Capital Factory

Demo Day September 9 with Keynote by Mike Maples, Jr.

For press inquiries, contact:

Caroline Traylor

Porter Novelli

  Caroline.traylor@porternovelli.com

512-241-2239

Capital Factory’s Demo Day Set for September 9 in Austin, TX, Marking Culmination of Inaugural Ten-Week Incubation Program

Capital Factory startups showcase business concepts to the world for first time at upcoming event

August 12, 2009, Austin, TX – Startup incubator Capital Factory today announced their inaugural “Demo Day” event will be held close to a month from today, on Wednesday, September 9 at the AT&T Conference Center on the University of Texas campus. As the culmination of a ten-week technology incubator program this summer, Capital Factory’s Demo Day will provide the five portfolio start-ups with the opportunity to launch their business concept to the world and specifically, to attending investors, to help the companies move toward the future and take things to the next level with their businesses. 

Demo Day, 8:30 a.m.-2:00 p.m., will kick-off with a keynote by Mike Maples, managing partner of Maples Investments, followed by 8-minute concept demonstrations from each of the five portfolio companies.  After each demonstration, there will also be a brief Q&A from the feedback panel.  

The five Company demonstrators include:

Cubit Planning, which provides data services that help engineering firms get environmental clearance faster. 

Famigo, which developed a platform for game developers to distribute family-friendly mobile games, hosted on a network that brings the family players together. 

HourVille, an online marketplace for local services, empowering freelancers and small service businesses to grow – with online scheduling, marketing and payment tools, and allowing consumers to find the right provider at the right place at the right time.  

PetsMD.com, an online resource that supports pet owners by providing the knowledge and products they need to more effectively manage their pet’s health; also supports vets by helping them grow their business. 

SpareFoot, an open marketplace for self storage with options ranging from the units at your local storage facility to your neighbor's garage. What Expedia.com does for travel, SpareFoot does for self storage. 

Additionally, after the demonstrations, both attendees and start-ups alike will benefit from a Venture Capital panel, “What’s it Take Today to Build a Super Startup?,” during which veteran investors will combine their varying experiences and perspectives to discuss best practices for securing venture capital and positioning new companies in a positive light.  Moderated by Joshua Baer, the panel will feature Satya Patel, Principal at Battery Ventures; Jim Armstrong, Managing Director at Clearstone Venture Partners; Rudy Garza, founder and managing partner at G51, and Bill Wood, Principal at Silverton Partners.  Attendees at Demo Day will also be able to enjoy one-on-one access to Capital Factory portfolio companies and hundreds of attending entrepreneurs over lunch. 

The corporate sponsors of Demo Day helping to make this inaugural event happen include ThinkTiv, Microsoft BizSpark, Austin Ventures, Red Velvet Events, Silverton Partners and WGSR.

The event is primarily invitation-only, open to technology investors, executives, entrepreneurs and press attendees. To request a ticket to attend Capital Factory’s Demo Day on September 9, email demoday@capitalfactory.com.  The ticket costs $30, which covers parking as well as lunch at the event.  The event will also be streamed live to thousands of viewers over the Internet. Check the Capital Factory website at www.capitalfactory.com to find out more on the video streaming component as more details become available. 

"We are very proud of the rapid progress the inaugural group of Capital Factory companies has made and Demo Day will be an incredible opportunity for these entrepreneurs to showcase their accomplishments," said Bryan Menell, co-founder and managing director of Capital Factory. "I think I speak for all of the mentors when I say that working with the five companies proved to be very motivational and energizing for us. They really reminded us of how tireless and inspiring the entrepreneurial spirit is in its purest form.  Attendance at Demo Day is limited so interested attendees are encouraged to request tickets soon.”

The inaugural summer program all started in April 2009 when Capital Factory founders, Joshua Baer, widely recognized email marketing pioneer who founded OtherInbox; Sam Decker, Chief Marketing Officer at Bazaarvoice, and Bryan Menell, founder of AustinStartup.com, selected the five start-up companies from a pool of over 250 applicants.  The winning companies officially kicked off their 10-week program in late May, receiving up to $20,000 in cash as well as weekly mentoring sessions with a select group of proven, successful technology entrepreneurs.  

Capital Factory would also like to specially acknowledge the sponsors that played a significant role in making this summer program a success. The sponsors donated everything from brand development support to legal advice to office space to press relations support, among many others.  Sponsors to pay tribute to include the following:  American Workforce, Clutch Creative, Conjunctured, JungleDisk, Microsoft BizSpark, Mosso, Porter Novelli, Rackspace, Slicehost, Square One Bank, Tech Ranch Austin, The Accounting Group, vcfo and Wilson Sonsini.  

