1. Venture Capital Is It For You. Is Your Venture Ready. by Barry G
Venture Capital Is It For You? Is Your Venture Ready? by Barry G. Bisson P.Eng (NB)

2. 3 Principles of Sound Finance
The business is adequately capitalized
The capital structure of the business has an appropriate mix of debt and equity
The financing need is addressed with the appropriate type of financing

3. “Money is Time”
The source of funds for your business is money from customers, ie. SALES!
The best “outsider” money for your business is “smart money”

4. Consider “Bootstrapping” Options
Convert “fixed costs” (incurred whether or not a sale is made) to “variable costs” (incurred only when a sale is made)
Outsourcing – reduce capital needs
Universities – expertise, pro bono work
Suppliers – terms, loans, leads, etc.
Factors – advance money, reduce collection risk

5. Consider “Bootstrapping” Options
Public relations – free advertising, eg. Obama and his Blackberry
Government – loans, grants, tax incentives
Incubators – lower start-up costs
Barter
Testing – before entering a large market, gain insights
Licensing

6. Consider “Bootstrapping” Options
Per Inquiry Ads - pay % of sales generated by ad
Pricing – get it right, don’t leave precious cash on the table
Staging – try to leave as many options open as possible, try to defer investments if possible
Mentors free advice from experienced skilled people

7. Consider “Bootstrapping” Options
Relationship building – in every facet of your business
Selling – persuading people to take a favorable action for all parties
Be the CEO – “Chief Everything Officer”

8. Conventional Financing
Assets
Inventory & receivables
Land & buildings
Equipment & vehicles
Other
Liabilities & Equities
Operating line of credit
Mortgage
Term loan
Share capital & retained earnings

9. VC Financing
Fills the cash gap between cash needs to finance high growth and cash available from earnings and conventional financing
Giving up a piece of the pie to grow a bigger pie

10. Capital Markets Playing Field
Phase I
Phase II
Phase III
Knowledge
Acquisition
Concept
Investigation
Basic
Design
Prototype
Building
Market
Entry
Manufacturing
Ramp-up
Government Programs
Public Issues
Commercial Banks
Non-Financial Corporations
Seed Funds
Venture Capital Funds
Wealthy Family Funds
Private Investors
Faminly and Friends
Personal Savings

11. The Business Life Cycle

12. Typical SME Growth Profiles
High-Growth Firm
Moderate-Growth Firm
VC Prospects
Low-Growth Firm 2

13. Magnitude of Investment
Typically >$1.0 million for institutional
Small deals too costly
Typically less than $10 million in Canada
Most deals $1.0-$3.0
Based on business plan pro formas

14. Investment Time Horizon
4-7 years
How long will it take to create value?
Years to cash flow breakeven?
“Money is time”

15. The VC Life Cycle Submit business plan Preliminary assessment
Meet the people
Light due diligence
Term sheet
Heavy due diligence
Investment memorandum
Commitment letter
Shareholder’s agreement
Grow the company
Exit in 4-7 years

16. VC Investment Criteria
Exponential growth potential
Attractive industry
Sustainable advantage platform
Excellent team “execution”
Owners receptive to involvement of outsiders
Owners willing to share the wealth creation
Credible exit alternatives (4-7 years out)

17. Ingredients-The Value Proposition
Why will/do our customers buy or product?
Ease the Pain
Improve Revenue/ Productivity/Profitability

18. The Ingredients-The Business Model
Implies having a well defined business model that says, “I know who my customers are, what they need, how I will meet their needs, how I will reach them, how I will service them, how I will continue to best my competition and how I will make money”.
Revenue sources, cost drivers, critical success factors, investment requirements alll make sense

19. Internal Rate of Return (IRR)

20. VC Investments and IRR

21. % Ownership Required

22. VC Target IRR Seed Startup First stage Second stage Bridge Restart
50-70%
40-60%
30-50%
20-35% ??

23. “The Golden Rule” of Venture Capital
“He who has the gold rules”