Innovating in Golden

Click on the pie chart to see who is coming to this event –>

 

 

Rockies Venture Club is the heart of private equity in Colorado. To honor the new partnership between RVC and City of Golden we are excited to hold our January Pitch and Networking Event in the American Mountaineering Center!

Event Schedule

5:00-5:55 Networking Happy Hour
5:55-6:45 Innovating in Golden, a panel including:Doug Coors9th Street Capital and Coors Tek
Dick Franklin – Director of CleanTech Open
Tom Stemple – Sold Original Wraps to 3M
6:45-7:30 Four great pitches:
Spiffit, Magpie Healthcare, Busylife Software, and Pairin.

Location

American Mountaineering Center
710 Tenth Street, Golden, CO 80401

Basic members only $25. Please pre-register if possible.
Registrations at the door are increased $10.


As always, the RVC Investor Forum meets around the Front Range on Thursday and Friday following our Tuesday Pitch Event.

 

Designing a Good Investment Deal

Upcoming Workshop: Designing a Good Investment Deal

When: January 28th, 4-6pm

Where: Holland and Hart’s Denver Office 555 Seventeenth Street, Suite 3200, Denver, CO

Cost: $149 for Non-Members

Register for the class

Lauren Ivison from Clear Creek Partners sees a lot of A and B Round deals. Whether you are an investor or a founder, her class will help you design a well crafted investment deal.

This class format will include discussion and will allow us to go over real life scenarios. If you have a deal in progress, feel free to bring specific questions.

Example questions that Lauren will answer
  • What are the most important Terms that can have an effect on future raises?
  • How do you balance what’s good for founders against what’s good for investors?
  • How can investors and founders avoid getting diluted in future rounds?

Lauren Ivison, thought leader for the workshop entitled “Designing Good Investment Deals”.

Investor Pitch Deck Series #2 – Exit Strategy

 

Dear reader,

This is the second of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I am creating a post about each investor pitch slide, why it is important, the common errors, and how to communicate that you have what it takes to achieve your goals for this company.

Posts in this series


The mantra for this series will be, “Above all, make sense.”


The Exit Strategy Slide

The exit strategy is one of the top three things that a potential investor wants to know about your business. There are two facets to an exit strategy – human and economic. The human element is simply whether the founders are interested in selling the business in a few years. The economic element is whether the business can be sold to a buyer in a few years. Your exit strategy slide must convey your desire to use this business to make money for yourself and investors. It also must directly describe the path that you are taking to create value in your company and to secure one or more potential buyers. Remember, the majority of your company’s value is gained at the exit.

Cringe Factors

Cringe Factor #1 – You describe your exit strategy as an acquisition by a large company like Google, Amazon, or Facebook.

Why this makes us cringe – Acquisition, IPOs, and mergers are goals, not strategies. If you are banking your time and your investors’ money on a lucky break, then everyone should be nervous for the future of this deal.

How to do it right – Research the recent acquisitions for at least three companies similar to yours in the last three years. Have the details of these exits in your back pocket to be used for follow up Q&A if you don’t mention these comparables directly in the pitch. Another great step toward a solid exit strategy is to have conversations with potential acquiring companies prior to the pitch. Savvy entrepreneurs will put out feelers in conversations with multiple companies months or years in advance of an exit.

Cringe Factor #2 – You don’t want to exit for 10+ years.

Why this makes us cringe – Venture investors are primarily interested in making their money grow quickly. If you think that an early exit for a few million is a sellout move, then your company might not be suited for venture (or angel) capital. Perfectly good companies make a lot of money for the owners without ever taking investor capital or exiting.

How to do it rightResearch your options. If you are seeking seed stage capital to grow your company, then check out the other ways to grow your company even if you are pretty sure investor capital is for you. Determine whether your goals are aligned with those of investors. Approach investors only after you are certain than you see a quick exit as a success and not a sell-out. Some people would rather be King than be rich and those people should really consider whether they should be seeking investment capital at all.

The Controversial Exit Slide

The exit strategy slide is rarely discussed in VC blogs, online forums, and other centers of intelligence on venture capital fundraising. Art of the Start Guru, Guy Kawasaki doesn’t include it in his 10 VC slides. ReOverthinking’s example pitch deck, while really good, neglects the exit slide completely. So, why is Rockies Venture Club pushing for an Exit Slide?

