Venture Capital Resources

Venture Capital is a specific term that refers to funding obtained from a venture capitalist. These are professional serial investors and may be individuals or part of a firm. Often venture capitalists have a niche based on business type and or size and or stage of growth. They are likely to see a lot of proposals in front of them (sometimes hundreds a month), be interested in a few, and invest in even fewer. Around 1-3% of all deals put to a venture capitalist get funded. So, with the numbers that low, you need to be clearly impressive.

Growth is usually associated with access to, and conservation of cash while maximising profitable business. People often see venture capital as the magic bullet to fix everything, but it isn’t. Owners need to have a huge desire to grow and a willingness to give up some ownership or control. For many, not wanting to lose control will make them a poor fit for venture capital. (If you work this out early on you might save a lot of headaches).

Remember, it’s not just about the money. From the perspective of a business owner, there is money and smart money. Smart money means it comes with expertise, advice and often contacts and new sales opportunities. This helps the owner, and the investors grow the business.

Venture Capital is just one way to fund a business and in fact it is one of the least common, yet most often discussed. It may or may not be the right option for you (a discussion with a corporate advisor might help you decide what is the right path for you).

Here’s a few other options to consider.

Your Own Money – many business are funded from the owner’s own savings, or from money drawn from equity in property. This is often the simplest money to access. Often an investor would like to see some of the owner’s fund in the company (“skin in the game”) before they’d consider investing.

Private Equity – Private Equity and Venture Capital are almost the same, but with a slightly different flavour. Venture Capital tends to be the term used for an early stage company and Private Equity for a later stage funding for further growth. There are specialists in each area and you’ll find different companies with their own criteria.

FF & F – Family, Friends and Fools – Those closer to the business and often not sophisticated investors. This type of money can come with more emotional baggage and interference (as opposed to help) from its providers, but may be the fastest way to access smaller amounts of capital. Often multiple investors will make up the overall amount needed.

Angel Investors – The main business angels vary from venture capitalists in their motives and level of involvement. Often angels are more involved in the business, providing ongoing mentorship and advice based on experience in a particular industry. For that reason, matching angels and owners is critical. There are substantial easily locatable networks of angels. Pitching to them is no less demanding than to a venture capitalist as they still review hundreds of proposals and accept only a handful. Often the demands around exit strategies are different for an angel and they are satisfied with a slightly longer term investment (say 5-7 years compared to 3-4 for a venture capitalist).

Bootstrapping – growing organically through reinvesting profits. No external capital injected.

Banks – banks will lend money, but are more concerned about your assets than your business. Expect to personally guarantee everything.

Leases – this may be a way to fund particular purchases that allow for expansion. They will normally be leases over assets, and secured by those assets. Often it is possible to lease specialist equipment that a bank would not lend on.

Merger / Acquisition Strategy – you may seek to acquire or be acquired. Generally even a merger has a stronger and a weaker partner. Combining the resources of two or more companies can be a path to growth – and when it is done with a company in the same business, can make a lot of sense – on paper at least. Many mergers suffer from differences in culture and unforeseen resentments that can kill the benefits.

Inventory Financing – specialist lenders will lend money against inventory you own. This may be more expensive than a bank, but might allow you to access funds you could not have otherwise.

Accounts Receivable Financing / Factoring – again a specialist area of lending that may allow you to tap into a source of funds you didn’t know you had.

IPO – this is normally a strategy after some initial capital raising and having proven a business is viable through the development of a track record. In Australia there are various ways to “list”. They are useful for raising larger amounts of money ($50m and up) as the costs can be quite high ($1m plus).

MBO (Management Buy Out) – This tends to be a later stage strategy, rather than a startup funding strategy. In essence debt is raised to buy out the owners and investors. It is often a strategy to gain back control from outside investors, or when investors seek to divest themselves from the business.

One of the most important things to remember across all these strategies is that they all require a significant amount of work in order to make them work – from the way the business is structured, to dealings with staff, suppliers and customers – need to be examined and groomed so that they make the company attractive as an investment proposition. This process of grooming and derisking can take anywhere from three months to a year. It is often costly both in actual expenses (consultants, legal advice, accounting advice) as well as changing the focus of the owners from “sticking to the knitting” and making money within the business to a focus on how the business presents itself.

