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TechMoney: Prepping for Diligence The Technical Side of Raising Capital

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The technical side of raising capital presented at CodeCamp. Cluj-Napoca Romania. A Presentation by: Stefan Koritar, EU Entrepreneur-in-Residence for CCM

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TechMoney: Prepping for Diligence The Technical Side of Raising Capital

  1. 1. TechMoney: Prepping for Diligence The Technical Side of Raising Capital Presented by: Stefan Koritar (@skoritar) EU Entrepreneur-in-Residence, Cachette Capital In Collaboration: Ellie Cachette (@ecachette) General Partner, Cachette Capital
  2. 2. Scan here to give feedback http://cluj.codecamp.ro/feedback/6 Room 6
  3. 3. CODECAMP Partners Cluj-Napoca, Romania Session 7 17:00 - 17:45 8 April 2017
  4. 4. #TechMoney Twitter: @skoritar
  5. 5. TechMoney: Prepping for Diligence CONFIDENTIAL © Cachette Capital Management 2017 The technical side of raising capital [English], 45 Minute presentation. CodeCamp. Cluj-Napoca Romania. A Presentation by: Stefan Koritar www.cachettecapital.com April 2017
  6. 6. A Little About US (CCM) Cachette Capital or “CCM” is a full service Fund of Funds which specializes in venture capital meaning: = WE ALL NEED EACH OTHER •  Venture Capitalists or Venture capital firms need us, we are their investors. •  Likewise, in order to help put money to work we need the venture capitalists. •  For venture capitalists to make money, they need great entrepreneurs
  7. 7. How Fund of Funds Work Fund of Funds (FUND I) Family Offices Pension Funds Individuals Foundations INVESTORS 500,000’s of companies VC Fund VC Fund VC Fund VC Fund VC Fund VC Fund VENTURE CAPITAL CONFIDENTIAL © Cachette Capital Management 2017 7
  8. 8. CCM Expertise in Diligence CONFIDENTIAL © Cachette Capital Management 2017 As a fund of funds we often perform three CORE types of diligence for ourselves or for our venture partners to ensure investment quality: Portfolio Diligence - Our experience as founders helps us understand how to launch and grow companies, and how to vet VC firms and their portfolios Technical Diligence - Our technical expertise, and deep understanding of software, allows us to value new technologies Emerging Market Comparison - Our global perspective allows us to spot emerging markets and identify venture firms poised to succeed in those markets 8
  9. 9. A Little About Me… Stefan Koritar •  EU Entrepreneur in Residence for CCM •  Co-founder of Sloppe •  Product Manager, Telenav •  Regional Director Balkans, Startup Grind •  Entrepreneur at Heart “Think meta”
  10. 10. Purpose of Today’s Talk •  Learn some tips and tricks from Silicon Valley •  Go over basics of technical diligence •  Build great products from Day 1
  11. 11. What is Technical Diligence? •  Prepping for Investors •  Knowing what “assets” are •  Development Budgets per Financing Stages •  Planning For User Growth and Scaling •  VC Approved Metrics •  Technical Documentation •  Risks to Fix or Avoid During diligence
  12. 12. Introduction: Why Technical Diligence? •  Founders and CTOs often overlook the value of technical diligence •  There are tricks to making a startup more valuable based upon technical execution •  Technical preparation can make or break a startup $$$$ Don’t lose money over simple technical mistakes which are preventable
  13. 13. Prepping For Investor Talks •  When do you start preparing? •  Prepping for investor diligence •  How can your dev team ruin funding •  Budget Expectations and Technology Expectations
  14. 14. When Do You Start Preparing? The right answer for when to start prepping for technical diligence is “now” but the practical answer is when you actually have something that works: •  When you have a working prototype and MVP and plan to start more serious development •  When you start to get users and tractions on some stage of a working product •  As soon as servers or software subscriptions are needed (say like Heroku). What account should all those link to?
