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0:00
Welcome everyone to Basics on Investors from SBIRs to Strategics. We're really glad to have you join us here today. For the part, 2 of our Funding and Equity Webinar Series I'm gonna be your host, and moderator today. I'm Kirsten Leute and I'm a partner here at Osage University Partners, and I lead up our university relations efforts. We'll go to the next slide. So I'm very pleased today to be joined by my panelist, Ajay Rayasam
0:28
unfortunately, Anurag is not feeling well today and so cannot join us. But Ajay knows all the material is gonna jump in talk a bit about life sciences which is a you know, been more in his comfort zone having worked in here it. I mean now for the the last year and a half. So Ajay, thank you so much for joining us. Could you introduce yourself. Yeah, thank you so much. Nice to meet everyone I'm an associate on the tech and physical science team at OUP.
0:53
Spent, the first 5 to 6 years in my career at an early stage software, company, helping them grow from 0 to a few 1 million dollars in revenue I mostly played a product and chief of staff role from their transition, to a master's, program, MIT graduated in 2020 worked at a Few, venture, funds. Before transitioning over to OUP. Been here for almost 2 years. And you know, love helping early stage, academic founders, or PIs, commercialize, the Research.
1:24
So Looking Forward to Meeting, you all hopefully one day. Great thank you so much. Ajay, I'm actually just putting into our chat. We'll go to the next, slide, I'm putting the chat right now. Our previous Webinar in this series, our founders Equity Webinar, so you can have a link to that in case you would like to watch that obviously today is our second part of this series of Webinars that we're having we'll, have our third part of this series
1:51
In February the fifteenth of 2023 on Valuation, and Term Sheets, and then you can see our subsequent Webinars, that We'll Be having in 2,023 what to Expect when Working with VCs Cap Tables, and Exits and payouts as well, as setting up your boards, throughout the first, half, or so of 2023, as well, so I hope you can join us for those for the valuation, and term Sheets, Webinar will be opening up registration for that in around early January I will go to the next slide
2:21
Right, so first, a few administrative items before we get into the content of our Webinar, the slides, and the recording of this Webinar, is will be available on OUP's Partner, Portal and a Recording Will also be a Publicly available on our YouTube channel the Partner, Portal that I mentioned is an online portal for I'm online portal for the tech transfer offices, and and researchers. That our partner. Is you and it's full of relevant tech transfer and startup content.
2:51
If you haven't been under there, please go, there we have a the URL here for you. You can also contact about some about this, for once you are in the portal, and you do need to register for the portal. If you have not already, you'll find find the downloadable presentation deck as well, as a video link for this webinar, on our Webinars, page, which is under our startup Resources, section throughout our presentation today, we encourage questions, please Use, the Q&A tool in the Zoom to submit
3:21
Your questions, please don't use the chat it's a much harder for me to track. The questions when people use the chat, so please use the Q. And a tool in zoom to submit your questions, and I think that's it for the questions we look forward to receiving them at Jay is very willing to answer them. Throughout, the Webinar, and I'll be posing to them. Hit them to him as they come in. So we'll go to the next slide
3:44
A short intro on OUP, for those of you who do not know us, we are a venture capital fund, that partners, with academic institutions, to invest in their startups. Typically by exercising participation rights available through the academic institutions, licenses as part of this partnership, the institutions share in our profits, and receive programmatic support on tech transfer and academic startups such as this Webinar today, OUP is now on its
4:12
For fund. We just started investing out of our fourth fund, and we've raised well, over 600 million across the 4 Funds. Now and we've made over. I believe 130 investments in all areas of deep science. We'll go to the next slide to show you just the breadth of our portfolio, companies both on the life sciences, as well, as the Tech or physical Sciences area. So if you have any companies that may fall into these areas of deep science, that we may not yet be tracking, please let us know about them.
4:44
But that's, our areas of expertise. It's also, why we have both a life sciences, as well, as a physical sciences, investment, team, looking at all of these Opportunities Alright this is not the focus of today our focus today, is obviously, on and types of investors themselves and the investments, that They make. So we're going to go to the next slide, just talk about our agenda really quickly, before I pass it over to a J. So we will start off just reviewing different types of investors.
