Investor PresentationsGigi Wang

Managing Partner, MG-Team LLC Board Member & Chair Emeritus, VLABHappyFarm Start-Up Workshops

12 November 2012

Different Types of Investors

Silicon Valley has the most developed start-up funding eco-systems in the world

Different types of funding include venture capitalists (aka institutional investors), strategic/corporate investors, angel investors, friends & family, and some governmental grants/loans

Many players in the eco-system provide intros into investors – bankers, lawyers, etc

Friends & Family

In addition to themselves, founders often look to Friends & Family for initial seed funding

Amounts typically from $10K - $100K Valuation is usually deferred until a

round with professional valuation

Angel Funding - Individuals

Individual angel investors invest their private money into start-ups directly

Best are super angels who have a lot of experience investing in and mentoring successful start-ups.o includes Ron Conway (PayPal), Jeff Clavier

(Yahoo), and Mike Maples (Twitter) Angel investors often required a PPM

(private placement memorandum)

Group Angel Funds Some angel investors prefer to

invest with others --> Angel Investor Groups

Collaborative due diligence Valuation method varies:

1) setting valuation and taking % of company (preferred), usually 10-20% of early stage2) convertible debt with preference at Series A valuation

Venture Capital Venture Capital is the most well-known source of

funding in Silicon Valley Scores of VC’s in Silicon Valley VC’s vary in the stage of focus (early, late stage

companies, and industry focus) Tier 1 VC’s include Kleiner-Perkins, Sequoia

Partners, Mayfield Partners, Norwest Venture Partners, and DFJ. Many want 25 – 40% of company and board seat to have control.

GP

GP

GP

GPGP

GPGP

GP

LPLPLP

LP

1% of total

99% of total

LP

LP LP

VC: Money Going Into Fund

LP = Limited Partner GP = General Partner

GP

GP

GP

GPGP

GPGP

GP

20 - 30% of total often based on reputation of VC

80% or less of

total

LP

LP

LP

LP LP

LPLP

VC: Profits Coming Out

~2.5% annual management feeo Pays for office space, salaries, other G&Ao Incentive implications for small v. large funds

All capital is repaid to LP before any profit is sharedo ~80% of profit goes to LPso ~20% of profit goes to GPs

An individual VC’s share of the total GP profit share is called “carried interest”

Operating a VC Fund

Deal sourcing and qualification: finding good opportunities Evaluation: deciding if there’s a good fit with investment

parameters; company history, business characteristics, finances, business plan analysis, comparative analysis, pro forma return model

Term sheets: a nonbinding letter of intent Due diligence: ensuring that everything we believe to be

true, is true; research, references, financials, transaction summary/approval, investment memo

Closing: final signature and LP announcement Value offered: capital, relationships, management support

VC Investment Cycle

Strategic Investors

Many corporations have Investment Funds – they are called Strategic Investors

Invest for two primary reasons:o Aligns with business unit objectives (Motorola)o To get a ROI on funds (Itochu Technology)

What Investors Want to Hear About

1. What is the BIG Need or Opportunity?2. What is your unique solution and why is it special? (Technology may be secondary.)3. Who is the team that is going to make your company a success? Who are we betting on?4 Who are the competitors?5. What are the revenue, business and financial models? How much do you need?

1. The BIG Need or Opportunity

Different ways to illustrate Show size of the Total Addressable Market

(TAM) – big numbers If showing global need/opportunity, numbers

on map are good If showing an need in the market, graphics +

numbers would be good (ex: clean drinking water in India)

Be creative, catch their attention (video, skit/acting, demo)

2. Compelling Unique Solution

What is your solution? Make sure they understand its value proposition

Why is it so unique and compelling about? It can be a really new technology that disrupts they

way things are being done (location based service) It can be a new business model for distribution (eBay) It can create new ways for social interaction

(Facebook)

3. The Team

The investor has to believe that the team can take his/her money and successfully grow a business that provides huge returns.

A team that has passion and energy which is inspiring is a must.

Investors look for teams which have most of the necessary skills for that company and its product to succeed especially to adapt to change. The CEO is most important since he/she is leading the team.

A team with a track record of successfully starting up companies has a BIG advantages over others

4. Who Are the Competitors

It’s necessarily to identify competitors.If you don’t, the investor thinks you don’t

know your market, OR that the market doesn’t have enough potential for others to be in the business

Look at both indirect and direct competitorsUser charts, tables, graphics and more to

show competitors and how they compare to your company

5. Financials – Business & Investments

Finally, it’s about how much money you are going to return to the investorThe revenue model and the financial projections give them insights on what you are trying to achieve and how (Note: too many revenue models is NOT good.)If it’s a serious investor meeting, and it seems like the investor is interested, have number ready on what you want them to invest and for what post-money valuation

The Three “T”’s Investors Really Look At

TEAM – a leadership that has a record of experience and successes

TRACTION – customers that have paid and thus generated revenue

TIER 1 INVESTORS – other investors which are have good reputation in investing in winning companies (minimizes risk)

*Investment guidelines according to Tim Chang, Managing Director of Mayfield Partners

Accessing Silicon Valley

Very rare that Silicon Valley investors invest in companies outside of US unless they have investment office there (ie China, India)

They want to invest in things they are familiar with and people they know and trust – remember the 3 T’s

Need to understand SV ecosystem and develop network – start with Cultural Tourism – and have deep meaningful meetings

Know Your Investor

CHECK OUT WEBSITE – What are their areas of emphasis? Ex: Shasta

Ventures focuses on wireless, consumer, retail

UNDERSTAND WHO IS IN THE MEETING – Background of who is attendingObserve who connects with which member of

your team

ASK AROUND ABOUT VC–TheFund.comFeedback from other startup companies

Falling In Love

Getting an investor to invest you is like getting a guy or gal to first go out with you, and then perhaps get MARRIED…

Gigi WangManaging Partner, MG-Team LLC

Board Member & Chair Emeritus, MIT/Stanford Venture Lab

<Gigi.Wang@MG-Team.com>

THANK YOU!