Details for next year’s program are still underway, but more information, including ways to get involved in the 2010 program, will be available at www.capitalfactory.com as additional details are confirmed. 

About Capital Factory:

Capital Factory is an early stage technology incubator based in Austin, Texas. Startup companies participate in an intense 10-week summer program that gives them up to $20,000 in cash, more than $20,000 in free services, and mentorship by a group of successful entrepreneurs. The program culminates in a demo day where the startups present to investors, the press, and the world. For more information on Capital Factory, visit the website at www.capitalfactory.com or on Twitter @capitalfactory.  For the full list of 2009 mentors, visit: http://www.capitalfactory.com/mentors.html

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Thank you, thank you, thank you

I can't say it too many times. Thank you to everyone who contributed to making this summer's first Capital Factory program a success!

• Thank you to the other Managing Directors Bryan Menell and Sam Decker.
• Thank you to the mentors that donated their time.  
• Thank you to the participants that gave it their all.  
• Thank you to the advisors that shared their experience. 
• Thank you to the partners that donated their services.
• Thank you to the sponsors helping to make Demo Day possible.
• Thank you to the more than 300 companies who submitted an application 
• Thank you to all of our other supporters on Facebook and Twitter. 
• And of course thank YOU!

How do we measure success? It's kind of hard because the most definitive success is when one of our companies has an exit through an IPO or acquisition and that takes most companies about 7 years on average. So going into the program we discussed a few objectives that we could measure by the end of the summer.

First of all, we knew that it was a success if there was sufficient interest and momentum from the participants and mentors to do another program in 2010. It's clear that we hit that one out of the park. Not only are we planning on repeating the program in 2010, but we've had quite a bit of interest in launching sister programs in Dallas and Houston in 2010!

Second we wanted the participants to walk away feeling like Capital Factory was a good use of their time and that they felt they had received significantly more value from the program than they expected. This seems like a clear win as well. While the participants have not been shy about telling us where we can improve, they have also made it clear that they are glad they made the decision to participate in Capital Factory this summer and feel like their business is much farther along now than it would be if they hadn't participated.

Finally, we wanted the mentors to feel like this was a worthwhile use of their time and wanting to participate again in 2010. It's clear from the level of participation and enthusiasm that we received that the mentors really enjoyed it and are already talking about how to improve for next year. We've also had quite a few inquiries from new mentors who are interested in participating in 2010 and we're looking forward to widening the circle.

I'd like to thank the Managing Directors Bryan Menell and Sam Decker who helped to launch Capital Factory 2009 and without whom it just wouldn't have been possible. It was quite a task to work through the 300 applications that we received in April and we all spent a long weekend watching videos and narrowing it down. Throughout the program they have been instrumental in lining up other mentors, advisors and partners and its hard to imagine two better people to organize an event like Demo Day.

The mentors went above and beyond the expectations that were set at the beginning of the program. Many mentors were attending multiple meetings per week for different companies. They donated office space, desks and chairs, old servers and more. Some drove hours to get here and some squeezed in early morning meetings before already jam-packed days. The mentors are the core of the program and these 20 individuals will always have my gratitude for believing in the Capital Factory vision and stepping forward with their wallets and their time.

The participants are what made it all worth it. We were blown away when we received more than 300 applications to the program and narrowing it down to just 5 was quite a challenge. The mentors were constantly impressed by the passion and tenacity of the entrepreneurs participating in the program and I know that many lifelong friendships were forged. We are fortunate to have selected 5 incredible companies to spend the summer with. Thank you to Cubit Planning, FamiGo Games, Hourville, PetsMD and Sparefoot.

In addition to the mentors, we had some incredible advisors volunteer their time with the participants this summer. Thank you to Allen Weiner from Gartner, Evan Kastner from WSGR, Jason Sugawa from Clutch Creative, Joe Dolye from Stalelife, Jonathan Davis from American Workforce, Kyle Parks, Laura Beck and Caroline Traylor from Porter Novelli and undoubtedly some others I'm forgetting.

I was blown away by all of the partners that provided services and products of tangible value in order to help the Capital Factory companies get off the ground. Thank you to 37 Signals, Blue Fish Development, Clutch Creative, Datran Media, Kenobi Restaurant, Porter Novelli, Rackspace, Red Velvet Events, Square One Bank, The Accounting Group, Tocquigny Advertising, vCFO, Wilson, Sonsini, Goodrich & Rosati and undoubtedly some others I'm forgetting.

We're fortunate that some other great companies share our vision and are helping to make Demo Day possible with their support. Thank you to Thinktiv, Microsoft BizSpark, Rackspace, the AT&T Executive Conference Center, Silverton Partners, Wilson, Sonsini, Goodrich & Rosati, and Austin Ventures.

