Show Me the Money: Pitching and Fundraising for Tech Startups
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Transcript of Show Me the Money: Pitching and Fundraising for Tech Startups
“Show Me the $$$$!”…Session 2: Pitching
Thursday, October 24th, 2013
General Assembly / RosePaul Investments Event
Learn from VC’s, Angels and Entrepreneurs:
What do INVESTORS love (and Hate!) to see in a Pitch?
Tom Wisniewski
RosePaul Investments
To all who attended the
SMTM Session 2 on
Thursday @GA:
• Thanks! Hope you
enjoyed it and gained
something. Feedback
welcome.
• This document lives
online at
www.slideshare.com/th
omaswis
***The next class I will
teach at GA is: SMTM 3:
Insiders View of Angel
Investing (11/19/2013)
http://bit.ly/1h1uFb7 ***
• Email me at
m. Connect with me on
LinkedIn/Twitter for
updates, etc. (Page 23
of this deck has my
details)
….Cheers, -TW
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Agenda
I. Kick-off and Introductions
II. Some Context and Background: Seed-Stage Fundraising
III. Guest Speaker Q&A: Investor Perspective
• BREAK: Networking and Beverages
IV. Best Practices: Pitching and Communication
V. Guest Speaker Q&A: Founder Perspective
• WRAP-UP: Networking and Beverages
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I. Kick-off and Introductions
a Start-Up of Sorts: …. this class and the SMTM series.
Started out with a 1 hour class and 10 students @GA 2 years ago:
• Angels and Angel Groups.
It experienced: “Product/Market Fit” “Growth” “Product Scope Creep” “Several
Pivots”
“Show Me the Money” series
• Simple formula:
1 part focused, actionable content
2 parts speakers, opinions and discussion
1 part networking
• Hate attending LAME classes and events
SMTM Session 1: Accelerators (July 2013)
SMTM Session 2: Pitching (Today!)
SMTM Session 3: Angel Investing (November: Tues, 11/19)
SMTM Session 4: [TBD Topic] (December: Tues, 12/17)
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The "1 in 100 get funded” ratio = REALITY.
• -----> Raising seed-stage money = TOUGH.
Poor communication ----DRIVES----> the “DING“
Feedback = LIES?!?
Pitching = 10-page PowerPoint.
*NO* shortage of pitch advice! = conflicting = WTF???
Seminar Rationale: Why are we here?
What is the PROBLEM?
CHALLENGING
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So….. what helps?
Understand the basics of “Good Communication”
Leverage other experience: Sales, Interviewing, Dating
Review examples the good and the bad.
Understand the rationale, the "why”
Study. Practice. Pitch. Repeat.
However, we can change the ODDS.
Pitching = Learned ART (and Science)
Everyone can improve their pitch. Channel some energy and
become a "student" of the pitching
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After B-school: joined a start-up management consulting firm Mitchell Madison
Group; focus on Strategy/Operations/IT for financial services, tech, outsourcing,
private equity/VC clients (1993 to 2000)
Walker Digital: helped set-up and run an early “internet incubator” (2000)
Independent Advisor / Turn-arounds: Advised VC and PE Firms on portfolio
company strategy and new investments; joined the management team of two
companies
Currently:
• Early stage investor and advisor to start-ups
• Investor and advisor to VC and PE funds
• Member and director at New York Angels
Tom Wisniewski: My background
Born in NYC; grew-up in Montclair, NJ
Physics and Philosophy major undergrad
(Clark University); MBA at Tuck School
(Dartmouth)
1st Job: Programmer at Morgan Stanley then
moved to Investment Banking
Having received (and delivered!) a lot of good and BAD presentations, I have become
a student of the Pitch myself…
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Additional Introductions
6
Pedro Torres Picon, Founder, Quotidian Ventures
Jacob Brody, Partner, MESA+ Ventures
Peter Sullivan, Founder/CEO of JackPocket
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Better understanding of pitching.
A set of specific insights that will *change* your pitch.
A “to-do” list: starting point(s), actions, things to try.
A set of recommended resources to consult and learn more
from.
A few new relationships with others in the NYC start-
up/fundraising ecosystem: fellow entrepreneurs, investors, etc.
Answers to specific questions about pitching that you might
have.
What would I like you to walk away with?
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So….what questions do you have about Pitching?
