Maher Hakim - Stratup Fundraising: What Do Investors Look For And Why

1. Startup Fundraising
What do investors look for and why?
Maher Hakim, Ph.D.
mhakim@qstp.org.qa
www.maherhakim.com
Managing Director, Qatar Science and Technology Park
Professor of Entrepreneurship, Carnegie Mellon University
Serial Entrepreneur & Angel Investor

2. Agenda
Do you need to raise money? Why?
Multi-stage financing 101
Not all investors are created equal
So, what do investors look for?

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Types of “Startups”

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Innovation Startup
Stages

5. Multistage Financing 101

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Yelp’s Story 2004
0 revenue
No Web site
No employees
2
FOUNDERS!
1 IDEA!
TODAY
$700M Annual
Revenue
150M Monthly
Visitors
Five Continents
~$2.6B Market
Cap

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Simple Scenario
$1M $4M
Founders: $4M EACH
A Investors: 10X
B Investors: 2X
Employees: Ferraris
Series A Price: $0.125
Series B Price: $0.57
Step-up: 4.5X
Year 0: 2 Founders 50/50 with 25% for employees
Year 1: Raised $1M for 50%
Year 3: Raised $4M for 30%
Year 5: $30M exit vs. $10M exit

8. Types of Investors
m/pulse/startup-investors-good-bad-ugly-why-do-some-tech

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Investors Types
VC/Private
Funds
Angels
Strategic
Public
Incubators
The Crowd

10. So, what do they look
for?

11. ALL
1.
2.
3.
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12. Versus
ALL
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13. ALL
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14. ALL
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VC/Private
Funds
Success Rate

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It’s About Big Winners
VC/Private
Funds

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IRR, Multiples & Time
Years 2x 3x 4x 5x 6x 7x 8x 9x 10x
1 100% 200% 300% 400% 500% 600% 700% 800% 900%
2 41% 73% 100% 124 % 145% 165% 183% 200% 216%
3 26% 44% 59% 71% 82% 91% 100% 108% 115%
4 19% 32% 41% 50% 57% 63% 68% 73% 78%
5 15% 25% 32% 38% 43% 48% 52% 55% 58%
6 12% 20% 26% 31% 35% 38% 41% 44% 47%
7 10% 17% 22% 26% 29% 32% 35% 37% 39%
8 9% 15% 19% 22% 25% 28% 30% 32% 33%
9 8% 13% 17% 20% 22% 24% 26% 28% 29%
10 7% 12% 15% 17% 20% 21% 23% 25% 26%
VC/Private
Funds

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The 10X Rule
Fund size $100M
15% IRR in 10 years 4X
Capital returned to investors $400M
Capital invested in companies $80M
25% Bust $20M
25% “Sideways” $20M
Expected invested in good deals $40M
Multiples of good investments ~10X
VC/Private
Funds

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My Money?Angels
The Good The Bad The Ugly

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Looking Good!!
Public
Incubators
Rule 1 - Follow
the Rules
Rule 2 - Put On
A Show

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What IF?Strategic
Fear #1
Fear #2

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The Herd!The Crowd

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Yelp’s ROI?
We Paid $0.1 Per
Share in 2004
We Paid $0.45 Per
Share in 2005
We Paid $4 Per Share in 2008
Share
Price
Today =
$32

24. Q&A