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VENTURE CAPITAL REVENUE MODEL

Mariah Lichtenstern - Mariah@DiverseCityV.com | @lightedstar


MARIAH LICHTENSTERN
Founding Partner
Serial Entrepreneur
Member of UCLA Ventures
Tech Advisory Committee for
CalSEED CleanTech Fund
Co-Director, Founder Institute
Female Founder Fellow, Founder
Institute Silicon Valley
Mentor & Judge: Draper University,
Startup Weekend, FBLA et al
Formerly FNRA licensed (Series 6, 63, & 65)
2015 Kauffman Fellows Finalist
Cal Bear / USC Mafia
OUR THESIS: COMPANIES
DiverseCity Ventures invests in scalable,
technology-driven companies with social, economic,
or environmental impact and high potential for
outsized returns.

@DiverseCityV
OUR THESIS: FOUNDERS
We have special interest in companies helmed by
exceptional founders who understand the value
of diverse perspectives. Data supports our belief
that under-utilized perspectives and underserved
markets are a treasure trove of opportunity.

@DiverseCityV
DIVERSE PERSPECTIVES
How much more likely are companies in
top quartile for diversity to financially
outperform those in the bottom quartile?

15% Gender
35% Ethically
Diverse Diverse

Source: McKinsey Analysis


@DiverseCityV
OUR BUSINESS MODEL
Deal Flow (marketing):
Collaboration with global accelerators and organizations
Open submissions evaluated for company viability and founder suitability (e.g.
impact-orientation)
Pitch competition partnerships / judging
RFP - Request for presentation

Features:
Angel & VC intros / follow-on funding

Relocation, recruitment, and go-to-market support

Partnerships and platform services in 60 countries

Fundapreneur program for non-dilutive capital & market validation

@DiverseCityV
TARGET INVESTMENT

$100k in early seed stage

$1MM in late seed stage

@DiverseCityV
VENTURE CAPITAL FAQS / *QUOTA:

When should I raise?

How does a VC decide who to invest in?

What market size & revenue models are attractive?

Does my exit strategy matter to a VC?

What are alternatives to Venture Capital?

Questions You Ought To Ask @DiverseCityV


FOUNDER FAQS / *QUOTA:
How big is your market?

What are your KPIs?

What is your market size / REVENUE model?

What does your team look like?

@DiverseCityV
THE ODDS

50% 99%
FAILURE RATE NO RATE

@DiverseCityV
FUND REVENUE MODEL
FUND SIZE TARGET RETURN TO FUND 3-5X

$20MM $60-100MM
$100MM $300-500MM
2% Management Fee / 20% Carry

@DiverseCityV
THINK LIKE A VC

LIFE OF FUND
10 Yrs.
DEALS PER PARTNER / YEAR
2 - 4 (x 4-5 years)
DEAL SIZE:

$20MM Fund $100K - $1MM


*
$100MM Fund $1MM -10MM

@DiverseCityV
DEPLOYMENT STRATEGY
(Example only - Deployment Strategies May Vary)

FUND SIZE $20MM (1P) $100MM (4P)


DEALS / YEAR 10 8
DEAL SIZE $100K $2MM
4YR DEPLOYMENT (40 Cos) =>$4MM (32 Cos) =>$64MM

FOLLOW-ON RESERVE $16MM $36MM


20% FOLLOW-ON 8 X $2MM 6 X $6MM

@DiverseCityV
PARETO PRINCIPLE

FUND SIZE TARGET RETURN 80% Return From 20% $$ / Co

$20MM $80MM $64MM 8 Cos. $8MM

$100MM $400MM $360MM 6 Cos. $60MM

How does VC get this return?

@DiverseCityV
EXIT AT 20% OWNERSHIP
FUND SIZE $20MM $100MM
TARGET RETURN / CO $8MM $60MM
20% POSITION $2.1MM $8MM
REQUIRED EXIT $40MM $300MM
MULTIPLE (Exit / ROI) 19X / 3.8X 37.5X / 7.5X

ASSUMING NO DILUTION!

@DiverseCityV
EXIT AT 10% OWNERSHIP
FUND SIZE $20MM $100MM
TARGET RETURN / CO $8MM $60MM
10% POSITION $2.1MM $8MM
REQUIRED EXIT $80MM $600MM
MULTIPLE (Exit / ROI) 38X / 3.8X 75X / 7.5X

@DiverseCityV
EXIT AT 5% OWNERSHIP
FUND SIZE $20MM $100MM
TARGET RETURN / CO $8MM $60MM
5% POSITION $2.1MM $8MM
REQUIRED EXIT $160MM $1.2B
MULTIPLE (Exit / ROI) 76X / 3.8X 150X / 7.5X

@DiverseCityV
VC #GOALS
FUND SIZE TARGET RETURN VC CARRY LP RETURN

$20MM $80MM $12MM $66MM


$100MM $400MM $60MM $330MM

@DiverseCityV
VENTURE CAPITAL FAQS / *QUOTA:

When should I raise? - A: When you have traction...

How does a VC decide who to invest in? - A: 20%-er potential

Does my exit strategy matter to a VC? - A: Rapid growth matters!

What are alternatives to Venture Capital? - A: Revenue! Crowdfunding.

Questions You Ought To Ask @DiverseCityV


FOUNDER FAQS / *QUOTA:

How big is your market? A: $Billion TAM

What are your KPIs? A: $100K MRR / $1MM ARR*

What is your revenue model? A: Large, scalable margins

What does your team look like? A: Cohesive, High EQ, Tech Savvy

*Monthly Recurring Revenue / Annual Run Rate @DiverseCityV


FOUNDER DNA *

Remember, its a 10 year marriage!

* FOUNDER INSTITUTE FI.CO/DNA @DiverseCityV


FOUNDER DNA *

* FOUNDER INSTITUTE FI.CO/DNA @DiverseCityV


WHAT TO EXPECT

In my experience, it will generally take three to four rounds


of equity capital to finance the business and 20-25% of the
company to recruit and retain a management team. That will
typically leave the founder/founder team with 10-20% of the
business when it's all said and done. - Fred Wilson, AVC

@DiverseCityV
FOUNDER DILUTION
Run your own scenario: https://smartasset.com/infographic/startup

Startup
26% Option Pool

Angel / SEED
$500K

Series A
$3M @ 20%

Series B
$8M @ 25%

0 25.0 50.0 75.0 100.0

Founder Team Option Pool Advisors Et Al Angel Series A Series B @DiverseCityV


DO YOUR HOMEWORK!

The 10 Most Popular Startup 15 Terms You Need to Know


Revenue Models About Revenue

* FOUNDER INSTITUTE FI.CO/DNA @DiverseCityV


Mariah Lichtenstern
Mariah@DiverseCityV.com
@lightedstar / @DiverseCityV