5:13
Going little deeply into each type of those then we'll dive more deeply into venture, capital itself. Getting connected to the VCs. How that happens preparing to pitch diligence, investment by feces, we'll actually we actually have done more in death presentations on each one of these areas and other presentations all be putting links to those webinars if we've done them Already in the chat throughout today. So you can have links to those as well, and then
5:43
just a brief foray into company formation formation itself. So with that Aj unless there's any other questions will you take it away Thank you so much. next up, please, and next, again, So this is just a brief overview of the type of investors. That you'll counter, as you grow your startup over time, and usually, and and the way this is. Structured is from you know the beginning, where you can consider 9 dilemma grants to
6:13
family, friends, around all the way up to a strategic capital round, and really, what this is meant to show is just the different type of stages at at the Stage, of your Startup there are different type of investors that you should reach out to and we'll cover each slide. And in in each section, more in depth, but just to show there's plenty of different types of resources, for you and at each stage, they're required they have different requirements,
6:42
and we'll, walk you through that next slide please Specifically for University Spin out. I think this is a a good guideline to think about the progress of your startup. So you start with some type, of invention, and then you start with and then you progress into some type of team, formation Customer discovery to for the actual startup formation licensing to launch the growth that each Stage, there, we recommend different types of Funding that could be available to you so it starts off with the
7:14
I, core, which helps you focus on Customer, Discovery, just because you have a really interesting idea. It's often often times, the most challenging thing to find a problem to solve. When you created a solution in many cases, the the opposite of the university has been out is identifying a problem, and then creating a technology, technological solution to that problem because you already know that this initial customer will pay for it oftentimes
7:40
it's quite the opposite for universities spin Else oftentimes it Requires a significant amount of funding to get off the ground and these are really like risk for like less riskier ways of basically understanding. The Commercial potential of your idea. And so we really recommend leveraging all the non diluted sources at your disposal with your local tech transfer office. Can help you and guide you and point you into the right directions, and you know something
8:10
that I took advantage of as a student, we're university prizes. You know you know at Mit, at least there was a 100 K Competition. There was the sandbox phone, there's all types of resources depending on your institution, that provide all Types of small Grants that have help you along the way many of them will either give you cash trans or at least the Ability to expense Any Type, of related Expenses, to your
8:40
Idea, and so there's a lot of resources that all these universities help to encourage you to explore your entrepreneurial idea, and on the other side of the non to those side, there's different phases of equity financing and it really depends on where you are in terms of building the Actual business. So we usually recommend thinking about an accelerator, an incubator. And then the typical path is going through Angel, investors who are willing to take barely risk before going into venture
9:10
Each individual company has their own journey, so there's not a set path. Sometimes it might make more sense to go straight to venture capital. It's happened before it really depends on how a you know how red be your technology. Is and then, also the team itself, like is there experience. It will walk you through how we think about investments, that way. But there's not a State path, but this is the typical way to de-risk. Your idea, next slide, please
9:42
Just going through the pros and cons. I think we can separate the segments into 2 variables, one or 9, Dilative side, which are their grants one in our one is potentially diluted which is from accelerators, angels, to dcs, on the pro side, no if you can get $9, of grants go for it. That means you don't have to give up a portion of ownership of your company, if It's if it leans towards what you're trying to build a long run then
10:08
there's a strategic Alignment you get compensated to Conduct Research to advance your technology. And so, that's very, You know the applications are really suited for early stage companies, the government other resources are really encouraging to explore these ideas, especially in strategic areas where this climate type. Can otherwise. on the flip side. You know some of these Applications can be pretty long.
10:33
These cycles are, you have to get the right timing they also Don't provide too much support, outside of the Money itself, which is kind of different from accelerators, and Angels, and Others, Who are basically, implied to help you and become more involved in the Operations, of the Company, There are also some restrictions on, and you know, becoming a Us citizen or being, a Us. And base vendor, so maybe not everyone is appoint like could could actually obtain those
11:03
crs. So there are some kind of restrictions in there next on the other side, accelerators, and incubators, so you get lab space you get much more mentoring really depends on a stage, of your startup. You get to engage in the entrepreneurial community. You know there's some kind of Operations, logistics. They make introductions, to investors, there's, a lot of positives. There but again, you're exceedingly exchanging a portion of equity.
11:30
Sometimes the Timelines are not ideal, for university spin outs. So a 3 month timeframe to get your technology, up, to a certain point may not necessarily fit, but sometimes that time pressures is associated with that type of Accelerator so may not be the best fit so you really have to not focus on the branding so much but focus on what you need and I'm over at time the next stage is sort of high now, with individuals that offer a portion
11:59
of interesting portion of equity they'll give you cash ideally many of these individuals are experience, that understand? The Risks associated with losing potentially their money. You know. It really depends on the individual some are more hands on some or not So the flip side of the pros, You know in many cases they may not be as involved. It could be challenging depending on you know, who who are the amount of money you get in.
12:31
We don't like to see a complex cap table and I can get into that later, as a as a venture investor, and You know it is a really unstructured way to get connected with these individual angels. And you have to review Each should have been understand. If they're actually gonna help your business, or hurt them, on the Vc Strategic side, this is the most professional group of of in Thees this year this is what we like to refer, to as institutional capital you know they're Focused.
13:02
On on growth, stage, companies. So you reach a certain point in in in your business, ideally, certain aspects are devious, especially with the team, the flip side is you may lose control so there's an exchange, of equity, which is ultimately, ownership of the company, and so there's different Sets of responsibilities. We like part of our Job, is to return capital to our investors in a certain amount of time and so there's there's undue pressure, and so ultimately,
13:31
you know it's a great state to get BC investment, but It's not the end I'll be At all, and sometimes early stage, companies and academic Founders Feel like they've made it, when they got the investment, but really it's just the beginning, next slide. Please You know, Jay, I'm just gonna just type in here that we did do a full presentation on friends, and family. I think, like a year or so ago. We did have an attorney.
14:00
Come on, kind of talk about how it works. Structurally, also an accountant talking about how that works. And then we also have people put some people who had actually raised friends and family come in and talk about how that worked for them as well, so if people particularly have questions on Friends and Family Funding I just to just put in a link to that particular video itself. So and then we do have one other question. so far is does oup, have working relationships with incubators.
14:25
And accelerators, or or do we have our own Yeah, So a part of our model is to cover over 100. University. So we do have personal issues with let's say the more common ones, like Delta v. From mit for example, we have individual relationships with ycom and in others, maybe it's more loosely, oriented like, again, it's Personal Weight Shift, because the number of Universities, Sponsored actually Attend these Type of excitement, is a little bit, lower but It's.
14:58
in an important aspect of being a venture capitalist, like we're looking for all kinds of connections with and to expand our Deal, flow so we relatively, are connected with these type of programs, and We Encourage, it especially if it's too, early, for me I will recommend companies to the Relevant Parties The Relevant Accelerator. Sometimes there, we'll get into it in a few slides, but sometimes your sector focus, sometimes they're focused on a particular university, and it's all all connected.
15:30
And so and some of us. I I don't know exactly who, and our team, we'd like to volunteer our time to become like an unpaid Mentor, and some of these institutions, so we're, constantly Doing What's, going on at the local Level. And it's an important part of the ecosystem Yeah. Great So moving on to the non diluted funding, we kind of briefly, talked about it, there's 2, important different programs, that we recommend the first of which is I
16:20
core and essentially it was modeled, after Steve, blanks, Lean, launch Patterns, and it, was just trying to Promote the idea of Early Customer Discovery even if your technology wasn't quite ready for it, because oftentimes, we found that like technical Founders and otherwise would build something. But no one would want to buy it, and so they're trying to address this gap by incentivizing you with up to $50,000. And so there's stages to be able to pay the full amount.
