resources Canadian Crowdfunding Specific Exemptions Start-Up Crowdfunding Exemption • BCI 45-535 Start-up Crowdfunding Registration and Prospectus Exemptions Form 1 - Start-Up Crowdfunding – Offering Document • Form 2 - Start-Up Crowdfunding – Risk Acknowledgement • Form 3 - Start-up Crowdfunding – Funding Portal Information Form • Form 4 - Start-up Crowdfunding – Funding Portal Individual Information Form • Form 5 - Start-up Crowdfunding - Report of Exempt Distribution (Form 5) (fillable form) • Start-up Crowdfunding - Purchasers Information (Schedule 1 to Form 5) (excel) • Start-up Crowdfunding Guide for Investors • Start-up Crowdfunding Guide for Businesses • Start-Up Crowdfunding Guide Preparing an Offering Document • Start-up Crowdfunding Guide for Funding Portals • CSA Notice 45-317 Amendment to Start-Up Crowdfunding Exemption (Jan 25, 2016) @AlixeCormick #VanFunding

25. Resources Canadian Crowdfunding Specific Exemptions National Instrument 45-108 - Crowdfunding • Notice of Approval MI 45-108 Crowdfunding • Annex A1 - Multilateral Instrument 45-108 Crowdfunding • Annex A2 - Form 45-108F1 Crowdfunding Offering Document • Annex A3 - Form 45-108F2 Risk Acknowledgement • Annex A4 - Form 45-108F3 Confirmation of Investment Limits • Annex A5 - Form 45-108F4 Notice of Specified Key Events • Annex A6 - Form 45-108F5 Personal Information Form and Authorization to Collect, Use and Disclose Personal Information • Annex A7 - Companion Policy 45-108CP Crowdfunding • Annex B - Consequential Amendments to National instrument 45-102 Resale of Securities @AlixeCormick #VanFunding

26. Resources Canadian Amended Offering Memorandum Exemption • Multilateral CSA Notice of Amendments to National Instrument 45- 106 - Prospectus Exemptions Relating To The Offering Memorandum Exemption • Changes to Companion Policy 45-106CP Prospectus Exemptions (Jan 7, 2016) • Amendments to NI 45-106 Prospectus Exemptions • National Instrument 45-106 Prospectus Exemptions • Companion Policy to National Policy Instrument 45-106 Prospectus Exemptions @AlixeCormick #VanFunding

27. Resources U.S. Securities Rules • Regulation D – Rule 506(c) • Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A Offerings; • Small Entity Compliance Guide; • Disqualification of Felons and Other “Bad Actors” from Rule 506 Offerings • Regulation A+ • Amended Conformed Version of Regulation A as Amended • SEC Title III Crowdfunding Final Rules • Crowdfunding Rule @AlixeCormick #VanFunding

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