Fritz Demopoulos, Founder of Queen's Road Capital

1. Exploiting fundraising opportunities
for entrepreneurs
The Women’s Foundation June 2015 Fritz Demopoulos

2. Fundraising is not for every
business
Do you have a business (or idea) worth funding?
2

3. We have an array of funding sources
available
3
Venture Capital – Early GSR, IDG, KP, Horizon, Sequoia, Qiming
Venture Capital – Growth GGV, DCM, Sequoia, Softbank
Angel Funds Zhen Fund, SV Angels
Corporate Funds Qualcomm, Intel, CKH, Google, Softbank
Private Equity Hillhouse, Dragoneer, TPG
Hedge Funds Maverick, Brookside, Janchor, Farallon
Super Angels William Bean
Accelerators 500 Start Ups, TechStars, Cocoon, Next
 All these firms are dabbling in early stage. Some more than others.

4. Let’s not forget alternative sources of
capital, albeit they may not be ideal
Seed and angel – Mostly our friends & family (avoid your
in-laws)
Debt – May not apply to early stage businesses
Project financing
Receivables
Payables, employees – Not recommended
4

5. Companies go through a financing
life-cyle
5

6. We’ll try to focus on
venture capital, angel,
seed, & PE; the most
common funding sources
for early and mid-stage
high-growth businesses
6

7. Early stage investors have a few basic
financial and psychological needs
Naturally, they want to make
a lot of money
Hit & miss nature means they
need to earn 10 x on a
successful deal
Of course, investors always
want to take credit for your
success
7

8. That means . . .
Scalable business models
Theoretically, should reach massive returns
The addressable market needs to be big enough
And, your expected market share needs to be
reasonable enough
Valuable and unique strategy
8

9. Dell is valuable but
not unique
Chrysler Viper was
unique but not valuable
9

10. Timing? Game of probability
Possible to raise money on a PowerPoint
But normally, we need to see some traction
Traction – Management team, MVP, revenues,
usage traction, unique technology
10

11. Commitment is crucial
11
Did you put up some of your own money? .
..”skin in the game”
Were you capable enough to convince
other capable people to join you?
If you are not full-time, no one will ever
take you seriously. .. unless you have a
track record, but you wouldn’t be listening
to me then
Never say, “only if I raise the money, I’ll be
full-time, hire people, get going, etc. . .”

12. The deal …
12
Financial
issues
Non-
financial
issues
Negotiation
/ tactical
issues

13. Financial issues
Valuation? Multiples or comparable
companies
No one uses CAPM, DCF except as a
reference
Investors’ thinking is different
13

14. $6 mln for 1/4th of
your company
$3 mln for 1/4th of
the same company 14

15. Non-financial
Control of Board
Control of decisions, CFO & other
Co-sale rights, drag-along rights, first rights
Anti-dilution provisions
Preferences
15

16. Negotiations / tactical issues
Sequence, more or less
-> Tease
-> Preliminary
-> Additional tease
-> Heating up & partner involvement
-> Detailed conversation & partial DD
-> Partner meeting
-> Term sheet
-> Comprehensive DD
-> Closing
-> Funds wired & money in the bank 16

17. Myth – Providers of capital
are indeed more intelligent
Reality – Providers of
capital think they are more
intelligent
17
Can’t listen to everything VC’s say

18. No one will ever say no to you…or very rarely
Why would VC’s limit their options in case for
some reason your vision, no matter how asinine it
is, actually materializes
18
Instead, they’ll say .. ..
”you are too early for us, but we’re interested”
“we focus on expansion capital, but we’re
interested”
“we are in the process of raising a new fund, but
we’re interested”

19. Most of the time, no one is interested
That’s fine…even for experienced entrepreneurs,
you are only as good as your last project..and
VC’s still forget
….you’ll definitely know if a VC eventually
becomes interested
19

20. Be aware of the types of people you
meet
20
Dangerous
Opportunity
High potential
Waste of time
Expert / Knowledgeable
Inexperienced / Uninformed
Interested
Uninterested /
Other agenda

21. Can’t underestimate the power of
influencers
21
Influencers
Media
Analysts
Events
Service
firms
Peers
- Trade, bloggers, pundits
– Industry analysts,
investment banking
analysts, research firms
– Conferences, forums
– Legal, accounting,
bankers
– Related
companies

22. You’d be
surprised how
naïve some
people are
22

23. NDA’s are lame. ..
There are no real secret ideas
Only things worth keeping confidential are client lists,
source code, names of key engineering talents. ..so
never share the entire picture
Anything you provide, whether or not you sign an NDA,
will definitely be floated to the VC’s portfolio
companies
23

24. “Image is everything”
-- Andre Agassi
24

25. 25
You need to look like a CEO/entrepreneur
Every industry is different
Two strategies…fit perfectly with expectations,
or do the opposite of what is expected. …

26. How to find venture capitalists or seed
investors?
Well, it’s their job to talk to companies and
read business plans…it should be pretty
easy to get in front
Needless to say, personal recommendations
are very important
26

27. It is very competitive
A top-tier VC will be reviewing
500-800 business plans per
month
And maybe make 1 investment
per month
And as an asset class, VC is
underperforming over the past
10 years
27

28. Remember, people & process
28

29. Thanks & good luck!
Fritz Demopoulos
fritz@queensroadcapital.com
29