16:49
You have to attend regional training. It helps if you have a prior assess research, award. But fundamentally, this is the first step that we recommend to just explore if there's actual potential for your idea, I mean, it's easy to get excited about what you're building and maybe you know it. The industry better than others, but to get a conf confirmed process from potential customers. It really not only helps you with obtaining investors, but also gives yourself internal confidence.
17:16
And so I think that's the great first step, and as you're growing the Sbir Satr programs are excellent, especially if it aligns with your research, and your end goals you know, not everyone. Needs to build a venture back business. So yeah, that's something that we encourage you to think about. In terms of eligibility. The difference between the 2 both have to be for pro like have to be some Type of Entities, owned by Us.
17:42
Citizens, the difference between the 2 is that the IC tars are are associated with the nonprofit. The University, so that's part of the requirement. But the phases are the same, so the initial, the initial checksizer, 250,000, maybe a little, bit more than that and then Based on the results from phase, one you can get up to a 1 million dollars or more by Phase, 3. You're expected to spin out at that point to to maybe perhaps you're gonna earn,
18:07
an additional contract or actually contracts from the government, really depends on what you're building but the important thing to know, is like each. This process is involved in in many government organizations. So nsf has their own Darpa, Dodo E. And so you just have to find you have to align with what you're building to the specific department next up please Great and just going into more the process for the Grants, for the I Corp, so, you have.
18:39
These are their eligibility, requirements, so Yep have a team 3 to 5, people, who are committed to Conducting these customer, interviews, this technology, has to be dedicated to where it. Has to be related to something in higher education. Ideally, your researcher part of a Lab at some point, whether you're a grad student, or researcher, scientist, or postdoc, or Pi the process Varies, based on on sort of the application, what is national Regional, so
19:08
if you, get the Regional, level, first I think it's about 3, k that you're offered. The full amount is 50 K. And we encourage you to talk to local tech transfer office. As well, to guide you, to these local hubs, they're separated by region, and so there's different locations. There's like a mid atlantic, location, etc. So you have to figure out the right hub, to connect to, but they'll provide training it'll be a support system.
19:33
You'll be involved with a number of the teams for doing the same thing that you are doing. Yeah, so and I would just encourage people. Like, if you're looking for a local incubator, or a certain incubator in a certain industry, area, you know, ask your local tech transfer office, or come ask us we can we can likely make recommendations based on on our networks. And so it'll just encourage you to be participative in the program We mentioned the eligibility for the Ispir Grants,
19:45
I think it's pretty self-explanatory. You're a little bit further along. Perhaps it's after I, core, you're thinking about like really the incorporating something and you found a grant that a lines with what you want a particular piece of advice that I received on this subject is don't apply blindly meaning trying to connect with as many Representatives of those particular departments as possible. I think there is a process to
20:11
submit, a proposal where you can kind of preview, the ideas especially if It's relevant for something that this particular agency is looking for it's, also important, even if you do apply blindly, you should Get feedback, on how to improve your application over time and so ultimately that'll just help you refine your ideas and hopefully, you'll get a grant, maybe in the next cycle I'm pretty sure the cycles are every 3 months or so but I could be wrong, so it should be there should
20:39
be multiple times to apply over the course of a year, and of course the the website. And locations are there, and I briefly talked about the different phases, but just think of Phase one as like the initial step and ideally, to get to phase 2, phase 3. And beyond You've demonstrated enough progress in the initial Phases, and you've demonstrated through the research that You had next slide please I I'm actually so, just just before we go on to the next slide.
21:08
There, I'm gonna just mention a couple of things about sbirs and S. Ttrs as well, as we do have one question so there are a lot of resources out there on Spirs and Sttrs. It's especially actually through the government websites themselves. Because this is such a huge program within the Us. And there, you have roadmaps, that basically will walk you step by step on how you do these there. It's it's so, there's a lot of information out there, so we don't want to duplicate,
21:37
that that information. We really want to direct you to get that information, but we did have a question about how do. Spi works in terms of dollar. Allocation agreements between the researchers, labs and the new company, when There's still significant development going on in the Labs, Well if There's still significant Development going on a Lab that's really an Sttr then for Sttr there is A Minimum of 30,% of the
22:01
Dollar allocation that needs to go to the research partner and a minimum of 40% that needs to go to the small business so there needs to be it's supposed to be you know collaboration, between the the Researcher the lab and and the small business for sbirs, on the other hand just a minimum of two-thirds is supposed to go to the the small business itself, but it's really not associated. As much with the researchers. Lap. So I think what you're describing there to me it sounds
22:30
more like an sttr type of grant. But again, this is where you can go on, and you can find out okay, what is right for me, because what is it what is it that I'm looking to do. And therefore, which which category should I fall under I think that was everything. I was good, oh, the one other thing I was gonna mention because because we get this question, a lot Jay and so I'm, gonna ask the question. To you. Is you know, when Vcs are looking at opportunities to invest in are there any
22:57
Downsides of having taken Sbir Sttr, you know I core grantment Yeah, it's a great question. I mean, I think initially, when when the team is just in a formation phase, and there's still a lot of technical items, to de-risk, it's encouraged, to get this type, of Funding hopefully You'll Address, the key challenges of the technology. the risk is, you know, I think a good question is what you're proposing, and what you're getting a grant for does it align with your long-term
23:30
goals and what you want to build it's very easy to go down the path of taking too. Many grants, you can actually create a business, just, you know, getting a like grants, awarded constantly and what we don't want to invest in is basically a lifestyle business. Where you continually, react these these grants time over time, which loosely doesn't really relate to what you want to build in long run that can generate a lot of Value so I think
23:59
there's a balance between Accepting these grants that really align with what like what is Attractive in terms of an investment like? What where the technology wants to go and and sort of look. At the early phase of accepting Experience. So it's a fine balance. So I don't think it's a a bad thing initially. But over time you'd hope that you don't stay in that direction. If that makes sense That's totally. N, Yeah, to me, it does. So thank you so much.
