As part of Orrick’s complimentary TOTAL ACCESS program for entrepreneurs, “Building Your Story,” (Part One) of the Fundraising Series, is a multi-part program designed to connect you with the inside information and contacts you need to accelerate your capital campaign.

1. 1
The Fundraising Series (Part One) –
“Building Your Story”
January 20, 2015
Featuring:
• Niko Bonatsos, General Catalyst Partners
• Steve Goldberg, Venrock
• Arif Janmohamed, Lightspeed Venture Partners
• Glenn McCrae, Early Growth Financial Services

2. Arif Janmohamed
Partner, Lightspeed
Jan 20, 2015
arif@lsvp.com
@arifj

3. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 3
Lightspeed at a Glance
 19 Investment
professionals
 140+ Active
investments
 $3B of committed
capital
 Investing out of $1B
Fund X
 Lead investment
approach with board
involvement
 Deep expertise in
enterprise
technology,
consumer, digital
media
1990’s TODAY
Lightspeed is an early stage venture capital firm focused on
innovations in the Enterprise and Consumer industries. For over two
decades, Lightspeed Partners have backed and helped build more
than 200 global companies, many of which have become market
leaders.

4. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Background: Arif Janmohamed
 My Background :
• Joined Lightspeed in 2008, promoted to Partner in 2011
• Cisco Systems, Mergers & Acquisitions
• Key transactions include WebEx ($3.3B), Securent ($100M),
Postpath ($200M), Jabber and Latigent
• Novitas Capital, an early-stage venture capital firm
• Sun Microsystems, Andes Networks (SUNW), WebTV (MSFT)
 My Education:
• MBA from the Wharton School, University of Pennsylvania
• BSc in Computer Engineering from the University of Waterloo, Canada.
 My Focus Areas at Lightspeed:
• Infrastructure (networking / storage)
• Mobile
• Cloud
• SaaS
4
@arifj

5. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Two topics to cover today…
5
Company Value
Proposition
what am I selling?
Investor Value
Proposition
how to raise capital from venture capitalists

6. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Two topics to cover today…
6
Company Value
Proposition
what am I selling?
Investor Value
Proposition
how to raise capital from venture capitalists

7. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
So what is a value proposition?
7
Value Proposition
inform a choice

8. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
What matters?
8
5 things…
purpose. audience. significance. category. uniqueness

9. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
5 things matter…
9
Purposewhat is it?

10. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
5 things matter…
10
Audiencewho cares?

11. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
5 things matter…
11
Significance
key benefits. painkiller or vitamin?

12. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
5 things matter…
12
Categorycompetition. economics.

13. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
5 things matter…
13
Uniquenessdifferentiation. substitutes.

14. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Two topics to cover today…
14
Company Value
Proposition
what am I selling?
Investor Value
Proposition
how to raise capital from venture capitalists

15. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
What matters to investors…
15
3 Things…team. market. plan.

16. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
What matters to investors?
16
Teamunfair advantage

17. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
What matters to investors?
17
Marketlarge, rapidly growing

18. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
What matters to investors?
18
Plan
sustainable leverage

19. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Ok got it. Now what?
19
First Meetinggoal is the second meeting

20. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
I got the meeting!
20
First impressions
first 3 minutes matter
who are you?
why is your product important?
unfair advantage?

21. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Why is Value Prop important?
21
Elevator Pitchpurpose. audience. significance. category. unique.

22. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Why is Value Prop important?
22
Elevator Pitchsimple. concise. investment thesis

23. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 23
Takeaway
The value proposition is ALL an investor needs
to know about your business.
So, make sure you concisely emphasize the points that
make your business a compelling investment
opportunity

24. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Venture Math…
24
20% - 30%series A ownership

25. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Venture Math…
25
10x – 20xexpected return

26. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Venture Math…
26
$500M+exit value

27. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Venture Math…
27
$50M+revenues

28. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Venture Math…
28
So think carefully about
whether you really want to
raise capital!

29. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
2014: What are the odds?
29
5000deals evaluated

30. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
2014: What are the odds?
30
500deals in diligence

31. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
2014: What are the odds?
31
50deals presented to the partnership

32. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
So how do I overcome the odds??
32
Processpipeline. iterate. feedback.

33. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
Turn-offs – how to get to “No”
33
• Asking an investor to sign an NDA
• Talking about “exit strategy” at the early stage
• Thinking too small
• Asking for term sheet ahead of diligence
• Focusing too much energy on valuation

34. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
What next
34
Q&A?ask me anything. just not for money now.

