Artemis Ventures, LLC Capital Acquisition Strategies Christine Comaford Managing Director

Artemis Ventures, LLC Bio § Engineer, entrepreneur, venture catalyst § 5x entrepreneur, 2 IPOs, 3 M&A, $100 million raised in last 5 years § Incubator/financier specializing in enterprise software & Internet software/services § 1 other partner: Kimball Atwood

Artemis Ventures, LLC Did You Know? 6 in 1,000,000 high tech ideas will result in a company that goes public

Artemis Ventures, LLC Did You Know? Founder CEOs own an average of less than 4% of their companies after the IPO

Artemis Ventures, LLC Did You Know? On average, 6 in every 1,000 business plans will be funded

Artemis Ventures, LLC Did You Know? 10% of startups in a given VC portfolio will succeed

Artemis Ventures, LLC Did You Know? The #1 reason a startup’s valuation is cut is an incomplete executive team

Artemis Ventures, LLC Why Create & Execute A Capital Acquisition Strategy?

Artemis Ventures, LLC To Get… § The right amount of money § At the right time § From the right investors § With the right terms

Artemis Ventures, LLC Know the Risks to Address § Financial § Market § Technology § Team -- THIS IS THE BIGGEST ONE!

Artemis Ventures, LLC Things You Must Have § Stable, working business model § Good business plan § Strong management § Great vision § Big markets § Good teams

Artemis Ventures, LLC Business Model Components § Markets & Customers  Profile and Segmentation  Key Pain Points  Size of the Problem in Dollars  Location of those Dollars  Competition § Products & Services  Product Definition  Value Proposition  Total Cost Analysis  Add-on Product Strategy

Artemis Ventures, LLC Business Model Components (cont’d) § Marketing & Distribution  Marketing Strategy  Sales Process  Implementation Process  Strategic Alliances § Financial Engine l Pricing Model  Revenue Model  Cost Structure

Artemis Ventures, LLC Step 1: How Much Money? § Rule #1: Take More Than You Need... § Rule #2: Only If It Is Cheap! § Multiple rounds (3-5) § Each round should last ~ 12 mos § Build a working financing model to do scenarios for differing financing amounts

Artemis Ventures, LLC Each Round Needs Goals §Such as…. l Seed - get to beta, build basic exec team l Series A - launch full product, marketing/sales, get paying customers, more hires l Series B - Marketing extravaganza, major partnerships, next product rev l Series C - CFO, killer IPO board members, acquisitions

Artemis Ventures, LLC Heads Up! § Avoid corporate financiers until series B+ § Around third institutional financing start planning exit § Minimum you’ll need to exit is $10 million if software/commerce, up to $40 million if content-focused

Artemis Ventures, LLC Step 2: When Do You Need It? § Rule #1: Raise Money Before You Need It § Rule #2: It Will Always Take Longer Than You Think! § Start raising money 6-9 months prior to flame out § Build a strong banking relationship NOW § Time rounds for 2-3x+ valuation jumps

Artemis Ventures, LLC Heads Up! § Internet cos should have 120% minimum growth annually § Progress milestones: more customers, new product revs, new product/service lines, increased market share, stronger team § Timing rounds to milestones = higher valuations § BUT avoid conditional financing or milestone-based tranches

Artemis Ventures, LLC Step 3: From Whom? § Rule #1: Only take money from someone you like and respect § Rule #2: We realize they can be hard to come by! § Passive or active? l Active early on l Passive if strong extended team already § List 10 most appropriate investors, take on the first 5

Artemis Ventures, LLC A Good Investor Match = § Understands/is active in your space or badly wants to be § Serves your company’s stage § Plays well with others § Doesn’t want to own the board/run the company § Has portfolio companies you can work with -- leverage!

Artemis Ventures, LLC Heads Up! § Never tell prospective investors about one another (“collusion happens”) § Plan for investor relations -- this will be time-consuming § Plans get passed around: only offer after strong meeting § Do your homework! § Create a sense of scarcity

Artemis Ventures, LLC Step 4: What Compromises? § Rule #1: Don’t Be Greedy § Rule #2: But Don’t Be Taken Advantage of Either! § Lower valuation and higher value investor is a decent trade-off § “Dilution happens”- expect to sell 10-25% on seed round, 20-40% each round thereafter

Artemis Ventures, LLC Basic Compromises § Loss of equity § Loss of control § Valuation differences l Go for value, trust l Greed extends financing process and can result in loss of interested investors § Reimbursing startup expenses (this is “sweat equity”, friends!)

