0
LAUNCHING YOUR STARTUP — Financing Your Venture — by Jim Butterworth U.S. Civilian Research & Development Foundation Idea ...
Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution ...
Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution ...
My Background <ul><li>28 years in technology-related ventures in all capacities </li></ul><ul><ul><li>Founder/CEO, venture...
Impact of U.S. Small Businesses <ul><li>25.8 million U.S. businesses </li></ul><ul><li>“Small” businesses represent: </li>...
Impact of Venture-Backed Companies <ul><li>In the U.S.: </li></ul><ul><ul><li>$1.8 trillion in revenue in 2003 (9.6% of al...
Impact of U.S. Universities <ul><li>Established > 4,100 new companies since 1980, 2/3 of which were still operating </li><...
Lifecycle of a Startup <ul><li>Conception / Invention </li></ul><ul><li>Seed Stage </li></ul><ul><ul><li>Formation / incor...
Lifecycle of a Startup <ul><li>Conception / Invention </li></ul><ul><li>Seed Stage </li></ul><ul><ul><li>Formation / incor...
Startup Fundamentals <ul><li>Solid foundation = best chance of funding your venture </li></ul>
Pour a Solid Foundation <ul><li>Market-driven concept </li></ul><ul><ul><li>Talk to prospective customers </li></ul></ul><...
Be Market-Driven! <ul><li>Purchase decisions are based on relationships – understand your customers </li></ul><ul><li>Unde...
Protect Your Assets!
Cash Flow is Your Life Blood! <ul><li>CFIMITYM </li></ul><ul><li>Cash flow comes ultimately and most importantly from cust...
Business Planning <ul><li>“The plan is useless; it’s the planning that’s important.” </li></ul><ul><ul><li>General Dwight ...
Output of the Business Planning Process <ul><li>Business plan (narrative) </li></ul><ul><li>Pro forma financial statements...
A Business Plan… <ul><li>Describes all the critical internal and external elements and strategies for guiding the directio...
Uses of a Business Plan (Internal) <ul><li>Refining your product / service strategy </li></ul><ul><li>Identifying key cust...
Uses of a Business Plan (External) <ul><li>Attracting key employees </li></ul><ul><li>Educating potential investors </li><...
The 12-13 Page PowerPoint Pitch <ul><li>Summary (1) </li></ul><ul><ul><li>Mission statement </li></ul></ul><ul><ul><li>Wha...
The Mission Statement <ul><li>To create [value/EVA] by [product/service] for/to [customer(s)] by… </li></ul>Strategic Obje...
The Mission Statement
Mission Statement Example <ul><li>To be Kazakhstan’s leading producer of “A-class” widgets to the natural gas sector by: <...
The 12-13 Page PowerPoint Pitch <ul><li>Summary (1) </li></ul><ul><ul><li>Mission statement </li></ul></ul><ul><ul><li>Wha...
Major Pain Points <ul><li>What is the major pain your customers face currently and/or in the future? </li></ul><ul><ul><li...
Favorable Market Dynamics <ul><li>The market is  large  for our product/service: </li></ul><ul><ul><li>Size stat 1 </li></...
The 12-13 Page PowerPoint Pitch <ul><li>Summary (1) </li></ul><ul><ul><li>Mission statement </li></ul></ul><ul><ul><li>Wha...
The 12-13 Page PowerPoint Pitch <ul><li>Operating Plan (2) </li></ul><ul><ul><li>Production / manufacturing </li></ul></ul...
What’s Proprietary About Your Idea? <ul><li>Competitive Advantages </li></ul><ul><ul><li>Proprietary IPR </li></ul></ul><u...
The 12-13 Page PowerPoint Pitch <ul><li>Operating Plan (2) </li></ul><ul><ul><li>Production / manufacturing </li></ul></ul...
Financial Projections <ul><li>Notes </li></ul><ul><li>Assumption 1 </li></ul><ul><li>Assumption 2 </li></ul><ul><li>Assump...
Funding Requirements <ul><li>Does your venture need external financing? </li></ul><ul><ul><li>How much & when? </li></ul><...
The 12-13 Page PowerPoint Pitch <ul><li>Operating Plan (2) </li></ul><ul><ul><li>Production / manufacturing </li></ul></ul...
The 12-13 Page PowerPoint Pitch <ul><li>Appendix (as long as you want) </li></ul><ul><ul><li>Market details (e.g., surveys...
The Elevator Pitch <ul><li>One of the most important “outputs” of business planning </li></ul><ul><li>Convinces the “targe...
Part I Summary <ul><li>Pour a solid foundation </li></ul><ul><li>Protect your strategic assets (like IPRs) </li></ul><ul><...
LAUNCHING YOUR STARTUP — Financing Your Venture — by Jim Butterworth U.S. Civilian Research & Development Foundation Idea ...
Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution ...
Review of Part I <ul><li>Pour a solid foundation </li></ul><ul><li>Protect your strategic assets (like IPRs) </li></ul><ul...
Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution ...
A Primer on Venture Capital <ul><li>What is venture capital? </li></ul><ul><ul><li>A cash investment made by professional,...
