Presentation on theme: "Walnut Investing Process"— Presentation transcript:
1Walnut Investing Process Walnut Venture AssociatesNovember 1999
2Walnut Venture Associates: Overview Investment FocusWalnut’s Company Building ExpertiseIndividuals in Walnut Venture Associates have been:Founders of 15 companiesCEOs of more than 20 companiesInvested in over 150 private companiesOn the Board of Directors of over 60 companiesThese companies include:Concord CommunicationsStratus ComputerAxon NetworksMicroSource FinancialKeyfileAvid TechnologyFirst Call, ComputerLandFenwick PartnersXyplexMorris Decision SystemsApplixNatural MicroSystemsMicrocomCambridge Technology PartnersAdams, Harkness & Hill,and many others.Objective: To help talented entrepreneurs build lasting businesses of significant value and to participate as active investorsWalnut Venture Associates looks for exceptional people with exceptional ideas.Geography: New EnglandIndustries: Information Technology, Software, Internet in Rapidly Growing MarketsStage: Seed, First Round, RecapitalizationsTypical Round: $250,000-1,000,000Skill sets include depth in all functional areas including general management, marketing, sales, product development, marketing communications, and finance.
3Walnut Investing Process Pre-ScreeningTuesday PresentationDue DiligenceInvestment and SupportGeographyIndustryPotential For High ReturnsInitial Assessment of Business Idea/ModelInitial Assessment of EntrepreneurInitial Assessment of Management Team30 Minute Presentation to Walnut Group- 15 Min. Presentation- 15 Min. Q&AProblem SolvedMarket Size/GrowthSolutionInitial Markets and/or CustomersTeam Track RecordBusiness ModelCapital Needs and Milestones- Now- Next RoundsFollow-up Meeting: Meet with Key Management at Company OfficeThorough Due Diligence- Personal References- Customer References- Competitive Assessment- Financial ReviewNegotiate Term SheetBoard SeatRefine your business planHelp Recruit Key ManagementIntroduce Company to Sources of Follow-on FinancingGuidance on Financial StrategyMake key contacts for strategic partnershipsConfigure the company for an IPO or being acquired
4Introduction and Concept Finances and Capital Needs In the Tuesday Meeting, the Company Should Concisely Cover the Key Areas That Will Drive the Company’s Success in 15 Minutes; Allow 15 Minutes for Q&AIntroduction and ConceptCompetitionElevator Pitch- Briefly tell us what important problem you solve and how you will make moneyConcept- Describe the product or service you will offer and how it solves an important problemWhat 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 winFinances and Capital NeedsMarkets and CustomersShow high level revenues and costs, and include the major driving assumptions of your business modelTell us how much total capital you will need to achieve cash flow breakeven and profitability; and when you will need these financing rounds over timeHow much capital do you need for this financing and what do you feel is the valuation of you companyHow will investors exit?IPO-why is this a good company for an IPOBeing acquired- who would buy and whyDemonstrate there is a rapidly growing market and briefly describe one or two driving forcesCustomers: Who will buy this and what is it worth to them?How will you reach/sell to the customers?Management TeamTell us why your team can execute and winRelevant industry experienceCustomer knowledge/contactsTechnology expertiseCompany/organization building skillsOther experience or skills you will need to bring inOtherAre there any crucial alliances required to execute the business model such as distribution or technology?
51. Market, Customers, Sales 2. Produce/Service Offering During Due Diligence, We Assess the Key Elements of the Business to Decide Whether to Invest and with Which Terms1. Market, Customers, SalesDocumentsBusiness planSales Pipeline Documents - Prospects, revenue projections, probabilityInterviewsCustomer references: validate need, willingness to pay, comments on competition, impression of the teamCurrent, prospective and rejected channel partners referencesIndustry expertsAssessmentGrowth and size of marketInitial customersSales cycle: revenue velocityDistribution channel: motivated3. Management TeamDocuments- Full resumesInterviewsReference checks on top managementAssessmentWork with them to see leadership, coachability, commitmentWeaknesses or gaps in the teamAre they finaceable by VCs?5. FinancialsDocumentsRevenue and costs going forward with driving assumptionsCash flow- past and futureEquity ownership tableOptions planCapitalization plan with milestonesFinancing history with valuationsInterviewsDiscuss business model assumptions, costs, hiring with managementAssessmentValuation for this roundFollow-on capital needs and likely sourcesMilestones and valuationsRobustness of business model; sensitivity to driving assumptionsStraightforward capital structurePrevious investorsRealistic path to exitDue Diligence4. CompetitionDocumentsBusiness planInterviewsCustomer & Alliance references and industry experts; discuss competitionAssessmentAssess threats of players to company; positioning, strength, focus, lead-time, financing, management team2. Produce/Service OfferingDocumentsBusiness plan, marketing literatureInterviewsAlliance partnersCustomers- functionalityAssessment- Technical Assessment & Demo
6After Investing, Walnut Can Help Build a Valuable, Lasting Company Walnut Provides Value After InvestingRecruit 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 company’s 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 acquisitionMake key acquisitions to drive company growth