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QuestU 203: What Investors Want?

Boris Mann
January 30, 2016

QuestU 203: What Investors Want?

Guest session for QuestU 203 class in Squamish, taught by Gal Smolar.

Boris Mann

January 30, 2016

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  1. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Quest U:

    What Investors Want Vancouver, January 2016 Boris Mann
  2. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Boris Mann

    • COO, HUMAN • Managing Partner, Full Stack • Over 10 years of community building in Vancouver
  3. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Venture Businesses

    • Are you building a venture business? • All businesses are not a candidate for venture investment • Big idea, big market, big growth, big outcomes • For the purposes of this presentation, I’ll be talking about venture businesses
  4. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Bootstrapping •

    Not all companies are right for the venture funded path • Recurring revenue SaaS companies are a great fit to grow organically • Some angels are a good fit • Early bootstrapping can still lead to later venture funding
  5. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Big Hairy

    Audacious Goal • You need a BHAG • Vision and purpose that form core passion & “true north” for the company & team • You also need an execution plan: • What can you build and sell today? • Prove you can ship • Charge money so you don’t die in the short term
  6. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Early Stage

    Funding • Pre Seed: < $500K • Working code & customers • Seed: > $500K to $1.x M • Paying customers or significant traction • Series A: $1M++ • At least one known, repeatable sales channel / distribution model Day job F&F $30K prototype Cofounder Accelerators Futurpreneur Consulting
  7. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo What Investors

    Want • Investment Deck • Team / Market / Solution (+ Proprietary Tech or Distribution) • Use of Proceeds (aka Budget for 12 months) • Hiring plan, sales & marketing “hypotheses” • User Model • Bottom up growth model • Cap Table • including scenario for next round
  8. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Investment Deck

    • An investment deck should be standalone and can be sent by email and make sense without you “live” talking about it • Pitching on stage doesn’t get cheques written • Market: who are the customers? what are their pains? • Solution: how are you solving the pain? have you developed novel technology or marketing channels? • Distribution: how do you think you will sell it to customers? • Team: why you, why now, why this?
  9. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo How many

    slides? • 10 slides • No really, 10 slides • But I need to explain my idea more fully! • Then your idea is too complicated to execute on • Really, 10 slides is the answer • …but feel free to put an unlimited number of slides in your backup
  10. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Use of

    Proceeds / Budget • The 5 year proforma is not very useful • “A 12 month budget is fiction. A 5 year plan is science fiction” • Hiring: who will be working on it full time, who do you need to hire? • Marketing: what marketing experiments will you run? • How many customers? Which methods of marketing work better than others? • What are the end goals? Customer adoption, revenue, building out product features
  11. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo How much?

    • Your plan determines how much you need • If you ask for too little, investors won’t take you seriously • You’re saying this isn’t a BHAG, or you’re saying you don’t know how to budget • 5 people at $5K per month + some monthly expenses = ~$30K per month, $360K for 1 year • People are likely your main cost for any tech / software business
  12. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo User Model

    • A bottom up model of how you add customers, lose customers, and bill customers • Self serve: we do marketing, drive traffic to our website, and users sign up / trial / pay us • Enterprise: we phone a lot of people, have a lot of meetings, and spend 1 - 3 months+ to sign up a customer • In reality: trying lots of things to beg anyone to use your product, so at least you can get feedback
  13. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo What is

    a cap table? • aka “capitalization table” • Record of all the major shareholders of a company, percentage ownership, and what people paid for various shares over time
  14. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo When do

    I need a cap table? • You’ll have one as soon as you incorporate a business • It’s the official share ownership of your company • Your lawyer keeps an official version, you’ll want to have an easily updatable one for doing “what if” scenarios related to investment
  15. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo How do

    I split equity with cofounders? • http://foundrs.com/ is an interesting tool to walk through • Also: reverse vesting for founders • Founders shares are granted immediately, reverse vesting clauses in the Shareholders Agreement describe how founders keep / give back those shares over time • vs. when your company is valued, you give out options, which are granted (vest) over time
  16. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Love your

    Cap Table • Equity is like sh*t – keep it piled in one place and it stinks, spread it around and good things grow • Reward advisors, early employees • Use your cap table to plan where you need to get to in terms of team, traction & timing • 20% - 30% dilution at each stage
  17. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo What Investors

    Want A great team (BHAG and passion) that has done their homework (models & budgets) with a plan (deck) looking for the right investor partners to join them now and for future growth (cap table and funding plan)
  18. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Cap Table

    Spreadsheets • Simplified Company Formation http://bit.ly/ captableformation • Multiple round “Ed Levinson” http://bit.ly/edlevcaptable
  19. –Mark MacLeod, @StartupCFO The best investors don’t want to just

    fund revenue growth, they want to create the future. When you look back at the biggest startup successes, they are all based on a simple, clear insight about the future of a market.
  20. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo Market: Top

    Down & Bottom Up $20B $5B $0 $1,250,000 $2,500,000 $3,750,000 $5,000,000 Y1 Y2 Y3
  21. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo 11 Pitch

    Types (Jason Shen) • #1 Traction • #2 X for Y • #3 Personal Story • #4 Pivot / Offshoot • #5 Evolution Next • #6 Painting the Future • #7 Service at Scale • #8 Wouldn’t it be cool if • #9 Insane Tech • #10 The Dream Team • #11 Consumerification of Enterprise
  22. Boris Mann, @bmann HUMAN • http://ishuman.co • @IsHumanCo References •

    How to Create an Early Stage Pitch Deck, Ryan Spoon • http://www.slideshare.net/ryanspoon/how-to-create-an-early- stage-pitch-deck • 11 Startup Pitch Archetypes, Jason Shen • http://www.jasonshen.com/2012/eleven-compelling-startup-pitch- archetypes-with-examples-from-yc-companies/ • Pitch Deck Template • http://www.slideshare.net/PitchDeckCoach/the-ultimate-pitch- deck-template-by-pitchdeckcoach