Workshop“How to attract investors”
Andrea Di AnselmoMETA Group
Civitanova Marche June the 5th
What to understand about investors
What to know for presenting a business idea
Presentation Index
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META GroupOur mission
Knowledge Marketto
Shaping Policies Entrepreneurial Regions Investing in start-ups
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Entrepreneurial RegionsEntrepreneurship Development
Shaping PoliciesConsulting Investing in start-ups
Fund Management
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.
Technical assistance in the implementation of programmes and projects in the areas of research & innovation, entrepreneurship and finance.
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.
Consulting
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Entrepreneurial RegionsEntrepreneurship
Development
Glo
beIn
nova
tion
Plat
form
Training
Innovation ecosystem activation through actual
challenges based approaches. Solutions driven
by entrepreneurship and engaging regional vs. global
players.Developing creativity and entrepreneurship through a series of internationally recognised formats.
Entrepreneurship Development
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Entrepreneurial RegionsEntrepreneurship
Development Investing in start-ups
Fund Management
Organization 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
WeekKauffman Foundation European Business
NetworkCreativity Camp
International Association of Science
Parks
Entrepreneurship Development Facts and figures
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Investing in start-upsFund Management
Fund Management
Angel Fund is the co-investment fund forBusiness Angels Clubs and Networks. It hasbeen created on the basis of the experienceand results reached in the USA, theNetherlands, France and the UnitedKingdom.
Science Fund represents the missing linkbetween academia and industry, providingthe much-needed proof of concept financeand business coaching to academicresearchers and would be entrepreneurs.
Ingenium is an early stage risk capital co-investment fund typically built arounda Region of a few million inhabitants focusing on Seed and Start-up but alsoconsidering expansion phase; Target: companies with high value of intangibles,knowledge intensive companies with high growth potential; Regional coherenceof sector of activity.
Spark Fund makes it possible for science parks to access venture capital bycreating a partnership among a number of them thus reaching the critical massneeded for a fund to be financially successful
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Investing in start-upsFund Management
Business Angels Europe
Italian Business Angels Network Association
Ass. Italiana del Private Equity e Venture Capital
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.)
Fund ManagementFacts and figures
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Coaching programme on how toaccess early stages investors andbusiness angelsInvestor readiness train thetrainers workshops on how tosupport entrepreneurs inaccessing risk capital funds andbusiness angels.Ready to invest programme forbusiness angels
Consulting Entrepreneurship Development Fund Management
Feasibility studies of early-stage financing mechanisms,
accelerators and incubators;Design and test of novel tools to
support competitiveness, innovation and entrepreneurship.
Angel Fund is the Co-investment instrument forBusiness Angels Clubs andNetworks. It has beendesigned capitalising theexperience gained in the USA,Netherlands, France andUnited Kingdom.
Ingenium is a risk capital co-investment fund typically built around aRegion of a few million inhabitants focused on Seed and Start-upstages but also considering expansion, targeting companies withhigh value of intangibles and high growth potential.
Activities with Business Angels
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What to understand about investors
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Main contents
o The early stage investing market
o The investment phases and actors
o Differences among Early stage and VCs
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The early stage investing market
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Financial Market segmentation
The enterprise finance market can be divided in 4 segments:
O I Initial and unorthodox sources of funding; O II Equity;O III Debt finance;O IV Combination of equity and debtO V Public Finance
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O I INITIAL & UNORTHODOX SOURCES OF FUNDINGS:
O entrepreneurs savings;O profit reinvestments;O friends and family savings;O second mortgage;O personal credit cards;O customer advance;O delay of payments;O premises sharing;O employing relatives at below
market salaries.O II EQUITY:
O seed and pre-seed capital;O business angels;O venture capital;O corporate ventures;O IPO and post IPO.
O III DEBT FINANCE:O bank credits: short or long term
loan, unsecured or micro loans;O commercial debt;O public/semi-public loans;O bonds;O factoring – leasing – franchising;
O IV COMBINATION OF EQUITY AND DEBT : MEZZANINE
O V PUBLIC FINANCE:O grants;O reimbursable advances;O guarantees.