A sound financial model and projection is one of the core ingredients of a business plan.
Here are some thoughts on how to do it right…
1. Keep it real. Don’t overstate sales projections. It is a common enough mistake to make because human nature says we want to put the best case forward. The solution os to have various scenarios, assign some probabilities, and tell an investor honestly what needs to happen to reach the targets.
2. State the assumptions clearly in the projection, so the investor knows what it is based on.
3. Make it easy to adjust and show the consequences – what if sales are lower, what if churn is higher, what if our costs decrease, what if our main customer leaves? Investors are a (justifiably) cynical bunch, so you need to be able to lay out a best case and a worst case scenario.
4. Show the effect of growth on cash flow. As sales increase, what is the increased need for further capital. This will show an investor not only how much they’ll need to put in, but when.
5. If you don’t know something, that is OK. Explain the gap in the knowledge and either how you’ll get the knowledge, or its likely impact if you don’t. If you claim to know everything, it’ll be clear you are not being honest.
6. Focus on readability – it’s easy to get wrapped up in the complexity of your own spreadsheet and end up with a wall of numbers which is incomprehensible. KISS. Use clear labels, colour code, space, and remove less material variations (put them elsewhere). Separate inputs and variables from calculations – so the user can see what they can adjust.
7. Get in a pro. You may be surprised by what you can achieve in Excel. For a small investment (a few hundred to a few thousand dollars) you can may build something which wins over an investor. Remember the quality of the brief to the programmer may have a major impact to the success… don’t assume they know anything about your industry. Explain everything.
8. GIGO. Get good input figures.

Guy Kawasaki is famous for his involvement in Apple (small company, has some great products apparently) and is now in the Venture Capital space and sharing some valuable information on venture capital tools.

Guy Kawasaki is an entrepreneur and an investor which is a great mix and makes for some very interesting advice on investing and venture capital resources.

In this video he covers early stage venture capital, and his thoughts on that. He eloquently covers a wide range of topics from viabiity v fundabiity, teams and “shitty” powerpoint.

(Part 1 of 3)

(Part 2 of 3)

(Part 3 of 3)

In order to write an effective venture capital business plan can be a challenging task to say the least. Business plans for venture capital require strength, determination and quality since you are going to be talking to the investors that hold the key to the future of your company in their hands.

Unfortunately, no more than 2 to 5 percent of companies lookin for venture capital actually succeed with their goal.Some fail on the first attempt and give up, others learn from the experience, correct the mistakes they made with their first venture capital business plan and strategies and go back to the venture capitalists for a second, third and forth time before they get the growth capital they require.

The small percentage (2-5% if you recall) that succeed in getting a venture capital investment for their business probably know something that the others don’t! Those that are successful in getting venture capital know how to position their companies in front of the venture capitalists, they know how to present them to capture the attention of their prospective investors and in many cases this is done in the first instance by the presentation of aneffective venture capital business plan.

It is obvious that this is no small achievement given the small number of people that are successful in finding growth capital from investors, so what did they do?

Here is a closer look at a few things that you can do:

1. Position Your Company – This means being in a successful industry with the potential for growth, ideally one that the prospective venture capitalists know well. Having a chain of ten successful stores is a very strong recommendation and would help your prospects as would the vision of ten successful stores presented in the right business plan to the correct group of venture capitalists.

2. Venture Capitalists Want A Sense of “WOW” – The initial response to your VC business plan needs to create a WOW factor. An effective business plan is one thing, but a business plan that makes people sit up and take notice is another. Having a WOW factor in your business plan doesn’t have to mean you set unrealistic goals, it just means that the vision you have, and your mechanism for implementing it are in line and that the venture capitalists reading your business plan can envision it coming to place with the correct injection of growth capital for your business. The presentation may not be everything, but without it, there is nothing.

Business plans for venture capital will have the most unique approach of all. Venture capital business plans cannot be “canned”. Entrepreneurs who use business plan templates at this level of funding just won’t get this level of funding, its as simple as that. The people who are reviewing these proposals have seen hundreds if not thousands of business plans and know which ones are genuine and which ones are from the wanna-bees.

A venture capital business plan presentation must be sophisticated, complete, accurate and, yes, it must also be dynamic. It must represent the company just like an ad in The Financial Review or The Australian would represent the company.

More than any other type of business plan, yours must have a solid foundation of marketing stats. Research, research, and more research.

You should create the most outstanding business plan possible. Sometimes there is no second chance at some venture capitalists, so make that first impression count.

Create an outstanding website. Whether your company’s business is based on the internet or not, a strong presence here is essential to convey your professionalism and seriousness to the potential investors.

It’s an mistake to believe the catchphrase that venture capitalists don’t invest in companies, they invest in people. Without doubt, an exceptionally strong management team with a so-so product will get a better response than a weak entrepreneur with a good product. The theory is that it’s easier to improve a product than it is to improve the people behind it. So strut your stuff — the VCs are watching. (This means you should “make that business plan so outstanding that they can’t refuse it, no matter what the product is.”)

