Startup Funding From Kickstarter to Venture Capital Brian Jacobs Emergence Capital Partners @brian_emcap

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Our Mission To unleash the power of SaaS and

Technology-Enabled Services (“TES”) to business users around the world

You’ve built an awesome app.

Is it time to raise venture capital?

1200 companies review materials�500 face-to-face meetings " "40%�50 due diligence (4-8 weeks) " x 10%�2000 reference calls�About 2 years of time�10 Investments " x 20%�

! < 1.0%

Typical Pipeline for 10 investments

VC Math�

VC Math�

"Investment "Total Value�3 Total Loss "$3 million "$ 0"�3 Return of Investment (1x) " 3 "$ 3" million �3 Sell for profit (4x) " 3 "$ 12 million � 1 Home run (10x) " 1 "$ 10" million �Total "$10 million "$25 million �

Typical Results – 10 Investments�

We are wrong �60% of the time! �

What are we looking for? Hypergrowth

VCs love Math Typical VC Questions: How will you generate revenue? Subscriptions, advertising, transactions, open source, freemium?

What is your average price?

How many customers do you need to reach $100 million in revenue? How many customers are there in the US? Worldwide?

What is your distribution model? Field sales, telesales, channels, freemium/viral? How much does it cost to sell a new customer? (Time and manpower)

What is your dollar-weighted churn? Logo churn?

What are the unit economics?

We want to calculate (1) how big is your market size and (2) how much money you will need to grow really fast.

How much do you need?

$50,000 $500,000 $5 million $50 million

SuperAngels Angel Funds Seed Funds

Venture Capital

Angels Accelerators

Bootstrap Incubators

Note: Log scale

Megafunds

Bootstrapping

+ Pros - Cons Maintain 100% control Go slow approach

Maintain 100% ownership Impossible with some business models

Macho points at meetups No expense account

Successful examples:

Best for: getting started, consulting companies, development shops, smaller opportunities, maintaining control

PaaS

AppStores

Incubators

Crowdfunding

New options for bootstrappers

Maximize your ownership by doing everything possible to prove your business model before selling a piece of your company

PaaS Case Study

•  Force.com ISV: Pharmaceutical CRM •  Startup to 1st customer: 180 days •  Angel Funding: $3 mm •  VC Funding: $4 mm •  $100+ mm revenue in 5 years

Angels

+ Pros - Cons Maintain control (>50%) Fundraising process (4-7 months)

Cool rich guys Limited help

May invite you to pool parties May not provide follow-on capital They take awesome vacations, but

don’t invite you

Successful examples:

Best for: small capital req’ts, preparing for VC route

Venture Capital

+ Pros - Cons Fastest growth possible Long fundraising process (6-9 months)

Lots of professional help Selling ownership to grow (30-80%)

Successful examples

Best for: top 1% of startups, the largest opportunities, need to grow very fast

Founder Math� "Ownership at IPO "Current Net Worth* "�

Bill Gates " 45% " $61 billion �Jeff Bezos "41% "$18 billion �Sergey Brin "16% "$17 billion �Mark Zuckerberg "18% "$15 billion �Marc Benioff "28% "$1.9 billion �Reid Hoffman "19% "$1.5 billion �

* Forbes 400 list, 2012

Should I get Venture Capital? Pop Quiz  Customers are begging for my product.

  If I hired twice as many employees, my business would grow to pay for them all within 6 months.

  I can grow my company +100% for 5 years in a row.

  I like hiring salesmen.

 My wife encourages me to work 120 hour weeks.

  I drink more than 15 cups of coffee per day.

  I would sell 1/2 of my company if that’s what it takes to beat my competitor.

  I like math

If you checked ✔ 4 or more boxes, please see me after the session.

Emergence Capital

•  We are 100% focused on SaaS and technology-enabled services targeting business users.

•  Track record of building global industry leaders

•  Leveraging a small, highly networked team

•  World class SaaS expertise

Brian Jacobs General Partner, Emergence Capital

@brian_emcap

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Venture Capital is not for everyone

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Bootstrapped Angel VC IPO

Note: Log Scale