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.

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.

Crowdfunding vs Angels – Circle the wagons!

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

Maybe it’s the landscape here in Denver. The gorgeous sunsets these last few days have been just the kind if backdrop that the protagonist should ride away into at the end of the day. And until today, I thought all was settled in the land of investors. Then an article like this guestpost on Venture Beat comes across my desk. Is this a new take on the old Cowboys vs Indians?  Crowdfunding vs Angels? Is Ryan Caldbeck (CEO of CircleUp) suggesting that we circle the wagons?

Caldbeck writes that with the new JOBS Act and crowdfunding rules, heads of angel groups will have to make adjustments to stay competitive. His argument seems to lie in the premise that online crowdfunding platforms like his will have such great dealflow that our angels will stop coming to investor meetings, instead choosing to do all their investing online. As one of these “heads of angel groups” I’ll have to beg your pardon.

Angel investing is notoriously inefficient. This part, Caldbeck has correct. Angels are simply high-wealth individuals who want to get involved with startups for a variety of reasons; for the most part, they are not trained investors. The individual nature of angel investing cannot be expressed enough. Sometimes multiple angels pool capital into LLCs to create a little fund for each investment, but generally, angels tend to make decisions to invest on their own accord. Crowdfunding will be no different. Investors will still make their own decisions to fund a company or walk away. No one is going to request a conference call with 99 other potential backers around the world to decide whether they will invest. Similarly, due diligence efforts can only be shared so much before you begin to wonder if you trust your money to someone else’s ability to dig up dirt on a would-be investment. I’ll make the argument that crowdfunding is just as individualized and inefficient as angel investing. Both crowdfunders and angels do their own due diligence and make their own decisions.

Caldbeck’s point that, for angels, getting strong dealflow can be a time consuming nightmare is also well taken. I am personally responsible for creating the eddies of dealflow for the Rockies Venture Club and I’m totally thankful that I have 27 years of local name recognition for my organization to fall back on. If I were to walk into a BDNT meeting, grab the microphone and boast to entrepreneurs that I am now accepting applications for companies to pitch to Nicole (vs pitch to the Rockies Venture Club), it wouldn’t go over so well. Few individuals have the quality dealflow that established angel groups can claim. For angels in towns lacking an angel group, I can see how crowdfunding sites will drastically improve the number of quality investment opportunities. However, in places like New York, Denver, Pasadena, Nashville, Philadelphia, Buffalo, Puget Sound, St. Louis, Las Vegas — I digress.

Is the promise of dealflow really the reason that angels come to angel group meetings? If so, then crowfunding sites may have the silver bullet and nationwide angel groups will soon be landing in the dust like the cowboy with a slow draw. Now, I’ve spent the last year facilitating two meetings per month of the RVC Investor Forum, and I have the sneaking suspicion that dealflow is not the only reason that we find ourselves around the boardroom table.

Why are we really there? Let’s go back to the part about how angels are high-wealth individuals who want to get involved in startups for a variety of reasons. Many of our angels are entrepreneurs who “made it”. Their last company had a great exit and now they want to invest in other startups. These folks are often young (sub retirement age), still starting companies of their own, and want to see what the other side of the negotiation looks like. They are not trained investors.

How does one learn angel investing, anyway? Angels learn to invest through formal or informal mentorship by other angels.

Where does an angel meet other angels? At angel group meetings.

At Rockies Venture Club, we quickly noticed that angels need to meet face to face with other angels so that they can learn what works, what doesn’t work, and how to get through the difficult and awkward parts of being an angel investor with dignity intact. We’ve taken this a step farther and have been creating courses for angels to learn the tricks of this wild avocation. (The next angel course will be Jan 22: Identifying and Designing a Good Deal)

I’ll relate a story to illustrate how an educated angel is invaluable. Recently a company came through our program and when it was time to negotiate terms, we quickly determined that prior funding terms made this deal very unattractive. If we had only neophyte angels in the group, the deal would have languished on our “watch” list until the founders decided to go get big corporate jobs. Fortunately, we had a highly experienced angel who took the deal by the reigns and re-negotiated old terms with the stakeholders. A big percent of zero is a lot less attractive than a smaller percent of a great exit and, after a few months, I’m happy to say that the deal is closed. Our less experienced angels have been learning from our highly experienced angels. The result is that our companies close deals at a rate of 22%. Are crowdfunding sites going to bring backers together to learn from one another as trusted friends and colleagues?

