A very candid discussion on what you need to know before considering to raise money from an institutional VC fund.

1. @damiensteel
December 2015

2. BIO - @DAMIENSTEEL
Damien Steel, CA, CFA
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• OMERS Ventures since 2011
• 10 years venture experience
• Previously member of the Ontario Security Commission’s
Small and Medium Enterprise Committee
• Previously member of the Ontario Center of Excellence’s CCR
Commercialization Panel
• Co-founded Novo Dental Studios (sold to DSG Canada)
• 5 years transactional and M&A experience
• Avid golfer and poker player

3. OMERS INVESTMENT ENTITIES
Over $100 billion in assets under management
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4. • Canada’s largest tech focused venture capital fund
• Over $460M funds under management
• Focus on the technology, media and telecom sectors
• We believe in the future of Canada and lifecycle
investing
- Investment sizes $1M - $40M
- Long term patient capital
OMERS VENTURES
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5. “DISCLAIMER”
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6. TYPES OF INVESTORS
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7. TYPICAL LIFE OF A VENTURE FUND
Example of VC Timeline
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5 yrs 10 yrs0
Commitment Period
End of Fund Life
Three 1yr Extensions
New Investments
Follow-on Investments
Exit Investments
Fundraising 2nd Fund

8. VC MATH
Example of a top decile fund
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VC raises $100M $20M in fees & exp
VC invests $80M $20M in write-offs
$60M remaining
investments
Portfolio value = $240M
Repay fees and exp
of $20M
Preferred return of $20M*Return invested capital
of $80M
$120M remains
$96M (80%) to LPs $24M (20%) to GP = Carry
That’s 3.0x!
* ignore catch up

9. Valuation isn’t everything
DEAL STRUCTURING
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10. THE UNICORN CLUB IS GETTING INCREASINGLY CROWDED
Approximately 90 North American-based companies belong to the
“unicorn club”. The increase is driven largely by “paper unicorns” –
private companies that have not yet had a “liquidity event.”

11. DEVIL IS IN THE DETAILS – SQUARE EXAMPLE
In October 2015,
with >$560M in
revenues, Square
should be ready
for an IPO.
In October 2014,
Square raises a
massive round
valuing it at $6B.
But it’s what the news articles don’t tell you…
Source: Square S-1 SEC Filing
Bankers decreased the offering price to $9,
valuing Square at $4.2B (lower than its last
round).

12. Company name
Original
Price
Q3-15
Value
Date
Purchased
Blue Bottle (Series D) $21.1M $12.0M May-15
Snapchat (Series F) $20.3M $15.2M Mar-15
Taboola.com (Series E) $6.6M $3.5M Dec-14
YourPeople (Zenefits) $10.3M $5.4M May-15
Uber (Series D) $80.0M $204.4M Jun-14
All Others $239.0M $218.2M Since 2013
Total $377.3M $458.6M
THERE ARE EARLY SIGNS OF A SHIFT IN THE WINDS
Fidelity Investments, As at September 30, 2015
Many prominent venture capitalists believe that a correction is currently
underway, and are expecting more of it in 2016:

13. Preferred Shares – be aware
- Dividends
- Liquidation preference
- Participating preferred (example)
- Redemption rights
- Veto: issuance of shares; sale/merger; dividend
payment; cap ex, compensation, etc. …
DEAL STRUCTURING
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14. DEAL STRUCTURING
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• Valuation isn’t everything!
• Preferred shares – be aware
- Dividends
- Liquidation preference
- Participating preferred (example)
- Redemption rights
- Veto: issuance of shares; sale/merger; dividend
payment; cap ex, compensation, etc. …
- NDAs (don’t ask for them!)
• Term sheets
- Be very careful not to sign term sheets with funds
that have not performed sufficient diligence

15. WHAT A VC IS LOOKING FOR
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• Get to the point!
• Clearly defined market need
• Clear articulation of why your company is
positioned to fill that need
• Knowledge of competitive landscape
• Multiple ways to monetization
• Strong team
• Think big (if everything goes right…)

16. WHAT NOT TO DO WHEN PITCHING TO A VC
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• Ask for an NDA if you are a startup
• Show up with a 50 page deck
• Show up with no deck
• Show up with an investment banker
• Show up with prewritten terms/valuation
• Talk definitively about exits
• Get “pissy” when your assumptions are challenged
• Lie – we will find out in diligence

17. RAISE VENTURE CAPITAL?
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Can you do it without
raising venture $?

18. QUESTIONS?
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@damiensteel