24:28
Yes, great next time, now that we focus on the the non diluted piece, we're transitioning to the diluted Fee. So you're exchanging a portion of your business, intern for a cash which can be used to operate the business. So we're all assuming that you've incorporated the company. You've issued shares to your early founders, and we'll go through the different types. But let's assume you've gone to the path that you've actually got enough confirmation that
24:54
this could be a value of a business, and you also think that you want to potentially have a venture back business. And so angel investors are typically high net worth of individuals, they have either prior Vendor Experience, Operating Experience, or they're, just, you know, really fascinated with certain Areas, and spaces and so what we recommend is going through affiliated groups, you can meet Angel investors, it
25:22
Really depends on your network. You can meet how now with individuals at any point, but they're usually 3, or 4 different types of Categories of groups. So, the first one being your university affiliation, there are typical alumni, who Actively looked on campus to support Current Students through Researchers. So Stanford, angel, network, Washington, You've Venture Network. Each University will probably have some kind of angel group, and ideally.
25:51
They have some kind of background in your space. And you want to find the right, fit You know full disclosure. I'm a I'm you know, a member of like Mit Alumni Angeles. I try to give back. I try to what I do is like if I find an interesting company that's really really simple, I will recommend individuals to pitch to these particular pitch days. Like usually happens, every you know quarter, or so, and so I try to stay involved that way, not only to get back, but also to look at Investment
26:22
opportunities. And that's how that works in different regions. There are sort of a second Level, Angel Network. So the mid-atlantic region, the Carolina region, and it operates in a similar manner, but it just a a way to categorize different individuals into a specific group, you like as an Angel, investor, you have to apply and you have to be accepted and so your reputation. Matters as well, typically, so you're typically vetted and so it's a process.
26:56
So a lot of these accredited investors are applying themselves to into these programs and of course, if there's, these national groups, so think of it the more well Known, the group the more vetted probably there are because this is an Exclusive Network, they have higher Quality deal flow and so they wanna make sure that they Maintain the Reputation of their groups, which is why we recommend thinking about it.
27:18
I think when you go to an individual outside of these groups, there's a lot, more variables, you're gonna have to do more research, on their prior investments, to understand how they've treated startups before and think about in Terms, of the size, investment it. Really Ranges. We've seen some super angels do entirely. 10 million dollar checks. These are billionaires. Essentially that are excited about certain spaces.
27:40
But the typical size Amount is like one to $300,000 in the evaluations are between one to 3 million it's very early and so they take a good amount of dilution and so what I hope is when you think about these individuals you, think about the fit in terms of Investor. Founder fit? Are they aligned with you? Are they helpful, have they helped you prior to an investment, and then you could assess over time, as you work with them.
28:06
How do they continue to be helpful? Would you recommend that to your own colleagues and so it's very much a relationship. I don't think it gets much different from taking An institutional investor and then the last piece which we didn't really talk, about in this Area, Family and friends there's, a Whole level, pressure. Here, you don't want to lose your family, and friends money. But it has been possible. You need to worry about that the risks of doing. So.
28:31
I assume that they have prior knowledge, that the risk of investing and start us. But you know many times they don't. And so you have to lay it out and make sure they're willing to lose money, that they're going to invest in your company. And typically friends and family angel around is, you know, 50 to a half 150. K. I participated in my friends investments before and I don't expect to return. It's more out of support. And so that's the way I think about it.
28:58
Yeah, there's undue pressure there. Obviously, it's a little bit more close to the best as opposed to Angel Investor. But they they should be treated the same essentially next slide So the process, accessing am usually there's a website, where you can just submit your application, I, kind of Hinted at it. I think the best way is sort of networking to find an actual member of these groups. That can recommend you that'll probably fast track you, but it is certainly possible to
29:30
just apply cold and try to get it on. Get get a pitch through that way. Usually there's also Info sets. Many of these groups are not that well known. So they'll want to encourage people to present, and so especially University Affiliate angel investment groups. They'll go around campus. They'll be part of Let's say at at Mit, there's like Venture, Mentoring Group, via mess you know they'll they'll Advertise, this and so You'll See that Around and and You'll get the Chance to Do
30:02
It, Their Process is pretty similar, but maybe I think it's more about a Gut instinct. I think a lot of them, just yeah, there's not much in terms of traction or tech diligence. That thing is still being built. And so I think primarily, it's about them. One to be part of the early stages of it, really interesting company and it just connect with you on an emotional level that's one i've seen that's my experience so far into
30:30
the right obviously there's a Website, there but you know, each each individual group, has their own a website. And application to submit alright next question, next slide, excuse me Now Accelerators, incubators. And there is a question about it before I think there's an important distinction between the 2. So an incubator is meant for individuals who don't necessarily have the idea of flushdown, and so in many cases they provide office space there's an indefinite timeframe the citrus
31:05
Foundry out of Berkeley Offers like a year, time frame for you to Explore your ideas. They do per like at like mentor. You to degree, the flip side of the Accelerator is meant to be at a later stage, where you have a team? It's formed Together. You have an idea, and you're going to go after it. So you have enough evidence and traction to prove that there are some interest in your technology. And the whole point of this stage is to really focus over a period of intensely, like a few
31:39
months of intensity on the on Proving Out that hypothesis so that's a fundamental difference but in both cases, for the most part, they do exchange their time, mentoring space, in exchange for A portion of equity, typically it's not written here. It's 4 to 7% up to $550,000. So you're looking at evaluations between 2 to 3 million dollars, and Many of which will help you raise additional funding as a result.