Frankly, Ryan Caldbeck, I don’t hear the cowboy showdown music starting after all. When the JOBS Act dust settles and crowdfunding is no longer a media buzzword, angel groups and crowdfunding sites will find there is little competition between them. Crowdfunding sites will have their place in cyberspace and angel groups will still have face to face meetings for those of us who actually like to shake hands.

 

CleanLaunch offers Free Coworking Space to likeminded entrepreneurs

Ever since high school we all wanted to be where the cool kids are. Right? Ok, maybe not you hipsters, but follow me anyway.

If you are a clean tech company, inventor, or human idea generator, you now have an invitation to hang with the cool kids. The CleanLaunch Technology Incubator at NREL is offering their space for free. They’ll give you conference rooms, a place to put your laptop (desk) and your rump (chair), internet access, parking, and enough coffee to fuel your ideas. They even have a color printer and if you don’t abuse your limits I bet they won’t charge you much for that either.

Still unsure, you can Tweetstalk CleanLaunch for a while.

Of course they can’t just open the doors to anyone. You really have to be working on clean tech stuff. There’s always fine print, isn’t there? Sorry, dirty tech people. This isn’t for you.

The fine print:

To qualify for the free coworking space at CleanLaunch, the business or entrepreneur must be developing, implementing, or operating an initiative that is addressing energy, environmental, and resource constraints. Examples include enabling technologies, software, and unique business models that are applied to energy, materials, water, food and agriculture, transportation, sustainable living, and resource efficiency.

For more information see the CleanLaunch website.

Who are these cool kids anyway? Colorado cleantech economic development stakeholders including NREL, CCIA, EEBC, Calstart, CAMA, Colorado Renewable Energy Collaboratory, and CleanLaunch

Rob Writz is the Director of New Ventures at CleanLaunch. He was recently highlighted in an interview here.

Updates for the New Year

  • Active investments are happening!
  • New private equity investment education courses
  • New Investor Meeting locations and more investors joining RVC every week!
  • Increased benefits for RVC members!

 

More Success!
We made big changes to RVC in 2012, and the fact is, we aren’t done yet! This year we added the RVC Investor Forum consisting of two Forum Meetings (Boulder and Denver) each month. This single change made all the difference for 22 great RVC companies who have reported investments totaling over $14,000,000 this year alone.

More Investor Meeting Locations!
In 2013 we are happy to announce that we will be adding another Investor Forum Meeting location in Golden starting in January. RVC has partnered with the Golden Economic Development Commission to stimulate deal flow west of Denver. We look forward to a change of scenery, and what pretty scenery it is. The exact location will be announced shortly.

More Education!
Next year you can expect more courses in the RVC Academy. The ever popular Pitch Academy runs every month on the Friday before our pitch event. This course is open to the public and space is limited. A new structure of this course allows for the option of sitting in and observing instead of having to pitch in class. Also, now you can bring the whole team at a discounted rate! Choose your level of participation.

A new Private Equity Prep Course will be available for companies to determine whether they are ready to seek capital. This will be an intensive workshop where each company can identify and address opportunities for improvement. We may end up calling it a Roadmap to Readiness Course.

Investors and entrepreneurs alike will be exited to take the new course Identifying and Designing a Good Investment Deal. Expert instruction by Lauren Ivison from ClearCreak Partners. Are you sure that the deal on the table isn’t laced with bombs and pitfalls? Learn from Lauren who frequently sees deals in arrested development because prior rounds were poorly structured.

Look for more courses in the coming months as we build out our suite of Private Equity Investment Education Courses.

