1. Miten pitchaan yritystäni rahoittajille?
How to pitch my start-up to financiers?
Spinnon kehitysohjelmat auttavat lupaavia, kasvuhakuisia start-up-yrityksiä
16.9.2010 16.30 – 18.30 + harjoitus
Tuomas Maisala / Spinno

2. Contents of the Presentation
Spinno in a nutshell
What to do before fund raising
Understand different financiers
Pitching to investors
Rahoitusfoorumi

3. Who is Tuomas Maisala?
Director of Spinno Enterprise Center
Tel. +358 40 5955547
Email: tuomas.maisala@spinno.fi
Education: Helsinki University of Technology, M.Sc. (Eng)
Start-up & business development experience: 10 years, since 2001 with the team
Industries: internet & media, telecom, professional services
Specialties: start-up financing, public funding instruments
Past Work Experience:
• Technopolis Ventures Ltd, 2001-2009, Director of Incubation Services, Deputy CEO
• Institute of Strategy and International Business, Helsinki University of Technology, 2000-
2001, Course Assistant & Coordinator of first Venture Cup in Finland
• Futuremark Ltd (MadOnion.com), 2000, Analyst, new business development
Examples of clients served:

4. What Spinno offers?
Business Idea Development Fundable Business Plan Credible Start-up Track to Growth
Free 1-2h meeting with our expert Pre-incubation program with Incubation program to launch Program extension for start-ups
in start-up business development. support, training and tools to your business (6-12 months). aiming at fast growth and VC funding
Confidential evalution of your help you to build a solid, Sparring, easy access to (6-12 months). peer group, training
business idea, initial analysis of presentable start-up case with a funding, practical training, and other events, advice and tips on
fundability and suggestions for business plan (1-3 months) contacts to right people, growth and funding.
further steps. credibility and a lot more!
Result: Understanding of the Result: A fundable and Result: Quick start from plan Result: Smooth transition from a
feasibility of your business idea and executable business plan with to real business, with funding Start-Up phase to accelerating
main challenges ahead. core elements in place, and other resources in place. international growth, backed by
understanding of business and growth funding and partnerships.
financial challenges ahead.
GROW!
LAUNCH!
KICK-OFF!
QUICK SCAN
• Market & competition? • Markets & channels?
• Product & Customers? • Access to seed funding?
• IPR, patents, trade marks? • PR & communication?
• Market size and potential? • Team & best partners?
• Incorporation process? • Team & management?
• How to make money? • Legal & administration?
• Convincible pitch and story? • Internationalization partners?
• Overall financing needs? • Risk management?
• Implementation plan? • Funding for growth?

5. What kind of start-ups we serve & work with?

6. Why start-ups fail in fund raising?
They are not perceived to be fundable
• It is not possible to measure chances of success, all is
based on human interaction and human assessment
No understanding of how start-up funding works
Not able to get traction and clients (evidence)
• Solution for a non-existent / not big enough problem
• Not able to present and sell their offering
Not able to communicate relevant aspects of the
business case from the perspective of financiers

7. What to do before seeking funding?

8. Steps towards a fundable business case
Business idea founders
Business plan / prototype / demo public
Pilot client(s) and proof-of-concept angel
Real product (price, materials, support etc)
Repeatable and scalable business model VC
Ability to execute in growth-phase

9. What you need to start fund raising?
Story
• an elevator pitch
• a slide deck
• summary/proposal
• maybe a business plan
• forget NDAs
Traction (evidence)
Team

10. Understand your options (Plan A, Plan B)
and related funding needs & rounds
€
t

11. Understand Different Financiers and
How They Work and Look at You

12. Start-up financiers and their motives
Clients / income / sales Added-value YOUR TARGET! (€)
Founder, own pockets Fastest and most motivated?
Friends, Fools & Family Relationship, emotional values
Keksintösäätiö (Tuoteväylä) Prototypes, IPR, growth, exports
ELY-keskus (ent TE-keskus) New jobs, , growth, exports
Tekes R&D, innovations, growth, exports
Finnvera Complements commercial banks
Banks Riskless return €
Business angels Emotions, financial return (€)
Veraventure/Avera Almost VC-ready to be fundable €
Venture Capitalists 5-10 x Exit €
(Vigo Accelerators) Quick wins on VC path, Exit) €
€ = funding that seeks a financial return