  15. 15. Ways Your Dev Team Can Ruin Funding Surprisingly having a great developer or dev team is only part of it. Here are some common ways your dev team can kill funding: •  If the persons, team or firm do not have enough equity or the correct contracts and agreements in place. •  When you start to get users and tractions on some stage of a working product •  If there is any sense of dev fraud: lies about how much code was done, if developers over billed, or not technical experience on staff to sniff it out
  16. 16. Budgets: Know Your Stage •  Whether its your funding stage or product stage, understand where you are in the mix. •  If you are looking for a product market fit, go low on design. •  If you are looking to scale, go high on dev and growth
  17. 17. Budgets: By Tech Category •  Operational Costs (servers, emails, website) •  Development Costs (developers, new dev) •  Hidden Costs (APIs, programs needed ex: Twilio) •  Development Team churn - Product market fit - Technical investment (money lost or gained in dev lessons) - Development Teams, Internal and/or Outsourced
  18. 18. Unless you are entering a Series A or B odds are you have very little to relevant intellectual property that has been established. It’s the nature of building something evolved. What is IP? •  Patents •  Intellectual Property •  Team - 1:1 meetings with dev team Understanding “IP”
  19. 19. Patents In 90% of cases, especially early stage technologies patents are worthless. Unfortunately legal things take so much longer to hash out than tech being replicated. That said, many investors DO care that you are atleast mindful about it. Things to consider around patents: CONFIDENTIAL © Cachette Capital Management 2017 19 •  Do you even have the right attorneys to defend a infringement? •  Do you have enough MONEY to defend an infringement? •  Could your product be easily replicated? If so would a patent even protect anything? •  Why do you want a patent?
  20. 20. Intellectual Property Unlike patents, intellectual property is VERY REAL. This means that whatever is being created even if a business process, industry knowledge or otherwise, needs to be protected and under the umbrella of a company. For tech that means: CONFIDENTIAL © Cachette Capital Management 2017 20 •  Servers and all tech, even laptops, should link to the SAME corporate entity •  Employees and contractors should all have contracts outlining whatever the relationship is, specifically around “invention” and “design” EX: NDAs or PIIAs. •  Intellectual Property can also be business processes too, how can you protect your employees from not creating competitors?
  21. 21. Dev 1 on 1: Power of Connecting One of the best ways to protect a company is by having great relationships with all employees, especially with developers. CONFIDENTIAL © Cachette Capital Management 2017 21
  22. 22. Why Does Technical Diligence Matter? If you want to get your company acquired and are doing anything remotely in technology, you need to know what your acquirers want and value for tech. If you want or need funding, ESPECIALLY, if you are claiming you need $ for development investors want to know WHY and WHAT is being built. If you have already spent investor money or a substantial amount of money on “tech” investors want to see how and why that was spent. If you are accepting a strategic partner and meshing up technologies, they are going to want to know the tech is secure and unique. CONFIDENTIAL © Cachette Capital Management 2017 22
  23. 23. Tools and Tips for Scaling •  Planning for user growth and scaling during fundraising •  Unit Tests / Integration Tests / Code Coverage •  Version Control / Github •  Monitoring •  Load Testing •  Automated CI •  Automated Deployments •  Automated Scaling
  24. 24. The Common Speedbump: Security •  Intrusion Detection / Intrusion Prevention •  Backups / Disaster Recovery & Business Continuity Plans •  HTTPS/SSL/TLS •  Security Audits & Penetration Tests
  25. 25. Technical Documentation Expectations •  Bare minimum •  Frameworks •  Wikis Do you have any documentation?
  26. 26. Fix or Avoid Risks •  Do the right preparation •  Always be ready for an audit •  Understand the math and value ROI of tech
  27. 27. Q & A CONFIDENTIAL © Cachette Capital Management 2017 27
  28. 28. Thank You For more information visit: Codecamp.com/decks slideshare.com/CachetteCapital Or email: ellie@cachettecapital.com