32:06
So? Why common is the most famous name I don't know if that's always conducive for university spin-offs, because it's a condensed timeframe but it does give you a lot of visibility. And so you know highlighting examples. I've mentioned Mit's Delta v. Start X from Stanford, There's nucleate, which is going around across the country. Right? Now it's student, lad, almost like an accelerator like program for Tech, Bio companies, it's
32:32
getting really popular that's $9, and then you have the Dialogue Versions, which text ours, Berkeley, Skype, is pretty well, known as Y combinator, and so the process there is it's pretty much the same formal application you submitted something online. You know some like what kind, are like 250 characters, less, which is really difficult, then you go through an interview, you'd give your pitch. The multiple interviews, with the partners, usually 2 to 3 interviews, and then they'll
32:58
make an offer you have to accept the offer within a timeframe, then you go through the program, get mentorship, you you know, on a weekly basis, it could be remote I think most of it's coming back in person and then it culminates with a Demo Day and Ideally throughout that time you're getting introduced to you know investors as part of their incentive they want to make sure you're successful and then it culminates in a Demo Day where you give
33:25
it 3 to 5 min, Pitch. And ideally, you get your next round of Funding. Most of the successful companies already have secured the funding by the Demo date. But who knows, maybe the times would change given, the market environment, so how to access it. It's. It's really a running theme. Here it's your personal, network, that's what's gonna. Get you really the access access to these programs, these these thing computers and accelerators are well known enough.
33:51
Where you could probably find friends, or mutual people that you know, that have attended it in that recommendation, is often the most strongest and so I'd recommend going through them, talking about their experience and if you have a close enough re relationship to make that introduction, that way, but you know investors like Myself, those are all strong singles, but it's really hard to predict how close the individual is to that program.
34:16
So I really recommend the program. Alumni You could do direct outreach, I know that there's a bunch of Info Sessions like I've walked in as A student on Y combinators info sessions at random, institutions it happens that you just added pay Attention to your local clubs, on, Entrepreneurship centers, they'll announce it they want to encourage as many applications, as possible. Next slide, please So just there was there were a couple of questions you actually already answered one of them.
34:46
Which was, you know how how important is your network and far as far as getting into the programs, and the the follow-up question that was that you know, like so let's say you do do a cold application, through the their website, do do the investors, actually check on those applications, that come through there I I think it depends on on sort of like, the the brand name meeting. You know, if you're if you're more well in an institution like a y combinator, you're
35:14
less probably likely, cause you get so many applications, and so it's difficult based on the volume but these early stage organizations, have been incentive to talk to as many people as possible so I Okay. think they're more likely to respond than not And in terms of why, see I think they still do read your each of your applications, but at the end of the Day. There has to be some kind of connection, meaning like you know you have to understand oh, 2
35:42
things, one they've met you at some time at these infant sessions, or you reach out directly or you got a recommendation. Through a program alone. Best ways to do it, and in second is You know you have the compelling team and story through your application and usually some of these like excelators list, ideas or sectors that they are particularly fascinating. I know that by commentary example. They'll they'll like put like a request for proposals,
36:11
or request for startups they'll say we're literally looking for something in this area. And obviously if you fit that description, they'll get kind of an interview regardless. If if you know people are not, but I think the fundamental theme is like it helps to have a connection, because many of these organizations gets so many applications. Yeah It's hard To Differentiate amongst most of the applications Alright, thanks, and then I know we don't have
36:38
I know we're now gonna jump into the really Do deep dive into venture capital. But before we do. I just wanted to talk a little bit about strategics, and you know cause that was under you know you kind of your last categories, about funding Diluta funding is Venture, Capital and strategics. And could you talk just about some differences between venture capital and strategics? And maybe how to approach them, but also, what the expectations should be when approaching
37:03
strategics, and I realize there are some differences here between the life, Sciences, and the physical sciences. As well, So just just if you could say a few words on that before we get into our Yeah, you know so there's been a rise of corporate venture capital in the last 5 to 10 years, and ultimately, the you know it depends so I think first, you have to categorize, corporate venture. Into 2. Categories like are they in theing off their balance, sheet?
37:27
Or are they do? They have a dedicated pool of capital, and really that meet what that means, is like are the managing directors, and sent? Device to earn profit on their investments. Do they need approval from internal people at the corporation in order to gain investment and what that means is that it delays the time in which they can make the us so the fundamental difference between a venture, capital and corporate venture
37:52
Is that they have these constituents, in which they have to sell and get on board. So sometimes the timelines for investing can be much longer, so in terms of months to make a decision versus in ventured capital it could be a few, days, and usually the second pieces they have they have they'd be strategic implications. So is your technology fundamental is it a disruptor for what they're doing in the future,
38:16
and or does it align with the greater corporate strategy that's how they think quite a bit and that's, a different and that that you can't, find it on their website, that's through Conversations with those individuals, and then, the third piece is this is where the fun structure really comes into play. Most strategic investors, do not lead deals, they tend to follow on so they encourage you, even if you reach out to them early they'll encourage you to get a financial, Vc, as a
38:45
lead investor, and will write checks, on top of that and but that doesn't accelerate their process in Terms of Making Investment more often than not, as I mentioned they're fall on investors, some do lead like Bmwi Ventures, and others. And you have to really distinguish it on a case by case basis, what is the pro what are the pros of getting strategic investors, distribution so some companies. Can give you access to a whole set of basis of customers.
39:15
For your particular idea. that's the best case scenario to their could be exit, opportunities. It's not always implied when they invest that they would acquire your company, but maybe, if it's a strategic value. It gives you an edge, and sometimes they might have provisions on that a third, you know, helps to have that name at certain times. If it's the line with what your goals are As I mentioned that relates to the first piece, which is distribution.
39:41
I would say. Sometimes they have experts in in internally, that can help guide your product, roadmap, or the way you sell and so those are the pros of going to Strategic Strategic Approach Cons are you know there's, also sort of a negative Incentive we get taking their their money, in that Way, like, maybe they have maybe it's a competitive threat, or maybe they will acquire try to acquire the company too soon.