And of course thank you! We need everyone's help in spreading the word about Capital Factory to potential applicants that would benefit from the program. Please encourage others to apply for the program in 2010!

2009 Venture Capital Investor Pitch Deck Outline & Example

Recently, I shared this outline with the Capital Factory; Below are both example slides and descriptions / discussion for each. Also note this earlier post regarding “what to ask” your potential Venture Capital partner.  Makes sense to read that while you’re creating your investor deck; I probably need to update that post as well.  Use this outline as a prototype for creating your very own deck for fun and profit.

High-level guidelines:

• Create your own deck!  Create a deck that allows you to tell your story according to your style; name the slides what you want; tell your story with text or pictures (within reason)
• Don’t leave out critical information!  This outline is my suggestion of a “critical information” list;  no rational investor will fund your company without knowing the information suggested by this outline.
• Proactively answer big-ticket questions!  If there are obvious, elephant-in-the-room sort of questions regarding your business: address them before they get asked.  This is always a better way to go.
• Be passionate and informed!  Investors invest in the team – show them your passion and be sure to know data from adjacent or competitive markets, companies, and models.
• Finally, it’s really important to have enough white space in your presentation format.  I like a white background because it prints and projects cleanly.  I like titles that are single-line and as few words as possible; and I try to keep the text/image area “middle part” of the slide as open as possible.  In general, right angles are easier to make look clean than circles but your mileage may vary.  Less is absolutely more when it comes to the presentation template.

1.  Title Slide

• The get everyone in the room and sitting down slide;  Don’t roll forward from here until you have everyone in the room and paying attention if you can help it.
• 

  The title slide is really an opportunity to call your investor meeting to order. Most of the time, investors will be in motion getting drinks, setting up, finding their partners, etc. Stay here until everyone is ready.

  Important information to have on this slide includes the company name, date, and some investor-specific marking such as show in the Title Slide picture.  Why the investor-specific tag?  I think most VCs tend to honor the notion of confidential information – but don’t try to get them to sign an NDA – they’d reather not hear your pitch.  I believe the most effective way to minimize the sharing of your investor deck is to ensure the investor’s name/firm is on EVERY page. That way, if it gets around, everyone will know where it came from and that should create at least some amout of hesitation ahead of sharing.

  Ideally, you’re off this slide as soon as everyone is settled or maybe just ahead of that…quick…the clock is ticking and your potential investors have very short attention spans. Trust me.

2.  Agenda + Company Overview

• Make sure you’re covering what they want to cover; ask if you’re missing anything before launching into the pitch
• This is also the slide to give a quick summary of your company.  This summary is important because it will give any other partners at the firm you talking to a “snap shot” of you’re company after you’re gone; it’s helpful for other partners in the firm to have at-a-glace info on what you do, in what market, company details, and so on.
• 

  In general, I believe that every slide should communicate exactly one concept (the “punchline”).  So why are there obviously two concepts on this slide?

  First, the Agenda has minimal value in the presentation but you still need an opportunity to ask if there is anything that this investor/firm wants to cover that is not in your current agenda. Maybe they have an investment in this space and therefore some very specific market questions; perhaps they have heard a few interesting things about your company that they want to be sure to dig into those items before the meeting is over. Who knows…but make sure you let them know what you’re going to cover and ask if there is anything else you should be sure to hit in the course of the discussion.

  The Company Snapshot serves to key purposes: first, it tells investors who are not familiar with your company what you do.  I can’t tell you how many times I’ve been in a pitch (to me, as an investor) where we’re at slide 5 in the deck and I’m still not sure what it is that this company does.  Don’t make your investors guess…lay it out simply along with the other details of your company so you don’t make anyone spend your precious pitch time on silly information you should have dished out earlier.

  The second thing that the Company Snapshot slide does is create a simple and effective way for partners at the firm who were NOT at your pitch meeting to easily understand the high-level information about your company.  In most cases, there will be more people involved in making the investment decision for your company than are in the room when you first pitch – give them an easy way to start understanding why they should care about you, your company, and your opportunity. Include: business focus, target market, significant customers & partners, how many employees you have (gives them a sense of your expenses), do you have any other investors currently, when & where was the company founded, where are other offices, and what can they expect in terms of revenue and expenses (”pre-revenue” is a fair answer as well).

3.     Market + Market Context

• Why is your market interesting?  Are there any compelling dynamics currently at play?
• How do you fit in?  This can help set up your unique competitive advantage / “secret sauce” slide.
• 

  When building the Market Context slide, you should feel comfortable with the nagging feeling that SURELY everyone on the planet knows at least this much information about the market your company operates within.

