Kenneth Larsen, Keystones, Denmark http://www.aal-invest.eu/page/speaker-profiles-kenneth

1. How to attract investors
to your AAL company
Kenneth Larsen, Keystones
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2. Content
 About Keystones
 Attract investors
– Understand the environment
– Decide on the type of financing
– The proces – what to do
 Q&A
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3. About Keystones
Basics
 Established 2001
 Services: Business development and matchmaking
 Based in the science park Scion-DTU, Copenhagen
 A few investments of our own
Team
 Commercial and technical education, broad international work experience
Kenneth Larsen Jan Rosenbom
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4. About Keystones
Company prepration Investor events
Matchmaking
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5. Understand the environment: Financial crisis
The game has changed……..
•VC investments record low in 2009
•Many Business Angels lost money
•Decrease in Bank credit lines given
This has lead to….
•Low amount of avaliable risk capital
•Investors focuses on existing investments
•Low valuations
•Investments mainly in companies generating
revenue
•Intensive “battle ground” for risk capital
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6. Understand the environment: Investment shift
Capital needed
IPO/ Stock Markets
Venture Capital
Business Angels
Seed funds
FFF 2008………
Research/idea Development Proof of Concept Proof of Business Scale
Company’s phase
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7. Understand the environment: Investment shift
Capital needed
Venture Capital
Business Angels
Seed funds
FFF ………2010….?
Research/idea Development Proof of Concept Proof of Business Scale
Company’s phase
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8. Understand the environment: Financial crisis
LONDON – July 28, 2010
Venture investors put €1.1 billion into 289
deals for European companies during the
second quarter of 2010, a 50% increase in
investment from the year-ago period.
Source: Industry-tracker Dow Jones VentureSource
With approx. 500 Venture Companies in
Europe this is only one deal per VC per
year!
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9. Decide on the type of financing
Qualification Investors
 Idea and potential  Own investment
 Purpose and ambition  FFF
 Business model  Banks
 Team  Private investors
 Budget, milestones  Business angels
 Valuation  Venture capital
 Stage  Corporate venture
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10. Decide on the type of financing: Venture Capital
• Funding provided to new or existing firms with
potential for above-average growth
• Management experience is a major consideration
in evaluating financing prospects
• The ownership and control of the entrepreneur
will be dilutted
• Requiring a high potential of return, is structured
so that it can be liquidated within a 3 to 7 year
period.
• Exit focus - initial public offering (IPO) or sale of
business
• Expect a 20-50% annual return on their
investment
• Typical investments range from $500,000 to $5
million (and higher…)
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11. Decide on the type of financing: Angel Investments
• Early stage round
• 50.000 EURO to 1 million EURO range
• Co-investors are trusted friends and associates
• Longer exit horizons – patient investors who
provide capital early
• Local networks of investors
• Invest close to home – within 1-2 hour of
travel time
• Markets and technologies with which they are
familiar – angels are “value-added” investors
• Required investment returns – often lower than
required by VC funds
• Terms and conditions – more informal
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12. Decide on the type of financing: Tough Questions
• What are my alternatives to getting investors omboard?
 People willing to work for shares
 Founder team financing further themselves
• Gaining staying power
 Create small/fast revenue streams
 Develop company/products through customer payed projects
 Publich funded projects
• ???
 Create ???
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13. The Proces
Opportunity Introduction Selection criteria
 Presentation, management team,
milestones, budgets
Initial Screening
 Management, business plan
Due Diligence
 Management, employees, marketing,
production, finance, references
Negotiating
 Valuation, ownership, control, legal issues
Funding
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14. The Proces
The quality of your business plan depends on your ambitions, finance
needs and the audience
Venture
capital
Business
plan
quality
Business
angel
FFF
Time spent
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15. The Proces: Top 10 do’s
1. Uniqueness in product and/or business model
2. The team (get the right people committed in the management or the
board)
3. 100% commitment: Chicken is dedicated, pig is committed
4. In the current investor market: Sell, sell, sell: Get a lot of direct customer
contact early on (earlier than you think)
5. “I’m only the CEO as long as I’m the right profile in the position”
6. Keep communication simple (elevator speech) even if it is really complex
7. “Staying power” in your business gives a better negotiation position
towards investors
8. What you see is what you get, honesty towards all stakeholders – no
surprises please
9. Focus on getting the deal done instead of getting 100% right terms
10. Aim high in your networking/ambassador ambitions
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16. The Proces: Top 10 pitfalls
1. CEO not the right profile for company’s next phase
2. “I will never sell the company, I aim to buy out the investors”
3. Material not investor friendly, 40 pages with product details
4. “We have no competitors” – leaves investor with research work
5. Valuation gone through the roof
6. 99% focus on product development, no focus on sales or customer needs
7. Secrecy, suspicion towards investors
8. Insisting on “the right” strategy all the way to the grave
9. We will let the investor decide on the strategy and board-members
10. No track record in building a business in the team
bonus:
11. “Personally, I cannot invest more in the company and I want a market level salary”
12. The product sells itself, we just need to develop it a little further
13. We are just looking for money, we have all the people and know-how we need
14. “I will not give up majority ownership of shares”
15. “Our budget (hockey stick) is extremely conservative “
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17. The Proces
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18. Keystones
Diplomvej 381
2800 Lyngby
Kenneth Larsen
+45 24251744
kl@keystones.dk
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