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![BACKGROUND
Principal – US Venture Capital Fund
4 investments, 2 exits
Investments
Angel Investments
Entrepreneur, Finance, & Tech
Coupons for India, Malaysia, Singapore
Web Push Notifications Platform
150+ Countries - [Acquired by Awesome Motive group]
Founder
Founder
7 investments, 3 partial exit, 1 exit
Agriculture
Equity Analyst
Software Developer
Focused on increasing
farmer income
Social Sector
Mentor
Advisory Board
Parivaar](https://image.slidesharecdn.com/angelfundraisingforagribusiness-211028060534/75/Angel-and-Venture-fundraising-A-360-perspective-2-2048.jpg)
![TYPES OF STARTUPS
Fast Growth, Funding Likely
Required
Organic Growth, Cash Flow
Positive
Example
Software as a Service,
Consumer, Agri-tech,
Services Company, Ad
Agency, Taxi Service,
Restaurant
Revenue Spend First, Earn Later Revenue from Operations
immediately
Funding Required May be needed at later stage
for growth
Risk Higher.
[ Over 95% fail]
Moderate
Time Longer time to build a
sustainable business. Need to
commit 10 years ( 5 years
min.)
Building a sustainable business
requires shorter duration
Focus of this discussion](https://image.slidesharecdn.com/angelfundraisingforagribusiness-211028060534/75/Angel-and-Venture-fundraising-A-360-perspective-4-2048.jpg)
![WHAT DO INVESTORS LOOK FOR ?
1. The Team [ 40%]
❖Integrity of Founders, Track Record
❖Complementary skills
❖Skin in the game of Founder
2. Investible Business [30%]
➢Market Size, High Growth
➢Product & Technology
➢Marketing & Sales Execution
➢Differentiation & Moat
➢Scalable
❖3. Valuation [ 20%]
❖4. Clean Structure [10%]](https://image.slidesharecdn.com/angelfundraisingforagribusiness-211028060534/75/Angel-and-Venture-fundraising-A-360-perspective-24-2048.jpg)
![HOW MUCH ?
❖Raise Enough to reach the next milestone
❖What is the next Milestone ?
➢Venture Round [ $1M and more]
➢Institutional Angel Round [ $1M and less, typically below $500k ]
❖How do you know you are ready for
➢Venture Round
➢Institutional Angel Round](https://image.slidesharecdn.com/angelfundraisingforagribusiness-211028060534/75/Angel-and-Venture-fundraising-A-360-perspective-27-2048.jpg)
![WHO TO RAISE MONEY FROM
❖ Depends on the stage
❖ Some thought processes
➢Smart Money > any money
➢Any money > No money [ If can’t bootstrap]
➢Institutional Money > Individual money
➢When given a choice of investors, choose based on
(1) Chemistry with investor,
(2) Willingness to help you,
(3) relevant connections/domain knowledge](https://image.slidesharecdn.com/angelfundraisingforagribusiness-211028060534/75/Angel-and-Venture-fundraising-A-360-perspective-28-2048.jpg)
Uploaded byRavi Trivedi
Angel and Venture fundraising - A 360 perspective
This document provides an investor perspective on raising angel/seed funding for agribusiness startups. It discusses the types of startups that typically require funding, basics on venture capital and angel investing, the typical process of fundraising, and what investors look for in potential investments. The document covers key topics such as the stages of startup financing, differences between angel and venture investing, why investors provide funding and how they make money, common reasons startups fail, and details on term sheets, valuations, and deal structures.