40:10
Perhaps it's not seen as let's say, it's attractive investment to Outside financial Vcs which is not always true. Third, they may not deliver on some of the promises when they invest and it's not necessarily their fault. It's just these are large organisations, that move slowly, and so perhaps they thought in a different division, would help but maybe their priorities are different and it's hard to control so so it's it's, really difficult to predict there so there's.
40:39
Pros, and cons in general, it really depends on the particular fund Great thank you so much So now we're gonna just gonna dial into venture for the remaining time I'll I'll try to run the slides and happy to answer any questions. So this is essentially our job, what we do. And so we're gonna assume that you've agreed on the path of growing, a company, to a massive scale. You want it to ideally become a publicly traded company.
41:07
You see the value that early Traction function. And the idea is that adventures like giving you support or fuel to go into like hyper growth, and the way to connect to us and the way to get funding is through phases that we like to think about is getting connected which is fundamentally, building a relationship with us. Second is telling the initial pitch, which is basically the story like you have to convince us that this is a great investment.
41:34
Opportunity that would generate lots of Capital in the future. And then there's our diligence process like, how do we come to a decision to invest in your company, and really that's a case, by case basis but there's, a general Framework that we can talk about next slide please Next, slide, okay, if you if you see a theme, it's like your network, this is more so than anything. But if you if you take the necessary steps to the beginning, talk to your truck transfer
42:06
office, talking to your local icorp developing mentors, at your local solution, getting angel investors, who are involved in the community all those individuals, will enable you to have connections, to institutional investors, like Myself we we talk to them all the time. I look for early deals. I want to know what the most exciting You know technologies are in the field. I'm paying attention to that. I may not talk to you all as much, but I I kind of know What's
42:32
going on, and so getting that warm construction is central and so obviously not everyone has access to the same, kind, of connections, but hey, you are at your institution. Now There's Entrepreneurship Clubs, There's local meetups. Now that things are open up again. there's ton of events, just conferences now that really promote this information, there are demo days. That you can attend from other. If you know people who are in these programs, there's,
43:02
so many ways to get connected now, and especially we still have a hybrid world where it's, much easier to do Zoom calls you. Don't need to meet in person There are ways to connect with individuals. Now, and many will actually be open to cold emails. I am. It depends on the individual and their bandwidth. But you know that's like the Worst Case Scenario, because it's a lower probability, but all these options will lead you to building connection
43:29
with with people like myself, and like I'm a little Biased like I would like to get to know you as soon as possible. Because I'd like to invest in lines, not dots and what I mean by that is that I want to see your progress over time. It's really difficult to make an investment decision based on one or 2 meetings. You know if you're Doing entrepreneurship, right you're learning at a Rapid, pace, and I want to see that next slide, please This is just a landscape of life, signs of investors.
44:00
Obviously not my area expertise, but just know that there're different types of investor, that invest in different types of stages they have different strategies. So a third rock outlist likes to build companies, meaning they'd like to meet with academic founders. Earlier Whereas, Many of these other companies want something that is already, and the clinic, or a little bit later stage and so just on their websites.
44:22
You can figure out what their investments strategies are, and you and depending on your stage. You can try to fit with that individual and I'd also encourage you to take in the next level, which is find the individual partner who's interested in your area of of expertise, next slide. Please Alright Thanks Bye Tech side is equivalent. We talked a lot about the Y combinator piece, different type of investors. More so than ever before. there's really been in the Blend of both Tech and Life Science,
44:56
investors they'll have different arms, New partners so I think We're seeing kind of an emergence of different types of investors, that are Investing across the Across, the Board Doesn't. Change I would say just try to fit with with kind of like the category of investment, You know something, a highlight, like sv angels, like, yeah, they invested in apple. So getting access to them is gonna be a lot more difficult than your local angel group.
45:24
But if you can do that somehow that's obviously a great thing Next slide. who and how to approach so this is a high level of our process. I won't get to into it Kirsten mentioned that we've talked about this in more depth, but High Level Process. So there are so associates, junior partners who are responsible for sourcing deals or investment opportunities, which is basically connecting with individuals like yourself,
45:53
they highlight things to the managing parrot sometimes a managing partner gets access to the investment opportunities, as well, and then we collectively make a decision over a period of weeks, to months, or days, depending on the Scenario. But the thing is to highlight You know sometimes you may think that I need to. You know, connect with a decision maker, like a partner and above great if you can get connected
46:18
to it but if you're connected with an associate like myself, that's perfectly okay, so sometimes it's better because ultimately, I'm responsible for the like carrying out the diligence, Anyways, these are flat organizations, I wouldn't worry so much about title, because I'm incentivized at this stage in my career to talk to as many people as possible and try to ask I think the thing that I would focus on is as you're talking to associates is is the associate bringing on
46:44
More senior level. People and then are they carrying it through the Process, that's more of a signal of how interested the the party is and that's something that keep in mind next slide please So highlight what you learned from hopefully from what I've I've shared today, each individual investor from accelerated to Angel investors to institutional investors, like strategic investors, to financial vcs, like our Sales they'll have, a different strategy, so based
47:19
on sector, Stage Availability Ownership targets. It can get really into its summer climate, based phones. Some are generous funds like ours, It's important to understand what the investor is. Looking for because they make it available to everyone. And so you know, unless you're someone with prior success Fund raising is gonna be a grind, because you're an improving person. And This is your first time, doing it there's going to be a lot of lessons.
