1. 1 Building a Company requires capital Operational capacity  Management  Sales and distribution  Support and service  Administration Working capital needs  Accounts receivables  Inventory Capital expansion  Technology  Equipment  Leasehold improvements

2. 2 Think about the sources of funding across the life of your business Friends & family Angel investors Banks Institutional Investors Business Lifecycle Concept Sales Growth Profitability

3. 3 Angel vs. Institutional Investors Source of Funds Business stage Angels Own money Mostly seed, start-up and early stage (but moving more and more to later….) Institutional Other’s money (e.g. pension funds, insurance companies, foundations) Most are later stage investors

4. 4 The front line of equity investors: Angels  Angel investors: Wealthy individuals who make equity investments in private companies, typically early stage - Investment range (~$10-$250K) - Use referral networks (attorneys, CPAs, bankers) - 140K+ active angels in the US, investing $20B+ annually - “Accredited” Investors ($200K annual income & $1MM+ in net worth) - Many are former entrepreneurs  Angel groups - Larger investments; follow-on capacity - Regular meetings - Syndication

5. 5 Goal of Angel Rounds: Prove you have a scalable business that can succeed if funded Capital is hard to get at any stage, the further you can go and the more you can prove before approaching professional capital, the better your odds Build a strong, numbers driven story that has shown it can scale -Product in the market -Sales/Concept proven  Proving you can gain distribution and drive velocity at the shelf is most important … quality of revenue is as important as quantity  Things from which you can extrapolate: “show the white space” -Team/Advisors in place If you can get capital, valuation will be based both on your past performance and the strength of your “going forward” story Be capital efficient early on -Delay all unnecessary costs: premature IP, legal, PR, “2.0” website -Bootstrap; work without a salary; moonlight; run lean ops; focus on revenue-generating aspects of the business; partner for equity -“The more self-sufficient a company is, the less risky it appears…”

6. Average 15-20% Annualized Return on Investment As… InvestmentOutcomeCash on Cash 1Write-off0.0X 2Write-off0.0X 3Write-off0.0X 4Write-off0.0X 5Write-off0.0X 6Write-off0.0X 7Write-off0.0X 8Bad1.0X 9Good5.0X 10Great12.0X Average1.8X IRR13% *Memo: Years = 5 year horizon *Chart Courtesy of ASW

7. Angel Round Dynamics It’s a numbers game so you need to build investor momentum -In many angel investments, 1/3 comes from a lead investor; -Second third from a team of people following the lead -Last third, random … cast a wide net, be Fearless, Accept No’s  Go hunting for that lead! The simpler and more straightforward the terms in the angel round, the better for all parties Equally importantly, terms shouldn't impede any future financings Always think FIRST about the NEXT round of capital

8. Materials for Investors Make the Company as Real as Possible - Pictures of Packaging - Effectively Frame up in the Competitive Context - Make realistic assumptions Be concise, compelling & realistic Write well; look professional Preempt obvious questions/concerns and be mindful issues which might knock you out of consideration. You’re selling an investment and not just an idea/product … be legally prepared to take in capital

9. 9 You’ll need a core set of materials when you enter the fundraising market 2-4 pages Something you can send to virtually anyone Executive Summary Business Plan Company Presentation Financial Model 10-15 pagesDetailed bottoms-up Scenario Driven Detailed 20- 40 page document Communicate a Vision, an Understanding and The Capability to Execute Against It Investment Documents PPM Term Sheet Subscription Agreement Shareholder Agreement

10. 10 A Strong Executive Summary is critical Cover all core parts of the business in 2-4 pages Topics (usually in this order – same for business plan) 1. Problem 2. Your solution 3. Business Model 4. Underlying point of differentiation, i.e. the unique selling proposition (secret sauce) 5. Marketing and Sales 6. Competition (features/benefits – comparison slide) 7. Team 8. Projections and milestones (Financials, historic & projected) 9. Status and timeline 10. Summary and Call to action  Exit strategy/market comps  Ask/Use of Proceeds  Capitalization to date

11. 11 Your business is assessed against an “ideal” Manage- ment Previously made money for investors Successful startup, ideally in same sector/space Complete team in core areas (sales, marketing, finance, etc) Market Large, fast growing with few competitors Product/ Tech. Great Packaging Differentiated yet understandable and priced appropriately Proprietary position (barrier to entry such as established market position and/or intellectual property, patents) Business Model Scalable: Can extend into multiple channels and geographies, no structural barriers to growth Exitable: A range of potential acquirers exist Financial Sustainable gross margins > 40% Limited financing risk (future rounds likely) No financial liabilities that affect value or equity position Legal No legal contracts that affect value or equity position No outstanding litigation around intellectual property or other assets Source: Clear Venture Partners, Inc.

