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Joe platnick - NZ VC Assoc Presentation
1. 7th Annual NZVCA Venture Capital &
Private Equity Conference
Joe Platnick โ Director, Pasadena Angels
6 November 2008
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
2. US Climate โ The Downside
โข Understand American mentality
- Expect only one crash per lifetime
- Blinded by speed and severity of current downturn
- Reaction based more on emotion than pragmatism and review of history
โข Likely that much of the noise and current amplification linked
to US election cycle
โข Hypercritical of overall market, industry sectors and
companies
โข 2001 โ Internet, Telecoms and Travel not viable businesses
โข 2008 โ Financial services getting tarnished, yet some good
companies in the mix
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
3. US Climate - The Positive
โข Had more crises than we care to remember and survived
- Japanese banks
- Emerging markets
- US S&L crisis โ 10 years and 2000 banks out of business
- 2001-02 market collapse
โข 2002-07: Internet #2 & Travel and Hospitality #3
โข We understand the challenges and are addressing them -
when action taken, markets quickly improved
โข Turnaround plan being implemented almost as fast as
markets collapsed
โข Most of 2005-07 sub-prime already written off; may take
only another six months to write off remaining loans
โข PE is here for the long haul
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
4. Key Areas to Focus On
โข Stay Stable, Steady and Rational
โข Be pragmatic & understand the rules of the game have
changed
โข Consistency and professionalism matter a lot & especially
when times are tough
โข Entrepreneurs will remember this and it will positively or
negatively impact long-term relationships & good will
โข History in US of good entrepreneurs not working with
investors based on behavior in past market downturns
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
5. What this Means for Entrepreneurs/Investors
โข Financing process will take longer
โข Bar raised (VC Darwinism) and only the best will get funded
and survive
โข Valuations will be lower
- Investors nervous and more conservative
- Comparable valuations have fallen significantly
- Impact on results & chance of revenue / cash flow shortfall
โข Beware of the US bottom feeders
โข Adapt quickly
โข Live lean and remember Cash is King
โข Better to be "Last Man Standing" in your market
โข May need longer runway in NZ and should consider self-
funded alternatives
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
6. What US Investors Look For
โข A great story to tell (Not to be confused with story telling)
โข Returns are key
โข Strong IP
โข Strong management team โ Presently or in the future
โข Prototype or proof of concept with customer validation
โข Comprehensive understanding of target customer(s) and
local sales process
โข The โPlanโ behind the Plan
โข Low burn rate for long runway
โข Short path to profitability and break even
โข Scalable business
โข Lucrative exit strategy
โข Company, assets & CEO must be domiciled in US
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
7. Working with VC Firms
โข Understand economics of VC fund
โข Recognize what they can and canโt do
โข What do you want from the VC
โข Are they open minded about working with foreign
companies (not all of them are)
โข Angel groups and incubators can help initiate contacts
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
8. US Angel Overview
โข Accustomed to providing both human and financial capital
โข Confirm that group is open minded about foreign companies
โข Make sure it has appropriate market/domain focus
โข Should be located in intellectual/market hub
โข Focus on making the best initial impression & capture
attention immediately with high-impact story
โข Put together a compelling โsummary of the summaryโ
โข Get a champion within the group
โข Start small, achieve one success and use that as
springboard
โข Personal introductions are more effective
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
9. Transitional Challenges
โข US angels & VCs driven by returns
โข Need to think Big ($50-100m)
โข Recognize that Americans are great marketers
โข US market requires greater emphasis (money, personnel,
research, etc.) on sales and marketing
โข Have sufficient horsepower or look for ways to get it
โข Understand local customer and validate that product or
innovation is a good fit
โข Donโt underestimate competition โ US market frequently
has more
โข Position company for scalability โ organization, technology
platform, etc.
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
10. Transitional Challenges (Conโt)
โข Donโt assume that product will meet the needs of US
customers based on local success
โข Prior to initial development, research US product
requirements
โข Transition to US will probably require more money than
youโve forecasted
- Product development
- Company Formation
- Sales & Marketing
- Customer uptake
โข Networks are key
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
11. Alternatives
โข If initial efforts are not successful, consider other self-funded
alternatives
- Indirect channels โ Reseller, OEM, distributor
- Sales/Support subsidiary
- Serve markets remotely
- Build critical mass and then return to US
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
12. Deal Syndication - Benefits
โข Increased resources to achieve minimum close
โข Access to more and larger deals
โข More favorable terms
โข VCโs interest aligned with Angelsโ
โข Lower risk
โข Less dilution
โข More human capital
โข Shorter time to exit
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
13. Deal Syndication - Issues
โข Deals already negotiated by another entity
โข Short time to closing
โข Deal "champion" heavily involved with the company or
acts as a go-between
โข Terms not equal for all investors
โข Less control over company & investment
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
14. Resources
Angel Capital Association
www.AngelCapitalAssociation.org
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.
15. Contact
Pasadena Angels Website
www.PasadenaAngels.com
Pasadena Angels Blog
www.AskTheAngelsBlog.com
Joe Platnick
jplatnick@pasadenaangels.com
ยฉ 2008 Joe Platnick / Pasadena Angels Inc.