  Perhaps they do; perhaps they don’t.  In any case, you need to frame up why you market is interesting: it’s big and growing; it’s going through massive disruption; it’s suddenly ready to enjoy the leverage of technology for the first time; everyone else is thinking about the problem/solution/etc wrong.  It’s important to describe the (hopefully growing) market in which your company will capture a small and growing portion.

  This is also your opportunity to describe any compelling dynamics currently at play; perhaps something that gives your company an advantage. In a real sense, this slide should be the set-up for your “secret sauce” / “why we should win” slide that is coming right up.

4.  One-slide company overview: THE SLIDE

• In many cases, your entire pitch will be an interactive conversation while sitting on a single slide; this should be that slide.
• Done right, this allows you to describe what you do, who you do it for, why that’s important and your vision for the future.
• 

  For me, this next slide is the most imporant slide in the deck.  This is the slide that, if necessary, you could use to tell the entire story (what you do, why (=value) you do it, and for who) of your company.

  While this slide can look VERY different, I believe it contains the same basic information for any company.  The concept of the past, present and future is key to this sort of slide because it allows you to talk not only about the product/solution you’re selling today but your vision of the future and the associated products. Your customers value your ability to see into your/their collective future and anticipate problems they don’t even have yet.

  In this example, the left of the blue bar represents all of the past…where customers didn’t need to (or didn’t KNOW they need to) use your company’s solution. But now, here in the blue bar, “we all now know we have this problem.”  We should name it! A perfect use of the header space.  Here, it’s called “The Land Grab” – which referred to broadband service provider’s need to quickly and efficiently acquire new broadband customers before their competitor beat them to it.  NewCo has products to help with this…and the effect is “Broadband Deployment Acceleration.”  Investors should appreciate how well you understand the problem (so well, in fact, that you named it). It also shows that NewCo’s products map to the problem and have a clear value proposition.

  The middle, green bar represents the near-future.  Perhaps NewCo’s customers are already experiencing problems associated with this near future. In any event, this represents the next step in how NewCo would work with their customers…and forecasts the products they might sell to address the next phase of challenges.  If it makes sense, name this one too!  This helps investors understand that you’re thinking down the path of product/market evolution and that you’re less likely to be a one-trick pony.  The more logical the linkage, the better. Here, it makes all the sense in the world that FIRST you have to initiate the service, THEN you have to manage and support effectively while minimizing the costs to do so.

  Finally, the orange section represents your vision of the future. If your company could wave a magic wand, this would be the resulting condition or capability. In general, this phase should be predicated in some capacity on the earlier phases. It’s really important for investors to hear your vision of the future; everyone will understand that it will take great products, a willing market, superior execution and money to get there…but you have to have a sense of where “there” actually is.  If your company vision is having your first / only product increasingly adopted – that’s not a company vision – that’s just execution. In this case, the vision was to eventually enable broadband service providers to sell value-added services (gaming, security, triple-play) to their subscribers in order to create some lock-in and differentiation for their service…instead of being relegated to providing only the increasingly commodotized broadband “pipe.”

5.  Business Model; How we make money

• How, exactly, does your company make money?  Do you have any examples of this working so far?
• Does any part of your business act as a “loss leader” for another, more valuable part?
• Do you have two models running simultaneously?  is that good or bad & why?  Make sure you clearly describe and delineate between them…and hopefully describe how they benefit and support each.
• 

  The business model / how we make money slide is a critical component to the pitch deck.  Again, it can take many different forms but the punchline is the same:  our company does “this set of stuff” in order to make money.  It may be a SaaS-based web application, it may be an appliance sold directly into IT departments, it may be a freemium model…what ever it is, you must explain it clearly.

  As you can see from the example slide here, the business model slide can actually be a product/solution/service description as well…as long as you’re sure to describe HOW you sell the product and the details of your go-to-market strategy and/or plan.

  A core aspect of the business model slide is an articulation of how the business scales within this business “model” and go-to-market strategy.  For selling directly into IT departments, it’s scaling up a direct sales force; for a product that can leverage existing channels, it’s finding and signing up channel partners; for SaaS businesses it’s how customers “find” your company on the Internet and your cost of customer acquistion versus your lifetime value of the customer to the business.  Does any part of your business act as a “loss leader” for another, more valuable part? if yes, then say so.  Do you have two models running simultaneously?  Make sure you clearly describe and delineate between them…and hopefully describe how they benefit and support each.  You get the idea.

6.  Progress, Mile stones, look into the future

• What you’ve accomplished so far?
• What you plan to do in the near future?  In what time frame?
• 

  The Milestone / Progress slide is your opportunity to show how far you’ve come since the original concept for your business.