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Angel and Venture fundraising - A 360 perspective
- 1. HOW TO RAISEANGEL/ SEED FUNDING FOR AGRIBUSINESS: INVESTOR PERSPECTIVE Ravi Trivedi Indian Administrative Fellowship, Agriculture Govt of Karnataka, & The/ Nudge Foundation Twitter: @trivediravi, [email protected] 28-Nov-2021 360 degree Perspective
- 2. BACKGROUND Principal – USVenture Capital Fund 4 investments, 2 exits Investments Angel Investments Entrepreneur, Finance, & Tech Coupons for India, Malaysia, Singapore Web Push Notifications Platform 150+ Countries - [Acquired by Awesome Motive group] Founder Founder 7 investments, 3 partial exit, 1 exit Agriculture Equity Analyst Software Developer Focused on increasing farmer income Social Sector Mentor Advisory Board Parivaar
- 3. AGENDA Types of Startup& Funding Needs Basics on Venture Capital & Angel Why & What of Angel Investment Typical Process of Fund raise What do investors look for in Investment Typical valuation in various stage Term Sheet Basics & typical term sheet in seed round
- 4. TYPES OF STARTUPS FastGrowth, Funding Likely Required Organic Growth, Cash Flow Positive Example Software as a Service, Consumer, Agri-tech, Services Company, Ad Agency, Taxi Service, Restaurant Revenue Spend First, Earn Later Revenue from Operations immediately Funding Required May be needed at later stage for growth Risk Higher. [ Over 95% fail] Moderate Time Longer time to build a sustainable business. Need to commit 10 years ( 5 years min.) Building a sustainable business requires shorter duration Focus of this discussion
- 5. STARTUP FINANCING CYCLE Source:Wikipedia
- 6. ANGEL INVESTING VSVENTURE INVESTING Differences & Similarities
- 7. VENTURE CAPITAL 101 Venture Capital Funds are professionally run Fund life is often 10 years. Means Investment to Exit is between 5 to 8 years. Offer Advice, HR management, Office Space etc. Typically, Series A onwards or >$1M investments They fund 1 in 100 plans Often company > $1M in revenue at time of Venture funding Often the next stage after Angel investment.
- 8. VENTURE CAPITAL/ANGEL 101 Why? •A Pension fund needs to grow its funds to match the needs • Investment Diversification Source of Funds for Venture Capital
- 9. VENTURE CAPITAL 101 Howdo VC make money ? Sell or IPO the Invested Companies Target 33/33/33 Rule 33 % Success – Most 2x to 10x, but Superhits can be 50x to 200x 33% Breakeven – 1x to 2x 33% Failure - 0x 1) 0.33x0 + 0.33x1 + 0.33x 10 = 3.66x 3.66 x in 8 years is 18% IRR 2) 0.33x0 + 0.33x1 + 0.33 x 20 = 7x 7x in 8 years is 28% IRR
- 10. WHY ANGEL INVESTMENT InvestmentDiversification If you have Rs 100 lakh to invest, how much will you allocate to Angel/Venture Investment 5 to 20% of total assets Example Asset Allocation US Pension Fund Private Equity/Venture Capital/ Angel , also known as Alternative Investments High Risk, High Return Asset Class
- 11. TYPICAL ANGEL INVESTMENTIN INDIA Invest investor invests between 2 lakhs to 50 lakhs in one startup. Expect returns in 5 to 10 years. High Risk High Return Asset Class. Upto 40% of startups may return 0. Expect 3x to 50x return. Unicorn return 100x+ In India an accredited investor should have a net worth of Rs 5 Crores. Average Return for India Stock Market = 13 to 15%. Expected Return from Venture/Angel hence is +5 to 10% over Indian stock market = 18% to 25% The broader the risk is spread, the better is risk diversification. Typical Angel Round deal sizes = 50 lakhs to 5 Crore As Angel investor you are investing in the person/team largely (more on it later)
- 12. GOAL OF AN ANGEL INVESTOR 1.Help startup with Funds 2. Guidance & Mentorship – aka Smart Money Help startup with guidance, mentoring & connections when asked for. 3. Help the company reach next stage – Where they can raise Venture Capital Funds, and pass the baton
- 13. POSSIBLE WAYS TOEXIT 1. Exit during Series B or later, when Venture funds buyout the stake. 2. Company Sale – Strategic or Financial Buyer 3. IPO. 4. Company shutdown return partial money or AcquiHire.
- 14. WHY STARTUPS FAIL ❖No Market Need ❖ Founder Conflicts & Team ❖ Run out of cash ❖ Product without Business Model ❖ Ignore Customers ❖ Outfunded/outcompeted
- 15. TYPICAL ANGEL INVESTMENT PROCESS 1.Startup Pitch or Introduction 2. Subsequent Discussion to Screen the Idea 3. Lead Investor & Investor group formation. 4. Term Sheet to Founder 5. Due Diligence Process 6. Shareholder agreement Negotiation 7. Deal Close, Fund transfer 8. Monitoring the Deal/Company & Helping 9. Exit the company
- 16. HOW TO RAISEFUNDS What do investors look for?