Artemis Ventures, LLC Sophisticated Compromises § Board structure l # seats in total (5-7 is best) l # seats for investors (2, or 20-40% of board) l # seats for company execs (2 max, usually 1 early on) § Terms - keep them squeaky clean! No ratchets! § Founders shares vesting/exec employment terms/exec salary/termination package

Artemis Ventures, LLC Financing Process Checklist ¶ Create capital acquisition strategy: how much, when, from whom, acceptable compromises · Contact targeted investors (preferably through a personal introduction) ¸ Pitch/exec sum/ business plan -- don’t state a valuation! Ask! ¹ Focus on finding lead investor º Get a silicon valley savvy attorney

Artemis Ventures, LLC Key Issues That Slow Funding § Full board § Incomplete/unimpressive exec team § Lack of extended/credible team (advisors) § Lack of contacts/understanding of process § Lack of sizzle (often simply poor presentation) § No capital acquisition strategy!

Artemis Ventures, LLC Tips for The Right Presentation

Artemis Ventures, LLC State Credibility § Exec team l Pedigree (education, past startups) l Publicity (published pieces, notoriety, awards) l Connections (technology advisor to White House, etc) § Well-known board members, advisors (who are betting on this company)

Artemis Ventures, LLC Who You Need On Your Team § Visionaries (assorted positions) § Leaders (CEO, Managers) § Implementers (Sales, Marketing, Technology) § Infrastructure Builders/Supporters (Operations)

Artemis Ventures, LLC Be Clear § Have 3 key points to deliver § Show and tell your story (use words AND pictures) § Repeat the 3 key points at least 3 times § Only tell stories that enhance your points

Artemis Ventures, LLC Be Concise and Complete § Why is this a great idea? § How will it be executed? § How will risk be minimized, return maximized? § What are the sustainable barriers to entry? § 20 page plan (3-5 page exec sum with 1 page financials)

Artemis Ventures, LLC Complete Means… § Pain/Solution § Opportunity/Market Size/Market Analysis § Competitors: today and tomorrow § Product/Service Definition & Futures § Marketing Plan/Sales Strategy/Strategic Alliances § The Team: staff and extended § Financials (create a dynamic model)

Artemis Ventures, LLC Be Compelling § This is a HUGE opportunity, we’re the best to seize it, here are 3-5 specific reasons why § You think this opportunity is HUGE today? Check it out in 2-4 years! § There is major PAIN, we remove it -- no doubt § We have the team, technology, right market, “just add water”

Artemis Ventures, LLC Give Them a Reason to Believe § Create the excitement (greed), then… § Convey the long term vision (wow! Look at all the additional markets we can get into!), then... § Spell out the short term practicalities (hey - - these guys look like they could actually make this happen!)

Artemis Ventures, LLC Give Them the Right Info  What is your elevator pitch? In other words if you had to tell someone about your company on a short elevator ride, what would you say? § What product or service is sold? § Who is it sold to? § How much does it cost (average sales price)?

Artemis Ventures, LLC Right Info Cont’d  How big is the target market? §What percentage of that market do you need to penetrate to reach $30 million in sales? § What is your key competition? § What is your KEY differentiation from the competition?

Artemis Ventures, LLC Right Info Cont’d  How long would this differentiation last? §Do you have customers? How many? §Revenue? How much? §Strategic Alliances? With whom? § Is your technology complete? If not, when?

Artemis Ventures, LLC Present Properly § Practice and know it cold § Have backup slides for key areas (such as market segmentation, financials) § Be ready with a reference list (for all key execs, both personal and customer references)

Artemis Ventures, LLC How Long Should a Pitch Be? § A VC pitch should be 20 minutes long (goal: book next meeting) § A customer pitch should be 30 minutes long (goal: convince them to bring the decision maker in) § A recruiting pitch should be 30 minutes (goal: check them out,sell the vision, decide next step)

Artemis Ventures, LLC Great Entrepreneurial Resources § Read “Burn Rate” - Michael Wolff § Read “High Tech Startup” - John Nesheim § Subscribe to Fast Company, Industry Standard, Biz 2.0, Internet Week, etc § Check out § resources section has growing library of goodies

Artemis Ventures, LLC Entrepreneurial Resources

Artemis Ventures, LLC Christine Comaford General Partner and Managing Director Thank You!