8
xxx
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II. Some Context and Background:
Seed-Stage Fundraising
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Context: Common Sources of Fundraising Capital
Who/what are
they?
• People you already
know, that trust
you, and (maybe)
understand your
venture
• Experienced early stage
investors (individuals or a group)
• Accredited Investors.
• Angel investing is not their “job”;
may not be F/T endeavor
• E.g.: NY Angels, GoldenSeeds
• Firm with multiple professionals that
raises, invests and manages
individual funds (other people’s $)
• Working F/T (this is their job…)
• E.g.: Greycroft, RRE, Union Square
Angel InvestmentFriends and
FamilyVenture Capital
“You”
aka Bootstrapped
Earlier Stage Later Stage
Round Size $: • $10’s of K
to $100K
• $100’s of K
to $1M+
• $500K to
$1.5M
Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K
Valuation (Pre-
Mon):
• < $1 M • $1 – 5 M • $5-10 M
“Seed” VC “Traditional Series A” VC
• $5M-$15M
• $3M – $5M
• $10 – 25 M
“Seed”
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Some Context: “VC” Business Process and the “100 : 1” Ratio
Deal Structuring
and Execution
Deal Sourcing
and Evaluation
Portfolio
ManagementFundraising
“Screening”
100 : 10
The “Universe” of
Companies
1000’s : the “100”
“Evaluation
(and Due
Diligence)”
10 : 3
3 : 1
“Final Due
Diligence
and Legal” “Portfolio”
10’s of
Companies
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III. Guest Speaker Q&A: Investor Perspective
Personal background and story?
Firm background?
Investment focus?
• Stage, investment size, sectors, etc.?
• Minimum threshold? (e.g. company generally needs to have xxx ?)
Some recent investments?
What do you like to see in a pitch?
What are some “Red Flags”?
Common mistakes generally?
What are your “turn-ons” with start-ups and pitches in particular?
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Tom Wisniewski: Investor Profile Direct “Angel” Investor in Companies
• $25K-250K investments; Typical valuations: $1-5 Million,
• Typical Stage: at least some “product” done, some customer/sales traction
• Sector focus: Opportunistic generally within internet/software space;
- fair amount of Saas B2B, and consumer “marketplace” models, ecommerce enablers.
- NOT (or not much?): hardware, heathcare/pharma, cleantech
• NYC based: 50% investments in NYC area companies; total of ~80% NE overall (e.g
Boston, DC), 20% West Coast.
• Examples:
- Sociocast (social/behavioral big data analytics)
- LiveLook (Saas, live collaboration sales/service platform)
- Anvato (Ad insertion to live video streaming via proprietary machine vision)
- Moveline (Uber for the moving industry)
- Bizodo (Saas, paperwork automation; “Adobe 2.0” internet document sharing)
- Movio (Digital “RedBox”; content delivery via “last 100 ft” of wifi internet)
- HeTexted (Relationship advice forum generating content, media opportunities)
- Wanderu (Kayak for ground transportation)
- DealFlicks (a “Priceline” or “Hotel.com” for movie theater tickets)
- iCharts (tool that enables engaging, sharable, embedible chart content)
Investor in Funds
• In addition to direct investments in start-ups, invest in VC and PE funds.
• Examples:
- Social Starts (Seed fund for start-ups leveraging the Social Web)
- Brooklyn Bridge Ventures (Charlie O’Donnell’s fund)
- Entrepreneurs Roundtable Accelerator (ERA Fund)
- Greycroft Partners (Venture Fund)
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III. Best Practices: Pitching and Communication
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Communication is Critical…Why?
“Finding Diamonds in the Rough” problem. There is no shortage of
supply: lots and lots of ideas, pitches, people, etc.
• The problem for investors is finding the “diamonds”.
The “first minute” problem. If you loose someone’s interest in the “first
minute”, you usually loose them.
• “First minute” = “first minute”…sometimes first 30 seconds!
• “First minute” = a conversation, a meeting, anything
• I need to quickly figure out whether I should “spend” more time/effort with
you, or move on to something else.
The “0 to 60” problem. Potential investors (or potential employees,
customers, etc.) usually start out knowing nothing about you or your venture.
• Getting someone “from 0 to 60 mph” is very challenging: too much to say,
don’t know where to start.
A Pitch is a “Sale”. You not just trying to “describe”, you are “selling”. Easy
to tell people what you are doing; harder to get them to ‘buy”.