47:48
So you're gonna get knows a lot. And hopefully you get some feedback. As well. But more importantly, you get the the grid and strength to keep moving forward. Sometimes you hear these stories that takes hundreds of conversations to get to you know one, you know one person, saying, yes, and all you need is one person to say yes, so I'd encourage you to go through that process. And just be prepared that's going to be a long haul and in some cases it may not happen
48:14
for this idea, but that doesn't mean in the future. Another idea, will work private play, some agents, like just a quick thought on that it's it's like a investment bank. And otherwise it's it's pretty acceptable in a later stage in an early stage. It's you're giving up a lot of percent of of of the Funding for this, so it's not as encouraged, it's almost like a a bad single so we'd, encourage, you, to focus on doing this, process of Yourself, it Could Change, down the Road, but we Wouldn't
48:48
Encourage, taking taking a private placement agent, upfront next slide, please Preparing to pitch the next side, we have a pitch, 101 deck and and Youtube, video that we've put in the Chat, so not gonna talk about this too, much, but the most important. Thing, in in so like 3 important roles, as you're, you're starting company, your founder. I'm assuming you're taking the Co. Role. Is one to raise money to keep paying the bills to to build talent, and 3 to define the strategy
49:23
of the business ideally in the commercial, Route and all 3, take an account, your ability to sell people, not just investors and that means You're telling a great story, and so this is a fundamental structure of telling a great story about your business, and the most important being. Clearly, explain your problem solution in a very simple, manner which is difficult, when it's a complex technology. And then, second, talk about how you're assembling, the team who's gonna execute all that strategy
49:55
those are the 2 most important things that I want to highlight the Rest you could look on on that particular Youtube, video and just remember that you know people buy, from people at the end of the day. and so as an investor, I'm gonna trust you to You know, execute on your ideas, and obtain your and to prove out your hypothesis, , and so that's what I'll mention about that next slide, please Diligence and Investment so as I mentioned, I talked to you about the Flip side, which
50:27
is you're gonna get a lot of news when you reach out to investors, and that's because the probability investment is fundamentally low oup track 7 to 9,000 companies, very Few we've invested in you, know, maybe 100 plus over the course of a 13 year period. So it like we look at hundreds of thousands of investment opportunities to get to a few in a year, and so and there's, a wide variety of reasons for why we Don't go through with an investment or not so this thought is just to tell you that hey?
51:02
It's, not personal, it's just. This is the probability is low, and so the only way to increase your probability of receiving funding is actually just. Have more conversations fundamentally, next side, please and When we look at teams, as I mentioned there's a wide variety of reasons for why we may pass on an investment, maybe the Market Size Opportunity. Is not large enough. maybe the clinic. The data is not ready. But fundamentally, the thing we focus most on is the team.
51:31
And so, that doesn't necessarily mean your serial entrepreneur. It just means that you've assemble, the ideal set of talent, skills, and aptitude to take on the enormous tasks that you're focused on in that You're Able like maybe You're not expected to know everything but you're able to strive, yourself. With people who can guide you or take on those particular roles, next slide, please and the questions we ask just to Elaborate, a little bit more we try to do as many Reference calls
52:04
on the founders, as much as possible because ultimately, we're, trusting you to execute on this idea I talked about prior track record. I talked about storytelling. Ability, or tickling, those goals, hiring a so essential, you know, I think a fundamental question. Is, you know, can this individual our team continued, to raise money especially in a deeply technical field that requires most likely a lot of capital.
52:30
And that's kind of the impression. That's something that I assess when I talk to individuals and like Ken, can this person grow can this person continue to spell you know further, investors. Like, the Later, stage investors are showed before Can they do that that's a fundamental question, we ask the last piece is a little bit subjective you know all types of Investors, kind. Of focus on different type of personalities. I don't, think there's, a correlation between
53:00
whether you're Difficult or easy to work with between Success, I think it's sometimes a little bit Random but there's a Preference, for each Firm, and that's, Part, of the Strategy, next Slide, please Most important characteristics, CEO the leader of the firm, or the company, I should say, these are characters that we like to see so of course this is our part of our strategy, Competitive Drive being able to Simultaneously think of the High Level Details as well as the Minor, details
53:33
Being Realistic, Modest being very Communicative, Combinational Low and high, you which means that you're humble enough to know, like What's wrong, but also you're confident, enough, in your own Abilities and ultimately we think that being flexible and being adaptable for changing market environments, or or technical challenges. Things don't always work, the way you want and you have to adjust and be resilient, next slide, please
54:01
Company, Formation these are last few slides, that I'll talk about you know, we, get this question quite a bit like, how you what's the right structure to form your company and it's it goes back to the initial question like do you want to take in institutional investors. Over time. Do you want to take venture capital because as a whole set of requirements? Do you want to build a publicly traded company that determines hundreds, to 1 billion dollars
54:30
of value, we think the Easiest way to have a Delaware in which you can take on Outside Investments you could create a I'll see and Convert it over time, and That'll be more costly But I think the simple question is, if you want to go down this path, we encourage you to do a C work and we're happy to talk more about it. I think we have a Webinar on that as well, excited. I think I think that's it for day, for the core, presenting Yes, all right. So we do have a few questions, and yes, we do.
54:58
Have a webinar on llcs that Katie, would you mind putting that in the chat, I put it in. Earlier, but I I don't have it at my fingertips at the moment. So we'll stay on this this slide. So if in case anyone wants to contact you afterwards, and ask some some more questions, just to note everyone, we did put the survey link in the chat, so please do answer the survey we do use these to help us with future webinars and what it, is that you're
55:22
interested in. And I am gonna just mention before people start Shuffling off to that we do have our next webinar in this series on February Fifteenth, that's the Valuations and term sheets Webinar but we Do have One Webinar actually probably 2 Webinars, before that one of which is gonna be on data licensing. So watch your emails for that one as well, but let's go to some of the questions that we have so a question from one of our audience, members does does a strategic investor who
55:49
doesn't participate in future rounds, raise a red flag for other investors, more so than a normal Vc Would then, you know, potentially normal Vc, not participating in those future rounds Okay I'm just saying that they've already invested in the previous round. I think that's what exactly. That's what they're saying. And so, yeah, okay. That's already someone who's invested in the company, would they're not participating in a future round versus a normal.
