A Quick Guide to Venture Capital by Apogee Accelerator Group

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Apogee Accelerator Group tells you what you need to know before seeking Venture Capital for your startup or small business. Visit our page: http://partner.salesbuddy.io/apogee

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A Quick
Guide to
Venture
Capital
In this guide, you'll discover: why your startup needs VC, what you
should know before seeking it, and what Venture Capitalists need to
see before investing. You'll also learn why the executive summary is
critical for your success, and much more.
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What We Do Best
A quick summary of our services:
Identify and Facilitate
Identify strategic sources of capital investment and facilitate deal closures by
assisting in the Executive Summary, Documenting Sales Process, Building the
Pipeline, Pitch Coaching and introducing clients to the top tier investor
groups.
Prepare for the Next Round
Helping drive the valuation of the company to the next round through the
development of Sales and Marketing, Tax Credits, HR Outsourcing
Services, Corporate Governance, Legal Services and Viral Social
Media extensions specific to your business.
Opportunities and Access
Providing partnership opportunities with over a dozen
leading Payroll, Accounting, HR, Marketing Companies, Media
Agencies, and Legal firms at discounted rates to position our clients for rapid
growth.
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Table of Contents
1. Cover Page
2. Resources
3. Private Capital Funds at an All-Time High
4. What You Need to Know Before Seeking Venture Capital
5. Why the Executive Summary Is Crucial for Your Success
6. What You Need to Know About Investment Bank Fees
7. 5 Things Venture Capitalists Need to See Before Investing
8. Book A Consultation
This introduction is slightly larger than the main body text to help catch
the reader's attention.
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Private Capital Funds at an All-Time High
2018: The Year of Private Capital
New information from Preqin, a London-based provider of alternative assets data, indicates
that private capital funds are currently holding onto historical amounts of money, waiting
for the right investments to come along.
Total Amounts per Strategy:
Private Equity: $1.14 trillion.
Real Estate: $294 billion.
Private Debt: $281 billion.
Infrastructure: $173 billion.
Natural Resources: N/A.
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Source: 2018 Preqin Global Private Equity and Venture Capital Report
Accelerated growth in private capital funds shouldn’t be a surprise to many. Following the
end of the 2008 financial crisis, the industry began to experience new growth and has now
surpassed all previous records. As traditional asset classes like public stock and bond markets
have started to appear increasingly overvalued, investors have shifted their focus toward
private capital.
Unlike traditional assets, such as stocks and bonds, private securities are traded much less
often, resulting in a scarcity of price information. Generally, they’re also longer term than
other investments. Why then might this seem appealing to investors?
Why Private Capital?
With rumors floating around that we’re headed for yet another financial crisis after unbridled
growth in investment markets, investors are starting to see the appeal of reducing their
liquidity and putting their money into private capital funds. This is because private capital
funds tend to perform well— even in the midst of economic slumps.
Unfortunately, there are some significant downsides to such rapid growth in private capital.
An abundance of money in the sector can eventually begin to inflate prices, causing ROIs to
be reduced in terms of real dollars.
Investors may have also forgotten the disadvantages of illiquidity, as we move further away
from the past financial crisis (and closer to a new one). However, an investment fund isn’t
created just to hold money; that money is there to be used for investments.
Money Is Burning a Hole in Private Capital’s Pocket
According to data from Preqin, 327 private capital funds raised a total of $214 billion in the
third quarter of this year, with a quarterly average of $192 billion. This record-breaking
fundraising makes 2018 the biggest year for private capital funds, second only to last year.
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In addition to an increase in the total amount of money raised, the number and size of
private equity firms have increased substantially since last year. Although it may be difficult
to top records from 2017, there are multi-billion dollar funds on the market still seeking
investor capital, such as Global Infrastructure Partners IV whose fundraising target amounts
to $20 billion.
If this goal were reached, it would make the fund the largest infrastructure fund in history.
Like we saw back in 2008, this year has brought us 11 of the 100 largest private capital funds
ever raised. With the growth of these funds, we’re witnessing a concentration of capital like
never before. Funds of over $1 billion accounted for 63% of fundraising this year and we’re
likely to see this trend continue as GIP and SoftBank Vision are scheduled to close in Q4 of
2018.
Conclusion
With private capital funds larger and more numerous than ever, the current climate is like a
gold rush for startups. We’re convinced that 2018 and 2019 are set to be record-breaking
years for private capital and that the chances of finding investment are greater than ever.
Startups and small business also represent a promising investment that’s more insulated
from a financial crisis than traditional assets. As fears grow regarding a possible burst of the
market bubble, your business will become even more appealing to investors.
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What You Need to Know Before Seeking
Venture Capital
Is Venture Capital Right for You?
Nearly every entrepreneur has the same dream.
That is, coming up with a great idea, getting funded by a large investment firm, and selling
their multi-million dollar business to retire at an early stage in their career.
This fantasy does come true for the lucky few, but the vast majority of entrepreneurial
daydreams don’t end up like this.
As consumers, we tend to only see the startups that achieve commercial success and reach
the market, giving us a distorted representation of what running a startup is really like.
While we may know the stories of successful startups like Uber, Airbnb, and Tesla, we are
largely unaware of the countless great ideas that never made it off the ground.
If we were to just take things at face value, it might seem like every startup and novel idea is
a billion-dollar business waiting to happen.
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To believe this would be akin to watching the Olympics and thinking that every athlete who
ever trained for the 100m dash has an equal chance of winning the gold medal.
This, of course, is not true. There are so many factors that determine an athlete’s
performance, such as their genetics, training, experience, dedication, past injuries,
environmental factors, and pure luck.
Perhaps we should then approach entrepreneurship in the same way—like a race with many
runners and just a handful of medals.
So, now that we’ve administered a small dose of realism (or pessimism) to the situation, we
should evaluate whether or not Venture Capital is the right decision for your business.
What You Need to Know Before Considering VC:
1. The majority of startups fail.
Like we mentioned earlier, only the most successful startups make it to market and become
visible, giving us a skewed representation of the truth.
Of 1,100 tech companies that raised seed rounds between 2008-2010, just 1% of these
investor-backed ventures ended up becoming a “unicorn”, or a startup with a valuation of $1
billion. These startups included the likes of Uber, Stripe, and Docker.
Without a solid business plan and preparation, it’s unrealistic to think that you’ll reach the
same level of success.
In our previous article, we discussed what VCs need to see from you before they invest and
how Apogee Accelerator Group prepares your business to pass the checklist.
