kbs+ Ventures Class 4 | Raising Capital

1
FELLOWS CLASS #4
DECEMBER 12TH, 2014
Friday, December 12, 14

IN TODAY’S CLASS... 2
• LAST WEEK’S READING / VIDEO
• INTRODUCTION TO RAISING CAPITAL: PART 1
• REAL WORLD PERSPECTIVE: MARVIN LIAO, PARTNER, 500 STARTUPS
• QUESTIONS
• HOMEWORK ASSIGNMENT #2 PRESENTATIONS

RAISING CAPITAL: PART 1 3
PART 1: PART 2: PART 3:
FUNDRAISING
OVERVIEW
VC MATH /
DEAL
STRUCTURING
PITCHING
INVESTORS

4 STARTUPS BY THE NUMBERS
http://www.entrepreneur.com/dbimages/article/where-startup-funding-really-comes-from-infographic.jpg

ACCORDING TO THE SMALL BUSINESS ADMINISTRATION,
~565,000 STARTUPS ARE LAUNCHED IN THE US EACH MONTH...
6.7M LAUNCHED IN THE US PER YEAR

ACCORDING TO THE SMALL BUSINESS ADMINISTRATION,
~565,000 STARTUPS ARE LAUNCHED IN THE US EACH MONTH...
6.7M LAUNCHED IN THE US PER YEAR
...<1% GET VENTURE FUNDING

5 FUNDRAISING OVERVIEW

WHERE ELSE CAN YOU FIND FUNDING?
6

WHERE ELSE CAN YOU FIND FUNDING?
6
• PERSONAL SAVINGS / CREDIT
• SIDE CONSULTING JOBS
• BANK LOANS
• GRANTS
• CUSTOMERS
• FRIENDS & FAMILY
• ANGEL INVESTORS
• CROWD-FUNDING

FUNDRAISING OVERVIEW 7

8 HOW MUCH ARE YOU LOOKING TO RAISE?
ROUGHLY ESTIMATED:
BOOTSTRAPPED
F & F /
BANK LOANS /
GRANTS
ANGEL
INVESTORS
EARLY STAGE
VENTURE
FUNDS
LATE STAGE
VENTURE
FUNDS
~$0-$25K ~$25-$150K ~$150-$1M ~$1M-$10M ~$10M+

9 HOW MANY GET FUNDED?
IT’S TOUGH OUT THERE:
BOOTSTRAPPED FAMILY & FRIENDS ANGELS EARLY STAGE VC LATE STAGE VC
~57%
OF STARTUPS
~38%
OF STARTUPS
~0.91%
OF STARTUPS
~0.25%
OF STARTUPS
~0.05%
OF STARTUPS
~$0-$25K ~$25-$150K ~$150-$1M ~$1M-$10M ~$10M+

10 BY THE NUMBERS

FUNDING ROUNDS 11
FAMILY &
FRIENDS
BOOTSTRAP
ANGEL
ACCELERATORS
SEED
SERIES A
SERIES B
PRIVATE EQUITY
GROWTH EQUITY (SERIES C AND BEYOND)
EARLY LATE

FUNDING ROUNDS 11
FAMILY &
FRIENDS
BOOTSTRAP
ANGEL
ACCELERATORS
SEED
SERIES A
SERIES B
PRIVATE EQUITY
GROWTH EQUITY (SERIES C AND BEYOND)
EARLY LATE
RAISING
< $2M
RAISING
~$2-10M
RAISING
~$10-20M
RAISING
~$20M+

12
ANGEL INVESTORS
ANGEL INVESTORS (ACCREDITED) -
• HIGH NET WORTH INDIVIDUALS
• OFTEN SUCCESSFUL ENTREPRENEURS OR BUSINESS PEOPLE
• PASSIONATE ABOUT PEOPLE AND IDEAS
• EARLY SUPPORTERS
• OFTEN OFFER HANDS ON SUPPORT, MENTORING, *ACCESS*
• CURIOUS BY NATURE
• DEVELOPING A CLOSE RELATIONSHIP IS KEY
WRITE 16X MORE CHECKS THAN VCS