13. TEKES Young Innovative Companies
Aim is to fund start-ups with high ambition and growth potential
Pre-phase for preparing the case and
to plan what it takes to grow Phase 2
Max 750 000 €
10
Phases 1 & 2 for commercialization, FAST Expert
against milestones
1 - 3 years
almost all costs are accepted GROWTH panel
Review panel evaluates, but 30…50 Phase 1
in the end Tekes decides GROWTH-
Max 250 000 €
PHASE 6 mo - 3 years
75% support level, but in Expert
panel
PREPARATION
practise appr 50% of
Pre-phase
other funding is 100…200 Max 50 000 €
de minimis
necessary PLAN FOR GROWTH PHASE
2-6 months

14. What does Tekes look for?
Pre-phase – tell an interesting growth opportunity
• Promising business ideas backed with good teams
• Start-ups after an R&D-project and with some sales
• Cases proposed by Vigo Accelerators for Due Diligence
Phase 1 – appeal to Tekes by looking like a winner
• Some pre-revenue cases w exceptional team/investors
• Mostly promising cases: solid team, sales 100…300ke
Phase 2 – show that you can keep on the track
• Phase 1 cases on their targets, e.g. on # of foreign sales
• Normally Phase 2 (750ke) is broken into milestones

15. Venture Capital – business angels and VCs
Categories
• Business angels
• Governmental VC (Veraventure, Teollisuussijoitus)
• Professional VCs
High risks = high financial returns
Investor becomes an owner and a decision-maker
Most expensive funding that you can get, but
sometimes the only option for growth
If you do not need VC, don’t raise it

16. How Do Business Angels Operate?
Business Angels are investing their own assets
• What other options do they have?
€ € € €
• They never have to invest in start-ups
Angels may operate individually or
in loose or more formal groups
They normally want an active role
Because investments are risky, they want to
see some benefits (profits)
Not necessarily exit-driven €
Startup Oy Startup Oy
Startup Oy

17. How Business Angels Look at Pitches
and Cases
Does it appeal to their ”hot buttons”
Ability to add value through involvement and own
experience and contacts
Favourably if the case is referred to them by a
trusted colleague
Want some financial upside (exit, dividents)

18. How Do VCs Operate?
Venture Capitalists are asset managers
• A VC company raises a fund, then invests the money,
and then attempts to get more money back from exits
• Life-cycle is 7-9 years, 2-4 years for making investments, then exits only
The true purpose of a VC company (GP)
is to make money to its investors (LPs)
If possible, VCs want to avoid
all unnecessary risks prior to board
VC Firm Oy
investing in a start-up member €
• technology risks Startup Oy Investor
• market risks Fund 1 Ky
Startup Oy Investor
• team risks
Startup Oy Investor
€

19. How VCs Look at Pitches and Cases
How fast can we achieve EXIT and how BIG
• IPO’s are rare, so typically a trade sale is the target
• a typical VC may target 20 – 30 % (or more) portfolio
internal rate of return (IRR) 5-10 x value at exit
Does it fit in the investment criteria
• business sector, phase, valuation, size of VC round
Does this case fit in our portfolio
Is the funding round big enough to make it big or
can we find co-investors for new rounds

20. Ok, I Understand Different Financiers.
How Do I Pitch to Them?

21. What is pitching?
A pitch is nothing more than a verbal
presentation of a concept or an idea.
Pitching is presenting your business plan and
business case.

22. Verbal Marketing
Life is marketing:
• Door-to-door salesman
• Job interview
• Meeting a nice girl/guy in bar...
We are marketing
• ourselves personally or professionally
• our products or services
• our ideas...
…and we are constantly being marketed to

23. Different Types of Pitches
Two line summary / tag line
• ”Facebook for corporations” 5-10 s
Elevator pitch
• 9 floors to get the job done 30-60 s
Short Presentation
• 5-10 slides with main messages
5-10 min
• Use visuals & easy to read text
Full Presentation
• Full slide show, 10-20 PPTs 20-30 min
• Have back-up materials/references