2. Seeking investment can distract you from running your business.
Many times, small businesses become so obsessed with reaching the next level of funding
that they fail to maintain their current operations.
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As a startup, you need to achieve a balance between chasing your dreams and taking care
of the daily operations that may seem insignificant at the moment.
Otherwise, this can result in sacrificing your current success for a dream that may or may not
come true.
For this reason, it’s recommended that you hire a third party who can take care of the
fundraising process while you grow your business and prepare for the steps following an
investment.
3. There is such a thing as too much money.
Indeed, it is true that more money often means more problems. However, it’s not money
itself that is the problem but focusing too much on it.
When your company is in fundraising mode, you can neglect your business strategy in favor
of seeking funds.
Funds in large quantities can also be easily misspent, as it’s hard to truly fathom the size of a
multi-million dollar investment when your company has never managed such amounts
before.
4. Startups often have high burn rates.
Burn rate refers to the rate at which a business “burns” through funds given to them by
investors. For startups who don’t have experience handling large sums of money, burn rates
can be astronomical.
Take Beepi, the used car startup, for example. The promising startup raised $150 million in
investment and reached a valuation of $560 million only to squander it all and go bust. A
complete mismanagement and abuse of funds, such as buying a $10,000 sofa for a
conference room and paying the phone bills of the founders’ family members, led to its utter
failure.
Before it went broke, Beepi was spending around $7 million per month with just 300
employees.
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Now that’s burning money.
5. You’re bound to your terms of agreement.
Don’t let the money blind you; you’re bound to strict terms of agreement when you sign on
the dotted line.
The sense of accomplishment and giddiness you may experience upon receiving funds can
distract you from the task at hand—and the promises you’ve made. Don’t make any of the
big legal mistakes that could end up in a lawsuit due to a breach of contract.
Another thing to be aware of is that many VC contracts are designed to prevent you from
exiting and moving on, keeping you under the control of the Venture Capitalist.
Therefore, you need to find the right VC who not only has the money but also shares your
goals and acts in your best interest.
Conclusion
Seeking out Venture Capitalists and gathering investment for your startup can be a rather
daunting task.
In addition, pursuing funds while running daily operations, staying focused on the road
ahead, and not becoming blinded by the money is difficult, to say the least.
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Why the Executive Summary Is Crucial
for Your Success
Less than five minutes.
That’s the amount of time your plan has in the hands of many potential investors before
they decide to turn “thumbs up” or “thumbs down” on it. In other words, they evaluate a
document that may have taken you weeks or even months to prepare in just a few
moments.
No matter how beneficial your product, how lucrative your market, or how innovative your
manufacturing techniques, it is your Executive Summary alone that persuades a reader to
spend the time to find out about your product, market, and techniques. Because of this, it is
imperative that you prepare the best version of your Executive Summary.
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To do so, you want to convey your own sense of optimism about your business. This does
not mean using “hype”; it simply means using a positive, confident tone and demonstrating
that you are well-positioned to exploit a compelling market opportunity.
In a short space, you must let the reader know that:
Your basic business concept makes sense.
Your business itself has been thoroughly planned.
The management is capable.
A clear-cut market exists.
Your business incorporates significant competitive advantages.
Your financial projections are realistic.
Investors or lenders have an excellent chance to make money.
The Art of the Executive Summary
By now, you’ve probably already read several articles, web pages—even books—about
writing the perfect executive summary. Most of them offer a wealth of well-intended
suggestions about all the stuff you need to include in the executive summary. They provide
a helpful list of the forty-two critical items you should cover—any entrepreneur worth his or
her salt should be able to address these points in less than 100 pages—and then they tell
you to be concise.
Most guides to writing an executive summary miss the key point: The job of the executive
summary is to sell, not to describe.
The executive summary is often your initial face to a potential investor, so it is critically
important that you create the right first impression. Contrary to the advice in articles on the
topic, you do not need to explain the entire business plan in 250 words. You need to convey
its essence and its energy. You have about 30 seconds to grab an investor’s interest.
You want to be clear and compelling.
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Forget what everyone else has been telling you. Here are the key
components that should be part of your executive summary:
1. The Grab: You should lead with the most compelling statement of why you have a really
big idea. This sentence (or two) sets the tone for the rest of the executive summary. Usually,
this is a concise statement of the unique solution you have developed to a big problem. It
should be direct and specific, not abstract and conceptual. If you can drop some impressive
names in the first paragraph you should—world-class advisors, companies you are already
working with, a brand name founding investor.
Don’t expect an investor to discover that you have two Nobel laureates on your advisory
board six paragraphs later. He or she may never get that far.
2. The Problem: You need to make it clear that there is a big, important problem (current or
emerging) that you are going to solve. In this context you are establishing your Value
Proposition—there is enormous pain out there, and you are going to increase revenues,
reduce costs, increase speed, expand reach, eliminate inefficiency, increase effectiveness,
whatever.
Don’t confuse your statement of the problem with the size of the opportunity (see below).
3. The Solution: What specifically are you offering to whom? Software, hardware, service,
combination? Use commonly used terms to state concretely what you have, or what you do,
that solves the problem you’ve identified. Avoid acronyms and don’t try to use this
opportunity to create and trademark a bunch of terms that won’t mean anything to most
people.
You might need to clarify where you fit in the value chain or distribution channels—who do
you work within the ecosystem of your sector, and why will they be eager to work with you. If
you have customers and revenues, make it clear.
If not, tell the investor when you will.
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4. The Opportunity: Spend a few more sentences providing the basic market
segmentation, size, growth, and dynamics—how many people or companies, how many
dollars, how fast the growth, and what is driving the segment.
You will be better off targeting a meaningful percentage of a well-defined, growing market
than claiming a microscopic percentage of a huge, mature market.
Don’t claim you are addressing the $24 billion widget market when you are really addressing
the $85 million market for specialized arc-widgets used in the emerging wocket sector.
5. Your Competitive Advantage: No matter what you might think, you have competition.
At a minimum, you compete with the current way of doing business. Most likely, there is a
near competitor, or a direct competitor, that is about to emerge (are you sufficiently
paranoid yet??).
So, understand what your real, sustainable competitive advantage is, and state it clearly. Do
not try to convince investors that your only competitive asset is your “first mover
advantage.” Here is where you can articulate your unique benefits and advantages.
Believe it or not, in most cases, you should be able to make this point in one or two
sentences.