 

Investor Pitch Deck Series: #1 The Market Slide

 

Dear reader,

This is the first of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I will create a post about each general 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. Here at the Rockies Venture Club, we pitch around 100 companies per year to investors. Plus, we teach the Pitch Academy course every month where we see lots of great companies that span the gradient from Newbie (first time pitch) to Pitch Maestro (hundreds of pitches). Trust me when I say we’ve seen it all.

 


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


The Market Slide

The purpose of the Market Slide is to show that you have enough people interested to buy your product so that you can ultimately have a scalable and sizable business. An underlying, and equally important purpose of this slide is to convey that you have a plan and are capable of actually capturing those customers. In this case nothing says “capable” like the existence of real paying customers. Barring that (if your product is still in development) you can show evidence of touching your potential customers through direct surveys, polls, and other interactions.

Cringe Factors

Cringe Factor #1 – When a pre-revenue company claims they are in a $X Billion Market, they will capture Y% the first year then Z% the following year.

Why this makes us cringe – Until you have a paying customer, you cannot be sure that you can really sell your product. If you are in revenue and you can track your increase in sales over time, then it stands to reason that your sales trajectory will continue on that track for a while. Prior to gaining paying customers, we are pretty sure you are just making stuff up.

How to do it right – If your company is pre-revenue, discuss the market size, then spend your time talking about how you are going to get out there and touch that market. Use specifics such as, “Last week, we had a phone call with Julie Miller from Borders about putting our product on their shelves. Next week, we have a meeting planned with the floor manager of the local Borders.” Your go-to-market strategy is way more exciting to investors than a bunch of made up numbers.

Cringe Factor #2 – You tell us that your pro forma includes “very conservative estimates”.

Why this makes us cringe – All we hear is, “I made up some numbers, then cut them in half.” Again, the appearance of invented numbers is the culprit.

How to do it right – Two words: field research. If you have talked to potential customers and gotten their word that they are willing to pay $10 for your product and that they would buy it 5 times a year, then you have a pretty good idea that the yearly value of a customer is $50. If you talked to 100 people in the right demographic and 6 said they’d be interested, then you expect 6% of your touched market to become a customer. If you’ve done some pre-product-release marketing to determine how many people you are able to reach with your initial marketing campaign, then you know your initial potential customer base. Put all that together and you have validated numbers for your pro forma. What’s better is that you can (and should) do this kind of bottom up market research before your product is available for purchase.

Cringe Factor #3 – You have no market strategy.

Why this makes us cringe – Your product or technology might be able to save the world and if no one knows about it, you’re sunk. (Inventors, this means you.)

How to do it right – Get out there, talk to people, and find out about their relationship with your product (or your type of product if yours isn’t available yet). You might be surprised what you learn. Really listen. Work with your team to build three different go-to-market strategies. Initially just brainstorm. Be silly about it at first. List ALL of the ways you might get the word out about your product. Are you finding that you are listing any organizations, government agencies, or large companies who might be really great strategic partners for you? Are their any groups or companies who might make bulk purchases? Does it make sense to give some of your product away for free to customers as marketing? Does it make sense to give your product to other companies for free or cheap if they can somehow connect you to your customer?

When you are done thinking, planning, rethinking, testing, pricing, and planning some more, you will have a great roadmap to get you into revenue. This is an iterative process and your market strategy will continually evolve. That said, you MUST be able to recite a market strategy when you present to investors. Investors know that nothing sells itself.

 

Example Slides

The first question I ask an entrepreneur of their product, “What does it do?” The second question I ask is “how does it make money?” The Market Slide is one of the ways that you illustrate how your product makes money. There are countless websites with investor slide examples. Instead of adding my own to the melee, below I address four examples and discuss how they handle the market slide.


This slide from ReOverthinking.com shows thoughtful consideration about the target customer. Identification of the customer is important and is sometimes non-trivial. In some cases you may be thinking of the end user as the customer, but who really pays you for the product?
My favorite part of this slide is that no claims are made to capturing any percentage of this market.