24. Common mistakes in pitching
Not understanding at all what the case is about
• You are not able to explain, what problem you are
solving or what you are offering to your clients
• Your position on the market / in the value chain
Boring/slow start of a presentation and no ”story”
• Too much technology (or jargon or abbreviations)
Afraid of revealing facts / lack of prior homework
• Leaving out all relevant information: clients, pricing
• E.g. ”we have no competition”, ”unique idea”
Not realistic funding proposal, ”just trying out”
Running out of time

25. What can you accomplish in 7 minutes?
Investors hear a number if pitches in a day
• Save them from bad pitches, a good first impression!
• You can deliver 2-4 main messages (arguments with
evidence) to show that your start-up is interesting
• Make sure that you have time for feedback/questions
Your goal is that
• they remember your start-up case
• you are invited for a meeting to show rest of the slides
• you can raise sense of urgency to act if you can get
several investors interested

26. Building the slide deck
Plan the content and main messages separately
• ABC is interesting investment opportunity:
• First clients and sales (evidence of market demand)
• Experienced team, ability to execute
• Big players are active in acquisitions in this field
Draft slides and content under topics/placeholders
Use visuals (graphs, pictures, screenshots)
Convert topics / placeholders into messages
• Team -> A strong team with 40+ years of experience
Add back-up slides for questions

27. Focus on the content (not on the order)
Model 1 Model 2
cover Problem /
summary Challenge +
team Solution
problem Market
Potential /
solution Customers
technology Business model
marketing Company and
sales the team
competition Technology
milestones Implementation
conclusion plan
financing Financial plan
and needs

30. Examples of business models / value chains
XYZ service offering
SIM cards
Service
SIM card revenue
Supplier XYZ Customer
Service fee
Client application
Server Client application
License fee components Service fee SIM cards with solution
XYZ Operator &
tech partner service channel
SIM cards
License revenue
Cell & Battery Cell and Battery OEM /
design Testing ODM
Raw Cell & Battery Battery
materials manufct . Distributor & Professional
Battery Pack user
Manufacturer Small
Retailer
Company X operations
Big
Consumer
Retailer

31. What you have done and plan to do
2010 2011 2012
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Company established
Business planning
Product Version 1.0
Pilot projects
First customers
Product Version 2.0
First international
reference
VC round
Significant market
penetration

32. Example Back-up Slide - Funding Plan of ABC
2009 2010 2011 2012
kehitys
Tuote-
T&K-hanke Jatkohanke: tuoteversio 2
12kk (n 200ke, 50%) 12-14kk (n 250ke, 50%)
VaRa
Liiketoiminnan
(15ke)
Tuoteväylä (30ke)
-IPR-selvitys
NIY Kehittämistuki-kv (50ke, 50%)
- proto
esivaihe - Markkinatut. (US)
kehitys
-Markkinakart.
3kk - KV-viestintästrategia
(66ke) - Messut ja matkat
DesignStart, PK-LTS,
Kasvuvalmennus
pääoma
Käyttö-
Käynnistysav. 15ke
Perustajat 30ke Avera n200ke
rahoitus
Tulo-
0ke 120ke 300ke 800ke

33. How to make your pitch to stand out
Attach your start-up to something everybody
speaks of or knows (that is in their minds)
• Start with a joke, show an article, ask a question
Use visuals (graphs, pictures, screenshots)
Demonstrate if possible
Be compelling
• be passionate of your opportunity and start-up
• external validation is best for all of the facts

34. Not Just Deck, Build Your Elevator Pitch
Assume short buildings
Put a tag on it (one sentence to remember)
Solve a problem
Lay out the benefits
Conclude with a call to action
Show Your Passion
(Tips from a list of Bill Joos, Garage.com)