In our community, entrepreneurs can find themselves face to face with an interested investor at any moment – in the bathroom during an RVC event, in a class, over appetizers and drinks, or in a mastermind meeting where entrepreneurs discuss strategy. Many of our investors are entrepreneurs who exited well in their last venture and now they jump the fence on a daily basis back and forth from entrepreneur role to investor role. Entrepreneurs rarely know when they are surrounded by investors. When we accept a new RVC company, we want them to be ready to pitch at a moment’s notice anywhere, with slides or without, in 30 seconds or 30 minutes.

The exit slide is simply an embodiment of real research on acquisition partners and shows the future goals of the founders. If you’ve done the work and made the slide, you never have to show it to anyone. Investors can tell that you know what you want and you are capable of doing the work to get there.

Bijan Sabet from Boston VC firm Spark Capital argues that there is no way to predict the ultimate buyer of your company, so don’t even worry about the exit when you are seeking seed stage capital. This to me is like saying you can’t predict your exact career trajectory so don’t even worry about your college major. I’m apparently not alone in my disapproval of this perspective. The point is, don’t spend all your time planning the exit. However, you DO need to have given it enough time that you don’t get that deer-in-the-headlights look when the investor asks about it.

 

Article by Nicole Gravagna, PhD, Director of Operations for the Rockies Venture Club as part of a series on the elements of an investor pitch deck. The next post is on the Team Slide.


It's Angel Capital Summit Time Again!

Register for Angel Capital Summit 2013
Date: Tuesday March 19th and Wednesday March 20th
Location: University of Denver, Sturm Hall, Room 346, 2000 E. Asbury Ave. Denver CO

Registration is open!

(Updates added on Jan 28th, 2013)

Angel Capital Summit is a two day conference designed to bring together angel investors and vetted companies that are serious about raising private equity.

Apply to Pitch

Now accepting applications to pitch at the March, 2013 Angel Capital Summit. The ACS has more early stage companies and investors in one place than any other event in Colorado all year!

New Single-track Format

The single-track format brings both sides of the negotiating table together on important legal, financial, and social implications of private equity deals. Entrepreneurs and Investors are faced with different challenges surrounding the same topics. With all the players in the same room throughout the workshops and pitches, we hope that the discussion will powerful and that more connections will be made throughout the day.

Workshops

Angel investing and raising money from angel investors both require a specific set of skills that are not common knowledge. Experts in each field lead in-depth workshops on topics such as understanding the termsheet, preparing and executing due diligence, vetting exit strategies, go-to-market strategy, and developing the board.

Pitches

We have access to the best up-coming companies in Colorado and around the country. We will identify the companies that are serious about raising capital, connect with the ones that best suited for angel capital investment, and coach them to begin developing relationships with investors.

 

Shark Tank

RVC Shark Tank Forums

Shark Tank

The holidays are a time of reconnecting with old friends and much-missed family. Inevitably, over the last month, my conversations have turned to work and how things are going in the new job I began this year. I’ve been with the Rockies Venture Club since the end of January 2012. We’re a small staff (only two until very recently) and the job has been hectic, scary, fun, amazing, and rewarding for all kinds of reasons.

My friends and family don’t really understand what I do for work. I tell them that I run a non-profit that connects entrepreneurs and investors. When I get to the part about helping companies pitch to investors, my friends faces light up with recognition. “Oh!”, they exclaim, “Like ‘Shark Tank‘ on TV!” I generally shrug and make comparisons and differences and wave off the idea that Rockies Venture Club is anything like the Emmy nominated reality show by Mark Burnett.

But then I reflect on the unique vantage point that we have here at RVC. From our small office in Thrive LoDo, we see incredible quantities of early-stage company dealflow. We know the (often secret) identities of the 200+ angel RVC Forum Investors in Colorado and elsewhere. We get to witness the leaps and bounds of improvements made between Friday afternoon at Pitch Academy and the following Tuesday at the Monthly Pitch Event. We are sometimes the first to find out that a company has closed a round, sometimes the last. And we know the truth when three companies in Denver simultaneously think they are the ONLY ones solving a given problem.

