Finding Funding

Calculate Financial Projections for Investment Presentations

Thursday, January 29th , 2015

11:45 AM - 2:00 PM

WeWork Fort Point, (map)

51 Melcher St, Boston

Join our experts in an overview discussion of financial projections. Learn the key metrics that will get investors to notice you, as well as those that will get you rejected. If you have no idea where to begin with your financial projections, this program is for you.

Experts -

Heather Onstott, Launch Capital

Heather Shanahan, VentureAdvisors

Thanks to our host:

Come to Terms with Angel and Venture Term Sheets

This limited-seat luncheon brings some of Boston’s most experienced attorneys to provide two hours of deep instruction to entrepreneurs struggling to understand the complexity of high growth investments. Sample terms sheets will be provided and analyzed.

Working lunch programs are hosted by TCN’s professional service sponsors to provide tactical level information designed to accelerate the fundraising process.

Experts:

Will Perkins - Bingham McCutchen

Jason Rodriguez - Bingham McCutchen

Siena Colegrave - Bingham McCutchen

Understanding Angel and Venture Term Sheets

This limited seat luncheon brings some of Boston’s most experienced attorneys to provide 2 hours of deep instruction to entrepreneurs struggling to understand the complexity of high growth investments. Sample terms sheets will be provided and analyzed.

Working lunch programs are hosted by TCN’s professional service sponsors to provide tactical level information designed to accelerate the fundraising process.

Customer Crowdfunding: Not So Fast Entrepreneurs (Again!)

I have written and spoken at length about the issues associated with equity crowd-funding of companies. And not long ago I wrote a piece entitled Customer Crowdfunding: Not So Fast, Entrepreneurs, which was about the pros/cons of customer crowdfunding at the product level (e.g. Kickstarter type fund-raising). In that piece, I made the point that, for […]

How to build a team – The foundation for a successful company

It goes without saying that expertise and execution are essential for the success of any new startup. But these represent only part of the equation. One cannot underestimate the importance of personal attributes to the success or failure of a founding team. Vision, drive & personality are at the core of any good team.

Vision and the ability to clearly communicate one’s vision are of the upmost importance. What does the company want and need to be? What does success look like? You can’t fill in the details without the big picture. You are selling your vision, so you better be able to communicate it effectively.

Drive is that elusive force which picks you up when you have been knocked-down and pushes you to succeed where others have failed. It is the greatest enemy of adversity, and there is plenty of that to go around in any startup.

Personality is comprised of a many qualities including self-awareness, interpersonal skills and flexibility. Strong self-awareness helps you surround yourself with co-founders and early team members that compliment your strengths and support your weaknesses. This is very attractive to investors. Strong interpersonal skills allow you to create positive environments with open communication, teamwork, and a strong culture. This is attractive to employees. Flexibility, allows founders to react quickly and effectively as their business or market needs change. This quality is especially important as companies evolve through various stages which may lead to management realignments or reorganizations for the betterment of the company. This is very attractive to investors, employees, and customers.

Obviously there are many things to consider in any startup, but the above core attributes will help maximize the probability of success. To learn more, join The Capital Network for the Life Science Venture Fast Track on Feb 12^th 2013, where various topics to create a successful company, including Building the Team, will be discussed.

Decisions on the road and on the project team: the mixed value of “notions”

After 9 months on the road during a recent sabbatical, I can attest that you learn a lot from your fellow travelers. You learn what food stalls to avoid in the Jamaa El Fnaa square in Marrakesh. You discover the best surf spot for beginners in Nicaragua. You also learn coping skills required for long-term travel: how to diffuse tense situations with a travel partner, how not to get into a street brawl with an aggressive “unofficial” guide, and how to keep a budget without sweating every single financial decision you make. It turns out that these skills are just as apt for the life sciences industry (however the travel partner may be a business partner, the aggressive guide might be a vendor, and the monthly financial close may still be tense). However, one lesson I learned from a fellow traveler named Brie revolutionized the way I think about decisions on project teams.

We met Brie and her fiancé, Jacob, on the way to the ferry to Spain in Tangiers. Brie and Jacob were a bit more adventurous than we were and had many stories for us. Like us, Brie and Jacob often sought suggestions from the people they met on the road for where to go and how to get there. And what Brie realized early on was the importance of concluding quickly whether or not the information they received was biased in some way; or, in her words, was it a “notion”.

