The Founding TeamA Discussion

September 2007

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Welcome

Introductions & welcome

Who is the founding team?

3 points of view: investor, manager, entrepreneur

Dynamics

Considerations

Questions

Ralph C DerricksonPresident & CEO

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The people who get to claim victory?

The scapegoats for a failed business or investment?

The reason investors make investments?

The reason other people join the company?

The reason the company succeeds or fails?

Who is the founding team?

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Where do you draw the line?

The people that are there when the business becomes a viable enterprise

⁃ Figured out their product and how to sell it

⁃ Figured out how their business model works

Can say no to additional investment – they don’t need the money

Does it include the board of directors or investors?

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The investment decision – the 3 “Ms”

Market – if the business did “it” would anyone care?

⁃ Is there a market for the “it”

⁃ Are there competitors?

⁃ How does the market buy?

⁃ Aspirin or vitamins?

Model – if they did “it” would it make money?

⁃ What is the unit transaction of the business?

⁃ How profitable is it?

⁃ Can it be replicated

Management – is this the right team to do “it”

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Investor: is this the right entrepreneur?

Experience:⁃ Anything relevant? Any experience at all?

⁃ Done something similar? Will they try to repeat? Dissimilar and try to repeat?

⁃ Do they know the market – players, dynamics?

⁃ Can they sell their product or service?

Management:⁃ Can they hire people that will help them?

⁃ Can they manage people?

⁃ Do they inspire confidence in employees – investors?

Character?⁃ Do you trust them? With the money? With the business?

⁃ Do they recognize their own strengths and weaknesses?

⁃ Are their goals the same as yours – do they measure success the same way?

⁃ Will they “step aside” if need be?

⁃ Do they own enough to matter? Do they own too much?

Do they have a plan for building value? Is it the same as yours?

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Entrepreneur: is this the right investor?

Do they have a track record of investing in this space?

Does the partner know the space? Have relevant experience? Have any experience?

Do they have the credibility to help me with other investors?

Do they have the contacts to help me recruit, get more investors, or find customers?

Do they have the money to support me down the road?

Know the difference between being on the board and running a company?

Do you trust them?

Will they push me aside? They can fire you but you can’t fire them!

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Manager: is this the right team?

Much different at the start, then later

⁃ Pioneers vs. settlers

Do I believe they can help me make the company successful?

Can I work with them?

Can I trust them?

Can they accelerate/contribute to institutional learning?

Can they shape the culture – is their personality or their behavior strong enough?

Will people model their behavior after them – are they a natural leader?

Can they handle a start-up?

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Dynamics – Fund Raising

Burn Rate?

Time?

Value enhancing milestone?

If schedule slips?

Next funding window?

Valuation Step up?Post

Money Value?

Next pre-money value?

Capital Raised?

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Dynamics – Cash Position

Elation

Terror

Paranoia?

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Dynamics – Changing Priorities

Product Development

Sales & Marketing

Fund Raising

Recruiting

Investor Relations & Board Meetings

What don’t I know?

Competitive and or Regulatory Threats

People issues: politics – favorites – paranoia – burn out - sleep

Seed Development Sales & Marketing

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Dynamics!

Product Development

Sales & Marketing

Fund Raising

Recruiting

Investor Relations & Board Meetings

What don’t I know?

Competitive and or Regulatory Threats

People issues: politics – favorites – paranoia – burn out - sleep

Burn Rate?

Time?

Value enhancing milestone?

If schedule slips?

Next funding window?

Valuation Step up?Post

Money Value?

Capital Raised?

Elation

Terror

Paranoia?

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Considerations

Experience vs. attitude?

Interviewing is an unnatural act – do your home work!

You never add to a team – you reform it with every new team member and shift in phase.

Rarely exit the same business you entered!

No recipe for success so don’t try to follow one.

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Questions