There are some similarities between Rockies Venture Club and ‘Shark Tank’. In the television show, the Sharks are angel investors. They are playing with their own money so they can make go, no-go decisions without discussing the deal with anyone. Most of the investors in our RVC Investor Forums are angels too. Their due diligence process can be expedited into a 15 hour study instead of a 15 week operation because they don’t have to answer to principals like Venture Capitalists do.

On the show, the Sharks have stacks of cash sitting next to them on their table. A viewer can get wrapped up in the drama of the stories, pitches, and negotiations and might forget to keep track of the amounts of money pledged by the Sharks to the entrepreneurs. I was amazed to read that it took 3 seasons of ‘Shark Tank’ before the Sharks’ investments totaled $15 million. They aired 38 episodes of the show in those three seasons. Our companies raised the same amount in a single year with only 12 “episodes” of RVC Pitch Events. At the rate we are helping companies raise money, we could have nearly $50 million raised after 38 pitch events!

Obviously, RVC is different than ‘Shark Tank’. We tend to look at early-stage companies, but the Sharks entertain embryonic companies with undeveloped teams and even inventors working alone. We don’t have a panel of investors at the pitch events who banter with each other and the entrepreneur; instead we let the whole community ask questions of the pitching company. Further, our negotiations go on behind closed doors. As for the dramatic focus, we prefer that the entrepreneur revel in the spotlight during the pitch instead of the investors stealing the show.

Shark Tank is in the middle of a very successful 4th season and RVC Investor Forum is wrapping up its very promising first year. We hope that RVC’s investors will continue to be active participants in the fun work that we do at RVC. It may not be exactly like Shark Tank, but really is a blast to get involved with all of the RVC companies. We get to meet amazing, driven, brilliant people who want only to achieve their company’s goals. It’s a pretty inspiring place to be. We’ve had a busy year, for sure, but there’s an upside to what we do. It’s downright entertaining.

 

Editorial by Nicole Gravagna, Director of Operations, Rockies Venture Club

Reach more Colorado customers

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Reach more Colorado customers by sponsoring the Rockies Venture Club in 2013.

How to Export to China: Recycle!

Guest Post by Chris Holmes at Cohort Capital

It’s amazing how quickly a simple concept to recycle smartphones, a dorm room hobby really, can grow into an actual business propelled by the energy and enthusiasm of one person. It’s not an uncommon story, and in fact, it’s one that has been over-popularized to the point where an increasing number of college-aged kids believe the path to success involves leaving the classroom to bootstrap a start-up that’s sure to be bought by (insert name of tech-company-acquirer-of-the-day here), turning them into young millionaires. Yes, it happens, but rarely, and the mythologized story tends to downplay many of the essential start-up ingredients. But that’s a whole other discussion…

Refreshingly, Brennan Zelner, and his Fort Collins Company, Newaya, aren’t caught up in Silicon Valley lore and are instead focused on achievable goals and organic growth. Admittedly, theirs is not the sexiest concept you’ve ever heard of, although it is a novel one when you think about it—the idea that we (America that is) have any electronics of value to export to China—especially when it was made there in the first place, is a bit counterintuitive. How did Brennan discover this anomaly of international commerce? He found, after years of flipping used iPhone’s on Craigslist and Ebay, that overseas buyers would purchase as many high-end phones as he could get his hands on. Why? The cost of cell phones in China are not subsidized by long-term service contracts with the carriers and therefore retail at full MSRP (about $600-$700US). This creates an arbitrage in which Newaya can purchase the used phones from American consumers and sell the phones to Chinese wholesalers who still find enough margin to sell the phones to Chinese consumers for less than they would pay new.

Founded during his sophomore year at CSU, the company has seen steady growth within the confines of Brennan’s excess bandwidth, studies, skiing, and probably a bit of college fun here and there. The guy’s enthusiasm is undeniable and infectious, arguably a key ingredient to the company’s success and ability to attract attention as well as valuable partnerships. From humble Craigslist beginnings, the company has expanded into retail outlets, corporate offices, and a robust web platform through which anyone in the country can get a quote, sell, or recycle their phone. Most recently Brennan has secured partnerships with New Belgium and Otterbox where, in exchange for advertising to their employees, Newaya will offer a 10% premium on the buyback of their phones. As another point of differentiation the company is also testing a new model in Alaska in which cell phones can be dropped off at a retail location rather than being mailed. “The conventional model—drop your phone in the mail—has proven to be difficult in Alaska. People think it’s a scam or it’s too inconvenient, so we’re providing a space where they can go in and leave the phone until we can get them a quote,” Brennan states.

