For investors it’s really hard to assess the merits of science-based ventures that don’t yet have any revenue or growth metrics. It’s often even harder to make any sense of the science-related claims of the inventors.
This makes it very hard for deeptech ventures to find a lead investor at the spinout stage and it makes it really hard for investors to lead investment rounds at that stage.
Read on to find out how the Deeptech seed Fund Scorecard solves this problem – for ventures and investors. We launched it publicly last November and already it has been adopted or is being piloted in several countries, including two programmes using it at a national level.
Innovate UK have adopted the scorecard nationally and we’re relaunching it now on foot of great new video content that they have created to help their ICURe programmes to use the scorecard properly.
If you’re running an incubator programme aimed at spinout ventures or if you have a seed fund that is trying to invest in spinouts, then please get in touch
The scorecard
The scorecard is here https://bit.ly/DTSF_Scorecard
For existing users – the text below is largely unchanged but the associated video is new.
Some small changes have been made to the scorecard and these are explained in this short update video.
Description and video introduction
0:00 In this video, created by Innovate UK, Pearse Coyle introduces the scorecard and explains the rationale behind it.
He explains the three main sections of it:
2:22 Traction and Market: Which allows the venture to present the evidence of traction and evidence of market size.
The aim here is to get past the PowerPoint BS, with logos of interested potential customers, and instead show how many early-adopters are in some way committed, in what way are they actually committed and how many of them will take a due-diligence call from an investor.
10:15 Team IP and cap table: Where the proposed ownership structure and IP licensing terms can be summarised.
Many spinout ventures defer agreeing a cap table and, surprisingly, in the experience of Innovate UK, failure to agree on a cap table is the biggest reason for the failure of spinout ventures.
For this reason the scorecard requires the team to state clearly whether or not they have agreed a cap table. It also provides one place to set out both the equity % claim of each individual and their proposed time commitment to the venture i.e. 100% = full-time. In negotiations within the team is very helpful to present these in the same place, especially when there are tenured academics who perhaps expect a lot of equity but are not silling to commit a lot of their time.
This sheet also allows for a simple summary of the terms of the Intellectual Property licensing deal (between the university and the venture) to be provided.
12:34 Funding ask: This shows the funds required broken down in a way that makes clear to investors and to grant funders who is expected to be funding the venture and to what level. In particular this highlights:
– The total amount of money sought, not just the amount sought from investors.
– The amount of money coming from early-adopters or collaborators. If this is zero then you have a credibility problem.
– The amount already committed, or offered by “follower” investors. E.g. many universities have seed funds that will pretty-much-automatically invest (follow) once you have a committed (lead) investor.
– The amount you expect to win in grants. It is really attractive for investors if you have loads of non-dilutive, “free”, money also coming in. Sometimes ventures just say that they need e.g. €300k from investors but they don’t make it clear that from all sources they might then have as much as €1M available to them.
Call to action
– Go ahead and use this scorecard if you’re running a deeptech incubator or are a very early-stage investor. Just let me know how you get on by emailing Pearse Coyle pc@deeptechseedfund.com or connect to me here on LinkedIn – with a note as to why you are connecting.
– If you want our help and might need a co-investor or a lead investor then we’ll help you use it
– If you’re a grant provider or are running an awards competition then talk to us. We believe this is an ideal way to objectively assess applicants.
Additional links/material
Early-adopter template proposal https://bit.ly/earlyadopterproposal This has been significantly updated and improved recently.
Presentation on how and why to get paying early-adopters https://bit.ly/deeptechearlyadopter
With thanks to
Rayner Lim Thomas Burniece Martina Maguire Paul Reavey Paul Donachy David Moore James O’Connor Alan Armstrong Adrian Jones Dr. Emma E Burke MBA Arnaud de la Tour Patrick Schneider-Sikorsky Guillaume Berteloot Robert Marino Bill Coughran Rhys Green Katarina Chowra
Achtung baby
Noah Isserman Harlee Sorkin Prajeet Patel Paul Maguire Barry Fennell
This post was originally posted on LinkedIn by Pearse Coyle. You can view the original post here and follow Pearse on LinkedIn here