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The investment phases and actors
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Knowledge intensive companies need (a lot of)
money!
Different stages of business idea development require different source of
funding!
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Early stage risk finance (and more)
Early Stage Financing
Pre-seed up to0,5 $ Mln Seed up to
1-2 $ Mln
Start up5/10 $ Mln
Second Round10/12 $ Mln
Expansion Capital10/50 $ Mln
Turnover
Cumulative Cash Flow
Business Angels
Venture Capital
Product definitionNo turnover
Product Completion
Initial commercial feedback
Venture Capital
Product Consolidation
Structuring of commercial channels
Strategic Partnerships
Continuous ideas/concepts/products innovationConsolidation of the organisation
Partnerships and acquisitions
Proof of concept funds
Seed funds
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FINANCIAL CYCLE (and more)
Expansion CapitalSecond round
Later stage (Venture Capitalist)
Start upSeedPree-Seed
Early stage (Proof of concept funds, BAs, Seed Funds, Venture Capitalist)
Scope
Company life-cycle
Identification of Market potential
Pre-businessplan
PrototypingAnd product development
Businessplan
Commercial-scale manuf.
And sales
Company established but not invoicing
Structuring commercial channels
Building up turnover
Continuous ideas/concepts/products innovation
Making Profits
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Differences between
Early Stages and VC investors
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…All money is not the same!!!
(Christian Saublen, Eurada)
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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 andii) the level of risk linked to it.
This explains the Anglo-Saxon expression « All money is not the same ».
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Each financial partner has its own expectationand
Its own requirements and evaluation criteria
(see paper “All money is not the same” EURADA pg 16)
Need to Know
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Financial tools (early stage financing) for knowledge based ventures
o Proof of concept funds
o Business Angels
o Seed funds
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Early stage investors – evaluation approach
Proof of concept
O Innovativeness (+)O IPR – Valorisation of research resultsO Entrepreneurial spirit
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Business Angels(informal investors and Spin-off corporate venturing)
O Atmosphere of trust between individuals andpositive feeling, confidence (+)
O Possibility of hands on interventionO Credible business plan in the eyes of the Business
AngelO Availability of exit routeO Return on investment (capital gain)
Early stage investors – evaluation approach
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Seed capital fund
O Team (+)O Clear, defendable Business modelO Intellectual capitalO Growth potential (High)O Availability of exit routeO Return on investment (capital gain)
Early stage investors – evaluation approach
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Venture Capitalist
o A young, small venture, still needing moneyo A well run-in teamo Fast growing marketso Scalable productso Client list & track record (+)o Return on investment (capital gain)o Minority shareholding position
Private equity – evaluation approach
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Buy-out
o Consolidated companies with a well defined portfolio of clients and products
o Assets (+)o Well known sectorso ROI: 2-3Xo Control position
Mainly debt capital
Private equity – evaluation approach
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What to know to present a business idea to investors
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What we need to understand for successfully presenting a business ideaWhat early stage investors look at(requirements for investment ready businesses)
How to pitchTips for successfully presenting the business idea to risk capital investors
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O You need to be an entrepreneurO You need to have a business not an inventionO You need to have a core teamO You need to have a clear view of financial resources
needed
Make money is not the only motivation but ishow shareholders measure success
Key elements seed investors look at
Need to Know
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Issues of concern for an investor(to be well understood by investor ready entrepreneurs)
O Want their money backO Want more (much more) than they putO Want to know whenO Want to measure the opportunity/risk
Need to Know
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5 keys to succeedO TeamO TeamO TeamO ProductO Market
A poor team ruins a great project
Need to Know
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The team(A manager is not an entrepreneur)
RequirementsO Ability to deliverO AmbitionsO ExpectationsO Serial entrepreneurs
(If “new” have the “proper board”)
Need to Know
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TIPS
O Have a simple and transparent structure(this is why universities can represent a problem, they are never simple and transparent, better a license agreement)
O Have milestones
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Common “weaknesses”
O Too little market ambition(no willingness to go global from day 1)
O People think too small(be ambitious but do it by milestones)
O A Business is different from an R&D project
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VCs invest in 1% of what they see
O 20% results in a total lossO 20% succeedO 60% survive
Need to Know
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Main evaluation criteria of fund managers
Need to Know
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o Formal screening criteria
o Strategic screening criteria
o Qualitative screening criteria
The Fund screening criteria
Need to Know
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Formal screening criteriasome examples
o Location….