Since entering the Rocky Mountain Innosphere, a Fort Collins Incubator responsible for propelling successful companies such as RideKick and CZero Inc., Newaya has tripled sales from about 30 phones a month to nearly a hundred. Brennan attributes this to the focus he’s found in an entrepreneurially collaborative environment away from the distractions of daily life, “They get me out of my dorm office and into an environment where any resource or connection I need in Fort Collins is at my fingertips. It’s been invaluable.”

Like his competitors (of which there are many), the buyback process is easy; simply fill out a short form online and Brennan will get back to you with a quote. You mail the phone, he mails a check. It’s a highly competitive marketplace, and in addition to Newaya, lots of other companies want to buy your phone. The guy on Craigslist wants to buy your phone. Your carrier wants you to trade it in. Charities want you to donate it. Options abound for the abandoned cell phone yet Newaya’s biggest threat may be a new phone. A number of companies, including Xiaomi Technologies, are producing smartphones costing under $200 specifically for the Chinese market. The aforementioned company sees itself as the next Apple and plans to dominate the Chinese market with its low-cost MI-One. As brand new smartphones move into reach for the price-conscious Chinese consumer, it’s difficult to say how long the buyback/resale model will last. Brennan predicts, “As Chinese manufacturers develop high quality alternative smartphones, I think we’ll see iPhone demand shrink a bit. I believe that the proprietary nature of the iPhone app ecosystem and the prestige of the devices themselves is why they are so coveted, and that’s not changing. Newaya will be adapting to the phone markets as they evolve. We might even be importing some popular Chinese handsets into the US at some point! For the next 2-3 years, I think that we’re on the right track expanding our exporting of iPhones and high end Android devices into Hong Kong, and actively searching for more buyers in other markets.”

So, what’s the next big step? For Brennan, it’s graduating, which comes in May. Beyond that, is the company pushing to raise capital? Take on the big competitors? “I’m in the middle of deciding if we want to pursue a franchise model in which we pay retailers per phone that they collect, or we want our own retail stores, or do we just want to focus on mail-in and B2B,” he says. While the company is open to a small amount of Angel funding its founder seems more interested in slow organic growth. “Every transaction we do has generated profit, and that to me is a successful business model,” Brennan professes.

Regardless of Newaya’s chances, this is really the story of a great young entrepreneur who, before even graduating college, has an impressive business philosophy and his own definition of success:

“There are two schools of thought in business. Set really big goals and build a road map back to how you will achieve them, or celebrate every incremental step you take so it doesn’t feel like such a huge undertaking. I like a hybrid model. If we can teeter between conservative and explosive growth and keep providing great value and continue with a strong social mission, I’ll be psyched.”

 

Women investors far from risk averse

Women investors are under-represented in private equity investment and folks are starting to notice. This month the Harvard Business Review posted an article by Sarah Granger about women in angel investing. She notes that there are a number of groups and organizations devoted to getting women more involved. She discusses Pipeline, Golden Seeds, Astia, 500 Startups that are all either entirely focused on women investing and advising or are well-balanced in their gender diversity. That’s great, but it’s rather sad when an organization is newsworthy because they are gender diverse.

The fact is that very few investing/advising groups are gender diverse. This is true in VC firms and also among angel investors playing with their own cash. The Kauffman Foundation has put together a white paper about all about it.

One explanation that I’ve heard many times is that women are too risk averse for private equity and this is why we don’t see more of them in the high tension world we sometimes call “risk capital”. A recent US Trust study of ultra-high net worth individuals found that women are 5% more likely to report feeling nervous while making investment decisions and 8% less likely to feel smart.

Yet, I’m comfortable arguing that risk aversion is not the problem here.