- 17. ENTREPRENEURSHIP “ Entrepreneurship isthe pursuit of opportunity without regard to resources currently controlled..“ Howard Stevenson, Professor, Harvard Business School
- 18.
- 19. BUILDING A INVESTIBLEBUSINESS
- 20. CUSTOMER NEED Unless theidea addresses an apparent or latent need/pain point for a customer, it cannot be turned into a business.
- 21. CUSTOMER NEED -EXAMPLES Bus Ticketing industry in India was largely unorganized. Consumer – Booking Buses tickets in peak season was a Pain Bus Operator - Inventory Management in real time was a challenge. Effective directory services Consumer - Local yellow page search with validated merchants
- 22. ABILITY TO MONETIZE Therehas to be a clear, simple and easy way to monetize your service/product either directly by users or indirectly (e.g. by advertisers etc)
- 23. USP / COMPETITIVE ADVANTAGE Youredge over other players in the market or the clear & unambiguous Unique Selling Proposition for your idea that makes a difference for the customers
- 24. WHAT DO INVESTORSLOOK FOR ? 1. The Team [ 40%] ❖Integrity of Founders, Track Record ❖Complementary skills ❖Skin in the game of Founder 2. Investible Business [30%] ➢Market Size, High Growth ➢Product & Technology ➢Marketing & Sales Execution ➢Differentiation & Moat ➢Scalable ❖3. Valuation [ 20%] ❖4. Clean Structure [10%]
- 25. TYPE OF SEEDINVESTORS & DIFFERENCES ❖Individuals Friends/Family Entrepreneurs/ Industry leaders ❖Groups Networks ❖Incubators/Accelerators Infrastructure only Accelerator ❖Seed Funds Institutional Funds - Individual LP funds – ❖Other Funds PE funds, Special Situation Funds Hedge Funds ❖ How do you reach out to investors Best through a reference a) Portfolio Company introductions are valued Angel.co/Linkedin/Conference/News
- 26. WHEN ? ❖ Ideain a slide ❖ Prototype Ready ❖ Customer Traction ❖ Paying Customers ❖ Product-Market Fit ❖ Multiple customer segment ❖Business Model Fit
- 27. HOW MUCH ? ❖RaiseEnough to reach the next milestone ❖What is the next Milestone ? ➢Venture Round [ $1M and more] ➢Institutional Angel Round [ $1M and less, typically below $500k ] ❖How do you know you are ready for ➢Venture Round ➢Institutional Angel Round
- 28. WHO TO RAISEMONEY FROM ❖ Depends on the stage ❖ Some thought processes ➢Smart Money > any money ➢Any money > No money [ If can’t bootstrap] ➢Institutional Money > Individual money ➢When given a choice of investors, choose based on (1) Chemistry with investor, (2) Willingness to help you, (3) relevant connections/domain knowledge
- 29. MILESTONES, VALUATION ANDRAISE Milestones Stage Age Revenue Pre-Money Raise Amount From Whom 1 Venture Launched 0 to 0.5 yrs 0 50L 5 - 20 L Self, Friends, Family, 2 Beta Product Launched 0.5 to 1 yr Small amount 5 to 10 Cr 50L to 3 Cr Self, Friends, Family, Individual Angels, Accelerator B2C : Product used by real customers, Few paying customers B2B: Good customer Pipline, 1-2 customers in trial 3 Stable version 1 - 1.5 yr 10 - 15L /yr 10 to 20 Cr 1Cr to 6 Cr Self, Accelerators, Seed Funds, Individual Angels, Regular Customer growth 4 Product-Market Fit Found 1 - 2 yrs 20L to 1 Cr/yr 15- 40 Cr 2Cr - 20Cr Individual Angels, Seed Funds, Few Venture firms Strong and Consistent Customer growth Clear product and revenue for next 2-3 yrs 5 Business Model Fit found 1.5 - 3 yrs 2Cr - 10Cr/yr 30Cr - 50 Cr 10Cr - 50Cr Venture Funds Clear growth Path for next 3 - 5 yrs Consistent growth in paying customers Potentially breakeven
- 30. UNDERSTANDING VALUATION ❖Pre-Money Valuation+ Invested amount = Post Money Valuation ❖ Investor invests 1 crore at 4 crore valuation Post Money = 4 Cr + 1 Cr = 5 Cr • Investor Stake = What is the right answer? A) 25% (1Cr/4Cr) B) 20% (1Cr/5Cr) ❖Typical Valuation Models apply for revenue companies ❖Revenue Multiple ❖DCF
- 31.
