A short introduction into venture capital, how to contact a VC, and how and what to present in a fundraising pitch.

1. V E N T U R E C A P I TA L I N 2 1 C
JUNE 2012

2. OCTOPUS INVESTMENTS
A SHORT INTRODUCTION
 We back teams rather than sectors
 Invest £100k to £5m
 £2.8bn FUM
 100# Octopus Venture Partners
 [Always] Open Office
 Early Stage – Realised IRR of 39% +
 Growth – Realised IRR of 28%
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3. ALLIOTT COLE
HOW TO CONTACT ME
acole@octopusventures.com
@alliott
Alliott.co
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4. Agenda
 Venture capital in 21C
 Venture capital and YOU?
 Raising venture capital
 Key investment terms
 Resources
 Q&A
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5. VENTURE CAPITAL IN 21C
MULTI-DECADE LOW CAPITAL SUPPLY (UK)
Net Bank Lending to SMEs Venture Capital Fund Raising
120
7
£m per working day
100
80 6
60 5
40 4
20 £bn
3
0
-20 2
-40 1
0
Jan-08
Mar-08
Jan-09
Mar-09
Jan-10
Mar-10
May-08
May-09
May-10
Jul-08
Sep-08
Nov-08
Jul-09
Sep-09
Nov-09
Jul-10
Sep-10
Nov-10
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09
Year
 The Equity Gap is continuing to widen
 Banks’ depressed lending to SMEs is likely to be prolonged
 Lack of VC fundraising is exacerbating the effects of the banking crisis
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Source 1: Bank of England
Source 2: NESTA

6. VENTURE CAPITAL IN 21C
EVOLVING INDUSTRY
 Imprecise term: wide array of investors
 Funds: geography, stage, sector and/or “thesis”
 New entrants:
 Full time Angels
 Crowd platforms
 Incubators
 Accelerators
 Stage of investment determines return requirement
 Seed – 15x
 Series A – 10x
 Series B – 5x
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7. VENTURE CAPITAL
IS IT RIGHT FOR YOU AND YOUR BUSINESS?
 Very inefficient market: 3000 plans >>> 8 investments
 Can your business be worth £100m - £1bn? Really?
 Several alternatives:
 Friends Family Fools (FFF)
 Angels
 Family Offices
 Grants
 Your customers
 Adopt a rifle approach – and then listen to feedback
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8. RAISING VENTURE CAPITAL (I)
COMPETITIVE TENSION
1. To get good terms, you need multiple offers.
2. To get multiple offers, you need to tell a good
story to multiple investors at the same time.
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9. RAISING VENTURE CAPITAL (II)
APPROACHING VENTURE CAPITALISTS
 Endorsement from a trusted partner
 Treat a VC = Customer
 Short email with bullet points
 Rifle shot approach
 Don’t cold call
Cf. Venture Hacks example email
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10. RAISING VENTURE CAPITAL (III)
WHAT TO PRESENT
 Sell the vision and excitement.
 Short 10 Slide Deck
 Team
 Product
 Traction
 Market Sizing
 Route to market
 Competitive landscape
 Barriers to entry
 Bottom up, assumptions led forecast
 Acquirer landscape
 Funding and allocation
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11. RAISING VENTURE CAPITAL (III)
WHAT TO PRESENT
 Appendix
 Very clear milestones / deliverables
 Explicit tech road map
 Clean and recent sales pipeline
 Relevant KPIs
 Share capital table
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12. RAISING VENTURE CAPITAL (IV)
HOW TO PRESENT – GOLDEN RULES
 Meet In the Morning
 Arrive Early
 Don’t hang out in reception
 Assume no knowledge of your sector or business
 Always speak to a slide deck
 10 Slides Maximum
 25 Minutes
 Video Kills the [pitch]
 Remember their Q&A
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13. RAISING VENTURE CAPITAL (V)
KEY TERMS
 Valuation
 25% dilution for £x
 Competitive tension is key
 Structure
 Understand the differences: simple, participation
 Anti- dilution – walk away
 Option Pool
 Structure against specific hires
 Reverse Vesting
 Founder friendly
 Leaver Provisions
 Portfolio Due Diligence
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14. RAISING VENTURE CAPITAL
RESOURCES
 Surviving Fundraising – Paul Graham
 Lines Not Dots – Mark Suster
 AVC – Fred Wilson
 A16Z.com
 FredDestin.com
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15. THANK YOU FOR LISTENING
ANY QUESTIONS
 @Alliott
 acole@octopusventures.com
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