I manage an angel group and I’m a woman. I’ll be the first one to tell you that I get lonely sometimes in investor meetings when I realize that I haven’t seen a woman across the table in what feels like months. I too, have wondered why we don’t have 50% or even 25% women in investor meetings.

At Rockies Venture Club, we have 209 self-identified investors (both angels and VC fund managers) on our mailing list. Only 19 of those are women. A whopping 9% of our investor group is female. Come on ladies, I’m dying out here!

There has been plenty of research that identifies women as wealth holders in the US. In 2005 women held $14 trillion, which was 51.3% of the wealth in the US. By 2007 the value had risen to $19 trillion. Maybe women really are afraid to lose that capital in high-risk early stage investments.

I still don’t think so.

Let me tell you a little about Rockies Venture Club Investor Forum. We are very friendly to the uninitiated accredited investor. In 2012, we did not charge investors a cent to attend meetings, and we don’t require a minimum investment. There is very little barrier to entry to get involved with our group. For a year now, we have had flexible rules to help neophyte investors meet and make friends with experienced investors. In general, the investors who come to the table have made an investment within 6 months. Not ALL of them, mind you. Some are still learning, absorbing, and waiting for their interest to be piqued enough to write the check. But most.

If women are risk averse, then I would expect the women on our list to attend investor meetings and absorb, learn, and wait.

But what really happens is a very different story. RVC women investors don’t behave like you’d expect risk averse people to behave. They invest. Often quickly.

Of the 206 current investors on our mailing list, 44 have attended an investor meeting since August. Eight of those attendees were women. Let me put a finer point on it. I’m saying that over 40% of the women who self-identify as investors on our mailing list physically show up at meetings. The male show-up-rating is only 19%.

It goes farther than that. More than 20% of the women on my list aren’t just showing up to meetings. I know they are ponying up the cash when it comes time to close a round. I don’t have final numbers for the men yet, but using a non-scientific mental survey, I’ll hazard a guess that it’s also around 20%. Roughly, the same percentage of our male and female investors are cutting checks.

Now we aren’t talking about chump change here. Rockies Venture Club Investors have invested at least $6 million this year making us one of the most active angel groups in the country. Final numbers are still coming in and final investments are still closing so the total for 2012 will likely rise closer to $7 or 8 million. Further, we’ve leveraged those dollars so the closed-deal-tally is more than $14.6 million invested in RVC companies this year.

The real difference between the men and women in our group lies in engagement. There are 187 male investors and only 19 female investors who are involved in RVC deeply enough to identify themselves as investors. How many accredited women are on my list who haven’t checked the investor box identifying them (privately) as an investor? Why haven’t they done so?

Frankly, we don’t have enough information to answer that question. They might not know they are legally accredited investors [accreditation means you had an income of $200K last year ($300K if married) and expectations for the same this year OR $1M in assets not including your home].

Some women may choose to invest in a more traditional, public portfolio. Maybe they follow the instructions laid out by their wealth managers who are not allowed to suggest private equity (it’s called ‘selling away’ and it puts wealth managers’ careers at risk). Or perhaps they are giving a substantial amount to non-profit charities for a tax break each year. Maybe fewer women have been involved with start-ups, small business, and fundraising and therefore aren’t even aware of the opportunities of angel investing. I will mention, as a caveat, that some women invest as part of a couple and send their husbands to investor meetings. These women are not being counted in my data since I never see their names on meeting rosters or their faces in the meetings.

One thing is for sure, the women in our group are just as likely to invest at the men. The old standby explanation of risk aversion is simply not describing this scenario. I think it’s time to look deeper to see why women are not engaging in angel communities and private equity at ratios equal to men.

At RVC, we cannot passively allow our investor groups to remain unbalanced. Women make 85% of the purchasing decisions in the US. This accounts for $3.7 trillion in consumer spending and $1.5 trillion in business spending. We run the risk of a disconnect when one demographic is so heavily involved with product purchasing and so uninvolved with the formative years of company development.

To begin balancing the gender scales we have created our own women’s group to invite the female side of our membership to get involved with private equity investing and mentoring. We encourage all accredited investors (even newbees!) to attend an investor meeting and see what we do there. In 2013, we are adding extensive educational content for investors and entrepreneurs to get savvy with private equity investing.

