About Me

Wednesday, March 3, 2010

Bill Payne

Friends, Family and Fools (3x investment levels)
  • Unsophisticated
  • 1 -2 times a lifetime
  • Passive
  • Gift?

Angels (1x investment levels)
  • Time and money
  • Active
  • Investing in entrepreneur
  • Accredited
  • Savvy

Venture Capitalist (1x investment levels)
  • Institutional money
  • Large portfolios
  • Invest in company
  • Limited partnership

Capital lifecycle

The funding gap
  • Between Angel and VC.
  • $1 US <--> $4 million US.
  • Entrepreneurs: Go where investors are.

  • Not motivated to steal technology.
  • Most Angels and VC will nto sign.
  • Write non-confidential business plans.

Friends, Family & Fools
  • Debt, equity or gift?

  • Accredited investors
  • Exited entrepreneurs
  • "Mad Money": Money set aside to lose
  • Range of roles
    • Lead investor
    • Investor/advisor
    • Passive investor

  • Venture capitalists make money
  • Return on Investment
  • Staying involved

Business plans
  • Elevator pitch: Verbal. Attract interest. Don't close.
  • PowerPoint: Verbal. 10 pages, 20 min, > 30pt font.
  • Executive summary: Written. Attract interest. Don't close.
  • Full Business Plan: Written. Validation score card. Write full plan first.

Evaluating deals
  • Management team > Opportunity > IP > Funding
  • Investing in the business, investing in you.

Fundable management teams
  • Vertical experience
  • Balanced / Complete team
  • Coachable
  • Leadership
  • CEO experience

Size of opportunity
  • High gross margin
  • Scalability
  • Large niche market
  • Unfair competitive advantage
  • Ready for customers

Angel investing process
  • Pre-screening
  • Screening
  • Due Diligence: Also check investors
  • Investment presentation
  • Follow up
  • Closing
  • 1 in 72 who apply receive investment

Five mistakes to avoid
  1. Don't take dumb money. Someone who is passive or does not help you.
  2. Don't elaborate in describing your product / technology.
  3. Don't overestimate market size.
  4. Don't ball park addressable market size as a percentage.
  5. Don't press the first mover advantage.

Finding money is time consuming.

Prefer to see a company with entrepreneurs with majority control of the company. not interested in taking control of the company. Prefer to keep entrepreneurs motivated.

Lack of execution on the part of the entrepreneurs.

If the total investment is more than $10 million US then company would probably not succeed.