IDEA The Story Planning/ Research Meet, Date, Try to Make it Work, Break Up Investor Referral to New Investors Investor Feedback to Refine Story Deal Manage Negotiation Micromanage Closing Funding Refinement Results Pinpoint Ideal Match © 2010 Six Secrets (Fisher/Powell)

Investors: Their goal is to give you everything you need, not what you want, and keep the rest for themselves Entrepreneur: Your goal is to give the investors everything they need, not what they want, and keep the rest for yourself. Negotiations: Key Parameters

Valuation: Initial valuation exerts unusual influence over the entrepreneurs economic return Valuation negotiation begins with budget forecast: examples Investor says: You say: Liquidation rights Investor says: You say: Compromise Economics Attorneys fees / transaction fees Investor says: You say: Compromise

Say-so in major decisions Major expenditures Budget approval Approval rights on sale of company / IPO Approval rights on liquidation Compensation of senior managers Board representation Board make-up Control

Your Employment Contract Compensation: salary and bonus Length of contract Termination for cause Termination without cause Non-compete Control

Get all the issues on the table first; don’t negotiate piece-meal: “Here’s the things that are important to me” “What are the things that are important to you?” You control the process by issuing the draft term sheet first You address, in the negotiation, the thing they need, not the thing they’re asking for You ask for something back, in return for anything significant you give up How to disagree: added bonus: their attorney If multi-party investment, pick a lead investor Stay positive, and keep them positive Negotiation Do’s and Don’ts

IDEA The Story Planning/ Research Meet, Date, Try to Make it Work, Break Up Investor Referral to New Investors Investor Feedback to Refine Story Deal Manage Negotiation Micromanage Closing Funding Refinement Results Pinpoint Ideal Match © 2010 Six Secrets (Fisher/Powell)

Individuals Angel groups Venture funds Strategic investors Hedge funds Mezzanine funds Private Equity Banks Public Markets The Investor Universe

VENTURE Stage Early, middle, late Specialties Tech, retail, online games, real estate, supply chain Driver expertise Direct marketing, business development, deep technology, mining data Seasonality Where are they in current fund Other criteria Circle of influence, champion Funding: Who is your best match?

Example Funding Series Company A – Persistent Pursuit Series A Series B Series C Series D FinancingValuation DateDilutionRaisePre $Post $ %$1,500,000$4,076,460$5,576, %$15,000,000$16,250,000$31,250, %$11,000,000$15,520,816$26, %$30,000,000$13,374,307$43,374,307 IRR A Investors-5%($1,500)$0 $1,074Common B Investors-24%($15,000)$0 $3,713Common C Investors-51%($11,000)$5,384 Series D Founders$2,919

IDEA The Story Planning/ Research Meet, Date, Try to Make it Work, Break Up Investor Referral to New Investors Investor Feedback to Refine Story Deal Manage Negotiation Micromanage Closing Funding Refinement Results Pinpoint Ideal Match © 2010 Six Secrets (Fisher/Powell)

Probability of Investment Confidence in Solution Persuasiveness of Problem CREDIBILITY: Exec Team Make-up / Expertise Passion of Entrepreneur RISKS: Known and Unknown Ease of Understanding SOLUTION Proof of Claim Audience’s Personal Experience of Problem Quantified Size of Problem and Potential Market Difficult to Solve (Barriers to Entry / IP) © 2010 Six Secrets (Fisher/Powell)

Secret 1 & 2500 (x) Bullet Proof Speech Secret 3 50 Mild Interest Secret 4 & 5 Secret 6 1 Writes a Check $$ FUNDED!! 10 Serious if no BPS 1 Pager BPS 500 (x) 3 minutes = 25 hours (1.5 (x) week) 3 50 (x) 2 hours = 100 hours (6 hours (x) week) 4 & 5 10 (x) 10 hours = 100 hours (6 hours (x) week) 6 1 (x) 40 hours = 40 hours (1.5 (x) week) © 2010 Six Secrets (Fisher/Powell)