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Investors

Dr  Michelle  DeakerManaging  Partner  and  CEO

OneVentures

Investor  Relations

Dr  Michelle  DeakerManaging  Director  and  CEO

OneVentures

Any money is good money, right? Wrong!

- Investor Relations-

Stage  1:  The  Idea Stage 2:MVP  /  Prototype

Stage  3:  BusinessModel  is  Validated

Friends,  Family  &  Fools

Government(EMDG,  EFIC, EIF,  State)

Angel  Groups

Mentors  /  Prof  Advisors

Early  Stage  Company  Infrastructure

VC  (Early  and  Later  Stage)

Management  Team  and  Employees

Incubators  /  Accelerators

ASSOB  (small  claims)IPO  (local or  offshore)

Development  or  Sales/Mkting Partners

Pre-­‐seed  and  Seed  Funds

Hedge  Funds

R&D  /  UniCollaboration  (CSIRO,  NICTA)

Customers Bank  Debt  /  Mezzanine  Funding  (Later  stage  or  profitable)

Funding:  Where  do  VCs  Fit?

1. Export  Market  Development  Grants  (EMDG)

2. Export  Finance  Corporation

3. Entrepreneur  Infrastructure  Fund  (Federal)

4. State  Funding

Can  you  boot  strap  and  meet  some  critical  milestones  /  validation

Paying  Customers:  The  best  non-­‐dilutive  finance  for  a  company

4 OneVentures Power Point Presentation

The  Funding  Story  of  My  Business  www.giftvouchers.com

Raised approximately $6.5m (equity / convertible notes / debt) 1999-2003

Concept giftvouchers.com / electronic vouchersRaised $30K family and friends

May 98 Dec 98 Aug 99 2000 Early 01 Aug 01 Dec 03 Sep 04 Dec 05 Dec 06

Company formedFirst Angel Investor $500k

50 retailers +NZ launchTech crashHard to raise capitalTook out loan $120k

Sold house / New major investor$1M

Handover Dec05-06

Signed AU BanksWon Coles Myer Business

Significant Strategic InvestorLaunched first Coles Myer brands (kmart/target)

Won Woolworths; launched in 3 monthsMyer, Coles launch

Started early operations in UK and South Africa

Managing $700M100 major retailersTrade sale UK PLC

Larger round of financingAngels and Financial$1.5M

Launch

The  good  newsIt  has  never  been  cheaper  to  establish  a  business  –you  can  get  to  customers  and  revenue  more  easily  than  in  the  past.

What’s  the  Bar  for  VC  investment

Funder Stage Raise What’s  the  BarFamily,  Friends and  Fools Pre-­‐seed  /  Concept $20k  to  $50k Great  Idea  and  Vision

Angels Seed $50k  to  250k Prototype

Angel  groups Seed  /  Series  A $250k to  $1m Minimum  Viable  Product /  Early  customers

Early  Stage  VC  Fund Seed  /  mostly  Series  A $500k  -­‐ $5m Early  customers  /  Validation  of  business  model  /  Phase  II  biotech

Later  Stage  VC  Fund Series  A  /  mostly  Series  B and  Series  C

For  A,  $500k-­‐$5mFor  B  and  C  $5m  to  $20M  Growth  Capital

Validation  of  business  model  /  Growth  capital  and  revenue  runrate of  $5m+  /  Phase  IIB or  Phase  III    or  fast  track  biotech

Corporate  accelerators  

Corporate  venturing

• As  you  reduce  the  risk  in  your  business,  you  can  attract  increased  level  of  funding.    

• The  best  valuation  is  when  you  can  show  you  can  service  a  market  profitably.

• Project  not  a  business• Technology  looking  for  a  market• A  market  with  the  wrong  product• A  product  with  the  wrong  go  to  

market  strategy• A  product  with  really  bad  IP  

management  or  contracts• You  don’t  know  your  customer• Inexperienced  team  • You  think  you  already  know  it  all

OrYou  are  simply  pitching  to  the  wrong  investor  (size  of  investment,  sector)

Why  Can’t  I  get  Funding?

Your  Investor  – it’s  everything  but  the  money

• The  wrong  investor  can  be  the  worst  decision  you  make  for  your  company

• Too  many  investors  =  lots  and  lots  of  extra  work  – it’s  a  big  distraction

• Stop  focusing  on  the  offer  • Think  more  about  the  organisation  and  people  –

who  will  be  interested  in  your  company  and  who  should  you  target

• It’s  a  tough  journey  to  the  top  of  the  mountain  –look  for  the  helping  hand

What  should  your  investor  bring  to  the  table

• Professional  investors  in  early  will  help  you  shape  your  company  for  bigger  investors,  partners  and  acquirers  

• Professional  Investors  =  material  value  and  advantage

Look  for:-­‐• Industry    /  domain  experience• Networks• Passion  /  enthusiasm• Trust  • Can  they  walk  the  journey  with  you?  mentorship,  entrepreneurial  and  business  

building  experience• Can  they  help  you  take  your  company  to  a  new  level?

What  is  “shaping  your  company”?