U.S. Venture Capital Market PLACEHOLDER
European Venture Capital Market PLACEHOLDER
Types of Venture Capital <ul><li>Private </li></ul><ul><ul><li>Professionally managed </li></ul></ul><ul><ul><li>Return on...
Venture Capital Investment Criteria <ul><li>Management Team </li></ul><ul><ul><li>Track record </li></ul></ul><ul><ul><li>...
The Venture Capital Numbers Game <ul><li>Receive 1000s of business plans each year </li></ul><ul><li>Read 100s of plans </...
How Venture Capital Funds Work <ul><li>General partners (GPs) manage the fund </li></ul><ul><li>Capital comes from institu...
Venture Capital Economics VC Fund IX, L.P. LP 1 GP LP 2 LP 3 Portfolio Company 1 Portfolio Company 2 Portfolio Company 3 P...
Venture Capital Economics VC Fund IX, L.P. LP 1 GP LP 2 LP 3 Portfolio Company 1 Portfolio Company 2 Portfolio Company 3 P...
Financing Your Venture <ul><li>Not all startups require external funding </li></ul><ul><li>Cash flow comes ultimately and ...
Financing Options <ul><li>Non-Equity </li></ul><ul><ul><li>Personal funds </li></ul></ul><ul><ul><li>Personal debt </li></...
Major Financing Questions <ul><li>How much? </li></ul><ul><li>When? </li></ul><ul><li>From where / whom? </li></ul><ul><li...
Raise Money from a Position of Strength <ul><li>Have cash in the bank </li></ul><ul><li>Prepare to build your company with...
Seek True Value-Added Investors <ul><li>Understand your business </li></ul><ul><li>Operating experience </li></ul><ul><li>...
Fundraising Process Budget 4-5 months,  or more 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Business Plan Submissions I...
Fundraising Lessons <ul><li>Network to gains access to VCs </li></ul><ul><li>Don’t get hung-up on confidentiality </li></u...
Believe In Your Idea! “ The wireless music box has no imaginable commercial value.” <ul><li>David Sarnoff Associates, in r...
Attributes of a Successful Entrepreneur <ul><li>Problem solver </li></ul><ul><li>Decisive </li></ul><ul><li>Leader & motiv...
Closing thoughts… <ul><li>Focus on the long-run </li></ul><ul><ul><li>What goes around comes around </li></ul></ul><ul><ul...
LAUNCHING YOUR STARTUP — Financing Your Venture — by Jim Butterworth U.S. Civilian Research & Development Foundation Idea ...
Upcoming SlideShare
Loading in...5
×

Launching Your Startup — Financing Your Venture

770

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
770
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
24
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Consultant to the U.S. Civilian Research &amp; Development Foundation, Science &amp; Technology Entrepreneurship Program. Have judged b-plan contests in FSU.
  • Defined as &lt; 500 employees 17,000 “large” businesses 97.5% of U.S. businesses &lt; 20 employees
  • Famous spin-outs: Yahoo!, Google, Sun Microsystems, Netscape, Cisco In FY 2003, Stanford filed 300 patent applications ~ 150 new MIT spin-outs each year (with about 10% as tech xfers) Source: 2003 AUTM Licensing Survey ェ
  • Conception / invention can be top-down (market driven) or bottom-up (product driven). The latter is as it sounds: uphill.
  • Lipstick on a pig, is still a pig!
  • Amazon HR process Not all ideas are worth pursuing…in fact, most aren’t!
  • Understand their needs, their situation, their vision, their constraints, their economic benefit, their corporate goals, and their career goals (Ken Morse, MIT Enterprise Forum) To understand your customers’ economic benefit, you need to get in their heads (“needs processing”) and model the positive effects on their business of using your new products and technologies What is their economic benefit / ROI? You must deliver excellent payback. Be sure to factor in “make v. buy.” Your product/service must be better, faster and cheaper than an alternative they or your competition can provide. This is where competitive advantages, such as technology and IPR, factor in.
  • Ken Morse, MIT Enterprise Forum
  • Executive summary = PPT
  • SLIDE 1 – Summary Introduce the project Why is it important Timeline and key milestones Expected business &amp; financial results Funding requested (total amount) Your value proposition must be compelling, quantifiable, provable, referenceable, and easily explainable Value Proposition (Solve an important, valuable problem, for customers that have money, that want to pay well, with a short sales cycle, and will buy more, soon!)
