Ready for VC? A short cheklist

transcript

Ready for VC? A short check list.

Olivier Witmeur

First seek to understand,then to be understood.

Stephen Covey, The Seven Habits of Highly Effective People, Habit 5

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):1. Management team2. Uniqueness3. Growth potential4. Exit

1. Do your Homework.

Team IPPositionBoard Partnerships

Investor Presentation

Executive Summary

Mantra

MarketResearch

Environment Analysis

(Competition incl.)Benchmarking NetworkingProof of

Concept

Business Model Vision (Exit incl.)

From BP To Pitch Formal Aspects

Sales & MarketingFinancial

PlanProduction / SCM

OrganizationFinancings

Milestones / Stages

Risk & sensibility Analysis

Key Success Factors

2. Understand that it is a people business!

Experience

Commitment

Competences

TrustworthyAdaptable

Passion

Vision

Open Mind

What makes you (truly) unique

Team, know-how…

Technology, secrets,

patents…

Partnerships, exclusivity…

Business model

First Mover Advantage

Brand, location…

4. Scalability, Growth, and Speed

• Internal capabilities vs outsourcing

• Direct vs indirect sales

• Sales process duration

• Repeated business

Growth

• Focus on a niche• Market

diversification (international)

• Product diversification

• Upstream & downstream integration

Scalability

• Production constraints

• Sales & Marketing constraints

• Investment required• Additional

developments

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

6. Focus on the deal (not on entry valuation)

Critical Negotiation Items

• Governance• Use of funds• Key People• Milestones• Options• Exit organization

Contingent valuation

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.

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 modest- Passionate …- … but realistic

• Avoid:- Too technical- Too much numbers- Too much names- Jargon (Argh!)

• Prepare and rehearse

I WANT IT NOW!

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 at European Level: www.evca.com

Final thought

You never get a second chanceto make a first impression.

Thank you

CONTACT:Olivier WitmeurSolvay Brussels School Of Economics and ManagementUniversité libre de Bruxelles

owitmeur@ulb.ac.bewww.olivierwitmeur.net