  In the example here, there are two simple examples of how you can present this information.  This sort of slide gives investors a short-cut to understanding how well you’ve executed so far in your company’s life.  Important, value-creating milestones over a reasonably SHORT amount of time suggests that your company is focused, you’re prioritizing what is important to grow your company and executing against that list.

  Value-creating milestones can really be anything but should clear a certain “news-worthy” bar to make a list like this. I’d suggest that the following items would clear that bar:  founding the company, funding events, launching a product, winning a customer or significant trial, signing business-affecting partners, and so on.

  Importantly, this slide is also an opportunity for you to forecast what your company will do next. Nothing suggests great execution to an investor such as calling your shot and coming back later and showing that “you did what you said you were going to do.” Conversely, be very careful NOT to suggest a big milestone such a significant customer win unless you’re VERY confident.  The first question out of an investor’s mouth during any follow-on meeting will inevitably be: “so, did you land that big account?”   You never want to say “No” to that question because there is no good explanation for why not given the fact YOU are the one that told them to expect it.

7.  Competition & your company’s “Secret Sauce”

• You relative to others in your space.
• The question that you must answer well:  if your company is successful, how will you defend its business from competitors who see your success and want some or all of it for themselves? What can you do differently? What can you do uniquely and realistically for how long?  What CAN’T (or is really really hard to) be duplicated? What is your special tech, model, process, team advantage or unique solution?
• 

  It’s important to realize that investors (any many other people) will begin to understand what your company does by ANALOGY.  Having seen many different companies over time (and understanding how THEY operate), understanding your company is largely an exercise in figuring how how you are similar to dissimilar to the companies that investors know well.  Framing up a set of similar and/or dissimilar companies is one of the key purposes of the competition chart.

  It is universally accepted that the standard “check-box” comparison chart will start with your company in the first column, having the vast predominance of boxes checked, and then proceed to list 3-4 other less-checked competitors that you’re in the process of wildly out executing.  The example Slide 7 has three examples of these charts.

  While nearly cliche, such a slide still serves the purpose of listing the competitive criteria that you deem important relative to your company and this market and how other companies in your space stack up.  …and it’s probably best to NOT use the phrase “secret sauce” in your pitch…we’re using it here colloquially.

  The set of competitive criteria for your company – the rows on these sort of slides – leads directly to your company’s unique competitive advantage (aka “secret sauce” or “unfair advantage”).  There are a number of standard, competitive differentiators:  being first to market, unique technology, patent protection, your amazing team, and others; these differentiators all have varying degrees of “defensibility,” which is an important concept when it comes to decribing your company’s competitive advantage.  For example, being first to market may simply illuminate the path for a larger competitor who is willing and able to fast-follow your strategy and throw huge dollars at solving the same problem.  Is that true?  why or why not?  Have your data-backed (versus emotional-bias-backed) answers ready!

  The question that investors will have and that you must answer as best you can is this:  if your company is successful, how will you defend its business from competitors who see your success and want some or all of it for themselves? What can you do differently? What can you do uniquely and realistically for how long?  What CAN’T (or is really really hard to) be duplicated?

8.  Current Partners, Customers & Pipeline

• Who are you working with today?  Who will be your customer tomorrow?
• How, exactly, do you acquire customers?  How much does it cost to acquire them?   What is your average deal size?  How could your business increase the average deal size?   What is the average deal size of other companies in this same market?  Does this information align with the Market Size / Market Context data from Slide #3 ? (hint: it should)  Once you have a customer, can you sell them MORE stuff more easily?  Why / why not / how much / when will you have it to sell?  What is the expected life-time value of a customer (be careful to think about this relative to the cost to acquire a customer)?
• 

  Perhaps more than any other slide, this example can take a variety of forms.  The “punch line” for this slide is to communicate what ever progress your company has made relative to actual customers, the future customer pipeline, and partners that help your business be successful in some capacity. Logos are always nice to look at but don’t get hung-up on anything other than clearly communicating your current status.

  You may not have customers yet; or your customer base may be every consumer in the world. In any case, you need to communicate the current status of how well your business is working and customers (because they pay or should pay you money) are a great metric for investors to use to judge your progress so far.  Revenue is, of course, the most binary judge of success…but revenue from a top-tier, brand-name, market-leading customer is (to some real degree) more valuable than revenue from a no-name company because markets tend to follow (adopt the same solutions in a similar time frame) the market leaders.  Alpha or Beta (or non-paying customers) should be called out explicity.