35. Last Pitching Tip
Rehearse, rehearse, rehearse…
Only practise makes a master

36. Ohjeita rahoitusfoorumiin

37. Rahoitusfoorumi – 6.10. Kalastajatorppa
Osana Kasvufoorumia, järjestää Ohjelmistoyrittäjät ry
• Spinno apuna toteutuksessa
Lyhyitä 15 tai 20min face-to-face/many-faces tapaamisia
• Voi pitchata eri ryhmille, 2-3 neuvotteluhuonetta rinnakkain
• Julkisia rahoittajia, enkeleitä, pääomasijoittajia
Yhteinen avaus Avaus
Esityksiä kumppaneilta Tauko 20min tapaamisslotti 20min tapaamisslotti
sekä julkisia pitchejä Esityksiä 20min tapaamisslotti 20min tapaamisslotti
20min tapaamisslotti 20min tapaamisslotti
Tauko 20min tapaamisslotti 20min tapaamisslotti
Esityksiä 20min tapaamisslotti 20min tapaamisslotti
20min tapaamisslotti 20min tapaamisslotti
Networking 20min tapaamisslotti 20min tapaamisslotti
20min tapaamisslotti 20min tapaamisslotti

38. Ohjeita rahoitusfoorumiin
20minuuttia on lyhyt aika, osa menee small talkiin
Esittäydy ja esitä yrityksesi tiiviisti (n 7min)
Kerää palaute esityksestä ja rahoitettavuudesta
Vaihda käyntikortteja
Selvitä oikea yhteyshenkilö / sovi tapaaminen
Varaa aikaa follow-upiin tapahtuman jälkeen
• Soita: ”Hei, tapasimme 6.10 rahoitusfoorumissa…”
• Meilaa: Rahoitusfoorumi/ABC Oy – Facebook yrityksille

39. Some of Finnish Business Angels
Most angels do not want to make noise of themselves
Only a few professional business angels, more “random experiments”
Trade sale / IPO:
Micheal “Monty” Widenius / Open Ocean Capital (MySQL)
Risto Siilasmaa (F-Secure)
Ilkka Hiidenheimo (Stonesoft)
Hannu Turunen / Magnolia Ventures (Stonesoft)
Micki Honkavaara (Hybrid)
Ari Korhonen / Lagoon Capital Oy (Komartek)
Several wealthy families: Herlin, Ehrnrooth, Fagernäs, Seppälä, Hartwall
Who else has made money recently?
Option programs of large corporations, FIM Group, eQ, Formula1 stars…
You need networks to find the angels!
VeraVenture angel track, a couple of new, merging www-services

40. Venture Capitalists 1/2
Funds Portfolio Typical
Investments
Aloitusrahasto Vera Oy 150+ investments, 250ke, max 500ke,
(Avera) 96Me (69M inv.) 30 exits Finnish start-ups
Conor Technology Fund II 7 listed, a couple Nordic, 0,5M-1,5Me
Ky 46Me 2010 of write-offs?
Conor Technology Fund I
Ky 16Me 2006
Inventure Fund Ky 42Me 12 listed, exits incl Nordic, 1-3Me
2008, old Holtron fund MySQL
7Me 2000 (?)
Several, old small funds 20+, some old, Finnish, small
(Ky and Oy), total 30Me many small exits
Nexit Infocom 67Me 2000 18 listed, several Global, 1-10Me
Nexit Infocom II 85Me successful exits,
2008 e.g. Hybrid, Hantro

41. Venture Capitalists 2/2
Funds Portfolio Typical
Investments
Eqvitec Technology Fund Appr 30, many old, Old focus 2-5Me,
III 140Me 2006, II 133Me good and bad exits new focus?
2001, Fund I 68Me 1998 from funds I and II
Total 650Me, mostly Direct investments Only Finnish, co-
invested in other VC funds 73 listed, 73 exits investor, 1-5Me
CapMan Technology 20 listed, 48 exits Nordic, 5-15Me into
2007, 120Me invested, from old funds , growth companies
VC funds since 1995 4,3 yrs on average with sales of >5Me
Over 1000Me, old Nokia 30+ Global, 1-5Me,
funds staff China, US, one
person in Finland