6. The Model: How specifically are you going to generate revenues, and from whom? Why
is your model leverageable and scaleable? Why will it be capital efficient? What are the
critical metrics on which you will be evaluated— customers, licenses, units, revenues,
margin?
Whatever it is, what impressive levels will you reach within three to five years?
7. The Team: Why is your team uniquely qualified to win? Don’t tell us you have 48
combined years of expertise in widget development; tell us your CTO was the lead widget
developer for Intel, and she was on the original IEEE standards committee for arc-widgets.
Don’t just regurgitate a shortened form of each founder’s resume; explain why the
background of each team member fits. If you can, state the names of brand name
companies your team has worked for.
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Don’t drop a name if it’s an unknown name, and don’t drop a name if you aren’t happy to
give the contact as a reference at a later date.
8. The Promise ($$): When you are pitching to investors, your fundamental promise is that
you are going to make them a boatload of money. The only way you can do that is if you can
achieve a level of success that far exceeds the capital required to do that.
Your Summary Financial Projections should clearly show that. But if they are not believable,
then all of your work is for naught. You should show three years of revenues, expenses,
losses/profits, cash, and headcount.
It might also make sense to show a key driver, such as the number of customers or units
shipped.
9. The Ask: This is the amount of funding you are asking for now. This should generally be
the minimum amount of equity you need to reach the next major milestone. You can always
take more if investors are willing to make more available, but it is hard to take less. If you
expect to be raising another round of financing later, make that clear, and state the
expected amount.
You should be able to do all this in eight to twelve pages, possibly a few more if there is a
particular point that needs emphasis.
Some people say it should be one page. They’re wrong. (The only reason investors ask for
one-page summaries is that they are usually so bad the investors just want the suffering to
be over sooner.) Most investors find that there is not enough information in one page to
understand and evaluate a company.
Please remember that the outline above should not be applied rigidly or religiously. There is
no template that fits all companies, but make sure you touch in each key issue. You need to
think through what points are most important in your particular case, what points are
irrelevant, what points need emphasis, and what points require no elaboration.
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Additional Tips:
Finally, one of the most important sentences you write will not even be in the executive
summary—it is the sentence that introduces your company in the email that you or a friend
uses to send the executive summary. Your summary might not even get read if this sentence
is not well crafted.
Again, it should be specific and compelling. It should sell your company, not just describe it.
The Conclusion
Writing an incredible executive summary that will convince potential investors is no small
feat; it takes an entire team of experts and months of hard work just to put just one
together. It also requires you to back up everything you’ve said on paper with hard evidence
and real financials.
However, no matter how much time you spend on the executive summary or the rest of
your business plan, you only have one short, 5-minute opportunity in front of the sharks to
drive home the most compelling aspects of your value proposition.
How you handle these 5 minutes can affect the fate of your business, your career, and how
you live the rest of your life.
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What You Need to Know About Investment
Bank Fees
An Overview of Investment Bank Fees
Investment bankers charge significant fees to provide their services on a deal.
Fee structures are typically customized to each deal, so there is no standard fee for a deal.
Generally, they include retainers, success fees, minimum transaction fees, breakup fees, and
expense reimbursements.
Fee agreements also usually define exclusions, exclusivity, tails and indemnification clauses.
To some extent, the size of the transaction and the possible fees to be earned from it
determine the type of type of firm that is likely to accept the engagement.
The following chart shows how much you can expect to pay in investment bank fees based
upon the size of the deal, as well as the type of firm that you’ll most likely deal with:
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Types of Fees You’ll Encounter
Retainer Fees
Investment banks will almost always seek to obtain a retainer fee for a transaction. A
retainer fee is a fixed amount of money that a client agrees to pay, in advance, to secure the
services of an investment bank or other professional. Retainer fees are paid whether the
transaction is successful or not.
A retainer is often paid in a single, lump sum, or on an ongoing basis (typically monthly or
quarterly). Fee arrangements generally involve two components–a non- refundable retainer
and a success fee based upon the amount of value received by the seller.
For middle market deals, non-refundable retainers fall in the range of $25,000 to
$100,000,with $50,000 or $75,000 being the typical retainer. Most investment bankers will
agree that the retainer is fully creditable against any success fee earned upon closing.
Retainer fees are often credited back to the client if a transaction is successful, but this must
be negotiated with the investment bank.
Most fee structures are based on a percentage of total value received, have a minimum fee
(on the lower side of the middle market) regardless of value received and have an increasing
fee percentage based on the sale process resulting in a value greater than agreed upon
hurdles.
For large, complex deals that are likely to take a year or more to close, or which are have a
substantial risk of failure, it is not uncommon for the investment bank to structure its fees
such that the retainer (sometimes augmented by hourly fees) make up the bulk of the
money they expect to earn on the deal.
Upfront Fees
In addition to monthly retainer fees, investment banks sometimes seek upfront fees that are
paid at the time of engagement, before work has started. This is really just a form of retainer
and is purely a matter of negotiation between the bank and the client.
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Success Fees
In a successful transaction, success fees (also known as “transaction fees”) are the largest
part of the investment banker’s compensation. A success fee is an amount of money paid to
an investment bank or another professional for the successful completion of a transaction.
Success fees are typically a percentage of the total deal value.
The Lehman Formula
Years ago, the best-known guideline for determining success fees was the Lehman Formula,
develop by Lehman Brothers in the 1970s: 5% commission for the first million dollars of a
transaction, 4% for the second million, 3% for the third million, 2% for the fourth million,
and, finally, a 1% commission for everything above $4 million.
Under this formula, an acquisition made for $10 million would give the investment bank a
success fee of $200,000 (5% of $1M + 4% of $1M + 3% of $1M + 2% of $1M + 1% of $6M =
$50,000 + $40,000 + $30,000 + $20,000 + $60,000).
As inflation reduced the absolute value of these dollar figures, the Double Lehman was
employed: 10% commission for the first million dollars of a transaction, 8% for the second
million, 6% for the third million, 4% for the fourth million, and, finally, a 2% commission for
everything above $4 million.
The Modified Lehman Formula is now widely used.
In practice, these formulas are rarely used: almost all success fee structures are highly
customized to the individual transaction and highly subject to negotiation.
Although opinions vary and the facts are often hard to verify, the following ranges for
success fees are sometimes mentioned:
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Minimum Fees
Investment banks will usually require a minimum fee as part of their engagement.