Impact Angel Investing Event

Rockies Venture Club has noticed a theme this year. All investors are looking for a strong ROI. Sometimes ROI stands for Return on Investment. Sometimes it stands for Return of Impact.

This month we will discuss social and ecological impact companies. Does a high return of impact preclude a high return on investment? Can impact companies do well for investors while they are doing good for the world?

Please Register for Impact Angel Investing

Space will be limited so register early!
Time: Tuesday, December 11, 2012, 5pm to 7:30pm
Location: Cooley Offices: 380 Interlocken Crescent, Broomfield, Suite 900

 

5:00-5:55 Networking Happy Hour
5:55-6:45 How to make profitable investments in social and environmental impact companies.
6:45-7:30 Four great impact investment pitches including:
Biovantage, Snugg Home, Hydrant Flush and Main Street Power

Angel Investor Forums:
As always, this event will be followed by investor
forums for accredited angel investors. If you have
been curious about learning about angel investing,
these meetings are for you.
Denver Tech Center Thursday 12/13 7:00 am
Boulder Friday 11/14 10:30am

 

 

To the right is the breakdown of attendees at the December 2012, Impact Angel Investing event. We are very pleased to bring a great mix of people together each month to get investment deals done.

 

Funding for Life Science Companies through Angel Investors

Guest Post Article by Joni Kripal, Healthcare Consultant and Co-founder of Ji Smart Stuff

This success story about a Colorado company called VetDC shows that funding for lifescience companies can come from angel investors. Further, VetDC dispels a widely-held myth that funding for life science companies can only be found in funds or angel groups dedicated to life science ventures.

VetDC, a private veterinary biotech company, was founded on the principle that companion animals should have greater access to novel, innovative medical treatments. Working closely with Colorado State University‘s world-renowned Animal Cancer Center and Veterinary Teaching Hospital, VetDC “reverse-engineers” promising new human technologies specifically for development in companion animal markets to address serious veterinary medical conditions.

VetDC was launched in 2010 and licensed its first molecule in early 2011 (learn more about the company, their purpose, and their pipeline at www.vet-dc.com).  The quest for capital was on!  Steven Roy, President & CEO, described their journey to successfully closing $1.5 million a few weeks ago. It’s a lesson in perseverance and possibilities, so entrepreneurs take heart!

After securing seed funding from CID4in 2011, the team initially went down the venture capital path, believing that the amount of funding needed was beyond the scope of a typical angel raise. They soon learned that it was also smaller than most VC funds preferred. In addition, there were few active life science funds in Colorado, so they needed to concentrate their efforts out of state. Unfortunately, most life science funds are not set up to invest in veterinary opportunities and doing so would require going back to their limited partners for approval to pursue an opportunity like VetDC. A step that few, if any, were willing to take. While meeting with these firms did not ultimately yield the money sought, it provided confirmation that VetDC’s business concept was valid and may ultimately provide a channel of new pipeline prospects from VC portfolio companies. So, there was somewhat of a silver lining associated with taking this path.

Fast forward to the Angel Capital Summit (ACS) last March. Steven considered participation in an angel pitch event a long shot but remained hopeful that he could attract the attention of local investors. And he did! After the ACS, he was on the Rockies Venture Clubradar and made several pitches to RVC investors. Encouraged by RVC’s interest, Steven decided to redirect his efforts toward angel investors. VetDC finally gained major traction when Steve Warnecke, a long time angel investor and entrepreneur who has taken several companies public, joined the cause and assumed the lead angel role. Negotiations ensued, investors were brought into the fold and the $1.5 million round was closed in early November.

Of course, the team at VetDC is energized by the infusion of capital to fund the next steps. They are absolutely delighted that they were able to access the needed capital right here in Colorado. “Keeping it local is a real plus. We look forward to accessing the tremendous expertise our angel investors bring to the table. It’s an exciting time at VetDC!”  says Steven Roy.

VetDC has moved into full execution mode preparing for the manufacturing of VDC-1101 and filing for FDA approval in canine lymphoma. They are now well on their way to making the launch of this life saving therapy a reality for dog lovers across the country. Their goal is to be ready for commercial launch in late 2014.