35. Arif Janmohamed
arif@lsvp.com
@arifj

36. Glenn McCrae
Chief Strategy Officer
EGFS
Building Your Financials:
Creating Your 3-Year Financial
Plan

37. 37
“Startups face a huge burden in today’s
economy, often having to choose
between funneling resources toward
creating their goods and services or
managing the often complex accounting,
tax and financial strategy planning
necessary to run a successful business.
~ David Ehrenberg,
Founder and CEO
Early Growth Financial Services
WWW.EARLYGROWTHFINANCIALSERVICES.COM

38. Building Your Story with Numbers
“The point of financial projections is to tell a
story with numbers—a story about
opportunity, resource requirements, market
forces, growth, milestone achievements, and
profits.
Your job is to create a numerical framework
that complements and reinforces the vision
you’ve painted with words.” – Guy Kawasaki
WWW.EARLYGROWTHFINANCIALSERVICES.COM 38

39. Presentation Overview
The essentials of startup financial management
• What are investors looking for in your
finances?
• What is a financial model?
• Setting financial goals and objectives
• Milestone funding
• Bottom-up financial projections
• Spend
• Budgeting
• Top-down projections
• Cost assumptions
• Reforecasting
39WWW.EARLYGROWTHFINANCIALSERVICES.COM

40. Why a 3-Year Financial Model?
A comprehensive financial pictures serves as the road-map for your
business
• Helps you understand your cash burn
• Forces you to evaluate key performance
drivers
• Validates your assumptions
• Puts challenges into perspective
• Iterative process continuously improves
your assumptions
• Insight into your business model
• Clarifies decision-making process (short-
term and long-term)
• Gives you leverage of accurate baseline
valuation
40WWW.EARLYGROWTHFINANCIALSERVICES.COM

41. What Goes Into a 3-Year Financial Model?
Essential components to your model
3
Major
objectives
Milestones
Key
assumptions
Trending
analysis
Key variables
Timeline
WWW.EARLYGROWTHFINANCIALSERVICES.COM

42. Identify Major Objectives for Your Company
Assess where you are and what you want to achieve
Venture funding and
negative cash burn
Positive cash burn and
no venture funding
What do you want to accomplish with
next raise?
What are the goals you want to achieve
during this time period?
WWW.EARLYGROWTHFINANCIALSERVICES.COM

43. Process for Creating Your Financial Model
How to approach the process and get buy-in
1. Go to stakeholders and members of
executive team – what do they need to
achieve objectives (revenue, product, market,
strategic, etc.)?
2. What is needed from a programmatic
perspective?
3. Compile information and discuss with CEO
(maybe executive team):
total amount requested relative to milestone
4. Dialogue about wants and tradeoffs
5. Use dialogue to create bottom-up
forecasting budget
43WWW.EARLYGROWTHFINANCIALSERVICES.COM

44. Bottom-Up Financial Projection
Forecast for realistic revenue potential
44WWW.EARLYGROWTHFINANCIALSERVICES.COM

45. Spend for Bottom-Up Projections
Consider relevant operational costs
• Customer/Cost details
• Human resource costs
• Consultant and professional services
• Research and development
• Office and admin
• Sales and marketing
• Capital spending
45WWW.EARLYGROWTHFINANCIALSERVICES.COM

46. Budgeting
Use your budget to plan your actions
46
• Budgeting created on accrual basis: budgeting
versus actual results
• Difference between cash and accrual is around
capital expenditures
• Report budget by department and major cost
drivers (expense categories and revenue
categories)
• Plan actions: how quickly will this impact revenue
and what will you be able to achieve based on
spending
• Identify key variables
• Identify key revenue assumptions
• Run different scenarios
WWW.EARLYGROWTHFINANCIALSERVICES.COM

47. Budgeting Exercise
Start from a milestone perspective
• If company has been around for a
while, look at historical costs
• What do you need to accomplish
before you run out of money, or in a
specific time period
• Ask budget owners what they need
to accomplish goals
• Tradeoffs
• Trending analysis
• Trending initiative
47WWW.EARLYGROWTHFINANCIALSERVICES.COM

48. Top-Down Projection?
Not particularly useful, but necessary for investors to show market
potential
48WWW.EARLYGROWTHFINANCIALSERVICES.COM

49. Reforecasting
Your financial plan is always evolving
• Don’t do a 5-year plan, at most
3-year
• Update your budget on a
quarterly basis (at least)
• For investors budget on a
quarterly basis for first year and
then annually
• What’s realistic in terms of
timeline and reforecasting on
monthly or quarterly basis?
49WWW.EARLYGROWTHFINANCIALSERVICES.COM