• You are selling your “product” to prospective “customers”. Product = your
company and the opportunity it presents.
• You are interviewing for a “new job”. You and your team = great fit for…
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Principles of Communication: A Starting Point
Audience. Who is the audience? Who are you selling to? …If you don’t
understand someone's “perspective” you will be ineffective
• For example: “they have 6 Saas investments vs. they can’t spell Saas”
• People generally understand things by association (to things *they* know).
Messages. What points you are making? What is the single key thought you
are trying to impart with each page?
• “the market is huge and growing” is a message; a chart, some stats, some
explanation is what makes up the page
Storyline. What is the narrative story you are building with the collection of
messages? Does the story flow well and get to your conclusions?
Goals. What is the goal of this specific meeting?
• Unlikely it is getting a “check”. Getting to the next step in the process.
Situation. What the format of the pitch? What are the constraints?
• 2 minute elevator pitch vs. 10 minute Power Point pitch vs. email
attachment
To start, lets use a simple framework: Audience, Messages, Storyline, Goals, Situation.
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The Communication Pyramid
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Level of Detail in
Different
Documents
1 page summary
10 –page deck
20 –page deck
20 page deck, +++
Level of Detail in a
Document
The Executive
Summary
First Page of Each
“Chapter”
Each Chapter
Each Chapter with
all the Back-up
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“Good” Pitch Deck
From “Triple Play” of VC Presentations by
Mark Suster (former entrepreneur, now VC)
Slide 1 – Team Bio
Slide 2 – 50k foot view of your company
Slide 3 – Problem Definition
Slide 4 – How do you solve the problem?
Demo Web Version and
a Demo Video Example
Slide 5 – Market Sizing
Slide 5 warning: (Market Sizing Pitfalls)
Slide 6 – Competition
Slide 7 – Customer Adoption / Traction
Slide 8 – Team
Slide 9 – Financial projections
Slide 10 – Use of Proceeds
Slide 11 – Fund raising process / Next steps
Appendix – Back-up slides
How to deal with the dreaded question of
valuation?
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http://www.bothsidesofthetable.com/pitching-a-vc/
Adapted from “10 Slides to an Awesome
Pitch” by Dave McClure, 500 Start-Ups
1. Elevator Pitch
2. The Problem
3. Your Solution (Demo Here!)
4. Market Size
5. Business Model ($)
6. Proprietary Tech
7. Competition
8. Marketing Plan
9. Team / Hires
10. Money / Milestones
http://www.slideshare.net/dmc500h
ats/how-to-pitch-a-vc-sept-2010
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V. Guest Speaker Q&A: Founder Perspective
Peter Sullivan Founder CEO of JackPocket
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Find Fit. Does this investor have “fit”? Do they invest in ventures like
mine?
......if not, then move on. (or at least prioritize accordingly)
Prepare! Don’t be lazy; invest some time.
•Steve Jobs: 30 hours to develop, 30 hours of practice…30 minutes of
presentation.
•For example : “Audience”. What have they invested in? Recently?
What can you find out about their background? Interests? Hot
buttons?
- How? Duh….Google: Blogs, Quora, YouTube, CrunchBase; talk
to people they know, better…talk to those they have invested in.
Pitch, Get Feedback, Revise. Repeat. No venture idea was built in
a vacuum. The ONLY way to develop business ideas is to share them,
solicit feedback, make adjustments, develop/refine/add and…..DO IT
AGAIN!
• 1 part “studying” pitching, 1 part “doing” pitching, 10 parts repeating
both……this is becoming a “student”
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Key Success Factors and Take-Away’s
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Better understanding of pitching.
A set of specific insights that will *change* your pitch.
A “to-do” list: starting point(s), actions, things to try.
A set of recommended resources to consult and learn more
from.
A few new relationships with others in the NYC start-
up/fundraising ecosystem: fellow entrepreneurs, investors, etc.
Answers to specific questions about pitching that you might
have.
What would I like you to walk away with?
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SMTM coming up……Join us:
SMTM Session 3:
•Angel Investing (November: Tues, 11/19)
SMTM Session 4:
•[TBD Topic] (December: Tues, 12/17)
“Curious about Angel Investing? Love to be a fly on the wall
to see how it really works?” - Who are these Angel Investors? Why do it?
- Where do you find them? Why would you want to?
- What are Angel Groups? How/why do the work?
