22. What is a VC?
Someone who invests other people’s money
Limited
Partners
General
Partners,
Associates,
etc.
Investor
1
Investor
2
Investor
3
FUND
Investment
1
Investment
2
Investment
3
20%
80%
$
23. VCs look for exits (Sale or IPO) and looking to return 3-4X to Limited Partners
Scenario:
VC invests $1mm for 25% equity
Post-money valuation = $4mm
Minimum exit: $20mm
Hit-driven business model
Size of fund gives an idea of size of exits they are looking for
Large funds looking for unicorns ($1bn+ exit)
2003-2013: 39 unicorns (all tech startups - US)
2014: 68 unicorns (in mobile internet startups only! - world)
11 out of 68 are game companies
24. They are picky: only 1-2% of companies are funded
When should you contact a VC?
Pre-seed / Idea phase? No
Seed / Showing product market fit? YES
Invest in:
Market opportunity
Entrepreneurs
Execution
Need to show understanding of initial target market VS future vision
27. Team of 1 or Dictator & minions
Lacking one or more core competencies
Tech, design, biz
No studio vision/roadmap
Interpersonal drama
28. Not original IP (owned/controlled)
Tech/platform timing issues
No scaffolding to next project…
No real understanding of resources needed to close the
project
32. Have your documents ready for due diligence
Data Room
1. Business Model and Overview
2. Employment & Contracts
3. Finances
4. Legal Docs and IP
Preferably in English/Bilingual and digital.
34. List of Key Staff (w/ bios)
Employment agreements, contractor agreements
IP assignments & waivers
Material contracts w/ Third-Parties
Leases? Loans? Rev Share deals? Commitments of any sort?
35. Budget
2 year is fine, no need for 5 year budget!
Know your monthly burn rate
Sales Forecast
Financial Statements
Minimum End of Year, preferably Quarterly as well
Tax Returns / Filings
36. Incorporation Docs
Minutes Book
Shareholder Agreements, Resolutions, etc.
Capitalization Table
Who owns / has rights on shares of the company?
Reverse Vesting
Employee Stock Option Plan (ESOP)
37.
38. Founders get shares over time, not right away
Ensures everyone’s commitment to the company
Allows flexibility in case of changes
Typical Arrangement:
Over 4 years
1 year “cliff”: Founders get 25% of the shares after 1 year
Rest of shares are given monthly during the remaining 3 years
39.
40. An option is the right to purchase a share
Often given to key employees as incentive to help grow
the company
When issued, a strike price is set and they vest over time
Typical Arrangement:
Set aside an option pool equal to 15% of the total share capital of the company
10 year expiry on options – employee has 10 years to exercise or they disappear
Shares obtained through options may or may not have voting rights
41. Employee is given 10,000 shares at $1 price per option.
5 years later… share price is now $100 per share…
Case 1: Company is sold for BILLIONS!!!
Options are exercised and sold automatically at company sale, so
employee makes:
• ($100-$1) * 10,000 = $990,000 profit
Case 2: Employee wants to become a shareholder
Options are exercised, employee pays $10,000 to the company for
10,000 shares (that are worth $1mm)
42.
43.
44.
45.
46. It’s take a lot of work and preparation to get funding
Know your “who, what, how”
Get your house in order
Have all docs ready to go
Make sure team is aligned on outcome
Not the same skillsets as making a game!
You should learn about legal, financial, and all the “boring stuff”, or hire
people who do