Unprecedented Joint Venture Agreement Sees Cream Minerals’ Nuevo Mileno Project Advance in Mexico

With a new joint venture agreement signed with Roca Mines for US million in exploration expenditures on the Nuevo Mileno Project, Cream Minerals’ President Michael O’Connor is enthusiastic about continuing with project generation. Cream Minerals is now turning its’ sights to the Blueberry Gold Project 20 km’s NE of Flin Flon, Manitoba; and the continued review of precious metals exploration properties in Mexico with the intention of optioning a property in the near future. Here, Mr. O’Connor speaks with resourceINTELLIGENCE reporter, Katherine Young about developments at Cream.

Resource Intelligence: Could you tell us about Cream’s Nuevo Milenio project in Nayarit State, Mexico?

Michael O’Connor: Yes, we acquired the Nuevo Milenio Project in 2000. It is located in northern Mexico 27 kilometres from Tepic, the capital city of Nayarit State. It has a resource of 5.1 million tonnes of ore, with 1.66 g/t gold and over 251 g/t silver, so very high-grade. The December 2008 resource estimate identified an Inferred Mineral Resource of 54.6 million ounces silver equivalent.

RI: Cream recently made a deal with Roca Mines to develop the project. Can you tell us about the deal?

MO: Cream Minerals still owns 100% of the project, but we recently optioned Nuevo Milenio to Roca Mines to develop the project.  Roca has agreed to spend US million over the next four years. Spending US $ 12 million earns Roca a 50% interest in the project, but in order to earn the full 70% they must also conduct a Compliant Feasibility Study.

This is an excellent agreement for Cream. An option agreement like this involves enough exploration capital to see the whole 2,560 hectare property systematically explored. Our current NI 43-101 Inferred Mineral Resource is based on exploration on an area that is approximately 600 ha of the total 2,560 ha. Roca could expand on that enormously. This is an enormous amount of money for an option agreement and a fantastic deal for both Cream and Roca. Normally, on a deal like this you might get a few hundred thousand dollars for a first payment, then moving toward a total of about million over 5 years. US million over four years is really unprecedented, but Roca Mines did their due diligence and reviewed all our data. They wouldn’t be investing capital like this unless they were firmly convinced of the potential for the project.

RI: What will change on the project now that Roca is involved?

MO: Now that Roca has taken over as the operator on this project exploration activity will accelerate. We had initially planned a 2-year underground exploration program that would have upgraded the existing inferred mineral resource to measured and indicated with an additional 50 million ounce silver target. The plan included a goal of production within five years.

The Roca option agreement extends over seven years with the requirement that Roca complete a Compliant Feasibility Study by the end of seven years and three months. Roca can pursue early production opportunities if they choose. If they do not proceed with a Compliant Feasibility Study and design a mine development and production plan, given that they are acknowledged to be excellent mine developers and operators based on the success of the MAX Mine, then the time line to early production would probably be roughly five to six years. Roca has the option to earn a further 20% interest in Nuevo Milenio, for a total interest of 70%, through the completion a Compliant Feasibility Study within three years of November 24, 2013. Should Roca earn an interest in Nuevo Milenio Cream and Roca would then participate proportionately in the further development of Nuevo Milenio.

RI: What has Roca undertaken so far on the project?

MO: Roca began drilling on the property in February 2010. The first phase of the drill program includes drilling up to seven holes for a total of 1,500 meters, which doesn’t sound like a lot, but fortunately for the project, the drill targets are shallow. They’ve been busy on the project since July 2009 conducting multiple property visits with their geologists, reviewing all of Creams core and analyzing all of Creams original data. In addition Roca has been working on generating a 3D geological model in Vulcan.  A phase II drill program is also planned following results from Phase I. Roca has engaged Robert (“Bob”) Lane P.Geo, a recognized authority on epithermal gold and silver deposits to design and oversee their exploration program.
RI: How is the infrastructure in the area of Mexico where the project is located?

MO: The property is located 24 kilometres by paved road and 3 kilometres by dirt road from Tepic, the capital city of Nayarit State, Mexico. Tepic is the capital of Nayarit State with a population of about 300,000 and is a commercial centre located 150 km northeast of Puerto Vallarta. Critical infrastructure such as airport, railway, water and power lines are all easily accessible to the Nuevo Milenio Project, which is good news for keeping costs low.

RI: What else should investors know about the operator, Roca Mines? Why are you confident in their expertise?

MO: Roca recently opened the MAX Molybdenum Mine, the newest primary molybdenum mine to begin operation in Canada. Roca this month announced revenues of .2 million for the nine months ended May 31, 2009.
Roca acquired 100% interest in the high-grade, large scale MAX molybdenum deposit in 2003. Exploration on the deposit eventually revealed a measured and indicated resource of 42.9 million tonnes at a grade of 0.20% MoS2, which at a cutoff of 0.1 % MoS2 makes for a billion dollar metal value at least.  