o Sector
o Age of the company
o Level of investment
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Strategic screening criteriasome examples
o presence of an intellectual capital management strategy (IPR ….)
o presence of a market ready product/ service
o a good percentage of IRR
Need to Know
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Qualitative screening criteriasome examples
o Overall Clarity and coherence of the Business plan
o presence of all the main section of the business plan
o coherence in between the sections;o the way each section is presented (clarity)
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The main elements of the Business Plan are:
O Business idea and Business model
O Company
O Product/service
O Market, customers, competitors
O Company strategy
O Organization and management
O Financial forecast
Need to Know
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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?
Screening Questions
Nice to Know
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How to pitch
Tips for successfully presenting the business idea to risk capital investors
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PITCHING:to clearly and convincing present your businessproposition in a fewminutes
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A good pitch is
As important asthe technology or
the solution you are proposing
Why is it so difficult?
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Entrepreneur:
O Loves his business idea (“The best business ideas in the world”)
O Knows very well the productbut not so much investor expectations
O Aims at developing asuccessful product
O «There are not enough investors willing to finance businesses”»
Investor:
O Looks at the business idea as“a project”
O Does not care about the product/technology but about doing a profitable investment!
O Wants to get the a 10x exit
O «There are not enough“investment ready projects”»
Entrepreneurs and investors have differentpoints of view and interests
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a) Message & Structureb) Visual story
c) Delivery
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MESSAGE
What did we learn at the elementary school?
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A good “composition” (presentation) contains:
O IntroductionO Key contentO Conclusions
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1) Why are you pitching
What is your objective?
Message - Get Prepared
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2) Who is the audience?
– Who are they ?– Why are they here?– What do they look for
(screening criteria)?– How can you best “reach”
them?
Message - Get Prepared
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3) What are you looking for?
– how much– to do what
Message - Get Prepared
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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
PITCHING Structure
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PITCHING Structure
Introduction to the business opportunityAchievement to date
TeamProduct / Service
TargetMarketBusiness Model
Economic and Financial objectivesInvestment plan
Why investing in us?
STRUCTURE - Need to Know
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Visual storyDelivery
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The first 30 seconds are crucial you have to make an impact by presenting
O What problem you are going to solve
O Your value proposition (how does you solve such problem?)
O Why you are the right team to achieve the result
O Why your company is the best deal for investors
Need to Know
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Investors want
O PassionO PerseveranceO “Profits”
O Ability to deliverO Ambitions
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O An effective communication is based on:
7% What you say (Content)38% How do you say it (Style+Voice+Attitude)55% Body Language
Remember…
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Key elements
O VoiceO Body languageO Eye touchO AttitudeO PresenceO Use of the space
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O Avoid slow start (first 30 seconds are crucial)
O Say only key things
O Do not speak too fast
O Use short clear sentences
O Use pauses
O Talk to the audience
O Respect time
Need to Know
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Exercise!!!
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An example of pitch
http://www.youtube.com/watch?v=kzcQtXA5Gc8
http://www.youtube.com/watch?v=MhKxPn_g_40
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DISCLAMER: This document has been produced with the financial assistance of the IPA Adriatic Cross-Border CooperationProgramme. The contents of this document are the sole responsibility of META Group Company, service provider of MarcheRegione, and can under no circumstances be regarded as reflecting the position of the IPA Adriatic Cross-Border CooperationProgramme Authorities.
Output identification code: LP_supporting_guide_how-to-pitch_WP6.3
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