Now certainly asking a hotel proprietor for directions to another hotel increases the likelihood that you may receive inaccurate information (“that hotel is closed”, “they are fully booked”, etc.). But those are biases that you can predict and then account for as you make decisions on the information received.

The more insidious version of misinformation is when your advisor is having “notions”. In these cases, absolutely friendly well-meaning people, with no investment in the final outcome, give you horribly misguided information. They have no desire for you to make a poor decision, it is just that with the limited information you have provided or their particular anecdotal experience, they are actually unable to properly give you the perspective you need. Importantly in every “notions” case, the advisor involved did not realize on a conscious level that their recommendations were not based in incontrovertible fact.

A case in point is my favorite of Brie and Jacob’s adventures in Morocco. As avid rock climbers they had headed out to some amazing gorges in the middle of the country. There they met a very nice Berber family who took them in and offered them food and conversation over the three days they spent in the gorges. As they prepared to head 400 km east to the city of Merzouga, gateway to a camel-based Sahara adventure, their hosts made a gracious offer. The hosts knew the desert. They knew how to camp. They knew how to ride a camel. Why shouldn’t they guide them? They could offer their services for much cheaper than the tours organized from Marrakech. It was an incredibly gracious offer and so Brie and Jacob accepted. Hours later, they found themselves at dusk in the middle of a desert-guide turf war with the local guides threatening their personal safety. As a result, they were left wondering not if their host/guide’s “notions” about his ability to guide them were mistaken, but rather would they survive the night!

Of course, individual decisions in biotech and pharma seldom have such immediate and dire personal consequences. But in spite of the scientific basis of our industry, I have found that often these decisions are directly influenced by “notions” of team members and advisors.

To be clear, like Brie’s Berber guide, the advisors and team members have no intention at all of misguiding the team. They are bright, experienced professionals passionately trying to do their job, however for whatever reason their advice was not applicable in the case at hand.

On the road, we had a strategy that seemed to work well for distinguishing “notions” from fact. We found a way to provide a “safe” opportunity for self-evaluation of the idea by the expert, allowing them to share more about their rationale without impeaching their assertions. By asking a few questions (Have others you know done this before? Have others found different paths? Would other people have different opinions? How often is this scenario encountered? etc.), the expert would reveal caveats, and also how much of their “notion” was built on a few anecdotes or personal preferences which may or not have been important for our particular case. A great example of this was when the manager of our sailboat chartering company suggested we skip sailing to the island of Mykonos altogether, even though he had never been there before. With amazing views like this one, I’m glad we challenged that advice!

Of course every entrepreneur seeking to commercialize their bio-innovation (be it a drug, device or IT) will need expert advice along the way. And since often, one doesn’t seek that advice until it is mission critical, one can easily end up in a scenario where you are not sure if the advisor you are working with has ever successfully led someone through your particular biotech “desert”.

That is why events like the TCN Life Science Venture Fast Track are critical to attend, particularly before you need advice. Through hearing expert panelists and mentors who have either been to your desert or at least the desert next door, you can make contacts and build your own framework for judging which advisors have experiences in deserts like your own. You’ll find that the panelists and mentors you meet are more than happy to share their experiences and also the limits of their experience; many times connecting you through to a better guide for your desert. Then, later, when you find yourself in the dunes of the life science desert, you’ll be comforted to know that your guide knows their way around.

Incentive Targeting Sold To Google, 82 Angels Cash Out

Congrats to ITI and the team on their success. TCN is always excited to see a Boston company with a successful exit. This time it’s even more exciting because we were there from the beginning. Incentive Targeting came to TCN as part of our mentoring program and several of our board and advisory board members mentored (and invested in) Inventive Targeting in their early days.

This post was written by George McQuilken and reposted with his permission. You can view the original post here

You may see lots of Scowling Scrooges and Sourpuss Santas this season, but you’ll see Smiling Angels all around Boston, 82 of them, who invested in Incentive Targeting, acquired by Google yesterday.

