Sample Venture Capital Investor Pitch by qjo87443


Sample Venture Capital Investor Pitch document sample

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									                     C o o l e y I n s I g h t s : V e n t u r e C a p i ta l

20                             Suggestions
                               in Preparing to Raise Venture Capital

1.	   TargeT	LisT. Create a target investor list using key criteria including: (a) industry sector; (b) investment
      stage (i.e., Series A, B, C, etc.); (c) geographic proximity; (d) amount to be raised; (e) comparable/competitive
      portfolio companies; (f) potential investor contacts. Find out as much information as you can about the current
      investment status or activity level of your target investors.

2.	   ready	for	Prime	Time? You usually only get one bite at the apple so don’t seek venture capital if you are
      not quite ready. Consider raising angel money or friends & family money first in order to hit important milestones
      that will make your business more marketable to venture firms.

3.	   documenTs. Prepare three documents: (i) a thoughtfully reasoned full business plan; (ii) a one to two page
      executive summary of the business plan; and (iii) a Powerpoint presentation. A full business plan should include
      a business model, financial projections and assumptions. Remember: even if the full plan does not get read, the
      process of writing it will crystallize the issues. You are selling securities so understand your disclosure obligations
      under applicable securities laws.

4.	   ProjecTions. It is critical to have detailed projections, with clearly defined assumptions, to illustrate path to
      revenues and profitability, target vertical markets, etc.

5.	   WriTe	WeLL. If you can’t write well, ask a friend who can to help or hire a good writer.

6.	   eLevaTor	sPeech. Write your “elevator” speech: you must be able to articulate your vision in a succinct way
      in less than a few minutes. What is your value proposition in plain English?

7.	   PracTice	your	PiTch. Find a friendly audience (including at least one experienced investor) who can help
      identify gaps and weaknesses in your pitch. When you make your actual presentations, space them so that you
      can incorporate feedback and suggestions in subsequent pitches.

8.	   “KiTchen	cabineT”/advisors. Surround yourself with good advisors who are experienced in raising
      venture capital, whether board members, attorneys, accountants, professional investors or industry executives.

9.	   LiquidiTy. Know your probable path to liquidity. Venture investors are not interested in “lifestyle” companies or
      overly long-term investments.

10.	 managemenT	Team. This is critical to investors and it is important to articulate clearly your background and
      experience, who has joined the team and who will likely join the team. Do the founders have money or meaningful
      “sweat equity” in the company? You must have some skin in the game.
             20 su g g estIons I n Pr e Par I n g to raIse Ve ntu r e CaPItal

 1 	    comPeTiTion. Know your competition and be prepared to distinguish your business model. Wrong answer:
        there is no competition.

 1 	 cLean	caPiTaL	sTrucTure. Create a good, clean capital structure (usually a Delaware c-corporation with
        10,000,000 to 20,000,000 shares of common stock).

 13.	 undersTand	vaLuaTion	and	caPiTaLizaTion. If you don’t understand the basics of a corporation’s
        capitalization, then ask someone to explain it to you (e.g., authorized vs. issued stock; reserved option pool vs.
        granted options). Prepare a detailed capitalization table. Understand what realistic valuation expectations for a
        company like yours may be to determine if venture capital is the right fit.

 14.	 documenT	oPTions	and	equiTy. Adopt a stock option plan with a 10%–20% reserved pool (but
        remember that the full pool usually gets counted in your pre-money valuation by venture investors). Document
        options and stock issuances right away. Don’t leave equity arrangements unwritten. Don’t enter into “squirrelly”
        stockholders agreements. Do include a right of first refusal in your bylaws.

 15.	 KnoW	your	inTeLLecTuaL	ProPerTy. Set up an IP counseling session with an attorney. Before you
        approach venture firms, know what is proprietary and likely protectible (patents, trademarks, copyrights, trade
        secrets). IP may or may not be a barrier to entry.

 16.	 due	diLigence. Review a sample due diligence request. Prepare a due diligence binder. This facilitates the
        fund raising process and gives the positive impression of being highly organized.

 1 	    Term	sheeT. Review a sample term sheet with an attorney before you start the process. Approximately 80
        percent of the terms contained in a term sheet are non-negotiable, so focus on the more critical 20 percent.

 18.	 Life	cycLe. Know with certainty where your company is in the life cycle and target investors accordingly. Is
        your company in the hangar, on the runway, taking off or at cruising altitude?

 19.	 “WindoW	dressing.” Do you have a business card? Phone number? Website? Product prototype?
        References? Remember, sometimes little things send big signals about your stage and progress.

 20.	 non-vc	invesTors. Consider lining up a strategic investor or partner or reputable angel investor first and
        use that to leverage venture capital interest.

                                   F O R M O R E I N F O R M AT I O N , P L E A S E C O N TA C T :

                        Michael R. lincoln                MaRk D. spoto                Ryan naftulin

                           703/456-8022                    703/456-8029                 703/456-8121

                                                         www.Co o ley.Co m

                                                                                                                             upDateD 11/2006

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