Craig Blair is a co-founder and partner at AirTree Ventures which invests in world-class Australian entrepreneurs building the iconic companies of tomorrow. With over 15 years experience running 2 of Australia’s most successful tech investment funds with partner Daniel Petre and backing businesses such as eBay, Beamly and Ninemsn, Craig is keen to share his insights on how to get a VC's attention. This presentation includes: - The Start Up journey - what you can expect - The key steps to approaching a VC - What to do (and what not to do) when pitching to your business - How to avoid the pre/post money traps - How to choose your funding partner (remember VCs and investors are an employee you can't fire!)

1. 1
14th October 2015
Financing your start-up
..A Founder’s and VC’s perspective
Craig Blair, AirTree Ventures
@craigRblair

2. 2
AIRTREE BACKGROUND

3. Me in 30 seconds
I have been a serial entrepreneur and investor and have spent the
past fifteen years building and investing in some of the leading digital
media and technology businesses in Australia and the UK.
I started out my career in civil engineering, management consultancy
and in investment banking.
Over the past 15 years, I’ve spent:
• Two years as Co Founder and Partner of Airtree Ventures
• Five years as Executive Director of netus, a top decile VC fund
• Four years as founding Chairman of Pet Circle
• Two years as founding CEO & Executive Chairman of Beamly
• Four years as Director of Travelselect/Lastminute.com
3

4. Investment Team
4
Daniel Petre
Co-Founder &
Partner
• Founded 2 of
Australia’s most
successful
technology
investment firms
• Senior leadership
roles at Microsoft in
Seattle/Asia Pac
• 2 portfolio board
positions
Craig Blair
Co-Founder &
Partner
• Principal at netus –
a top decile VC firm
• Founder/CEO/Direc
tor of Travelselect,
Beamly (Aus),
PetCircle Expedia
• 3 portfolio board
positions
Paul Bennetts
Investment Director
• Entrepreneur,
investments,
operations , PE and
investment banking
• 2 portfolio board
positions
Cath Rogers
Investment Manager
• Entrepreneur,
operations, PE and
investment banking
• 2 portfolio board
positions

5. Founders Daniel Petre and Craig Blair established
and ran two of Australia’s most successful VC funds
Netus 2005 - 2012
Ecorp 1997 - 2003
15years experience
4.1Xcash on cash returns
in 2 funds
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6. Portfolio size
Target total investments:
12-15
Timeframe
Hold period:
4yrs
Investment Size
Per investment:
No single investment more
than 30% of the fund
$2-5m
Geography
Major focus:
Expansion into SE Asia
where relevant
Aus & NZ
AirTree I $60m
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7. 10 Investments in our First Year
Date Description Investment round Investment size Founders
Dec 14 Online pet sitting Convertible Note $1.5m
Tanguy Peters
Feb 15 Design marketplace Series B $6m
Alec Lynch
March 15
Web based design
platform
Convertible Note $7.5m USD
Cameron Adams, Cliff Obrecht &
Melanie Perkins
7

8. Date Description Investment round Investment size Founder
April 14
On-demand cleaning
service
Late Seed $750k
Stacey Jacobs
April 15
Designer dress rental
marketplace
Late Seed $500k
Dean Jones
Audrey Khaing-Jones
May 15
Educational resource
platform
Series A $2.6m
Jeremy Cox, Duncan
Anderson, Ben Szu
10 Investments in our First Year
8

9. Date Description Investment round Investment size Founders
June 15 Cloud-based rostering Late Seed $1.2m
Aulay Macaulay
June 15
Vertically integrated ecommerce
furniture business
Series A $2m
Ivan Lim
July 15 HealthTech business Late Seed $2m
Ben Hurst
August
15
FinTech business Series A $1m
Greg Moshal and Beau
Bertoli
10 Investments in our First Year
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10. 10
Startup Ecosystem

11. The start-up journey
1. Often
raising
seed/angel
3. Series A/B
raised2. Need time and
the right team and
investors to navigate
Source: Gartner Hype Cycle 11

12. The cost of a start-up is getting lower
…it’s now possible to build a start-up with a credit card
£5m
$1.5m
$20K
1998
My first
start-up
2005-2011
Businesses built in
the Netus vintage
2015
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13. 13
Accelerators and Incubators Angels and Micro VC Early Stage VC Traditional Venture Capital Late Stage VC
Range Sweat- $100k $100k-$500k
$500k-$2m
(late Seed/ Pre S-A)
$2m-$5m $5m +
Funds
AngelCube, Blue Chilli,
Incubate, Startmate,
iAccelerate, Griffin
Sydney Seed Fund, Angels,
SydAngels, QUT’s Creative³
AirTree Ventures, Blackbird
Ventures, BlueSky VC
AirTree Ventures, Square
Peg, One Ventures,
Bailador
Telstra Ventures, Blackbird
(Follow-On Fund)
Selected
Companies
SweetHawk, Social Status,
SignOnSite
CompeteShark,
HandKrafted, Qwilr
GlamCorner, Ento,
TidyMe,Coinjar, Equitise,
Brosa, HotDoc, Stackla,
Straker Translations, School
Places
Canva, DesignCrowd,
Prospa, Vend, Invoice2go,
Wego
Portfolio Companies Na Na 4 3 3
AirTree Investment Space
..and it’s never been easier to finance your start-up