- 32. TERM SHEET BASICS– ECONOMIC RIGHTS ❖Liquidation Preference – Defines how cash is distributed on liquidation to preferred stock-holders vs. common stockholders. ❖Participating vs. Non-participating. ❖Cap vs. No Cap Participating Preference 2.0x Non-Participating Preference 2.0x Investment Amount $5M $5M % Stake 30% 30% Equity Value in Sale $20M $20M Investor’s share 2 x5M +30% x10M = $13M Max of {2x5M = $10M , 30%x 20 = $6M } = $10M Management share $7M $10M
- 33. TERM SHEET BASICS– ECONOMIC RIGHTS ❖ Anti-Dilution ➢Clause comes into play when there is a down-round and the earlier round investor can to protect his stake ➢Down –Round = Lower valuation in future rounds. ➢Series A = $1/share, Series B = $0.5/share ➢Two Types - Full Ratchet & Weighted Average ➢Full Ratchet – Series A is also brought at = $0.5/share, conversion rate 2:1, i.e 1x new shares issued. Less common ➢Weighted average - More common.
- 34. TERM SHEET BASICS- CONTROL INTERESTS ❖Tag-Along Rights ➢Management agrees not to sell without giving investors a right for pro-rata participation in sale. ➢ If Promoters are selling some part of their shares in next round, the minority investors also have the same rights. ❖Right of First Refusal ➢Existing investors have first right to buy any shares transferred (new fund raise or buyback) ➢At-least pro-rata participation ❖Board Composition ➢Voting (Director) ➢Non-Voting positions (Observer, Advisory) ➢Investor Seat vs. Majority by founders ❖Investor Rights ➢Reports, Appointment of Auditors (internal & external)
- 35. CONVERTIBLE NOTE VS.STRAIGHT EQUITY ❖Solves for Mismatch in expectation in Valuation & Investor Expectation ❖SHA negotiation can take longer Solution: ❖Deferred Valuation to next stage of funding ❖20% discount to Series A ❖Convertible Preference Shares (India Company law), compulsory converts to Equity ❖Reference - https://www.100x.vc/isafe
- 36. TYPICAL TERMS INSERIES AA TERM SHEET ➢Liquidation – 1.0 participating or 1.5– 2.0x non participating ➢Anti-Dilution – Weighted Average / Full Ratched (common in India) ➢Tag Along/Drag Along ➢Board Seat + Board Observer ➢Valuation ➢Founder Vesting – 3 to 4 year
- 37. NON-OBVIOUS REASONS FOR REJECTION ❖Structure/Others ➢Cap-table– Dead equity, Too much dilution ❖People Related ➢Founder and Team Chemistry ➢Reference Checks/ Litigation Threat ➢Coachability ➢Single Founder ➢Location ❖Market ➢Portfolio Company Competition ➢Bias regarding a space
- 38. SUMMARY ❖Angel investment ismainly an investment in the team + large market size. ❖Entrepreneurship is like running a marathon. (with several 100 meter sprints in middle) You need to set goals The beginning is the best part Its easier to do with support The preparation has a huge impact Things you don’t expect to go wrong, will go wrong You are crazy to think you can do it Running out of money (water) is bad Mental game. Emotional Roller Coaster
- 39.
- 40. ANGEL INVESTING RESOURCES? Resources ❖Book :Angel Investing: by David Rose ❖Naval Ravikant – Founder AngelList - https://nav.al/angel-1 ❖Series AA Term sheet – Techstars, YC ❖Angel.co - List of Angels Entrepreneur Pitchbook – How to create one by Canaan. http://www.slideshare.net/canaanpartners/canaa n-entrepreneur-pitchbook-presentation