A minimum fee is the smallest sum of money the investment bank will accept to undertake
the engagement. For instance, a large investment bank might stipulate a minimum fee of
$500,000, meaning the client must pay at least that sum of money to the bank no matter
what the outcome of the transaction.
Consideration To Be Used In The Fee Base
Defining the consideration to be used in calculating success fees is often difficult.
Shares and cash exchanged at the time of closing are easily defined and measured, but
transactions are often structured such that less liquid assets are exchanged (e.g. above-
market employment contracts, selective non-compete agreements, below-market supply
contracts) or liquid assets are to be exchanged at an undefined time in the future (e.g. as
part of an earn-out or true-up).
Investment banks frequently seek to use enterprise value as the basis of the fee calculation.
Enterprise value is a measure of a company’s value, often used as an alternative to market
capitalization.
The concept is the theoretical cash that would have to be paid to buy a firm and settle its
outstanding debt and preferred shares.
Enterprise value is calculated as market cap plus debt, minority interest, and preferred
shares, minus total cash and cash equivalents.
Expense Reimbursement
Investment banks, as with most other professionals in the US, will seek to have their
expenses reimbursed.
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While this is accepted business practice in the US, investors should be careful to limit these
expenses by establishing reasonability standards, requiring preapproval and
documentation, and placing a cap on overall expenses.
Without these safeguards, clients often find themselves required to pay for first-class
airfares, luxury hotels, and expensive restaurants.
As expenses are virtually always incurred in connection with doing something the client
requested, it is usually impossible to limit payment for these expenses after they have been
incurred.
Equity Compensation
Most equity compensation paid to investment bankers is in the form of warrants.
The warrants are generally for a number of shares equal to between 5 percent and 10
percent of the number of shares sold in the deal by the investment banker.
The warrants generally have an exercise price equal to 100 percent to 120 percent of the
price of the securities sold in the deal and have a term of from one to 10 years. In some
cases, the warrants terminate on IPO of the company.
Although investment banking fees for most transactions contain a combination of expense
reimbursement, cash percentage fee, and warrants, the amount in each category of fees
varies from deal to deal.
Conclusion
The world of investment banking can be a difficult one to navigate, with many hidden fees
and costs that you may not be aware of from the beginning.
In addition to creating room in your budget for these expenses, you’ll need to prepare
yourself to give the big sales pitch and win the deal. Otherwise, you’ll be stuck with a non-
refundable retainer fee and a sense of disappointment.
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5 Things Venture Capitalists Need to See
Before Investing
What Exactly Do Venture Capitalists Look for in a Business
Proposal?
Once a seldom heard term, Venture Capital has become quite the hot topic in recent years.
Everyone including celebrities, athletes, and even rappers are trying to get into this lucrative
business.
If you’re looking to take your business to the next level, there’s no doubt that you’ve
considered seeking investment from VCs (Venture Capitalists) at least once or twice.
Maybe, you’ve already presented your idea to investors to only be denied funding.
This can be a frustrating experience, as you know that you have a dream along with the
abilities it takes to reach the next steps of growth.
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The only problem: you simply lack the capital to make it happen.
Asking for money from strangers is never an easy task. You need to prove to Venture
Capitalists that the money they invest in you will ultimately make them money in the long
run.
Therefore, before you even start to write your sales pitch, you need to know exactly what
VCs are looking for when they invest in a company and hand it to them on a silver platter.
ROI (Return on Investment) is, of course, the most obvious metric that every investor looks
at before they put down their money. It’s also the first thing that entrepreneurs like yourself
consider before they put together a boardroom presentation.
But, there are other related factors that VCs take into account when deciding whether or not
to put their money into your pockets.
Let’s explore some of these factors:
1. Unique Product, Pricing, or Process
With stores like Walmart carrying at least 70 million SKUs, it’s hard to say that your idea has
never been done before or has never reached commercial success. Instead, your best bet for
achieving success is differentiating your product from the rest by tweaking certain aspects of
it, such as pricing schemes, manufacturing processes, and materials.
For example, everyone today has a smartphone and they all do essentially the same thing.
What if there were a smartphone made out of 100% recycled metals and a biodegradable
alternative to plastic derived from rice husks? That’s creating a synthesis of two existing
ideas.
“There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and
put them into a sort of mental kaleidoscope. We give them a turn and they make new and
curious combinations. We keep on turning and making new combinations indefinitely, but
they are the same old pieces of colored glass that have been in use through all the ages.”
-Mark Twain
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2. Big Market and Potential for Future Growth
VCs want to see your business grow—and their investment along with it. Without a big
enough market for your product, you’ll hit a wall rather quickly. Investment is a game of
percentages and the more room you have to grow, the higher percentage of ROI your
investors will receive.
It can be a tricky situation when trying to come up with new ideas while staying within the
boundaries of a large, pre-existing market. For this reason, it’s best not to try to reinvent the
wheel. Just seek to improve, build upon, or tweak what’s already successful.
3. AGood Management Team
Businesses aren’t just made up of statistics and cold data—they’re made up of human
beings who have the ability to both succeed and fail. One of the most overlooked aspects of
pitching your idea to investors is convincing them that your management team is prepared.
Show VCs that your management team is not only experienced and capable but also able to
grow alongside the company. If you’re asking investors for an investment to take you from a
$10 million dollar company to $100 million dollars, you need to prove that your
management team can handle that task.
4. Metrics, Data, and Solid Financials
The numbers never lie.
Having gathered metrics, data, and solid financials is the ultimate test of whether or not
your sales pitch will convince Venture Capitalists to invest in your business. ROI is a numbers
game and you better bring the numbers that make your offering more attractive than
anyone else out there.
Perhaps you have a competitive advantage in labor and manufacturing costs, sourcing
materials, or shipping. Whatever your advantage may be, make sure it’s on full display for
everyone to see.
11/6/2018 Salesbuddy | Statement
http://beacon.by/magazine/v4/99465/pdf?type=print 39/41
5. Match with VC’s Investment Philosophy
Believe it or not, Venture Capitalists do care about more than just money. Many VCs have
personal investment philosophies that guide them in their decisions. Seek out Venture
Capitalists and find out what causes they support. Then, contact the ones whose investment
philosophies best match your own (e.g. If you sell products that are biodegradable, seek out
VCs that care about environmental causes).
Conclusion
In addition to just a great idea and an already successful business, you need to look towards
the future and convince investors that their money is better off in your and your team’s
hands than anywhere else.
Apogee Accelerator Group helps get the capital you need by improving your business
strategy and accounting, introducing you to the right VCs, coaching you for sales pitches,
and much more.