- What about AngelList, “Soper Angels” and Angel Funds?
- How do Angel Investors differ?
- What does the Angel Investment process look like?
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Thanks! Thomas Wisniewski
Contact Info
Email: [email protected]
LinkedIn: http://www.linkedin.com/in/thomaswis
Twitter: @thomaswis
This presentation: http://www.slideshare.net/Thomaswis/
New York Angels www.newyorkangels.com
New York Angels Educational Meetup: http://www.meetup.com/NY-Angels/
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Additional Slides
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Sources of Investment: Seed Fundraising, Angels and VC’s
Stage (Pre-Round):
• Expected to
have:
• An idea, initial/rough
b-plan
• Initial founders, key
advisors
• Path to ???
• Detailed b-plan,
• Key founders (bus & tech) full-time
• Prototype/alpha done and tested,
• Some piloting (paying?)
customers, some revenues?,
• All legal documentation in place,
board of directors
• Path to break-even or next funding
• Significant variation among firms
but…. Angel req. +:
- Anchor clients on board, revenue
growth (B2B),
- Growing base of users, with strong
usage trends (B2C)
- …..Growth potential! Credible
path to $100M Rev
• Don’t Expect: • $ Rev, Customers,
Minimum Viable
Product (MVP); full
legal documentation
• Income (e.g. cash flow positive);
all key management ; completely
developed business model (e.g.
understand it will change)
• Income (e.g. cash flow positive)
Who/what are
they?
• People you already
know, that trust
you, and (maybe)
understand your
venture
• Experienced early stage
investors (individuals or a group)
• Accredited Investors.
• Angel investing is not their “job”;
may not be F/T endeavor
• E.g.: NY Angels, GoldenSeeds
• Firm with multiple professionals that
raises, invests and manages
individual funds (other people’s $)
• Working F/T (this is their job…)
• E.g.: Greycroft, RRE, Union Square
Angel InvestmentFriends and
FamilyVenture Capital
“You”
aka Bootstrapped
Earlier Stage Later Stage
Round Size $: • $10’s of K
to $100K
• $100’s of K
to $1M+
• $500K to
$1.5M
Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K
Valuation (Pre-
Mon):
• < $1 M • $1 – 5 M • $5-10 M
II. Pitching to Prospective Investors
“Traditional Series A” VC
• $5M-$15M
• $3M – $5M
• $10 – 25 M
“Seed”
“Seed” VC
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Given this landscape, how do I get to the pitch?
Who are the “right” investors? Where is there a “fit”?
• Reality Check. “people invest in things that they understand and have experience with”
- Target find Fit: Find investors that come from industries, sectors, business models
etc. that are same/similar to your venture and your customers
How to “get” a pitch meeting?
• Connect. The hard part.
- Avoid “cold-calls”; look for “warm introductions”
- Networking. Who do you know that knows them?
- Find them at an event. (Email sucks!)
Really you should be thinking…How do I build a relationship first?
• Pitching by its very nature can be awkward. “This guy wants something from me.”
• Most investors mean-well, and would like to help…but are busy
Solution: Build a relationship before you need to pitch. OK, How?
• Give, don’t Ask: what can you do for them?
• “Ask for advice, not money”
• Debate / Discuss a topic, Ask opinion about X.
• Find ways to “show” rather than “tell”:
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Common “Forms” of Pitch Communication. What are they? Which should I use?
“Document” Simplistic Description Common Situation/ Use
1-pager “1 pager Exec Summary, Word
doc”
• Email attachment or handout
• Online platforms e.g. Gust, AngelList
Email Brief “Teaser paragraph of text / bullets” • “In the intro email” (w/ attachments)
Business Plan “10-40 page Word doc” • Detailed discussions (similar use)
• Stand-alone, due diligence
Pitch Deck “10 page PowerPoint
presentation”
• “15 minute stand-up presentation”
• Email attachement
Long-Form Pitch
Deck
“20-40 page version of 10 pager;
PowerPoint presentation”
• “60-90 minute follow-up meeting with
smaller group”
Elevator Pitch “No document, just you talking for
60 seconds”
• Your quick intro after you meet
someone in person
“Video” Pitch “10 minute video of your deck/
demo w/ you voice”
• Email attachment
• Online platforms e.g. Gust, AngelList
Due Diligence Docs “All the detailed spreadsheets,
data, etc. that back-up your pitch”
e.g. Financial Projections, Sales
Funnel, Legal Docs
• For detailed discussions with
interested investors, usually post-
term-sheet
• Online platforms e.g. Gust, AngelList
The Good News:
• you don’t need to have all of them (maybe ever, certainly 1 or 2 to start is fine)
• much of the content, messages, storylines can be shared and reused
• Preparing thoughtful docs ……refines your thinking and your venture.