Ensuring  Asset  Value

What  a  professional  investor  will  focus  on• Cleaning  up  the  cap  table  (your  company  ownership)• Taking  skeletons  out  of  the  closet  (family  loans  etc)• IP  Protection  /  Freedom  to  Operate• Professional  Contracts  – terms  that  build  value  • Major  Client  Introductions  and  Door  Openings• Tracking  to  Milestones  and  KPIs• Building  out  a  valuable  future  investment  syndicate• Shaping  your  management  team• Proper  IP  Assignment  and  Employment  Contracts

=  taking  your  business  to  the  NEXT  LEVEL

VC:  It’s  a  Risky  Business

• Mark  Andreessen’s  Onion  Theory  of  Risk• Day  1,  you  have  every  conceivable  risk

• As  you  grow  and  raise  capital,  it’s  a  process  of  peeling  back  the  layers  of  risk  

Invest  Capital  and  Expertise

Reduce  and  manage  risk

Reducing  Risk  improves  the  reward  =  better  potential  for  return  =  happy  investors

VCs  – Vision  Buyers  (not  Vultures)

Why  VCs• Largest  numbers  of  companies  on  NASDAQ  are  VC  financed• 30%  of  top  US  companies  were  VC  backed• We  buy  your  vision  and  do  everything  we  can  to  make  that  happen

Our  terms• Preference  shares  – this  is  investor  hard  earned  capital  – it’s  not  sweat  equity  –

downside  protection  for  investor  capital  to  come  out  first• Dividend  or  coupons  – there  is  a  basic  time  and  cost  for  capital  (like  interest)• Voting  rights  – key  decisions  especially  around  spend,  shareholding• Board  representation  – we  do  get  involved  – we  aren’t  bystanders!• Rights  to  do  the  next  investment  round

Don’t  talk  to  a  VC  if  you  don’t  want  these  terms  BUTRemember  the  benefits  your  VC  can  bring:  support  getting  that  $X00M  exit  or  NASDAQ  IPO

Pre-­‐seed  usually  $1-­‐2M  pre-­‐money

US  Seed  is  Australian  Series  A  raising  Pre-­‐money  $3.5M  to  $7M

US  Series  A  is  closer  to  an  Australian  Series  B.  Premoney above  $10M

*investors  in  Australia  need  to  factor  in  the  cost  of  relocation  to  offshore  markets  within  valuation(usually  means  loss  of  6  to  12  months)

*investors  can’t  recover  when  they  overpay  for  their  investment

Who’s  responsible  for  the  price?The  valuation  is  also  a  reflection  of  the  market  size.

What  Do  VCs  Pay  – US  figures

13 OneVentures  Power  Point  Presentation

“Be  Credible  with  your  Valuation”

• The  premoney valuation  is  critical  for  future  returns• What  milestones  will  you  hit  for  value  inflection  points  in  your  business• A  serious  investor  will  want  a  material  part  of  your  company  (20%)  or  they  just  won’t  be  

interested  or  incentivized  to  make  your  business  work

Try  to  define  the  value1. Value  for  similar  companies2. Value  of  Idea  (size  of  market,  what  you  can  get,  clients)3. Initial  expenditure4. Sweat  equity5. First  mover  advantage6. Competitive  position  (exclusive  agreements,  long  contract  terms)  7. IP  – patents8. Revenue! [we  love  this  one]

Valuation:  Incredible  or  Credible

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2010 2011 2012 2013 2014 2015 2016

Company  Progression

$6.5M$1.5M

$6.5M$12.5M

Company  Acquired  

VCs  – Accelerate  your  GrowthValuation  $m

VCs  – What  We  Have  to  DoA  Return  25  to  30%  YOY  (IRR)  and  A Cash  on  Cash  Return  (Return  on  Investment)  of  >3x  

• They  are  very  incentivised  to  accelerate  your  growth    FAST!

• They  want  to  protect  their  investors  capital  – it’s  not  play  money

• Our  Best  Company  CEOs  Value  their  Investors  Money!

VCs  – It  isn’t  that  easyIRR  of  25  to  30%  YOY  (IRR)  and  ROI  of  >3x  Across  a  Whole  Portfolio  after  each  company’s  had  multiple  rounds  of  financing

Not  every  company  is  a  WINNER

Every  round  of  financing  makes  it  harder  to  generate  the  right  return

Your  VC  is  very  incentivised  to  help  you  perform  and  succeed

Build  the  Relationship

• Begin  the  dance  early• We  track  companies  for  years• Mentors  often  turn  into  investors• It’s  all  about  you  team• Show  your  progression  – milestones  past  and  future  • If  you’ve  had  setbacks  – don’t  let  your  investor  find  out  in  due  diligence  – say  what  happened  and  what  you  did  about  it.• Confidence  – show  you  meet  your  milestones

Finding  your  Funding  Partner:It’s  everything  but  the  Money!

üContext• What  round  are  you  raising?  How  much  are  you  raising?  Do  they  know  your  industry?

üCapacity• Will  they  go  all  the  way?    What  when  you  need  $25M  not  just  $250k

üContacts  and  Networks• Funding,  customers,  employees,  advisors

üCommitment• Passionate  about  your  opportunity

üDomain  and  Expertise• What  have  they  done  in  your  domain  before  – built  companies,  significant  investments,  offshore  as  well  as  onshore

üCompanionship• It’s  lonely  at  the  top  

Goodluck with  the  Pitch