If you’re currently seeking investment from Venture Capitalists and you want to take your
business from $10 million to $100 million, or from $100 million to $1 billion in valuation,
contact us to schedule a quick consultation.
11/6/2018 Salesbuddy | Statement
http://beacon.by/magazine/v4/99465/pdf?type=print 41/41
Talk with
Apogee
VISIT OUR PAGE
Interested in taking your business to the next series
of funding?
Visit our page and enter your information for a
quick consultation with Apogee Accelerator Group.

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A Quick Guide to Venture Capital by Apogee Accelerator Group

  • 1. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 1/41 A Quick Guide to Venture Capital In this guide, you'll discover: why your startup needs VC, what you should know before seeking it, and what Venture Capitalists need to see before investing. You'll also learn why the executive summary is critical for your success, and much more.
  • 2. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 2/41 What We Do Best A quick summary of our services: Identify and Facilitate Identify strategic sources of capital investment and facilitate deal closures by assisting in the Executive Summary, Documenting Sales Process, Building the Pipeline, Pitch Coaching and introducing clients to the top tier investor groups. Prepare for the Next Round Helping drive the valuation of the company to the next round through the development of Sales and Marketing, Tax Credits, HR Outsourcing Services, Corporate Governance, Legal Services and Viral Social Media extensions specific to your business. Opportunities and Access Providing partnership opportunities with over a dozen leading Payroll, Accounting, HR, Marketing Companies, Media Agencies, and Legal firms at discounted rates to position our clients for rapid growth.
  • 3. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 3/41 Table of Contents 1. Cover Page 2. Resources 3. Private Capital Funds at an All-Time High 4. What You Need to Know Before Seeking Venture Capital 5. Why the Executive Summary Is Crucial for Your Success 6. What You Need to Know About Investment Bank Fees 7. 5 Things Venture Capitalists Need to See Before Investing 8. Book A Consultation This introduction is slightly larger than the main body text to help catch the reader's attention.
  • 4. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 4/41 Private Capital Funds at an All-Time High 2018: The Year of Private Capital New information from Preqin, a London-based provider of alternative assets data, indicates that private capital funds are currently holding onto historical amounts of money, waiting for the right investments to come along. Total Amounts per Strategy: Private Equity: $1.14 trillion. Real Estate: $294 billion. Private Debt: $281 billion. Infrastructure: $173 billion. Natural Resources: N/A.
  • 5. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 6/41 Source: 2018 Preqin Global Private Equity and Venture Capital Report Accelerated growth in private capital funds shouldn’t be a surprise to many. Following the end of the 2008 financial crisis, the industry began to experience new growth and has now surpassed all previous records. As traditional asset classes like public stock and bond markets have started to appear increasingly overvalued, investors have shifted their focus toward private capital. Unlike traditional assets, such as stocks and bonds, private securities are traded much less often, resulting in a scarcity of price information. Generally, they’re also longer term than other investments. Why then might this seem appealing to investors? Why Private Capital? With rumors floating around that we’re headed for yet another financial crisis after unbridled growth in investment markets, investors are starting to see the appeal of reducing their liquidity and putting their money into private capital funds. This is because private capital funds tend to perform well— even in the midst of economic slumps. Unfortunately, there are some significant downsides to such rapid growth in private capital. An abundance of money in the sector can eventually begin to inflate prices, causing ROIs to be reduced in terms of real dollars. Investors may have also forgotten the disadvantages of illiquidity, as we move further away from the past financial crisis (and closer to a new one). However, an investment fund isn’t created just to hold money; that money is there to be used for investments. Money Is Burning a Hole in Private Capital’s Pocket According to data from Preqin, 327 private capital funds raised a total of $214 billion in the third quarter of this year, with a quarterly average of $192 billion. This record-breaking fundraising makes 2018 the biggest year for private capital funds, second only to last year.
  • 6. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 8/41 In addition to an increase in the total amount of money raised, the number and size of private equity firms have increased substantially since last year. Although it may be difficult to top records from 2017, there are multi-billion dollar funds on the market still seeking investor capital, such as Global Infrastructure Partners IV whose fundraising target amounts to $20 billion. If this goal were reached, it would make the fund the largest infrastructure fund in history. Like we saw back in 2008, this year has brought us 11 of the 100 largest private capital funds ever raised. With the growth of these funds, we’re witnessing a concentration of capital like never before. Funds of over $1 billion accounted for 63% of fundraising this year and we’re likely to see this trend continue as GIP and SoftBank Vision are scheduled to close in Q4 of 2018. Conclusion With private capital funds larger and more numerous than ever, the current climate is like a gold rush for startups. We’re convinced that 2018 and 2019 are set to be record-breaking years for private capital and that the chances of finding investment are greater than ever. Startups and small business also represent a promising investment that’s more insulated from a financial crisis than traditional assets. As fears grow regarding a possible burst of the market bubble, your business will become even more appealing to investors.
  • 7. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 10/41 What You Need to Know Before Seeking Venture Capital Is Venture Capital Right for You? Nearly every entrepreneur has the same dream. That is, coming up with a great idea, getting funded by a large investment firm, and selling their multi-million dollar business to retire at an early stage in their career. This fantasy does come true for the lucky few, but the vast majority of entrepreneurial daydreams don’t end up like this. As consumers, we tend to only see the startups that achieve commercial success and reach the market, giving us a distorted representation of what running a startup is really like. While we may know the stories of successful startups like Uber, Airbnb, and Tesla, we are largely unaware of the countless great ideas that never made it off the ground. If we were to just take things at face value, it might seem like every startup and novel idea is a billion-dollar business waiting to happen.
  • 8. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 12/41 To believe this would be akin to watching the Olympics and thinking that every athlete who ever trained for the 100m dash has an equal chance of winning the gold medal. This, of course, is not true. There are so many factors that determine an athlete’s performance, such as their genetics, training, experience, dedication, past injuries, environmental factors, and pure luck. Perhaps we should then approach entrepreneurship in the same way—like a race with many runners and just a handful of medals. So, now that we’ve administered a small dose of realism (or pessimism) to the situation, we should evaluate whether or not Venture Capital is the right decision for your business. What You Need to Know Before Considering VC: 1. The majority of startups fail. Like we mentioned earlier, only the most successful startups make it to market and become visible, giving us a skewed representation of the truth. Of 1,100 tech companies that raised seed rounds between 2008-2010, just 1% of these investor-backed ventures ended up becoming a “unicorn”, or a startup with a valuation of $1 billion. These startups included the likes of Uber, Stripe, and Docker. Without a solid business plan and preparation, it’s unrealistic to think that you’ll reach the same level of success. In our previous article, we discussed what VCs need to see from you before they invest and how Apogee Accelerator Group prepares your business to pass the checklist. 2. Seeking investment can distract you from running your business. Many times, small businesses become so obsessed with reaching the next level of funding that they fail to maintain their current operations.
