The Founding Team

1

• The Founding Team
• A Discussion
• Ralph C Derrickson
• President CEO Managing Member
• RCollins Group, LLC

2
Welcome

• Introductions welcome
• Who is the founding team?
• 3 points of view investor, manager, entrepreneur
• Dynamics
• Considerations
• Questions

3
Adequate Management?

• Our research showed that investors are extremely
  reluctant to invest without knowing their risk
  concerning adequate management.
• High Tech Start Up
• The Complete Handbook for Creating Successful New
  High Tech Companies
• John L. Nesheim

4
Who is the founding team?

• The people who get to claim victory?
• The scapegoats for a failed business or
  investment?
• The reason investors make investments?
• The reason other people join the company?
• The reason the company succeeds or fails?

5
Where do you draw the line?

• The people that are there when the business
  becomes a viable enterprise
• Figured out their product and how to sell it
• Figured out how their business model works
• Can say no to additional investment they dont
  need the money
• Does it include the board of directors or
  investors?

6
The investment decision the 3 Ms

• Market if the business did it would anyone
  care?
• Is there a market for the it
• Are there competitors?
• How does the market buy?
• Aspirin or vitamins?
• Model if they did it would it make money?
• What is the unit transaction of the business?
• How profitable is it?
• Can it be replicated
• Management is this the right team to do it

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Investor is this the right entrepreneur?

• Experience
• Anything relevant? Any experience at all?
• Done something similar? Will they try to repeat?
  Dissimilar and try to repeat?
• Do they know the market players, dynamics?
• Can they sell their product or service?
• Management
• Can they hire people that will help them?
• Can they manage people?
• Do they inspire confidence in employees
  investors?
• Character?
• Do you trust them? With the money? With the
  business?
• Do they recognize their own strengths and
  weaknesses?
• Are their goals the same as yours do they
  measure success the same way?
• Will they step aside if need be?
• Do they own enough to matter? Do they own too
  much?
• Do they have a plan for building value? Is it the
  same as yours?

8
Entrepreneur is this the right investor

• Do they have a track record of investing in this
  space?
• Does the partner know the space? Have relevant
  experience? Have any experience?
• Do they have the credibility to help me with
  other investors?
• Do they have the contacts to help me recruit, get
  more investors, or find customers?
• Do they have the money to support me down the
  road?
• Know the difference between being on the board
  and running a company?
• Do you trust them?
• Will they push me aside? They can fire you but
  you cant fire them!

9
Manager is this the right team?

• Much different at the start, then later
• Pioneers vs. settlers
• Do I believe they can help me make the company
  successful?
• Can I work with them?
• Can I trust them?
• Can they accelerate/contribute to institutional
  learning?
• Can they shape the culture is their personality
  or their behavior strong enough?
• Will people model their behavior after them are
  they a natural leader?
• Can they handle a start-up?

10
Dynamics Fund Raising
Next funding window?
Capital Raised?
Next pre-money value?
Burn Rate?
Valuation Step up?
Post Money Value?
Value enhancing milestone?
Time?
If schedule slips?
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Dynamics Cash Position
Elation
Paranoia?
Terror
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Dynamics Changing Priorities
What dont I know
People issues politics favorites paranoia
burn out - sleep
Competitive and or Regulatory Threats
Investor Relations Board Meetings
Recruiting
Sales Marketing
Product Development
Fund Raising
Seed
Development
Sales Marketing
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Dynamics!
What dont I know
Next funding window?
People issues politics favorites paranoia
burn out - sleep
Capital Raised?
Competitive and or Regulatory Threats
Burn Rate?
Investor Relations Board Meetings
Elation
Recruiting
Valuation Step up?
Sales Marketing
Paranoia?
Post Money Value?
Product Development
Value enhancing milestone?
Fund Raising
Terror
Time?
If schedule slips?
14
Considerations

• Experience vs. attitude?
• Interviewing is an unnatural act do your home
  work!
• You never add to a team you reform it with
  every new team member and shift in phase.
• Rarely exit the same business you entered!
• No recipe for success so dont try to follow one.

15
Questions
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Health care that comes to you