Raising Venture Capital Considerations for Entrepreneurs Robert R. Ackerman, Jr. Founder & Managing Director Allegis Capital

Copyright 2012 – Robert R. Ackerman, Jr. IS VENTURE CAPITAL RIGHT FOR YOU? Venture Capitalists are Looking for Large Opportunities Is Your Target Market Large Enough to Warrant Attention? Are You a Feature? A Product? A Company? Differentiation – Barriers to Entry are Essential Are You Ready to Surrender Total Control? “Investor” Means “Partner” Most Companies Will Raise Capital “4” Times You Will Likely See Dilution with Each Round When You Have a Venture Board – You Have a Boss Choose Very Carefully Are you and your Company Ready? Timing is Important Preparation Essential

Copyright 2012 – Robert R. Ackerman, Jr. SELECTING POTENTIAL INVESTORS Not all Venture Capitalists are Right for You Location Most Firms Invest Within 100 Miles of Their Offices Sector Preference Firms Invest in Targeted Areas (Expertise) Stage Preference Firms Tends to Focus on Different Stages of Investment Partners Collection of Individuals – Domain Knowledge (Expertise) Portfolio Complimentary or Conflicting Investments (Expertise) Assets Do They Have Sufficient Capital And then the Hard Work Begins

Copyright 2012 – Robert R. Ackerman, Jr. SCREENING YOUR TARGET LIST Not all Venture Capitalists are Equal What is the Firm’s Reputation – With Entrepreneurs Do They “Add Value”? When Things get “Tough” – How Do They Respond? Are They Helpful in Fund Raising? Would Entrepreneurs Work with the Firm Again? Where is the Firm in Their Fund Cycle? Do They Have the Capital to Support You Through Your Growth? Do Your Due Diligence Can You Get a “Warm” Introduction to “the” Partner Firms Will Look at Opportunities in a Year 1% +/- Will Lead to New Investments You Need to Get to the Top of the Stack of “Possibles”

Copyright 2012 – Robert R. Ackerman, Jr. THINGS TO KEEP IN MIND Invest in Yourself First Putting Your Money Where Your Mouth Is Get to the “Right Time” to Seek Venture Capital Raise Money When You Don’t Need It Raise from a Position of Strength Have Options Convey Scarcity and Build Momentum You are Selling Yourself Ideas are Great, but Success is About People Investors Have Heard it All Before Need to Build Credibility and Confidence For Most Entrepreneurs – Success is About Persistence A Lot like Dating The Money is not raised until it’s IN THE BANK.

Copyright 2012 – Robert R. Ackerman, Jr. TILTING THE ODDS IN YOUR FAVOR Three Types of Risk for a Start-Up Market Product Execution Ensure You Know Your Customer Better Than Anyone Validation of Problem & Value Proposition Customer References Critical to Conveying an Ability to “PIVOT” Have a Product Address Technical Credibility Brings the VISION to Life Get Traction Connecting Supply and Demand Builds Confidence

Copyright 2012 – Robert R. Ackerman, Jr. SEVEN SLIDES TO FUNDING 1)Your Credentials 2)The BFD (Big Fundable Deal) 3)The Market 4)Competition 5)What We Own (IP, Trade Secrets…) 6)Summary Financials 7)Summary Timeline…

3 Months 12 Months 6 Months 15 Months 9 Months 18 Months NOW Financing Product Revenue Marketing THE PLAN – SUMMARY TIME LINE Series A Product AlphaMarketingRevenueProduct Beta Product General Availability Series B

Copyright 2012 – Robert R. Ackerman, Jr. AN ALTERNATIVE Just show up, no foils We’ll give you a marker and a white board You’ll show your command of your BFD

Copyright 2012 – Robert R. Ackerman, Jr. FAMOUS COUNTER EXAMPLES Just to keep (some) perspective Jobs and Wozniak: Who will fund these unbathed hippies? What? A third search engine? WebVan: Big Idea, Big Names (Investors, CEO), Big Crater…

Copyright 2012 – Robert R. Ackerman, Jr. A FEW HINTS Even with Screening – Don’t assume your Audience are Experts You should be the “subject matter expert” in the room Make Sure you have Your Elevator Pitch down Cold Open your meeting by Framing the Conversation Manage your Meeting Time 30 Minutes for the Presentation 10 Minutes for the Demo 20 Minutes for Questions The Objective of the First Meeting is to Get to a Second Meeting Don’t try to convey everything you know – You will FAIL Engage with Questions – Don’t Become Defensive Don’t Bulls#$% - Building Confidence is Essential Anticipate Due Diligence Requests and BE PREPARED Read

Copyright 2012 – Robert R. Ackerman, Jr. Check List  Clearly articulate your vision  Overflow with passion and conviction  Keep it simple  Know your numbers cold  Start with the problem you intend to solve  Rehearse your pitch… a lot  Do something surprising  Make us believe in you  Don’t exaggerate  Tell us the hard part  Demonstrate how you can defend against competition  Answer “Why does this business need to exist?”  Have a thoughtful and deliberate game plan  Remove any vagueness  Balance boldness with believability  Highlight what makes you unique  Proofread every correspondence  Show a pattern of achievement  Make every word count  Why us? Tell us what specific help you need  Never say, “We have no competition”  Make sure you can defend your core assumptions  Provide a view into how you think through problems  Don’t talk too much – listen and engage, don’t preach  Follow up with absolute precision – every interaction is a test  Never present two different ideas  Have a sense of humor  Never ask a VC to sign an NDA (you’ll look like an amateur)  Focus more on the team than the exit  Tell us how you’ll overcome adversity  Show your product or service from the customer’s view  Answer, “It a feature or a business?”  Show us how the company can become big  Figure out a way to connect to us without cold-calling  Answer questions directly, quickly, and honestly  Why? Why you? Why now?  Show how you’ll create an “unfair advantage”  Be open-minded, humble, and coachable  Tell us how you’ll create a “category of one”  Never say your forecast is conservative  Don’t name drop  Make us feel your burning desire to achieve Credit: Josh Linker – Detroit Venture Partners

Questions? Robert R. Ackerman, Jr.