  • 9. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 13/41 As a startup, you need to achieve a balance between chasing your dreams and taking care of the daily operations that may seem insignificant at the moment. Otherwise, this can result in sacrificing your current success for a dream that may or may not come true. For this reason, it’s recommended that you hire a third party who can take care of the fundraising process while you grow your business and prepare for the steps following an investment. 3. There is such a thing as too much money. Indeed, it is true that more money often means more problems. However, it’s not money itself that is the problem but focusing too much on it. When your company is in fundraising mode, you can neglect your business strategy in favor of seeking funds. Funds in large quantities can also be easily misspent, as it’s hard to truly fathom the size of a multi-million dollar investment when your company has never managed such amounts before. 4. Startups often have high burn rates. Burn rate refers to the rate at which a business “burns” through funds given to them by investors. For startups who don’t have experience handling large sums of money, burn rates can be astronomical. Take Beepi, the used car startup, for example. The promising startup raised $150 million in investment and reached a valuation of $560 million only to squander it all and go bust. A complete mismanagement and abuse of funds, such as buying a $10,000 sofa for a conference room and paying the phone bills of the founders’ family members, led to its utter failure. Before it went broke, Beepi was spending around $7 million per month with just 300 employees.
  • 10. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 14/41 Now that’s burning money. 5. You’re bound to your terms of agreement. Don’t let the money blind you; you’re bound to strict terms of agreement when you sign on the dotted line. The sense of accomplishment and giddiness you may experience upon receiving funds can distract you from the task at hand—and the promises you’ve made. Don’t make any of the big legal mistakes that could end up in a lawsuit due to a breach of contract. Another thing to be aware of is that many VC contracts are designed to prevent you from exiting and moving on, keeping you under the control of the Venture Capitalist. Therefore, you need to find the right VC who not only has the money but also shares your goals and acts in your best interest. Conclusion Seeking out Venture Capitalists and gathering investment for your startup can be a rather daunting task. In addition, pursuing funds while running daily operations, staying focused on the road ahead, and not becoming blinded by the money is difficult, to say the least.
  • 11. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 16/41 Why the Executive Summary Is Crucial for Your Success Less than five minutes. That’s the amount of time your plan has in the hands of many potential investors before they decide to turn “thumbs up” or “thumbs down” on it. In other words, they evaluate a document that may have taken you weeks or even months to prepare in just a few moments. No matter how beneficial your product, how lucrative your market, or how innovative your manufacturing techniques, it is your Executive Summary alone that persuades a reader to spend the time to find out about your product, market, and techniques. Because of this, it is imperative that you prepare the best version of your Executive Summary.
  • 12. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 18/41 To do so, you want to convey your own sense of optimism about your business. This does not mean using “hype”; it simply means using a positive, confident tone and demonstrating that you are well-positioned to exploit a compelling market opportunity. In a short space, you must let the reader know that: Your basic business concept makes sense. Your business itself has been thoroughly planned. The management is capable. A clear-cut market exists. Your business incorporates significant competitive advantages. Your financial projections are realistic. Investors or lenders have an excellent chance to make money. The Art of the Executive Summary By now, you’ve probably already read several articles, web pages—even books—about writing the perfect executive summary. Most of them offer a wealth of well-intended suggestions about all the stuff you need to include in the executive summary. They provide a helpful list of the forty-two critical items you should cover—any entrepreneur worth his or her salt should be able to address these points in less than 100 pages—and then they tell you to be concise. Most guides to writing an executive summary miss the key point: The job of the executive summary is to sell, not to describe. The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression. Contrary to the advice in articles on the topic, you do not need to explain the entire business plan in 250 words. You need to convey its essence and its energy. You have about 30 seconds to grab an investor’s interest. You want to be clear and compelling.
  • 13. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 20/41 Forget what everyone else has been telling you. Here are the key components that should be part of your executive summary: 1. The Grab: You should lead with the most compelling statement of why you have a really big idea. This sentence (or two) sets the tone for the rest of the executive summary. Usually, this is a concise statement of the unique solution you have developed to a big problem. It should be direct and specific, not abstract and conceptual. If you can drop some impressive names in the first paragraph you should—world-class advisors, companies you are already working with, a brand name founding investor. Don’t expect an investor to discover that you have two Nobel laureates on your advisory board six paragraphs later. He or she may never get that far. 2. The Problem: You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve. In this context you are establishing your Value Proposition—there is enormous pain out there, and you are going to increase revenues, reduce costs, increase speed, expand reach, eliminate inefficiency, increase effectiveness, whatever. Don’t confuse your statement of the problem with the size of the opportunity (see below). 3. The Solution: What specifically are you offering to whom? Software, hardware, service, combination? Use commonly used terms to state concretely what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t try to use this opportunity to create and trademark a bunch of terms that won’t mean anything to most people. You might need to clarify where you fit in the value chain or distribution channels—who do you work within the ecosystem of your sector, and why will they be eager to work with you. If you have customers and revenues, make it clear. If not, tell the investor when you will.
  • 14. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 22/41 4. The Opportunity: Spend a few more sentences providing the basic market segmentation, size, growth, and dynamics—how many people or companies, how many dollars, how fast the growth, and what is driving the segment. You will be better off targeting a meaningful percentage of a well-defined, growing market than claiming a microscopic percentage of a huge, mature market. Don’t claim you are addressing the $24 billion widget market when you are really addressing the $85 million market for specialized arc-widgets used in the emerging wocket sector. 5. Your Competitive Advantage: No matter what you might think, you have competition. At a minimum, you compete with the current way of doing business. Most likely, there is a near competitor, or a direct competitor, that is about to emerge (are you sufficiently paranoid yet??). So, understand what your real, sustainable competitive advantage is, and state it clearly. Do not try to convince investors that your only competitive asset is your “first mover advantage.” Here is where you can articulate your unique benefits and advantages. Believe it or not, in most cases, you should be able to make this point in one or two sentences. 6. The Model: How specifically are you going to generate revenues, and from whom? Why is your model leverageable and scaleable? Why will it be capital efficient? What are the critical metrics on which you will be evaluated— customers, licenses, units, revenues, margin? Whatever it is, what impressive levels will you reach within three to five years? 7. The Team: Why is your team uniquely qualified to win? Don’t tell us you have 48 combined years of expertise in widget development; tell us your CTO was the lead widget developer for Intel, and she was on the original IEEE standards committee for arc-widgets. Don’t just regurgitate a shortened form of each founder’s resume; explain why the background of each team member fits. If you can, state the names of brand name companies your team has worked for.