I’m not wild about the rest of the slides in this example since they are too busy for a live pitch presentation, but here they are.

 

 


 

This example slide from Shai Goldman goes a step farther and mentions the “bottoms up” approach. If you can add bottom up research (also called ‘field data’) for any market size numbers you will gain immediate credibility. Bottom up research looks like a well set diamond in your slide deck.

You can find the rest of this deck on slideshare.

 

 


 

What is a discussion of investor pitch slides without an example from Guy Kawasaki, Pitch Guru? His marketing slide includes a mention to sales. I could not have put a finer point on it. Your company’s goal is sales. How are you going to begin and increase sales? What have you already done? Who on your team is driving the sales?

 

 

 

 


 

Here is a real-life example from AirBnb’s first pitch deck. This slide simply identifies the size of the target market. They coupled this with another side listing the number of users on two different competitors’ web sites. By pairing the total market with the real user numbers from comparable companies, they show a realistic best case scenario for early market size. Later in the deck, they show a market adoption slide covering the strategic partnerships they will use to touch their targeted customers.

 

 


The next installment in the series will be the Traction slide exit strategy slide. The change was inspired by a blogpost by A Smart Bear.

Peter's 12 Ps of Investment Readiness

Peter Adams, RVC Executive Director, taught two courses during Denver Startup Week. He culminated the presentation with the 12 Ps of fundraising preparedness. Is your company ready to raise capital?

Are you prepared to begin raising capital for your company? Use this checklist to determine how ready you really are. Not all companies will have all 12 of these readiness factors, but the more you have, the more ready you are.

Package – Investors are buying a piece of your company. When you present your investment opportunity to investors be sure that you are presenting the whole package, not just the product or technology.

People – The management team is incredibly important. If your company is still small or can’t afford to hire a complete team, be sure to add people to your deal in the form of volunteer advisors. Can you name 10 people who are willing to publicly be affiliated with your company?

Plan – Failing to plan is planning to fail. Of course you won’t follow your business plan exactly and everything will change next week. Write the plan anyway, then keep improving on it.

Proforma – Investors love to see the numbers. It’s better if you can provide validated numbers that reflect a few of the big decisions you are going to make.

Prototype – Can you put your product in an investor’s hand? Better yet, is it a working prototype? Prototypes show you are another step closer to revenue.

Product – Do you have a finished product? Even better.

Promotion Strategy – You may have the best product in the world and if no one knows about it, your company fails. How are you going to get your product into the world? Provide specifics about your strategy such as, “work with Marketing Company X, beginning March 2013”.

Partnerships – No company is an island. Partner with other companies toward a common goal of increasing revenue. A great example is Zappos which partnered with UPS to provide free shipping. Zappos gained customers through their always free shipping gimmick and UPS increased volume of their shipping business. Obviously, Zappos paid UPS, at a bulk discount, to ship.

Paying Customers – Have you convinced anyone to pay you for your product? Even if it’s only two customers, flaunt all sales.

Proof – Proof of concept and proof that your business model is a valid one comes in many ways. The more proof you have that your company can make money, the more likely you can get investors excited about your company.

Pitch Deck – You have to communicate your business to investors in a short period of time. Your message must be clear or you can lose credibility fast. You really do only get one chance to make a first impression.

PPM –  A Private Placement Memorandum is a legal document that includes an engagement letter, term sheet, and everything your company needs to issue stock in accordance with the Securities and Exchange Commission. The document details the summary of the offering, financial data, industry overview, management, etc. Companies with a PPM tend to close on their rounds faster than those who don’t.

If you are feeling a little overwhelmed at the extent of preparation that is necessary to raise funding, don’t fret. Fundraising is a process, very few companies have all of these when they begin seeking capital. Often companies set aside a year when they decide that it is appropriate to begin fundraising. They spend some time gathering the information for the proforma and PPM, begin to create a pitch deck, and start spreading the word that they are interested in investment. A great investment takes time to prepare.