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Walnut Investing Process Walnut Venture Associates November 1999

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Presentation on theme: "Walnut Investing Process Walnut Venture Associates November 1999"— Presentation transcript:

1 Walnut Investing Process Walnut Venture Associates November

2 2 Walnut Presentation Walnut Venture Associates. Walnut Venture Associates: Overview Investment Focus Walnuts Company Building Expertise Objective: To help talented entrepreneurs build lasting businesses of significant value and to participate as active investors Walnut Venture Associates looks for exceptional people with exceptional ideas. Geography: New England Industries: Information Technology, Software, Internet in Rapidly Growing Markets Stage: Seed, First Round, Recapitalizations Typical Round: $250,000-1,000,000 Skill sets include depth in all functional areas including general management, marketing, sales, product development, marketing communications, and finance. Individuals in Walnut Venture Associates have been: Founders of 15 companies CEOs of more than 20 companies Invested in over 150 private companies On the Board of Directors of over 60 companies These companies include: Concord Communications Stratus Computer Axon Networks MicroSource Financial Keyfile Avid Technology First Call, ComputerLand Fenwick Partners Xyplex Morris Decision Systems Applix Natural MicroSystems Microcom Cambridge Technology Partners Adams, Harkness & Hill, and many others.

3 3 Walnut Presentation Walnut Venture Associates. Walnut Investing Process Due Diligence Follow-up Meeting: Meet with Key Management at Company Office Thorough Due Diligence - Personal References - Customer References - Competitive Assessment - Financial Review Negotiate Term Sheet Follow-up Meeting: Meet with Key Management at Company Office Thorough Due Diligence - Personal References - Customer References - Competitive Assessment - Financial Review Negotiate Term Sheet Pre-Screening Geography Industry Potential For High Returns Initial Assessment of Business Idea/Model Initial Assessment of Entrepreneur Initial Assessment of Management Team Geography Industry Potential For High Returns Initial Assessment of Business Idea/Model Initial Assessment of Entrepreneur Initial Assessment of Management Team Tuesday Presentation 30 Minute Presentation to Walnut Group - 15 Min. Presentation - 15 Min. Q&A Problem Solved Market Size/Growth Solution Initial Markets and/or Customers Team Track Record Business Model Capital Needs and Milestones - Now - Next Rounds 30 Minute Presentation to Walnut Group - 15 Min. Presentation - 15 Min. Q&A Problem Solved Market Size/Growth Solution Initial Markets and/or Customers Team Track Record Business Model Capital Needs and Milestones - Now - Next Rounds Investment and Support Board Seat Refine your business plan Help Recruit Key Management Introduce Company to Sources of Follow-on Financing Guidance on Financial Strategy Make key contacts for strategic partnerships Configure the company for an IPO or being acquired Board Seat Refine your business plan Help Recruit Key Management Introduce Company to Sources of Follow-on Financing Guidance on Financial Strategy Make key contacts for strategic partnerships Configure the company for an IPO or being acquired

4 4 Walnut Presentation Walnut Venture Associates. Introduction and Concept Markets and Customers Management Team Competition Finances and Capital Needs In the Tuesday Meeting, the Company Should Concisely Cover the Key Areas That Will Drive the Companys Success in 15 Minutes; Allow 15 Minutes for Q&A Elevator Pitch- Briefly tell us what important problem you solve and how you will make money Concept- Describe the product or service you will offer and how it solves an important problem Elevator Pitch- Briefly tell us what important problem you solve and how you will make money Concept- Describe the product or service you will offer and how it solves an important problem Demonstrate there is a rapidly growing market and briefly describe one or two driving forces Customers: Who will buy this and what is it worth to them? How will you reach/sell to the customers? Demonstrate there is a rapidly growing market and briefly describe one or two driving forces Customers: Who will buy this and what is it worth to them? How will you reach/sell to the customers? Tell us why your team can execute and win Relevant industry experience Customer knowledge/contacts Technology expertise Company/organization building skills Other experience or skills you will need to bring in Tell us why your team can execute and win Relevant industry experience Customer knowledge/contacts Technology expertise Company/organization building skills Other experience or skills you will need to bring in What are the alternative ways of solving the problem? Who are the competitors? How does your offering differ from the others? Tell us why and how you can win What are the alternative ways of solving the problem? Who are the competitors? How does your offering differ from the others? Tell us why and how you can win Show high level revenues and costs, and include the major driving assumptions of your business model Tell us how much total capital you will need to achieve cash flow breakeven and profitability; and when you will need these financing rounds over time How much capital do you need for this financing and what do you feel is the valuation of you company How will investors exit? IPO-why is this a good company for an IPO Being acquired- who would buy and why Show high level revenues and costs, and include the major driving assumptions of your business model Tell us how much total capital you will need to achieve cash flow breakeven and profitability; and when you will need these financing rounds over time How much capital do you need for this financing and what do you feel is the valuation of you company How will investors exit? IPO-why is this a good company for an IPO Being acquired- who would buy and why Other Are there any crucial alliances required to execute the business model such as distribution or technology?

5 5 Walnut Presentation Walnut Venture Associates. 3. Management Team Documents- Full resumes Interviews Reference checks on top management Assessment Work with them to see leadership, coachability, commitment Weaknesses or gaps in the team Are they finaceable by VCs? During Due Diligence, We Assess the Key Elements of the Business to Decide Whether to Invest and with Which Terms 1. Market, Customers, Sales Documents Business plan Sales Pipeline Documents - Prospects, revenue projections, probability Interviews Customer references: validate need, willingness to pay, comments on competition, impression of the team Current, prospective and rejected channel partners references Industry experts Assessment Growth and size of market Initial customers Sales cycle: revenue velocity Distribution channel: motivated 2. Produce/Service Offering Documents Business plan, marketing literature Interviews Alliance partners Customers- functionality Assessment- Technical Assessment & Demo 5. Financials Documents Revenue and costs going forward with driving assumptions Cash flow- past and future Equity ownership table Options plan Capitalization plan with milestones Financing history with valuations Interviews Discuss business model assumptions, costs, hiring with management Assessment Valuation for this round Follow-on capital needs and likely sources Milestones and valuations Robustness of business model; sensitivity to driving assumptions Straightforward capital structure Previous investors Realistic path to exit Due Diligence 4. Competition Documents Business plan Interviews Customer & Alliance references and industry experts; discuss competition Assessment Assess threats of players to company; positioning, strength, focus, lead- time, financing, management team

6 6 Walnut Presentation Walnut Venture Associates. After Investing, Walnut Can Help Build a Valuable, Lasting Company Walnut Provides Value After Investing Recruit and Coach Management: Walnut can help identify and assess management candidates and check on their track records. Recruit the Board: Walnut can help identify and recruit board members. Our strong industry and venture contacts and prior start-up experience help us identify effective board members. Recruit Venture Capitalists: For certain companies, our primary post-investment role is to help prepare the company for subsequent venture capital funding. We have strong venture capital contacts and can make introductions once the company is well positioned. Help with Financial Structuring: We can help craft the companys financial strategy in raising follow-on capital. Many individuals in Walnut have deep experience in financial structuring for mergers, acquisitions, and strategic partner investing. We can also advise on option and incentive plans. Customer and Alliance Building: Our extensive industry experience and relationships can provide a useful means to access customers and alliance partners. Company Building: We can advise on organizational structuring; defining and establishing the marketing, sales and distribution strategies and other growth issues in building a valuable company. Configure the company for an IPO or an acquisition Make key acquisitions to drive company growth


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