  • 15. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 24/41 Don’t drop a name if it’s an unknown name, and don’t drop a name if you aren’t happy to give the contact as a reference at a later date. 8. The Promise ($$): When you are pitching to investors, your fundamental promise is that you are going to make them a boatload of money. The only way you can do that is if you can achieve a level of success that far exceeds the capital required to do that. Your Summary Financial Projections should clearly show that. But if they are not believable, then all of your work is for naught. You should show three years of revenues, expenses, losses/profits, cash, and headcount. It might also make sense to show a key driver, such as the number of customers or units shipped. 9. The Ask: This is the amount of funding you are asking for now. This should generally be the minimum amount of equity you need to reach the next major milestone. You can always take more if investors are willing to make more available, but it is hard to take less. If you expect to be raising another round of financing later, make that clear, and state the expected amount. You should be able to do all this in eight to twelve pages, possibly a few more if there is a particular point that needs emphasis. Some people say it should be one page. They’re wrong. (The only reason investors ask for one-page summaries is that they are usually so bad the investors just want the suffering to be over sooner.) Most investors find that there is not enough information in one page to understand and evaluate a company. Please remember that the outline above should not be applied rigidly or religiously. There is no template that fits all companies, but make sure you touch in each key issue. You need to think through what points are most important in your particular case, what points are irrelevant, what points need emphasis, and what points require no elaboration.
  • 16. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 25/41 Additional Tips: Finally, one of the most important sentences you write will not even be in the executive summary—it is the sentence that introduces your company in the email that you or a friend uses to send the executive summary. Your summary might not even get read if this sentence is not well crafted. Again, it should be specific and compelling. It should sell your company, not just describe it. The Conclusion Writing an incredible executive summary that will convince potential investors is no small feat; it takes an entire team of experts and months of hard work just to put just one together. It also requires you to back up everything you’ve said on paper with hard evidence and real financials. However, no matter how much time you spend on the executive summary or the rest of your business plan, you only have one short, 5-minute opportunity in front of the sharks to drive home the most compelling aspects of your value proposition. How you handle these 5 minutes can affect the fate of your business, your career, and how you live the rest of your life.
  • 17. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 27/41 What You Need to Know About Investment Bank Fees An Overview of Investment Bank Fees Investment bankers charge significant fees to provide their services on a deal. Fee structures are typically customized to each deal, so there is no standard fee for a deal. Generally, they include retainers, success fees, minimum transaction fees, breakup fees, and expense reimbursements. Fee agreements also usually define exclusions, exclusivity, tails and indemnification clauses. To some extent, the size of the transaction and the possible fees to be earned from it determine the type of type of firm that is likely to accept the engagement. The following chart shows how much you can expect to pay in investment bank fees based upon the size of the deal, as well as the type of firm that you’ll most likely deal with:
  • 18. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 29/41 Types of Fees You’ll Encounter Retainer Fees Investment banks will almost always seek to obtain a retainer fee for a transaction. A retainer fee is a fixed amount of money that a client agrees to pay, in advance, to secure the services of an investment bank or other professional. Retainer fees are paid whether the transaction is successful or not. A retainer is often paid in a single, lump sum, or on an ongoing basis (typically monthly or quarterly). Fee arrangements generally involve two components–a non- refundable retainer and a success fee based upon the amount of value received by the seller. For middle market deals, non-refundable retainers fall in the range of $25,000 to $100,000,with $50,000 or $75,000 being the typical retainer. Most investment bankers will agree that the retainer is fully creditable against any success fee earned upon closing. Retainer fees are often credited back to the client if a transaction is successful, but this must be negotiated with the investment bank. Most fee structures are based on a percentage of total value received, have a minimum fee (on the lower side of the middle market) regardless of value received and have an increasing fee percentage based on the sale process resulting in a value greater than agreed upon hurdles. For large, complex deals that are likely to take a year or more to close, or which are have a substantial risk of failure, it is not uncommon for the investment bank to structure its fees such that the retainer (sometimes augmented by hourly fees) make up the bulk of the money they expect to earn on the deal. Upfront Fees In addition to monthly retainer fees, investment banks sometimes seek upfront fees that are paid at the time of engagement, before work has started. This is really just a form of retainer and is purely a matter of negotiation between the bank and the client.
  • 19. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 30/41 Success Fees In a successful transaction, success fees (also known as “transaction fees”) are the largest part of the investment banker’s compensation. A success fee is an amount of money paid to an investment bank or another professional for the successful completion of a transaction. Success fees are typically a percentage of the total deal value. The Lehman Formula Years ago, the best-known guideline for determining success fees was the Lehman Formula, develop by Lehman Brothers in the 1970s: 5% commission for the first million dollars of a transaction, 4% for the second million, 3% for the third million, 2% for the fourth million, and, finally, a 1% commission for everything above $4 million. Under this formula, an acquisition made for $10 million would give the investment bank a success fee of $200,000 (5% of $1M + 4% of $1M + 3% of $1M + 2% of $1M + 1% of $6M = $50,000 + $40,000 + $30,000 + $20,000 + $60,000). As inflation reduced the absolute value of these dollar figures, the Double Lehman was employed: 10% commission for the first million dollars of a transaction, 8% for the second million, 6% for the third million, 4% for the fourth million, and, finally, a 2% commission for everything above $4 million. The Modified Lehman Formula is now widely used. In practice, these formulas are rarely used: almost all success fee structures are highly customized to the individual transaction and highly subject to negotiation. Although opinions vary and the facts are often hard to verify, the following ranges for success fees are sometimes mentioned:
  • 20. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 32/41 Minimum Fees Investment banks will usually require a minimum fee as part of their engagement. A minimum fee is the smallest sum of money the investment bank will accept to undertake the engagement. For instance, a large investment bank might stipulate a minimum fee of $500,000, meaning the client must pay at least that sum of money to the bank no matter what the outcome of the transaction. Consideration To Be Used In The Fee Base Defining the consideration to be used in calculating success fees is often difficult. Shares and cash exchanged at the time of closing are easily defined and measured, but transactions are often structured such that less liquid assets are exchanged (e.g. above- market employment contracts, selective non-compete agreements, below-market supply contracts) or liquid assets are to be exchanged at an undefined time in the future (e.g. as part of an earn-out or true-up). Investment banks frequently seek to use enterprise value as the basis of the fee calculation. Enterprise value is a measure of a company’s value, often used as an alternative to market capitalization. The concept is the theoretical cash that would have to be paid to buy a firm and settle its outstanding debt and preferred shares. Enterprise value is calculated as market cap plus debt, minority interest, and preferred shares, minus total cash and cash equivalents. Expense Reimbursement Investment banks, as with most other professionals in the US, will seek to have their expenses reimbursed.