“It has been a hard-working, but a wonderful ride” says one of our private sources. “This evening, after the official closing, our “family” had a celebration and many of the 82 investors joined the party. Yes, you got that right – 82! I just came back. The investors are happy as can be — what a better way to end a year than having a story to share at upcoming cocktail parties about how their investment was not only above the average, but also was bought by Google!”

Incentive Targeting, as a large 100% angel deal, may well prove to be a milestone event both locally and nationally. “This is great for the angel ecosystem in town: it is a shot in the arm to have Google validate one of our smaller companies and it is liquidity for 82 angels who will plow that money right back into local companies to fund innovation and create jobs. Exits like this are exactly what aspiring ecosystems crave - Boston is established, but needs these exits to stay strong,” says Christopher Mirabile, Managing Director of Launchpad Venture Group.

The amount of angel money invested in this company was $6.2 million, with Launchpad at $1.3 million and Hub Angels at $600k. Angels also contributed effort and advice. “Launchpad member Bob Gervis was on the board and was absolutely instrumental in helping the company get the deal done and in helping them to raise the two bridge rounds necessary to fund them through the deal,” says Mirabile. Paul Silva of River Valley coordinated the second tranche of the A round. Launchpad led the A2 round.

“This company raised a sizable amount of capital over more than three years, all from angel investors. To me, this shows the power angel investors can have by syndication and cooperation,” says Gervis. “In addition, I believe that the fact that Incentive Targeting raised all of its capital from angel investors facilitated the company’s ability to achieve a successful exit. The reason is that by relying exclusively upon angel financing, the company was able to manage its valuation during each financing round in such a way as to broaden the range of acceptable exits. While the terms of this transaction have not been disclosed, I believe that all parties are pleased with this outcome.”

Syndication proves successful
For angels, this was an absolutely massive syndication measured both by number of investors participating and by the amount of money raised. Its origins lie back a decade or so; back before there was either a national Angel Capital Association or a regional angel syndication group (we call these our quarterly New England ACA Regional Summits). James Geshwiler of the Common Angels had invited a number of us to meet together to discuss common problems. Present were Ham Lord (Launchpad) and myself (eCoast Angels). There were others present, but I’ll have to refresh my memory. The ACA was formed in January, 2004 and we all became charter members.

Our first syndication meeting was in 1975. But, as we all know, it can be a long slow journey from investment to exit. “Incentive Targeting is an early example of New England angel groups pioneering the formation of large angel syndicates. We were the first region in the country to really do this well and it is a credit to our strong ecosystem and the tight, cooperative and friendly relations between all the groups in the northeast,” says Christopher Mirabile.

Kudos exchanged

“Launchpad is incredibly proud to have been part of such a large and successful investor syndicate and for the opportunity to assist Josh, Win and Ben on the board as they built this terrific outcome. It is a credit to the angel community in the northeast as well as its fantastic entrepreneurs that we have this to celebrate. Congratulations to all,” says Mirabile.

“We didn’t reach this milestone alone. From day one, we have relied on the support and commitment of our retailers, brands, investors, partners, and advisors, as well as the hard work and dedication of our team. We could not have done this without them, and as we look ahead, we are thrilled to be part of Google!” - Ben Sprecher, Josh Herzig-Marx, and the entire Incentive Targeting team.

Tuesday Night: the deal is signed and now comes the toast. From Left to Right are Nick Pappas of MassVentures, Win Burke, CEO, Robert Gervis, Launchpad board rep, David Verrill, Hub Board rep, and Ben Sprecher, one of two key founders (Josh Herzig-Marx, the other founder, is not pictured). Photo by Christopher Mirabile.

Saving the World – One Social Venture at a Time

-Written by TCN Guest Contributor, Sharon C. Lincoln, Esq. Foley Hoag LLP

So you’d like to make the world a better place and have an idea that will do that? That’s great! These days, a social innovator like you has more options than folks who wanted to save the world twenty years ago. Or even five years ago. It’s a good time to try to save the world.