ACCELERATORS 13
ACCELERATORS
• COMPETITIVE SELECTION
• SPECIFIC PROGRAM WITH A DESIGNATED AMOUNT OF TIME (E.G. 3 MONTHS)
• PROVIDES SEED CAPITAL
• ADDS CREDIBILITY
• ACCESS TO LARGE MENTOR NETWORK OF ENTREPRENEURS AND INVESTORS
• PROVIDES PRODUCT AND STRATEGIC DEVELOPMENT SUPPORT

HOW VC WORKS 14
VC FIRM
(GENERAL PARTNERS)
LIMITED PARTNERS (“LPs”)
• Public/Corporate pension funds
• High net worth individuals, Family offices
• Endowments, foundations, insurance companies
VC FUND (LIMITED PARTNERSHIPS)
2% MANAGEMENT FEE + 20% OF PROFITS
$$ FUND
MANAGEMENT
$$ FUND OWNERSHIP
$$ $$ $$
INVESTMENT
(OWNERSHIP %)
INVESTMENT
(OWNERSHIP %)
INVESTMENT
(OWNERSHIP %)

EARLY STAGE 15
EARLY STAGE VCS
• INVEST AT THE EARLIEST PHASES (SEED / SERIES A)
• OFTEN INVEST IN THE TEAM, OR MARKET TRENDS
• OFTEN HAVE AN INDUSTRY FOCUS (E.G. AD TECH, MOBILE)
• OFTEN PROVIDE SUPPORT SERVICES, BUSINESS FEEDBACK, TALENT RECRUITMENT, ETC.
• SMALL TEAMS

LATE STAGE VC 16
LATE STAGE VCS
• INVEST IN PRODUCTS OR SERVICES THAT HAVE GAINED TRACTION
• OFTEN SERIES B AND BEYOND (THOUGH THEY MAY INVEST EARLIER)
• FOCUSED ON EXIT / SERVICE LPS
• OFTEN PROVIDE SUPPORT SERVICES, TALENT RECRUITMENT, MARKETING, M&A

WITH VC... KEEP IN MIND: 17
AVERAGE EXIT TAKES ~6 YEARS, AND A LOT OF MONEY
YOU’RE ESSENTIALLY HIRING YOUR OWN BOSS...
PICK THE RIGHT PARTNERS!

VENTURE CAPITAL: POWER LAWS 18
POWER LAW:
~15 COMPANIES
WILL GENERATE 95%
OF ALL ECONOMIC
RETURNS... EVEN
TOP VCS WRITE OFF
HALF THEIR DEALS
http://a16z.com/2014/07/21/a-dozen-things-ive-learned-from-marc-andreessen/

POWER LAWS 19
THE MOST BREAKTHROUGH TECHNOLOGIES SEEM CRAZY AT FIRST
THINK ABOUT THE VALUE PROPOSITION
LEARN THINGS MOST PEOPLE DON’T
SEE THINGS DIFFERENTLY
“ENTER AS CLOSE AS YOU CAN TO A ZEN-LIKE BLANK STATE OF
HUMILITY AT THE BEGINNING OF THE MEETING AND SAY, “TEACH ME...”
-MARC ANDREESSEN

REAL WORLD PERSPECTIVE 20
PARTNER SPOTLIGHT!
MARVIN LIAO
• PARTNER, 500 STARTUPS
• SF BASED
• MENTOR AT 16 ACCELERATORS ACROSS 10
COUNTRIES
• YAHOO VETERAN

NEXT WEEK... 21
• OFFICE HOURS: TUESDAY AFTERNOON
• SPECIAL REPORT! INTERNET OF THINGS
• KATE STONE, TED SPEAKER AND FOUNDER OF NOVALIA
• KEEP WORKING THROUGH DISCOVERY, HOMEWORK #3! (DUE 1/16)

CONTACT:
JESSICA PELTZ, INVESTMENT DIRECTOR
JPELTZ@KBSP.VC
JOSH ENGROFF, MANAGING PARTNER
JENGROFF@KBSP.VC
QUESTIONS? 22

kbs+ Ventures Class 4 | Raising Capital

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