  • 21. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 33/41 While this is accepted business practice in the US, investors should be careful to limit these expenses by establishing reasonability standards, requiring preapproval and documentation, and placing a cap on overall expenses. Without these safeguards, clients often find themselves required to pay for first-class airfares, luxury hotels, and expensive restaurants. As expenses are virtually always incurred in connection with doing something the client requested, it is usually impossible to limit payment for these expenses after they have been incurred. Equity Compensation Most equity compensation paid to investment bankers is in the form of warrants. The warrants are generally for a number of shares equal to between 5 percent and 10 percent of the number of shares sold in the deal by the investment banker. The warrants generally have an exercise price equal to 100 percent to 120 percent of the price of the securities sold in the deal and have a term of from one to 10 years. In some cases, the warrants terminate on IPO of the company. Although investment banking fees for most transactions contain a combination of expense reimbursement, cash percentage fee, and warrants, the amount in each category of fees varies from deal to deal. Conclusion The world of investment banking can be a difficult one to navigate, with many hidden fees and costs that you may not be aware of from the beginning. In addition to creating room in your budget for these expenses, you’ll need to prepare yourself to give the big sales pitch and win the deal. Otherwise, you’ll be stuck with a non- refundable retainer fee and a sense of disappointment.
  • 22. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 35/41 5 Things Venture Capitalists Need to See Before Investing What Exactly Do Venture Capitalists Look for in a Business Proposal? Once a seldom heard term, Venture Capital has become quite the hot topic in recent years. Everyone including celebrities, athletes, and even rappers are trying to get into this lucrative business. If you’re looking to take your business to the next level, there’s no doubt that you’ve considered seeking investment from VCs (Venture Capitalists) at least once or twice. Maybe, you’ve already presented your idea to investors to only be denied funding. This can be a frustrating experience, as you know that you have a dream along with the abilities it takes to reach the next steps of growth.
  • 23. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 37/41 The only problem: you simply lack the capital to make it happen. Asking for money from strangers is never an easy task. You need to prove to Venture Capitalists that the money they invest in you will ultimately make them money in the long run. Therefore, before you even start to write your sales pitch, you need to know exactly what VCs are looking for when they invest in a company and hand it to them on a silver platter. ROI (Return on Investment) is, of course, the most obvious metric that every investor looks at before they put down their money. It’s also the first thing that entrepreneurs like yourself consider before they put together a boardroom presentation. But, there are other related factors that VCs take into account when deciding whether or not to put their money into your pockets. Let’s explore some of these factors: 1. Unique Product, Pricing, or Process With stores like Walmart carrying at least 70 million SKUs, it’s hard to say that your idea has never been done before or has never reached commercial success. Instead, your best bet for achieving success is differentiating your product from the rest by tweaking certain aspects of it, such as pricing schemes, manufacturing processes, and materials. For example, everyone today has a smartphone and they all do essentially the same thing. What if there were a smartphone made out of 100% recycled metals and a biodegradable alternative to plastic derived from rice husks? That’s creating a synthesis of two existing ideas. “There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely, but they are the same old pieces of colored glass that have been in use through all the ages.” -Mark Twain
  • 24. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 38/41 2. Big Market and Potential for Future Growth VCs want to see your business grow—and their investment along with it. Without a big enough market for your product, you’ll hit a wall rather quickly. Investment is a game of percentages and the more room you have to grow, the higher percentage of ROI your investors will receive. It can be a tricky situation when trying to come up with new ideas while staying within the boundaries of a large, pre-existing market. For this reason, it’s best not to try to reinvent the wheel. Just seek to improve, build upon, or tweak what’s already successful. 3. AGood Management Team Businesses aren’t just made up of statistics and cold data—they’re made up of human beings who have the ability to both succeed and fail. One of the most overlooked aspects of pitching your idea to investors is convincing them that your management team is prepared. Show VCs that your management team is not only experienced and capable but also able to grow alongside the company. If you’re asking investors for an investment to take you from a $10 million dollar company to $100 million dollars, you need to prove that your management team can handle that task. 4. Metrics, Data, and Solid Financials The numbers never lie. Having gathered metrics, data, and solid financials is the ultimate test of whether or not your sales pitch will convince Venture Capitalists to invest in your business. ROI is a numbers game and you better bring the numbers that make your offering more attractive than anyone else out there. Perhaps you have a competitive advantage in labor and manufacturing costs, sourcing materials, or shipping. Whatever your advantage may be, make sure it’s on full display for everyone to see.
  • 25. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 39/41 5. Match with VC’s Investment Philosophy Believe it or not, Venture Capitalists do care about more than just money. Many VCs have personal investment philosophies that guide them in their decisions. Seek out Venture Capitalists and find out what causes they support. Then, contact the ones whose investment philosophies best match your own (e.g. If you sell products that are biodegradable, seek out VCs that care about environmental causes). Conclusion In addition to just a great idea and an already successful business, you need to look towards the future and convince investors that their money is better off in your and your team’s hands than anywhere else. Apogee Accelerator Group helps get the capital you need by improving your business strategy and accounting, introducing you to the right VCs, coaching you for sales pitches, and much more. If you’re currently seeking investment from Venture Capitalists and you want to take your business from $10 million to $100 million, or from $100 million to $1 billion in valuation, contact us to schedule a quick consultation.
  • 26. 11/6/2018 Salesbuddy | Statement http://beacon.by/magazine/v4/99465/pdf?type=print 41/41 Talk with Apogee VISIT OUR PAGE Interested in taking your business to the next series of funding? Visit our page and enter your information for a quick consultation with Apogee Accelerator Group.