42. Appendices
Liitteet

43. Kasvufoorumin rahoitusryhmässä 2008:
yleiskuva rahoituksesta ohjelmistoalalla
Pre-seed / Seed / Early VC VC
Ideavaihe Käynnistys Varh.kasvu Kasvuvaihe
10-100ke 100ke-1Me 1-3Me >3Me
Rahoitus / Paljon: TE-keskus, Useita: Tekes NIY, Harvoja: Eqvitec Vähän: CapMan,
Tekes, FV, Avera, FV, Avera, Conor, CapMan, ulkomaiset
rahoittajat enkelit, alueelliset Inventure, Nexit, ulkomaiset
rahastot muutama enkeli Rajallinen Rajallinen
Saisi olla lisää Tulisi olla uusia hankevirta, ei hankevirtaa, ei
bisnesenkeleitä VC:tä tai isompia rahoituspulaa rahoituspulaa
fundeja ja
[super]enkeleitä
Yritykset / Paljon hakijoita: Melko paljon Vähän, puuttuu Harvoja yrityksiä,
ongelmaksi hakijoita: puutetta osaamista puuttuu osaamista
yrittäjät koetaan julkisten käyttöpääomasta, kasvaa
instrumenttien rahoittajilla korkea Osa ei halua ottaa
hajanaisuus, kynnys rahoittaa VC-rahoittajaa Osa ei halua ottaa
riskirahoituksen Rahoittajan mukaan VC-rahoittajaa
kärsimättömyys, näkökulmasta mukaan
valuaatio, puutetta ongelma tiimien lt-
käyttöpääomasta / kasvuosaamisen
puute, varovaisuus

44. Julkisen rahoituksen erityispiirteitä
Rahoituspäätöksillä on yhteiskunnallisia/poliittisia tarkoitusperiä
Rahoitus on yleensä avustusta tai lainaa ja vaatii omarahoituksen
Hakeminen vie aikaa ja vaatii erilaisia hakemuksia
Rahoitus kohdistuu tyypillisesti projektille (alku ja loppu, tavoitteet)
Huomioi eri kustannusten kelpoisuus vaihtelee instumenteittain
Hyvä yhteyshenkilö on kultaa kalliimpi; auta häntä myymään projekti!
Yksi kustannus vain yhdelle projektille (aina oma kustannuspaikka!)
Jos yli 50% julkinen tuki hankintalaki ostojen kilpailuttaminen
Kustannusperusteinen maksatus aiheuttaa aina kassarasitteen
• Esim. TEKES-projekti 50% avustus vaatii n 75% rahoituksen projektin läpivientiin
Vähämerkityksisen, kilpailua vääristämättömän De minimis –tuen
max 200ke/3v ja säännöstön noudattaminen on yhtiön vastuulla

45. Keskeiset julkiset rahoitusinstrumentit
Käynnistysavustus (10-15 k€) ELY-keskus, 100%, hautomoyrityksille
Yrittäjälaina (20-100 k€) FV, laina _yrittäjille_ osakepääomaa varten
Pienlaina/-takaus (3-35 k€) FV, pienen yrityksen käyttöpääomaksi
Tuotteistetut as.tun.pal. (1-10 k€) ELY, tuettuja konsulttipalveluita rajatusti
Keksintösäätiö/tuoteväylä (5-25 k€) KS, 100%, Innov. liikeidean selvitykset, IPR
Valmistelurahoitus (10-15 k€) ELY, 70%, hankevalmistelu, tuotestrategia
Tekesin T&K-rahoitus (50-1000 k€) Tekes, 35-70%, tuotekehityshankkeet ja –kulut
Avustus innov.palveluihin(50-150 k€) Tekes, 75%, innov. liittyvät _ostopalvelut_
Kehittämisavustus kv:een (20-50 k€) ELY, 50%, messut, matkat, partnerit, vienti
NIY Esivaihe (25-50 k€) Tekes, 75%, Nuoret innovatiiviset yritykset
NIY 1. ja 2. vaihe (250-1000 k€) Tekes, 75%

46. Very rough scale of start-up valuation
Business idea 10ke
Business plan / prototype / demo 100ke
Pilot client(s) and proof-of-concept
Real product (price, materials, support etc) 1Me
Repeatable and scalable business model
Ability to execute in growth-phase 10Me
IPR may increase valuation
Credible, competent team increases much more!

47. The Process of Closing VC Funding
Pitching Paper work
Initial contact
Discussions & evaluation
Term sheet
Due diligence
Final negotiations
Closing
2 – n weeks 2 – 4 weeks 1 – 2 weeks 3 – 5 weeks 1 – 2 weeks 1 – 2 weeks
500 100 15 10 8 7
(Statistics by Gearshift Group, 2008)