56:11
Vc who'd also invested, you know. Would that raise a more of a red flag Yeah it's a red flag either. Way. If if there are Strategic Investor Normal Vc, you want to know why the insight errors that means the existing investors aren't Continuing To Invest in the Company typically the Way, you Generate, Massive returns in Venture, capital is like is through the power. Law, basically a few number of Deals, Drive returns, for your entire investment.
56:37
So you can make 100 investments. But really it's like one investment really carries the entire return and so usually you want to invest as much as you want as you can into that particular investment. Because doesn't come come around that often. And so I would question that regardless and so I'd want to know. It wouldn't be a deal breaker for me, but I would want to talk to that investor to understand why they aren't investing. Maybe maybe there, so a good answer is, hey, we ran out.
57:04
We don't have any more capital. In this one like the and but we would have loved to continue investing like that's, that's the answer you want to hear the other other ones are you know if they say it's valuation, or We don't believe in the company. Those are bad signals. Great thanks. next one. Our Vc. Is more prone to investing in medical devices as compared to general life, sciences, maybe more to risk. That and I'll just answer that one pretty quickly. So we actually have a financing trends
57:30
webinar, that we put on every year that is taken from our own data as well, as data from other sources. Showing where investors are investing for medical devices in particular. They're often medical funds focused on the Medical devices, etc. But are, they more prone to investing in medical devices? I would say in general, no, and that in part of that is just because of the exits exits in general, on medical devices are harder to come by the people in other life science
58:01
areas so but you know, obviously those who are really concentrated on the field they really I think it's a a Obviously a, a, a great way to to invest and yes, potentially, there is more de-risk that has been done, etc. And and we do invest in medical devices, just not as often, for example, say as therapeutics, so unless there is something else. You want to stand at a Ji will move on. Okay. No Alright. Okay, alright, our next question was finding a CEO for a startup can be hard any suggestions.
58:34
On that obviously you ran through this great CEO characteristics. But other ideas on finding your CEO, It's the hardest challenge, you know there's not a really great answer. I think, but the fact I think it's a good sound. That you're asking that question because based on our statistics is like the if if you hire an outside, CEO, you're more likely to generate like exponential value in terms of university spin out so a that's a good question as b that's the hardest thing to
59:01
Find, so I don't have a particular recommendations. But you know, like talking to angel investors talking to your early investors having a conversation where you're open to looking for an outside, Vc. Is a great start, and typically they'll have a pool of individuals for irs like depending on the size of the Vc. Or how much of an institutional investor. They are, so they may have the resource in hand to be able to help you.
59:30
You know, let's see what else I I think it's it's something we solve for Every Day. There's a finite pool of individuals to be honest. But yeah, it's a it's a great question to think about I'm sure we will have additional we we've had other webinars on talent, and Ceos in the past I'm sure we will have more in the future, because it. Is absolutely just one of the most critical areas that's that's, the hardest to deal with. Okay.
59:58
And and one thing. The thing I'll just add on that I forgot to mention is like in many cases. Vcs like myself, when we get to that stage, we we hire like professional recruiters. And so we spent a considerable amount Yes, yes, right. Yeah, next question, Jay, yeah, you push for a Delaware incorporation. If you're based in California? What are the benefits of that rather than California and corporation as a c-corp I I can talk about the benefits of Delaware itself.
1:00:25
I mean, there's More Corporate Protections for Board Members and it's probably why, it's almost a standard line of Business or venture capitalists to talk, about that there's also less Protection, in Terms. Of Minority, shareholders, in California, and so and then the third factor is taxes. Taxes are very different, and so much higher in California. So there's a bunch of advantages there, but it's almost. Yes go for And right, and and and I and I do and and so on.
1:00:53
The Llc's met Webinar I mentioned. Actually it is lllcs versus corporation, and we do talk a little bit about that we actually had a tax attorney on as well, so we do talk about that somewhere in there and there, as well, so yeah, I think we're probably good on that one last question, and I thank you thank you so much For those of you are saying a little bit longer, I know that we've gone a little bit longer than we expect.
1:01:16
It. We have another question that says, what would be proper strategy to move from Espir Phase, one, to 2, to 1 2, to the next stage. So I'm not sure, if they're asking about phase 3, or for this, the moving from phase one to phase, 2, there but for phase one for Phase, 2 basically I I know, that the Sbir, and Sttr folks are really looking at what you did in Phase, one and Saying, Yes, this is now ripe and ready for these next steps, and you're showing what you accommodate for that.
1:01:50
But I'm not sure if they're asking something else. There, if you glean something else from that. Ej Yeah, Oh, to private funding, the person says, so going from Phase one and phase 2. To private fundings making that jump. I guess what you've you've shown there Oh, I I don't know. I I I don't know. If there's like an exact pattern. I think ultimately, it's like when when you're ready for outside, cap cause there's different set of pressure like when you take the $9 Grants
1:02:21
there's an In-depth Current, Timeframe, like where you, can Leverage, this Funding, and so depends on the stage of your technology. You might need 6 months, to 9 months to you know, achieve certain milestones, which is not necessarily conducive to venture funding where the pressures. A little bit on there, the Timelines get shorter and so I think it's a case by case, basis, and some some actually ended up raising at the same time, because it's it's conducive.
1:02:49
It's the Right, moment and they also have interested parties Okay. Alright, I'm just typing in our last answer. So when I'm just more information on the SBIRs Sdtrs but I don't think we have any other questions. So Ajay, I'd like to thank you so much, for taking the time, and filling in for Anurag who again, is not feeling so great today. And so thank you for being here for the entire time. Answering everyone's questions thank
1:03:18
you so much to our audience for so many of you, for sticking around for even past our time, we're really glad that you joined us, today. Thank you, in advance for filling out the the survey. As we do use that and thank you, everyone for spending this last year with us on all of our Webinars. We have a lot more coming up this next year. And we look forward to seeing you at those. Then take care.
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