  The discussion of your company’s “pipeline” is basically a description of how customer acquisition is going.  Whether you’re an Internet consumer application or building widgets to sell directly to other businesses, how efficiently your company acquires new customers is material to investors as they judge the state of your business and what could / should happen if they choose to fund you.  How, exactly, do you acquire customers?  How much does it cost to acquire them?   What is your average deal size?  How could your business make the average deal size go UP?   What is the average deal size of other companies in this same market?  Does this information align with the Market Size / Market Context data from Slide #3 ? (hint: it should)  Once you have a customer, can you sell them MORE stuff more easily?  Why / why not / how much / when will you have it to sell?  What is the expected life-time value of a customer (be careful to think about this relative to the cost to acquire a customer)?

  Partners are a necessary evil in most businesses.  “Evil,” because in general, a company’s life would be much easier if it ran and scaled just fine without help from any other company. Partners might be a critical part of your business/market ecosystem; they might give you efficient access to potential customers; they might provide a critical part of your overall solution; they might actually sell your product or service for you.  What ever they “might” do, the one thing that is for certain is that they require some level of “care and feeding” and that equates to time and money for your business.  Make SURE they are worth it.  And remember that all partnerships tend to fail in the long term if both sides are not benefiting to approximately the same degree relative to their business. What did the partner commit to, if anything?  What did your company commit to?  Do you need more than one such partner?  How long will it take for you to measure partnership success?  What is required to ensure they are effective?  How might this partner accelerate, add scale, or de-risk your business and your execution?

  One concept that we’ll keep coming back to is the concept of scale and, in particular, scaling your business. Investor’s excitement about your business is predicated on their beliefs regarding how your business scales from where it is today to something much larger and much more valuable in the future. Desire for scale in your business is, without question, is applied most directly to revenue. That said, there are many other factors related to scaling your company:  business processes (go-to-market, sales, manufacturing, testing, etc), hiring, geographical expansion, and general awareness of your company / product / service. Of course, all these factors are related to revenue scale in some direct or indirect way.  Think through the discussion generated by this slide as a tool to proactively address questions regarding how your business scales.

9.   Financial Details (revenue, expense, HC, projections)

• What is your current and future headcount (this equates to your burn rate as headcount is almost always the biggest expense)?
• what is your current monthy/quarterly burn rate and how does that ramp over time?
• what is your current revenue and how does that ramp over time?
• How quickly are you approaching a cash-flow breakeven point?
• What’s your revenue run-rate 12 months from now?  What’s the net loss / gain over the same period?
• 

  Independent of the stage of your company, communicating simple and clear financial details is critical to an investor’s understanding of the current state of your business. What they care about is very simple:

• current revenue and expense trends,
• projections for the same going forward,
• current equity situation (who owns what, option pool, near-term option usage), and
• current cash position.

…Cover these these items clearly and you’ll be answering their questions before they get asked.

For early stage companies, I believe that a “one quarter ago, current quarter, and 4-quarters-out” view presents a reasonably complete set of financial information.  With such a time frame, you’ll show a bit of history, where you are today, and a reasonable guess  at what is going to happen in the next year.  I think a simple auto-generated excel graph help quickly communicate the ramp in both expenses and revenue.

If the company is really early stage and doesn’t have revenue or limited expense detail, it’s still far better to say something is explicitly zero (or unknown) than not mention missing/needing important data.

This example chart is a bit busy as it combines both the graph as well as a screen-grab from the company’s financial model spreadsheet.  If you have a longer operating history or feel like you need to communicate more detail, it makes sense to break this into two slides: a graph (the reader’s digest version) and the spreadsheet detail.

Data that investors will always want to clearly understand include: what is your current and future headcount (this equates to your burn rate as headcount is almost always the biggest expense)?   what is your current monthy/quarterly burn rate and how does that ramp over time?   what is your current revenue and how does that ramp over time?  How quickly are you approaching a cash-flow breakeven point?  What’s your revenue run-rate 12 months from now?  What’s the net loss / gain over the same period?

10.  Funding “ask” + use of proceeds (timing, other firms)

Funding Status and Ask

The funding ask slide requires a bit of finesse as you are starting a set of discussions that could turn into negotiations if your potential investor turns into your actual investor.

In this slide, a little back ground is very helpful.  Make sure you let your audience know who you have raised money from in the past and at what valuation. This is not “secret” information; be open and transparent.  If you seed funded your company, that’s a good story, make sure you talk about it.  You should also talk about the structure of any prior formal investment by a third party: who, how much, when, format (common, preferred, convertible debt, etc).

It’s important to get right to the punch line of this slide; You MUST be prepared to address the following (have data, be thoughtful, use a clear explanation):

1. how much money would you like to raise?
2. why that amount?   (what will it be spent on? how long will it last?  what value will you create in your business using it?)
3. could you do what you need to do with less?   what might you do with more?
4. are you actively working with anyone else on this round?

