Calling All Angels: What Product

Managers Need to Know About

Investment Pitches

Rosalee Gordon

Rosalee Gordon

Product Management Angel Investment

InvestorDeal Screening

Director of Diversity

If you are a Product Manager …

You know more about AngelInvesting than you think.

The Business is Your Product

Product Manager CEO

“Product” Product Business

“Customer” Customer Investor

Exchange of Value Revenue $ for Product Investment $ for Shares

Objectives

• Overview of Angel Investing

• Product Manager’s contribution to successful pitch

• Pitch Session!

Outline

• Sources of investment money

• Who are Angels?

• 6 components of a pitch

• Example pitch video

• Pitch session

Sources of Investment Money (pre-VC)

• Founder

• Friends and family

• Government grants

• Bank loans

• Angel

• New … equity crowdfunding

Typical Investment Rounds: Valuation & Investment

Source: Randy Thompson, VA Angels

Who are Angels?

• Accredited investors

• Former entrepreneurs

• Interest in early stage, scalable companies

• All different

• “Smart money”

• Value authenticity and coachability

“The Ten Things Angel Investors Wish Entrepreneurs Knew About Angels”

www.rosaleegordon.com

“Required reading for anyone looking to raise Angel capital.”

- Kristina MilkePresident, VA Angels

The 6 Componentsof the Pitch

1. Problem/Solution

2. Customers

3. Technology/IP

4. Team

5. Financials/Deal

6. ExitTotal time: 10 minutes

Product Manager Contribution

Product Manager Contribution

High

1. Problem/Solution

1. Problem/Solution

• Problem or Opportunity• What problem are you solving?• Degree of customer pain/need/desire

• Value Proposition• Benefit of your solution

• Product Solution• Screen shots, pictures, diagrams (minimize text)• How better than alternatives• Key features/benefits• Stage of development and roadmap• NOT a product demo

Product Manager Contribution

High

1. Problem/Solution

2. Customers

• Size of market• Initial target market

• Market potential

• Current customers/pipeline

• Buying behavior. Sales cycle.

• Marketing, sales, and distribution strategies.

Product Manager Contribution

Medium High

2. Customers

3. Technology & IP

• Core technology

• Protection• Patents, provisional patents

• Software: high number of users (Facebook)

• Long term contract with large customers

Product Manager Contribution

Medium Low

3. Technology/IP

4. Team

• Management Team• Hipster, Hacker, Hustler

• Board of Directors• Corporate governance• Industry expertise, legal, finance

• Board of Advisors• Supplement skills of core team• Sales and marketing, technology

• Consider Diversity

Product Manager Contribution

Low

4. Team

Why is Team so important?

• Companies receive financing for three main reasons:

• Brand name CEO (Elon Musk)

• High growth sales

• Strong team

5A. Financials

• Revenue Model - How will you make money?

• Projections• Revenue• Gross margins (consider distribution)• Earnings (EBITDA)• Cash flow• Point out cash flow positive point, positive earnings point

• Assumptions• Size of addressable market• Percent of market we can obtain• Price • Cost – Product, Sales & Marketing, Overhead

• Must show potential for “hockey stick” growth for angel money.

Medium High

Product Manager Contribution

Medium High

5A. Financials

“The Business Plan and the Financial

Model must tell the same story”

Scalable vs Incremental Growth

Revenue and Earnings

5B. Deal

• Total investment required• Minimum per investor

• Use of funds and expected outcome • Hypothesis tested, plus 6-9 months to raise next round.

• Capital structure• Equity or debt

• Terms • Equity: Company valuation, % of company for $ invested.• Debt: interest rate, when payable, convertible?

Low

Product Manager Contribution

Low

5B. Deal

“Convertible debenture, 25% discount, $3 million

cap, 8% interest rate, convert next round”

How Do You Value a Pre-Revenue Company?

• Can’t use multiple of EBITDA

• Comparables

• Berkus valuation formula

$0 – 500 K Idea

$0 – 500 K Protection

$0 – 500 K Prototype

$0 – 500 K Customers

$0 – 500 K Culture/team

$2.5 Million max Plus private capital invested, plus sales in last 18 months

6. Exit Strategy

• Not afterthought, not optional.

• Return capital to investor within 5 – 7 years.

• 5X – 10X return

• Exits• Financial buyer

• Strategic buyer

• IPO, RTO (rare)

Low

Product Manager Contribution

Medium Low

6. Exit

Hearts – Minds - Wallets

Pitch Video: Pieter Boekhoff, iMirror

• 2 min pitch: https://www.youtube.com/watch?v=hIrE3J0w3sE

• 500 Startups / Deck: http://www.slideshare.net/500startups/500s-demo-day-batch-15-nobal-technologies

Welcome to Meet Up Angels

For Further Information

Rosalee Gordon

rgordon@vaangels.com

www.rosaleegordon.com

VA Angels

www.vaangels.com

VA Angels Basecamp program