Develop a detailed table which illustrates that you clearly understand the market you’re competing in.
Make sure that you are current on your competitor’s product so that you can demonstrate your understanding of your market.
If there have been any acquisitions or IPO’s in your sector, make sure you understand all the information behind this events.
Channel Partners, Pricing, Websites and company acquisitions are also important to understand
X X X X Comp 3 X X X X X Comp 2 X X X X X Comp 1 X X X X X X X Newco Attribute 7 Attribute 6 Attribute 5 Attribute 4 Attribute 3 Attribute 2 Attribute 1 Company
KEYS TO GOOD BUSINESS PLAN Financials – Capital Needs
Financial Projections for at least 2 – 3 years are essential.
Insure that you have a deep understanding of the assumptions behind your Revenue projections and make them explicit.
Project Gross and Operating Margins and compare them to public companies in your overall sector to do a “reality check”.
Make sure that your capital raise is consistent with your financial plan.
Specify the “Uses of Capital” so that investors can understand where the money is being used.
Surround yourself with great stakeholders? Lawyers Accountants Industry Advisors Board Members Management
What are the other sources of capital? Most companies do not secure venture capital
Debt financing – commercial banks, venture banks, government grants
Angel financing – early capital which can be strategic and often comes in the form of Common Stock
Strategic financing – vendors, suppliers or customers who have a vested interest in the success of the business
Friends & family – high net worth individuals who oftentimes have a direct connection with the entrepreneur
How are investments structured? Different groups structure securities different ways
Debt – senior in the capital structure, often require cash flow and generally have interest payment required or accrued
Preferred Equity – sandwiched between Debt and Common Stock, oftentimes has a number of features and protections associated with institutional capital – general features include preference, participation, Board rights, anti-dilution provisions and information rights.
Common Equity – most junior capital which oftentimes is the first capital but lacks features of Preferred Equity – generally used for management and employees
Convertible Debt – sits in between Debt and Preferred Equity and is oftentimes convertible upon a specific event (e.g. a future financing)
Seed & Early stage fell 17 percent to $1.7 billion into 330 deals with average seed deal of $3.6 million down slightly from $3.8 million last quarter.
Expansion stage deals were flat with $2.9 billion going into 318 deals with the average expansion deal up to $9.0 million from $8.1 million in Q’ IV 2007.
Later stage investments fell 11 percent with $2.6 billion going into 274 deals & accounting for 30 percent of total deal volume. Later stage deals in QI ’08 were $9.6 million was slightly higher than $9.4 million in last quarter.
Industry Overview – Stage Breakdowns What is Venture Capital?