Early-stage company financing presentation at Port Tech Expo. San Pedro, CA

1. Early-Stage Company
Financing
Port Tech Expo Conference
San Pedro, CA
September 14, 2011
Joe Platnick
Partner, Pan-Pacific Capital Ltd.
Director Emeritus, Pasadena Angels
Copyright 2011 © Pasadena Angels Inc.

2. Pasadena Angels Overview
Founded in 2000
One of largest angel organizations in Southern California and U.S.
Approximately 110 members
$30 Million invested in over 80 companies
Finance $1-5M with VC co-investment
Active participants – Human & Financial Capital
Copyright 2011 © Pasadena Angels Inc.

3. Start-Up Company Financing
Self-Funding
Friends & Family
Angel Capital
Venture Capital
Government Grants
Small Business Administration (SBA) Loans
Commercial Banks
Copyright 2011 © Pasadena Angels Inc.

4. Company Funding Cycle
Pre Seed Seed/ Start-Up Early Later
Stage
PCF FFF Angels VC Funds
Source
$25K $100K $500K $2M
Demand
Supply ---------------------------------
Funding Gap
Copyright 2011 © Pasadena Angels Inc.

5. What Every Entrepreneur Should Know
Raising capital requires both time and money
Having a good idea is not enough
You can save time and money if you understand the process
Identify and contact prospective investors whose investment criteria
match
This research may also help you discover things about the investor
that you can use to get your plan noticed
Investors only make a limited number of investments each year
It’s like college, you’ll be graded on a curve
Don’t stop till it’s done
Copyright 2011 © Pasadena Angels Inc.

6. The Path to Funding
Develop Business Plan, Executive Summary and Pitch
Initial contact through website or member
Include phone number and e-mail address
Process
- Initial vetting - ~70 companies per month
- Screening - Six each month
- Breakfast - 1 to 2 each month
- Due diligence
- Funding - Approximately 12 per annum
Copyright 2011 © Pasadena Angels Inc.

7. The Magic Five Sentences
What do you do and how are you changing the world?
What is your market size and growth rate?
What makes you unique vs. competition?
Current status and where are you in your development?
How much capital do you require-now and total in the future?
Copyright 2011 © Pasadena Angels Inc.

8. Investment Criteria
Is company an interesting opportunity?
Competitive advantage
Intellectual property
Prospective or actual customers and partners
Current and future revenue prospects
Funding sought and use of proceeds
Dollars invested to date
Funding needs after this round
What share of the equity will investors receive?
Is the company ready to pitch?
Observations from telephone contact frequently tip the balance
Copyright 2011 © Pasadena Angels Inc.

9. Understand the Mind of the Investor
Want and need returns - Can’t continue doing this without them
Will shy away from sectors of past failure
Are accomplished individuals, but are not overly technical
Love it when the entrepreneur addresses their concerns
Do your homework
Be succinct - Can have short attention spans
Respond emotionally as well as to reason
It’s show-time – show energy and enthusiasm
Don’t be dismissive of questions or comments
Run in packs
Cultivate a champion early
Copyright 2011 © Pasadena Angels Inc.

10. The Investor Cheat Sheet
Prospective investors assess the following after reading/listening
to your pitch:
Does the company address an important problem?
Do many people have this problem?
Does the company offer a good solution?
Why is their solution better?
Have they made good progress to date?
Do they have a sound plan for the future?
What about the people?
Is this likely to result in a reasonable investment return?
It’s best to provide the answers to these up front
Copyright 2011 © Pasadena Angels Inc.

11. Common Denominators of Successful Companies
They delight their early customers
They listen and learn
They are flexible
“Plan your dive, dive your plan,” but if your air hose springs a leak,
you’d better surface
They build the best possible team
You can’t do it all, nor are you always the best person for the job
Balance energy and enthusiasm with experience
They set qualitative and quantitative milestones
Identify metrics or qualitative goals that capture your milestones
Measure your progress religiously
Copyright 2011 © Pasadena Angels Inc.

12. Top Deal Killers
The presentation is not properly focused or lacks clarity
If you can’t readily explain your business to your
grandmother, will your customers get it? Will investors get it?
Pitch is long on history, technology, people, but what’s the plan?
Presentation lacks details or is incomplete
Assumptions are too generic
Lack of appreciation for the competition
“There are no competitors in our market space.”
“Aren’t you just like…” Must kill this perception quickly or you’re
headed for trouble
Overestimating the barriers to entry
Copyright 2011 © Pasadena Angels Inc.

13. More Deal Killers
Weak (or non-existent) sales/marketing plan
Technology looking for a market
Poor understanding of the customer
Market inertia may be your worst enemy
Inaccurate, incomplete, or grossly unrealistic financial projections
Unrealistic view of capital requirements
Where exactly will this round get you?
How will this translate to further financing success?
The plan does not suggest a compelling return potential
Lifestyle business
Initial valuation is too high
Early financing rounds bear the highest risk
You must instill confidence that the company will be well run
Copyright 2011 © Pasadena Angels Inc.

14. If you have a great product, a
huge and hungry market, a sound
plan and a great team to execute
it, you won’t need 10 gallons of
gasoline and a box of matches to
start an inferno.
Copyright 2011 © Pasadena Angels Inc.

15. Pasadena Angels Website & Blog
www.pasadenaangels.com
Copyright 2011 © Pasadena Angels Inc.