12. 12 Valuation Terminology Basics Pre-money + New money = Post-money Valuation before the investment “Pre” The investmentValuation that the company is “sitting on” Post” $3M pre-money $2M buys 40% of company Post-money valuation

13. 13 $2M raise scenarios: Staged Rounds Series ASeries B Raise $1M on a $1M Pre Pre = Entrepreneur Ownership New investor buys 50% of company Achieve milestones and prove early business model 18 months later raise $1M on a $4M pre -Up round: $2M company value “steps up” to $4M -New Investor buys 20% Entrepreneur owns 40% Srs A has 40% at 2X the value – $1M now “worth” $2M New Pre

14. 14 Some resources Events Angel Associations Nutrition Capital Network -2x/year -20 Companies presenting to 50+ institutional/strategic investors Investors’ Circle -2x/ year -Tracks for Health & Wellness/Other consumer companies to present to “socially responsible” angel/fund investors -Newsletters Angel Capital Association (www.angelcapitalassociation.org/)www.angelcapitalassociation.org/ -Directory of 330+ angel groups, organized by state Investment Bankers Bankers know the market and players Many have industry newsletters for free

15. 15 Some resources Blogs “Healthy Living and Consumer Venture Capital, Consulting and Investment Banking” (Mike Burgmaier) www.nevc.blogspot.comwww.nevc.blogspot.com “A VC” – Fred Wilson from Union Square Ventures – great blog on general VC trends: http://www.avc.com/a_vc/ http://www.avc.com/a_vc/ “Ask the VC” – General blog with great archive http://www.askthevc.com/blog/ http://www.askthevc.com/blog/ 2X Partners Blog & Trend Watch: http://www.2xpartners.com/ http://www.2xpartners.com/

16. 16 Some Summary Considerations in Finding the right capital Consider your personal goals -Your role in company over time -When you take someone else’s money, you have taken on an entirely new responsibility to the company and shareholders -Shareholders need to be paid back: Is this a lifestyle for you or the next Microsoft Be realistic on time and effort it takes to secure funding Find investor/company alignment -Stage of development -Goals; return objectives; timing…. Respect the Capital - Valuation and Terms - Don’t take “No”s in the process personally Source: Clear Venture Partners, Inc.

17. 17 Additional Slides Appendix

18. 18 Institutional investors can come in several types Family Offices -Wealthy family private investment arms Fundless Sponsors -Deal-by-deal economics -No dedicated pool of capital -Investor deal fees -Term sheet “lock up” first step Dedicated Private Equity funds -Many investors/”Limited Partners” (LPs) create a dedicated pool of capital -Defined life vehicle (10 years)

19. 19 Finding the right institutional investor for you is important Stage Fund size/ Amount to invest Early, Development, Late Alignment needed Average investment over multiple rounds +/- 25%: Take the size of the fund & divide by 15 Active/Passive Investors People and funds are different Active, expert “accelerators” /operating partners vs. “just” money Expectations Temperament Returns (Spectrum of pure financial to “social”) Timing to exit: Year of fund matters Communication: Frequencty/depth Whatever your plan is, you are unlikely to hit it….boardroom dynamics…logical? Rational? Which investor/ not just which fund Who will join your board?

20. 20 Some active funds Financing Fast Growth Hosts: Early/Development Stage Later Stage FundDeals Sherbrooke Capital FoodSouldTasteGood; Oregon Chai; Izze Beverage; Immaculate Baking; Adina Maveron NextFoods; Pinkberry Greenmont Capital Eco Products; Madhava; Blue Horizon Organic; Bossa Nova; Mary’s Gone Crackers Generation Equity Dancing Deer Baking Co.; NutraBella PCV Fund Adina; Niman Ranch Prolog Ventures Nest Collective; Attune; Brand New Brands; Corazonas Catamount Ventures Nest Collective TBL Capital Numi Organic Tea; CleanFish; Gaia Herbs; LaLoos 2X Consumer Products Growth Partners Tasty Bite; Orabrush; gDiapers Emil Capital Balance Water, Cheribundi FundDeals TSG Consumer Partners Cytosport; Glaceau (Vitamin Water); Voss; Perricone MD; Smart Balance; Alexia; Arrowhead Mills Encore Consumer Capital Ciao Bella; Aidells Sausage Company; MyChelle Dermaceuticals Inventages Honest Tea; MooBella ; Organic To Go; The Healthy Beverage Company (Steaz) Verlinvest Sambazon; Vita Coco; Hint; Glaceau (Vitamin Water) VMG Equity Partners Mighty Leaf Tea; Pieceworks (KIND); Pirate Branks (Pirate’s Booty); Waggin Train Northcastle Naked Juice; EAS; Ibex Highland Consumer Fund O Water; lululemon athletica; Pharmaca Integrative Pharmacy; mix1 Catterton Partners Nest Collective; Van’s Foods; O.N.E. (One Natural Experience); Sweet Leaf Tea Winona Capital Boloco