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Who are these “Angels”? What do they look like?
Experienced, successful entrepreneurs: frequently multiple exits
• Some from “tech-start-ups” some from other businesses
• Usually some link to
Successful “corporate” business people: CEO or CxO-types
Older: most are in the 40-60 age group. But there are also notable angels
in their 20’s and 30’s e.g. newly minted start-up millionaires
3 – 10+ Angel Investments
~10% of investible capital in Angel Investments
Differ *widely* in: Industry/Functional Experience, Investment Expience,
Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal
do’s/don’ts and hot buttons.
Lists? Not many. All are partial. AngelList? Gust? Other?
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NY Angels Profilewww.newyorkangels.com
Member Profile: ~80 investor/members; several early-stage funds; Member
backgrounds are generally representative of the tech / entrepreneurs / industries in NYC:
software, e-commerce, ad-tech, finance, media
Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC
Area.
Stage. Mostly early stage (with some customers/revs), some seed stage (pre-revenue)
Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M – 4M;
investments tend to range from $250K to $1M+;
• For larger rounds, NYA often leads the deal and helps find the rest of the capital by
sharing/syndicating the deal with other Angel Groups
Group Structure / Investment Decisions. NYA core structure is as a group of individual
investors. Individual investors “opt in” to deals and make their own investment decisions.
• Typical member invests $25-50K in a deal.
• In addition to the core “opt-in” model, NYA has just closed a small seed fund that will
operate in parallel (using a “democratic model” for investment decisions)
History/Background. NYA has invested $45M+ in 70+ companies.
• We are very active in the NYC entrepreneurial / early-stage ecosystem
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Variations on the Theme: Other Players
“Super Angel” (vs. Angels, Angel Groups). Sophisticated angel investor with a large portfolio
of early stage investments (30? 50?) and that is investing frequently (10 + per year). E.g. David
Rose, Fabrice Grinda
Microfund or Micro VC Fund. Small VC fund ($1-10 M) often run by a single person typically
making “angel” size investments in early stage companies.
Seed Fund. VC fund focused on “seed” (aka Angel) stage investments: often pre-revenue,
pre-product. Some VC’s that typically invest in “Series A” rounds will reserve a portion of their
fund for seed investments: e.g. $250 – 750K investments at $1-5 Million valuations
Incubator/Accelerator. Entity that provides non-monetary support/services (in addition to $’s)
to early stage ventures. Typical support/services can include: space, IT infrastructure, shared
admin service, advice/feedback, introductions/networking. Public vs. private, independent vs.
captive. Examples: TechStars, ER Accelerator, DreamIT, Y-Combinator
Strategic Partner/Investor. Some operating companies will invest in ventures. Typically it is
in an industry/ sector / product-space similar to theirs (sometime with an eye toward potential
acquisition in the future)
Crowd Funding Platforms. Currently this is financing via donation or “pre-sale” of products.
Equity financing under JOBS Act is TBD. Not obvious this will be a good match for most Tech
AngelList. Similar to an angel group, but without centralized control. More of a open
“marketplace” of individual investors and ventures to facilitate funding.
Gust. Software platform that most angel groups utilize (and many small VC’s) to run their
investment process and connect angel groups together to share deals.
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Additional Thoughts…..
Lots of start-up advice out there. Lots about the art of fundraising.
• Huge volume of blogs, articles, Quora-posts, etc.
• Well…….that’s good, right? Yes.
• But why doesn’t it help?
- Overwhelming
- Conflicting
- Not specific
- Not enough context
- It’s just advice, ideas, …..not interactive, not experience.
• Need to understand the “why” behind it all and adapt it to your venture, your situation.
Beware of simple answers, absolutes. As you are reading and listening to all these
opinions, data sources
• For any “fact” “rule” “truth”… if you don’t understand how it is both true/false, you don’t
really understand the point.
- Under what circumstances is this “rule for fundraising” “true”? Where does it apply
well With whom?
- How and when is it not true (Or less true)?
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