When it comes to timing, it’s important be realistic. If this is the first time you have met with this firm, it’s typically just the beginning of a process that will almost certainly involve multiple meetings over weeks if not months. For larger VC firms, you will not receive a term sheet until you’ve run the gauntlet of their Monday partner’s meeting…if you’re dealing with a top 25% firm, you’re not even close to “done” until you’ve got the Monday invite.  Smaller firms are able to be much more dynamic and efficient…however, that doesn’t guarantee that they will.

If the conversation is going remotely well, you’re likely to be asked about your valuation expectations.  If you have raised money at a particular valuation in the past, that is your starting point…but in this current macro-economic environment previous valuations do not guarantee ANYTHING.  If you have a number in mind that is based on data that is realistic – don’t be shy – flop it out there.   It’s important to understand enough about the VC business to know that investors tend to model their business on investment exits, cash returned to their limiteds…and consequently ownership percentages in their portfolio companies at the time of exit.  Given this, it’s reasonable to approach a valuation discussion by starting with “how much of the company you’re comfortable selling in this round of financing.”  Fixing the amount raised and how much you’re comfortable selling implies a valuation.  Raising $300k while targeting selling 25% of your company imples a valuation of $1.2m.  This is a useful way to have a valuation discussion because if the round size happens to go up (not uncommon) as the round & syndicate come together, you can at least make an argument for raising the valuation. No guarantee it will work.

11.  Team Overview (yes; I added a new slide in the outline as of July 28th)

The Team Slide

Ah, the team slide. I’m not a huge fan of the team slide as I personally prefer the details (background, passion, expertise, etc.) of the team to come out in the presentation and subsequent discussion.

That said, your potential investors will want to know about you and your team so you should be prepared to have a slide that allows you to brag on yourself and your team a bit.  This is especially true if your team delivers some competitive advantage or special expertise to your business.

My advice is to keep the slide short and sweet. The example here is from an early-stage company I know and it represents a nice, simple, to the point example. Pictures are optional but it’s a good, visual touch…and clearly less likely as your company and executive team grows in size.

Finally, this example remindes me to make one note on titles.  My personal rule of thumb is that company size should match title size; very early companies should have teams with titles that don’t over emphasize a hierarchy that doesn’t yet exist.

It doesn’t make too much sense to have four C-level executives in a company of four people (I’m not picking on this example slide…I’m talking “in general”).  President instead of CEO; Director of Finance instead of CFO; perhaps just “development” on the business card until there are more than 2 developers.  While this is not a critical point, reasonably scaling into your mangement-team titles does send a good message that the team is focused on the “right” things and that outcomes matter more than titles.

12.  Thank you, questions, contact info (no example slide)

Thank you slide

Be polite; say “thank you.”  More than anything else, this slide serves as the indication of the end of the presentation.  Questions and other discussions are welcome.

That said, if you somehow managed to get here in a linear, non-distracted manner it’s probably more cause for concern than celebration.  The flow of most investor pitch presentations diverge wildly as questions, deeper details and anecdotes drive the conversation – and that is a good thing. It shows your investors are interested.

Interview with PetsMD

We had a chance to catch up with Capital Factory company PetsMD, and co-founder Tina Cannon.

Capital Factory Invests in Five Startups for 2009 Fund Also Recognizes 5 Additional Finalists

Austin, TX (PRWEB) April 22, 2009 -- Capital Factory, an early stage technology incubator in Austin, Texas, announced investments in five emerging technology startups selected to participate in its inaugural 2009 summer program. Each company will receive a cash investment of up to $20,000, more than $20,000 in free services, and mentorship from some of the top entrepreneurs in central Texas. The free services include office space, legal counsel from Wilson Sonsini Goodrich & Rosatti, public relations support from Porter Novelli, and accounting support from The Accounting Group and vCFO, among many other benefits.

Investments:

    * Cubit Planning - Environmental reports at the click of a button

    * FamiGo - Mobile games that bring the family together

    * Homstie - Person-to-person marketplace for storage space

    * Hourville - A marketplace for services by the hour

    * petzMD - Website for Pet Health, from A to Z

Capital Factory also recognizes five additional finalist startups that were top runners among the program applicants as well, including:

    * Infochimps - A central website to find any dataset worldwide

    * Notesmart - Buy & sell classroom notes efficiently

    * Pear Analytics - Marketing decision analytics

    * POLCO - Public policy portal for measuring your representation

    * ProspectIdentify - Sales intelligence tool to find who to call, when, and what to say

The five startups were selected from a list of more than 250 applicants and five additional companies were recognized as finalists. Applications were submitted from all over the country although more were from Texas than any other state. Four of the five startups were already located in Austin and one, Homstie, will be relocating from California this summer.

