Workshop Investor readiness

Program for today 13:00Introductions 13:30Fundamentals on startup investments 14:15Preparation investment game 15:00Play investment game 16:15Evaluation

Who are you and who am I?

Niek Huizenga | Lecturer EntrepreneurInvestor Consultant Coach

Chordify BV “Tune into chords” Spin out from the University of Utrecht & Oxford Started in 2012 by a group of scientists Launched the web service in 2013 Working Business Model in 2014 Growth and investment in

Business Investments

You need fuel to launch your strategy ….

What is finance? Verb: “provide funding for a person or organization”

Who needs finance?

Getting finance….

Pecking order of finance Own money Gift Loan – Normal loan – Subordinate loan – Convertible loan Equity

Two types of funders Trust driven funders Self Family, friends & fools First employees “Sweat” Crowd funding Business angels Fact driven funders Venture capitalist Banks

Trust driven funders

Fact driven funders (VC’s and banks) Remember: they manage money of others!! Focus on evidence: – Business opportunity – Customer references – Experience of team It is all about risk management!

Funding stages 1.Own money and friends, family & fools “pre seed” – 50k –Idea stage, search for customers demand, only founding team 2.Business angel and subsidies “seed” – 500k –Prototype stage, first customers, first employees 3.Venture capitalist “series A / series B” – 5M –Scaling stage, serious revenue, growing team 4.Exit “IPO / acquisition” – A lot –Serious challenger or opportunity for big players

Funding stages

An ideal investment has… A working product A growing market A launching customer …. A great team

Are you looking for an investment?

The search for funding (1) Do you have the ambition? Can your startup become a real business? What stage you are in? Define your risk profile? How much funding you need? What are you willing to share / give away? What do you need besides funding?

The search for funding (2) 1.Make your materials: one pager, pitch deck, business plan 2.Mobilize your network and announce you are looking for funding 3.Make a list of potential funders (desk research) 4.Visit events to meet potential funders (field research) 5.Approach the least appealing funders first and practice 6.When you have enough feedback and confidence, approach the most appealing funders Be critical to yourself, if you do not find investor’s interest maybe it is because of you!

Making the deal: Term Sheet Negotiate the terms for funding – Valuation – Type of stock – Dividends – Anti Dilution Rights – Governance – Vesting conditions – Management and CEO replacement – Ambition for exit – Confidentiality – Termination conditions – Other…. No experience: always get an advisor!!

Making the deal: Due Diligence Due diligence – Product – Market – Team – Financial Do your own due diligence!

Making the deal: Bring in the lawyers! Paperwork – Participation agreement – Shareholders agreement – Guarantees and disclosing – Management agreement – Company constitution – Representations – Warranties – Etc. etc. etc.

Making the deal: Champagne!! Closing – Day at the notary! – Lot of signatures! – Don’t forget to celebrate!!

Getting an investor is like a marriage Are you sure you need funding? Put everything on paper and assume the worst case scenarios! Never sign anything until you fully understand everything! Trust and share the vision! Remember: you can only give away shares once

Tvilight BV “Intelligent streetlights, reducing energy consumption” Spin out from the TU Delft Started in 2012 as a one person project In 18 months company grew to 25 employees In Summer 2013 we closed an investment of 4M Now growing rapidly on global scale

Instructions Investment Game

Workshop: Close a deal between the entrepreneur and the investor Participants are divided into teams of two Teams are assigned the role as entrepreneur or investor Teams receive the case of the entrepreneur/investor Case needs to be prepared intensively prior to workshop

Case -The company Earth Escape needs an investment of $100M. -The VC Aerovent Capital is interested to invest the full amount. -How to structure a deal acceptable to both parties? Profile Earth Escape -The founder of Earth Escape dreams of conquering the market of space tourism. His team has 25 years of experience, their product is superior and the market forecasts are fantastic. Profile Aerovent Capital -Aerovent Capital is a renown investor in the aerospace industry. They have a proven track record of successful investment deals. Besides financial resources they offer a vast network of experts and potential clients. Earth Escape is a risky investment, but it has the potential to become a “home run”! Case: Aerovent Capital & Earth Escape

Points to earn for: -Substantive terms (S) 50% -Process evaluation (P) 50% Substantive terms (Term Sheet) -8 technical aspects of the deal (minimum score is 45). Process evaluation -5 process aspects of the deal (no minimum score). How to make a successful deal?

1.Equity percentage 2.Type of stock 3.Dividend 4.Anti dilution clause 5.VC board members 6.Vesting of shares 7.CEO replacement 8.No shop The founder and investor get points for each negotiated results. However they are not aware of the importance of each others results! Substantive terms

1.Trust 2.Respect 3.Equitability 4.Regard to other’s interests 5.Interest in future collaboration A deal is only a good deal if both parties leave the table with a smile. How far do you go to get your substantive points? Proces points

Teams FoundersInvestors Marielle, HubertJori, Steven, ArjanSander RowanSeverin

Evaluation Scores on the substantive terms Scores of the process What’s next?