Here’s a summary of some options:

Pure Charity

Nothing new here – if you want to establish a charity, the process is straightforward. First, incorporate as a nonprofit organization at the state level then apply for tax-exempt status from the IRS. However, there are a few items worth considering in advance, to make sure this is the right vehicle for your brilliant new idea:

1. Mission: A charity is a mission-driven organization. It is not driven by a mandate to maximize profits. A charity is a very good vehicle for safeguarding the social good you intend to accomplish.
2. Funding: If you are certain that you will be able to raise sufficient funds through gifts, grants, and donations from a wide variety of individuals and organizations, this may be perfect for you. Note that charities cannot issue stock, convertible debt or other ownership interests, so raising capital from investors is not an option. No one owns a charity. Not even the folks who got it started in the first place.
3. Regulations: Since charities receive a sizeable subsidy from the federal government in the form of an exemption from income taxes, the IRS – through the Internal Revenue Code – regulates the charitable sector. Be prepared for technical, complex, and less-than-intuitive rules, as well as for federal and state information returns.
4. Compensation: Running a charity can be fulfilling, rewarding, and fun. Doing good really can be its own reward. Don’t expect to get rich doing things this way, though. The IRS has rules prohibiting lavish salaries. In addition, you won’t be able to “cash out” after the charity takes off and is a success – remember, no one owns a charity.

The New Hybrids

Benefit Corporations

If you want the flexibility of a for-profit combined with a commitment to doing good hardwired into your new organization, a benefit corporation may be the vehicle for you. Many states, including Massachusetts, have laws that permit the formation of benefit corporations. (California even has a similar type of entity called a “flexible purpose corporation”.)

Like a traditional corporation, benefit corporations are for-profit entities that can raise money through issuing stock, debt, warrants, etc. They can decide to pay their executives market rate salaries. As the founder of a benefit corporation, you would likely have the option to cash out if the venture is a success.

Like a charity, a benefit corporation must commit to promoting a general social benefit and may be run in a manner that prioritizes this social benefit over maximizing profits. In fact, benefit corporations generally must be run in a manner that takes multiple interests into consideration – including customers, employees, the local, regional and global community, and the environment.

This is in stark contrast to traditional corporations which have one main focus: maximizing shareholder value. It was this duty to bring in the most money for shareholders that prompted the founders of Ben & Jerry’s to agree to sell their company to Unilever. Even though many questioned whether Unilever would continue the company’s innovative social and environmental initiatives, Unilever offered the highest price so the directors of Ben & Jerry’s felt duty-bound to accept the offer.

If you want to establish a flow-through social venture (akin to a partnership), S-corporations can be benefit corporations as well.

Established corporations that have opted to convert to benefit corporation status include Patagonia and King Arthur Flour.

L3Cs

The limited liability company (LLC) counterpart to a benefit corporation is a low-profit limited liability company (L3C) which must specify a social benefit in its organizing documents. In addition, an L3C may not prioritize making a profit over its social mission. An L3C is also a flow-through entity.

B Corporations

If your investors are wary about putting money into a new type of entity or you yourself would prefer to stay with something tried and true, you can always establish a traditional corporation, LLC or partnership and have it certified as a responsible social venture by a neutral third party. For example, B Lab confers a “B Corp” certification on entities that commit to adhering to certain social benefit criteria. This certification must be renewed every two years. While a certification such as the “B Corp” label is akin to a Good Housekeeping seal of approval, and does not carry the legal significance of a benefit corporation or L3C, it can be a useful identifier that sets your social venture apart from the pack.

Established companies that have opted for B Corp certification include Dansko and Seventh Generation.

Final Thoughts

A traditional charity may still be the way you want to go, since a downside to these new types of entities is that they are new. That means you will have to educate your investors and your customers about what makes your social venture worth investing in and worth buying from. But if you really want to establish a profit-making venture with the soul of a nonprofit, one of these new hybrid forms may be just right for you.

Launchpad Overview – Angel Video Interview Series

[This post is part of an on-going series of video interviews with members of the start-up community - see a list of links to the full series here.] This one is a bit off the usual beaten path. I was asked to give an interview about Launchpad and US angel investing in general for an entrepreneurial course being […]

Joe Caruso – Angel Video Interview Series

[This post is part of an on-going series of video interviews with members of the start-up community - see a list of links to the full series here.] A CEO turned professional board member, volunteer, organizer, angel investor, and most importantly, advocate for entrepreneurs, Joe Caruso is a fixture on the early stage scene in Boston. Always […]