"We were only planning on investing in three startups this year," said Capital Factory managing director, Joshua Baer. "But we received three times the number of applications that we expected and ended up investing in five! We just couldn't pass up the opportunity to work with these entrepreneurs."

The selection process included a one page application and five minute video. After reviewing hundreds of applications, about five percent were invited to in-person interviews with the mentors. With many promising entrepreneurs to choose from, the mentors focused on startups who they could help the most and with the greatest chance of success.

"The interviews helped us understand what these companies needed and the extent to which we could help them," said Sam Decker, Capital Factory managing director. "All of them stated that the money helped, but the mentorships were what they needed to get their idea off the ground or to the next level."

The mentorship program starts on May 22 and lasts throughout the summer, ending with a "Demo Day" where the five startups will present their business to investors, the press, and the world.

About Capital Factory:

Capital Factory is an early stage technology incubator based in Austin, Texas. Startup companies participate in an intense 10-week summer program that gives them up to $20,000 in cash, more than $20,000 in free services, and mentorship by a group of successful entrepreneurs. The program culminates in a demo day where the startups present to investors, the press, and the world. For more information on Capital Factory, visit the website at www.capitalfactory.com or on Twitter @capitalfactory.

Click here for the full list of 2009 mentors

For press inquiries, contact:

Caroline Traylor

Porter Novelli

(512) 241-2239

carolinetraylor [at] capitalfactory.com

Video Pitch Review

Most of the companies who submitted applications to Capital Factory made them public on YouTube or their website and included the words Capital Factory so you can just search YouTube to find them. Here are some of our favorite videos. Note that this is not a measure of how we evaluate their business - this is about the quality of the video. You'll see how we rate the businesses when we announce the winners.

Best Instructional Video - Homstie

Best Video Editing - InfoChimps

Best Background - ShortOrderPhoto

Best Voiceover - PetzMD

Most Likely to Get Arrested - dSpot

(there were numerous candidates in the running for this one)

Best Floating People - BullMooseTicket

Why wasn't I accepted into the program?

I've received dozens of polite, respectful responses to the first round of "Sorry..." letters we had to send out. They pretty much all ask the same question, "Why wasn't I accepted into the program?" I am going to try and respond to each one individually with some feedback over the next two weeks, but here is answer for most of the applications: It's not you, it's us.

The very thing that makes us attractive to work with makes us very busy because in addition to doing the mentoring most of us are running another business. We aren't limiting the number of companies that we select because of a lack of cash - quite the contrary - we've been turning away people who want to put their money into the fund. We have to limit the number of companies because of a lack of time. After reading so many impressive applications, I know that all of the mentors are wishing that we could accept more of them!

In filtering down the applications, we focus the most on companies that we think we can help the most and have the best chance of succeeding. You could have an amazing company idea for a new type of medical device that would save lives and make lots of money. Even though we might believe in the product and the founders we just wouldn't have a lot to contribute to making that a success and so we'd probably pass on it. 

When I say, "It's not you, it's us" what I mean is that in most cases there is nothing at all negative about your company idea or your founders. Figuring out which companies to focus on was a matter of adding up all their strengths - we really didn't talk about negatives. 

Things that made an application stronger:

• one or more of the mentors has experience in that market
• we think we can accomplish a significant milestone within the 10 week program
• the product is sold and marketed over the Internet
• the company has unique competitive advantages 
• the company has paying customers 
• the company has a balanced team with both business and technical resources  
• the product is a good fit for word of mouth marketing and social media 
• more... 

I hope that gives you some insight into how we filtered the applications. I know that there are going to be a LOT of great companies who were not accepted but are going to succeed anyway. I'm bummed that we can only work with a handful! 

Applications closed - what happens next?

First of all, THANK YOU to the hundreds of entrepreneurs who took the time submit an application for the 2009 Capital Factory program. Our goal was 100 applications and you've surpassed that by many times. We're very impressed by the enthusiastic response from all of the incredible entrepreneurs we have met over the past few weeks.

The 20 mentors have already had multiple meetings and have been reviewing applications all weekend. It's already obvious that there will be many more companies that we want to work with than that we will be able to work with. I guess that's a good problem to have, but it's going to be hard to say no. We're going to do everything in our power to make sure that even the companies who are not selected for the program can still benefit from the program. 

So what's next? First we narrow down the list by eliminating companies who don't meet the basic qualifications. Then we will identify a shorter list of the companies that we think we can help the most and ask some more questions by email. Finally we'll interview companies over the phone and in person.

We're still shooting for April 15th to announce the winners. The unexpected surge of applications at the end may push it out a few days but we're not sure just yet. Watch this blog and follow us on Twitter to find out about any changes.