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SOFTEX: What are your thoughts on valuations today? MURCHISON: I think current company valuations are inflated and based on unsubstantiated projections. I prefer to use real numbers or substantiated projections. CORSON: I feel that all new tech companies seem to provide the same valuation multiples based on acqui- sitions by Google and Apple. These are just not realistic. HUBBARD: Many capital providers in the CapStack com- munity spoke to the lack of flexibility by the C-suite to take advice from veterans within their industry. Others commented on due diligence not matching the initial presentation data, slow response times from executives when answering questions, and lack of depth as to the real capital needs of the company by using a range of in- vestment instead of putting a stake in the ground and sticking to it. More money does not mean you can grow faster, it just means you will spend more money. SOFTEX: What causes you to shy away from an opportunity? CORSON: Executives can be so focused on increasing the features and benefits of their software that they forget to work on obtaining sufficient revenue streams to sus- tain their operations. They worry too much about R&D and not enough about having a good business sense. MURCHISON: Unrealistic expectations and no revenue model will deter us from moving to next steps. ANDERSON: If a CEO can't articulate with conviction how the company is going to win, that's an automatic no. HUBBARD: Setting expectations requires research into the market, a real understanding of business growth, the actual value of momentum (and the underlying data to substantiate the monetary impact), and training of chan- nel partners (if applicable). If you feel investors are fight- ing your projections, engage them. Don't defend your numbers. Learn from them, prepare for the next meeting, and fine-tune your Q&A. It may even help you get a sec- ond meeting with the naysayers. When I started my first company in 1988, the overall market for my product was finite. Attaining a $100M run rate wasn't going to happen without serious market penetration. Today, the global market's sheer size means there can be 10 or 20 $100M companies in the same niche. So don't get defensive about your unique value proposition. Instead, revel in the fact that competitors have jumped into the niche and are educating the market for you. S consumer buying preferences and learn in "nearly real time" which messaging will get the most sales conversions for a new product. Marketing agencies may no longer have to do split testing, focus groups, or pilot programs to gauge interest. I only see the ef- fects of AI accelerating. CARPOU: We see a lot of potential deals in AR/VR, AI, and cybersecurity. The most interesting companies have shown a path to monetize this technology and have a targeted base of B2B and B2C customers. ANDERSON: As an alternative lender, we're fascinated by blockchain as it is the most intriguing frontier soft- ware. It has the potential to reinvent all financial mar- kets in a more efficient, cost-effective, and secure man- ner unlike anything we've ever seen before. HUBBARD: If you are raising funds and your software does not fall in these categories, you need to provide investors with a compelling reason for engagement. Whether you drive home the revenue model, a clever market penetra- tion process, a sizable opportunity, a unique innovation, or long-term staying power, every investor has different ex- pectations for each segment of their portfolio. Find these key drivers and position them for the capital provider. The next step in the process of identifying the right capital partners pertains to the introduction. How do you connect? A warm introduction is always preferable. SOFTEX: What do investors want to see? HUBBARD: Many capital providers like an executive sum- mary. Don't sell; inform the reader. If you are sending a deck, be sure it is self-giving and includes full notes sec- tions on every page so the capital provider can easily de- termine if there is a match. You don't want them to make a snap judgment based on limited information. Most decks are built to be given verbally, which can cause a dis- connect when sent without narration. Don't risk it. CARPOU: We require the company to have already raised some capital from friends, family, or angels. The company must also have a solid business plan, identi- fied team, and proof of concept on the product/service. CORSON: We like to see a slide deck, minimum revenue of $2 million annually, breakeven within three years, and strong executive team bios. HUBBARD: Most capital providers prefer a third-party valuation, and you should as well. Seasoned investors find most CEOs ill-prepared to discuss valuation. And that frustrates them right from the outset. 29 SOFTWAREEXECUTIVEMAG.COM OCTOBER/NOVEMBER 2017

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