50. Thank You and Q&A
50
Glenn McCrae
contact@earlygrowthfinancialservices.com
415-234.3437
www.earlygrowthfinancialservices.com
Follow us @EarlyGrowthFS
WWW.EARLYGROWTHFINANCIALSERVICES.COM

51. Niko Bonatsos
@bonatsos General Catalyst Partners

52.  The mechanism by which the company proposes
to deliver their product’s unique value proposition
to their target market.
◦ Who to sell to?
◦ How much will we charge?
◦ What is our product portfolio for target customers?
◦ How will we promote our products?
◦ How will we sell our products?
@bonatsos

53. @bonatsos

54. @bonatsos

55. @bonatsos

56. @bonatsos

57. @bonatsos

58. @bonatsos

60. @bonatsos

61. @bonatsos

62. @bonatsos

63. @bonatsos

64. @bonatsos

65.  Iterate all the time
 Distribution, distribution, distribution
 Every business is different
 Great product is “table-stakes” today
 Advisors & experts vs. customers & market
 Startup = Growth (Paul Graham)
@bonatsos

66. Market Sizing and
Competitive Analysis
Steve Goldberg
66
Orrick Fundraising Series
January 20, 2015
*Special Thanks to Steph Palmeri of Softtech VC

67. Proprietary and ConfidentialProprietary and Confidential
What matters to investors…..
Great team
Great product
Fundable plan
Big market*
Differentiated
offering*
….we’ll discuss what is ‘big’ and what is ‘differentiated’
67

68. Proprietary and ConfidentialProprietary and Confidential
Market Sizing
68

69. Proprietary and ConfidentialProprietary and Confidential
Why $1B…..
69
 Valuation not revenue
 VC fund size
 Return commitment to LP’s
 Market share
 Time to liquidity

70. Proprietary and ConfidentialProprietary and Confidential
Market Types
Existing: Better, Faster, Cheaper
Re-segmented: Specialized, Niche
Completely new market: Did not exist
Clone: Copy of existing business in new geography
70

71. Proprietary and ConfidentialProprietary and Confidential
Market Attractiveness
• Monetization potential
• Growth rate
• Share
• Timing
• Competition
• Disruptive
• Regulatory
• Consolidation
71

72. Proprietary and ConfidentialProprietary and Confidential
Who are you targeting?
72

73. Proprietary and ConfidentialProprietary and Confidential
Computing numbers
73
 Analyst estimates
 Proxy markets
 Growth rate
 Total $’s available
 Market/Channel activity
 Salespersons x $’s per year
 Count customers x rev/customer
 Count $’s being spent

74. Proprietary and ConfidentialProprietary and Confidential
Competitive Analysis
74

75. Proprietary and ConfidentialProprietary and Confidential
Competitive Analysis
75
Competing by selling
the same product
Competing for the
same market

76. Proprietary and ConfidentialProprietary and Confidential
Market Ecosystem
76

77. Proprietary and ConfidentialProprietary and Confidential 77

78. Proprietary and ConfidentialProprietary and Confidential
SWOT
78
Strengths: Characteristics of the business
or project that give it an advantage
Weaknesses: Characteristics of the business
or project rendering a disadvantage
Opportunities: Elements that the project
could exploit to its advantage
Threats: Elements in the environment that
could cause trouble for the business
or project

79. Proprietary and ConfidentialProprietary and Confidential
SWOT
79

80. Proprietary and ConfidentialProprietary and Confidential
Feature Set Comparison
80

81. Proprietary and ConfidentialProprietary and Confidential
Spider Chart
81

82. Proprietary and ConfidentialProprietary and Confidential
Magic Quadrant
82

83. Proprietary and ConfidentialProprietary and Confidential
Magic Quadrant for CRM
83

84. Proprietary and ConfidentialProprietary and Confidential
Competitive Advantage
Barriers to entry
Sustainable advantage
Regulatory climate
Market Disruption
Funding
Freedom to operate
84

85. Proprietary and ConfidentialProprietary and Confidential
Snapshot in time
Your product in x months or years
Your competitors product today
Your competitors product in x months or years
85

86. Proprietary and ConfidentialProprietary and Confidential
VC ‘Speak’
What you hear……..
Who do you compete with today?
Who will you compete with tomorrow?
{Insert Name} just raised $50M from these firms, how are you
different?
What they are thinking…..
How are you different from the 15 other dating services?
When does Facebook plan to do this?
Your competition has deep pockets…will there be anyone
around to fund your next round?
86

87. Proprietary and ConfidentialProprietary and Confidential
Questions/Contact Info
steve@venrock.com
87