14. VC Funding Process
VC World Entrepreneur World
We have seen 400 business in 9 months
60 Became Leads 340 didn’t fit our
thesis
20 were
intensely
reviewed
40 didn’t fit our
thesis
6 were funded
You make 5 calls
5 responses 5 Responses 0 Responses
Everyone Loves it Too Early
(VCs never say No)
VCs Suck!
Who to choose?
VC is dead
AUS VCs don’t take risks
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15. Use contacts
to get an
introduction
Use advisor
sparingly
- e.g. Support on deal terms
not for introductions
Do homework
on the
VC/Partner
Be clear on the
differences of a VC
lead round over a
‘book build’ approach
Background
Check
1 2 3
4 5 6
Approaching a VC
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16. SOME DOS AND DON’TS

17. What To Do
• Have a detailed understanding of your
competitors
• Develop a healthy paranoia for your
position in the market
✔
17

18. What Not To Do
Self Aware
Dumb
Genius
Ignorant
US
✖
Competitor 1
Competitor 3
Competitor 2
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19. What To Do
✔
• Tell a narrative
• Be authentic
• Acknowledge most ideas are derivative
19

20. What Not To Do
✖
• Create a bullshit story!
• Back solve for a passion to fit the story
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21. What To Do
✔ • Succinct Elevator Pitch Problem/Solution
- Who is the customer?
- Differentiator/competitor set
- Team
- Traction
• Crisp/insightful investor presentation (10-20 Slides)
• Simple model
- Clear understanding of business drivers
- Sense check with competitors/overseas
players
- Unit economics understood
- Cash requirements 21

22. What Not To Do
✖
• Make an 80 page investment memo!
• Detail/data is super important (but long
docs are not data)
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23. Incubator
$100k of value
10%
$1m*
Funding your business
Beware of the pre-money trap
* Implied
Continuing to raise at higher valuations is difficult.
Company forced to live off drip fed angel funding
rounds
Starts with artificial
valuation before there
are real metrics
Angel rounds from
HNWs may mean
raise is at a high
valuation and/or……
not enough raised to
grow into valuation
Need to show up
rounds – “grew 100%
since last round so
valuation is 2x
previous round”
Without a big enough
raise to allow the
business metrics to
catch up to the
valuation
Pre-money Valuation
Raise
% Dilution
Post-money valuation
Angel
$3.5m
$.5m
12.5%
$4m
Late seed
$8m
$1m
11%
$9m
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24. Key Focus Points for Series A
Know your metrics
• Unit economics are critical
– Consider the “unit” that makes sense for your business
– Understand exactly how much your make or lose for each transaction over
time and when a customer becomes profitable
– Don’t forget all the direct costs of a transaction (customer service etc) and
make sure the contribution is measured after marketing costs
• CAC or LTV
– Bottom line: investors don’t want you to use their funds to “buy” unprofitable
business
– The earlier you are in a business the more you can focus on LTV, it’s OK if
customers are expensive to acquire if they are valuable over time
– Be realistic in estimating repeats and retention, very few businesses can
confidently assume a customer “lifetime” is more than 5 years
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25. People are key
• People
– Building a successful start-up to an exit is an extraordinary business outcome
– Requires a few extraordinary people……. not everyone can hit this benchmark
– The best companies are able to hire and develop people....... and they
recognise quickly when there is not a fit
– Use networks over recruiters where possible
– Prioritise product and customer facing over marketing in the early days
– Consider office manager in the first 4-5 hires……. great utility and leverage for
the rest of the team
• Other
– Use equity/ESS to create ownership and alignment……. but only where this is
valued
– Founder vesting is good for the company and all shareholders
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26. Take Aways
• Long term value of your business > minimizing dilution in a round
• Build the right team including some extraordinary people
• Surround yourself with investors who can help build value
• Consider capped convertible notes when metrics are not clear or raising from
Angels or Accelerators
• Too much capital can kill a business
– Raise 12 months in angel/seed
– Raise 18-24 months with Series A
• Allow room for market to value on real metrics
• Know your metrics
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27. How to choose your funding partner?
• Can they add value over capital?
• Reference check, reference check. High profile does not always =
value add
• Are you aligned on how to scale the business?
• How you solve problems together in the early discussions are a
good indicator of how you will work together in the future
• Can they support the business through future rounds or in a slow
down?
VCs and investors are the employees you can’t
fire.. make sure you are doing 4-5 references on
the firm and partner
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28. 28
?
Questions

29. Some Common Terms Explained
Term Explanation Rationale Avoid
1. Preference
In case of liquidation preferred stock
is paid out before common stock
Avoids misalignment at
exits around entry price.
1x OK. Avoid 2-3x in early
rounds
2.Participation
The degree to which preferred
holders share in the proceeds after
liquidation preference
Demonstrates adequate
return for an investors risk
< 1x >
3. Anti-dilution
In the future, the company can't
issue shares to new investors at a
lower price than the previous
investors
Company has mispriced the
round and investors should
average out their
investment
Full Ratchet
4. Tag-along Rights
Gives the minority shareholders the
right to be tagged on the same terms
as the majority in case of a sale to a
3rd party
“All in all out”
Protection for minority
5. Drag-along Rights
Gives the majority shareholders the
right to drag along the minority. if the
3rd party wants a 100% stake in the
company.
Enables the majority of the
investors to make decisions
in the best interests of the
company.
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30. Funding your business
Beware of the post-money trap
Incubator Angel
Pre-money
Valuation
$100k (of value) for
10%
$3.5m
Raise $.5m
Post-money
valuation
$1m (implied) $4m
- Decision option set moves from
“what can we afford to do?” to
“what is the optimal use of
capital and resources?”
- Deploying capital sensibly is
more difficult than most teams
appreciate
- Company unable to create 3-5x
value for every dollar invested….
Pre money valuation is fair, but size of raise inflates post money
valuation and makes a subsequent up round more challenging
$5m
$15m
Late seed/Series A
$10m
Raise a lot of capital given
opportunities for sensible growth
investment
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