RI: Could you tell me a little about your team?

MO: I have over 20 years experience on the financial side in brokerage, private banking and investment counseling, investor relations and corporate communications. My background in financing developing companies is particularly relevant for my leadership at Cream.

We have Frank Lang who retired as President of Cream Minerals in late 2008, but remains with us as Chairman of the Board of Directors. In 1982 Frank co-discovered the Hemlo discovery, which became the Hemlo mine. That mine currently produces 500,000 ounces of gold per year.  Frank has founded a number of companies including Aurizon, which also became a producing mine. Aurizon is on track to produce in excess 150,000 ounces of gold in the coming year.
We also have Fred Holsipak who is our head geologist. He has extensive experience in acquisition and exploration of mineral projects in North and South America and Mexico as well as Australia and Africa over the last 30 years. He was exploration manager of Agilis Engineering for eight years. He acted as Director of Exploration for the Nicaraguan Government between 1979 and 1982, and since 1991 he has been the exploration and administrative manager in Mexico for the Lang Mining group of companies.

RI: What other properties does Cream Minerals have on its roster?

MO: In the beginning of December we announced that we expanded our mineral claim interest on our Blueberry Project in northern Manitoba. The Blueberry Project is located only 20km northeast of the infamous Flin Flon, Manitoba. There is great access to the property and solid infrastructure. There is a road that is maintained year round that runs right through the property and gives us four season access to the property.

We’re excited that there is an outcropping in the middle of the property that is approximately 250m by 450m. Grab and chip samples from that outcropping have returned assays that range on the low end from 0.4 g/t gold and on the highest end up to 43 g/t gold. So we’re pretty encouraged.

We also have the Goldsmith property in southeastern BC. Grab sampling there in 2003 returned very high-grade gold-silver assays, the highest being 9,901.79 g/t gold. We have the silver-lead-zinc Kaslo Property about 12 km from the town of Kaslo in southeastern BC at the site of the old Cork Province Mine. We completed an HTEM HELIMAG Airborne Geophysical survey there. At the Cork South Zone, drilling returned a weighted average of 209.3 g/t silver, 6.02% lead, and 8.04% zinc over a 21.1 meter width. In the Gold Cure zone trenching returned an average silver grade of 416 g/t silver, 1.2% lead and 0.63% zinc over a 4m width. Finally, the Silver Bear Zone returned averages of 192.3 g/t silver, 1.76% lead and 1.69% zinc over a 37m width.

Another important property is our Casierra Diamond Project in Sierra Leone. It is an offshore alluvial diamond exploration prospect. It’s approximately 88 square kilometers in size and the Moa and Mano Rivers drain into this area from well-known diamond hosting areas in Sierra Leone. We’ll be looking to joint venture this project to continue exploration on the project.

RI: The deal Cream made with Roca could be described as project generating. Is Cream focused on project generation at the moment, and if so, why?

MO: Joint venturing with companies like Roca Mines is advantageous in the current economic climate because capital is expensive at the moment. Cream Minerals has long considered itself to be a project generation company, but particularly at this time, it is a clever strategy to partner with companies like Roca Mines who have excellent cash flow, which gives them the leeway to invest in exploration and develop properties toward production.

Milestones:

* July 24, 2010: Roca Mines’ deadline to spend US
* million on Nuevo Milenio
* July 24, 2011: Roca Mines’ deadline to spend US .5
* million on Neuvo Milenio
* July 24, 2013: Roca Mines’ deadline to complete US million on exploration on Nuevo Mileno

Part 2 of 4 Chief Technology Officer Dr Tom Denniss founded the Company (initially called Energetech Australia Pty Ltd) in 1997 and spent nine years as the Company’s first CEO. He developed the core technology that Oceanlinx is now commercializing. Prior to forming the Company, he spent four years lecturing in mathematics and oceanography at the University of NSW and five years in an investment bank. He has continued as a prominent contributor to the marine technology industry over many years through both academia and industry conferences and committees around the globe. He is the recipient of a number of awards for his pioneering work in wave power. As Chief Technology Officer Dr Denniss will continue to improve and advance Oceanlinx OWC technology as well as use his extensive global network of relationships with academic and industry leaders to further enhance the Company’s position and profile as well as expand the Company’s investment and business portfolio. Oceanlixn is coming to Maui 1997: Oceanlinx is founded by Dr. Tom Denniss (as Energetech Australia Pty Limited) 1999: Energetech receives a A0000 Federal Government grant to develop the Port Kembla project November 2001: Energetech closes a round of venture capital funding with the Connecticut Innovations Incorporated in the USA, enabling the establishment of a US subsidiary, Energetech America 2002: Three European investment groups specializing in innovative energy technology invest US.75 million, and German …