  • SLIDE 2 – The Business Problem State the problem in business terms (Business problems: production, cost, competitiveness, product, service, delivery etc.) Define the market opportunity (No. buyers in the first 18-24 months, value in sales) Name/identify target customers (May be team’s company partner or other customers) Why the customers care Focus on how and why prospective customers will buy from you, and pay you money Name your first 10 prospective customers
  • SLIDE 3 – The Solution How you solve the problem for the customer’s perspective The specific value in your proposition Specific benefits to the customer (non financial) Financial benefits (estimates) to the customer Describe the product / service Who is the customer? Correlate product / service to the pain Features &amp; benefits Should also foot directly with market overview What’s unique about the solution? Where is the value-add? (hint: see strategic objectives ) Why is no one else doing it? Competitive analysis Value chain dynamics Disintermediation Intermediation Reintermediation
  • SLIDE 4 – Business Model How will money be made or saved? How will the science team earn income? How will the company team earn income? What is the margin, profit, or savings? Is the company-partner the end-user? Manufacturer? Seller? How will the product/service be delivered to the customer(s)? Will the product/service be sold through other companies or directly to end-users? Product or service? Sold by contract? SLIDE 5 – Technical Advantage State the special or key aspect of technology in “translated” or common terms What are the intellectual property plans (if any)? What stage of development is the technology currently in (again in common terms such as early, mid, late)? How much time and funding is needed to finish the technology? THIS IS THE ONLY TECHNOLOGY SLIDE Only the key technology element that relates directly to the key business advantage matters! SLIDE 6 – Sales &amp; Marketing How will your team (or company partner) reach the customer? How long will each sale take to close (the sales cycle)? What is the role of 3 rd party partners in marketing, distributing, and selling? Will you sell directly, through others, or both? How will your team inexpensively inform customers (promotion, advertising)? By word of mouth, call them, advertise (where?, how much cost?) SLIDE 7 – Competition What alternatives exist to your product/service? Including do nothing (low risk, cost estimate) Who else is trying to solve the problem? Current competitors and substitutes How large/profitable are they? Are they ahead or behind? Matrix of features and value NEVER SAY “There is no competition” SLIDE 8 – The Team (Company team) Experience in the industry with customers, manufacturers, distributors, retailers (Science team) Experience in technology field Management and operations Company team: production, delivery Science team: project management, technology development Sales &amp; marketing experience Industry partners and resources Outside partners needed Okay if you don’t have them yet; important to state gaps) SLIDE 9 – Financials Simple budget table for project Simple budget table for marketing &amp; sales (if applicable) Key metrics People, revenues, gross profit (margin), expenses, number of customers, average selling price, etc. When (how fast) will you spend and earn money?
  • SLIDE 8 – The Team (Company team) Experience in the industry with customers, manufacturers, distributors, retailers (Science team) Experience in technology field Management and operations Company team: production, delivery Science team: project management, technology development Sales &amp; marketing experience Industry partners and resources Outside partners needed Okay if you don’t have them yet; important to state gaps) SLIDE 9 – Financials Simple budget table for project Simple budget table for marketing &amp; sales (if applicable) Key metrics People, revenues, gross profit (margin), expenses, number of customers, average selling price, etc. When (how fast) will you spend and earn money?
  • Independent variables &amp; dependent variables
  • SLIDE 10 – Road Map (Where you have been and where you are going) Accomplishments to date Major accomplishments planned and when Technology development Business (production, sales, marketing, distribution) What is on the near-term horizon that secures Strategic objectives Competitive advantages Nothing else matters, per se
  • Convinces the “target person” to schedule a longer meeting with you, and be receptive to doing business with your company
  • Select type to match needs. Each has different benefits, drawbacks, goals and objectives. For corporate, operation skills include manufacturing, project management, marketing, financial, etc.
  • Receive some 10,000 to 12,000 business plans from entrepreneurs each year. Might meet with 150 to 200 entrepreneurs, and make a deal with 5-10 of them.
  • According to the SBA, iin 1998 82.5% of U.S. small businesses used credit/debt to finance business. Merger and Acquisition Initial Public Offering Secondary/Follow-on Public Offering Private Placements – Debt &amp; Equity Buyout/Acquisition Financing Corporate Debt Joint Ventures Spin-offs Mezzanine Financing
  • Talk about valuation, and how it’s tied to various factors like: Competition for deal Exit potential Stage of company development The best financing deal is not necessarily the deal with the highest valuation or best terms; it is usually the deal with the best investors. “Value-add, not valuation” philosophy of funding.
  • Set expectations for VCs: Under promise and over deliver.
  • Leader &amp; motivator Able to attract world class talent Hires to overcome weaknesses (see Amazon.com)
  • Remember, any % of something &gt; 100% of 0 No such thing as winners and losers; instead, “winners and learners.”
  • Transcript of "Launching Your Startup — Financing Your Venture"

    1. 1. LAUNCHING YOUR STARTUP — Financing Your Venture — by Jim Butterworth U.S. Civilian Research & Development Foundation Idea to Market Workshop Kazakhstan, June 2007
    2. 2. Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution </li></ul></ul><ul><ul><li>Business Planning </li></ul></ul><ul><li>Part II </li></ul><ul><ul><li>A Primer on Venture Capital </li></ul></ul><ul><ul><li>Financing Your Venture </li></ul></ul><ul><ul><li>Other Startup Considerations </li></ul></ul>
    3. 3. Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution </li></ul></ul><ul><ul><li>Business Planning </li></ul></ul><ul><li>Part II </li></ul><ul><ul><li>A Primer on Venture Capital </li></ul></ul><ul><ul><li>Financing Your Venture </li></ul></ul><ul><ul><li>Other Startup Considerations </li></ul></ul>
    4. 4. My Background <ul><li>28 years in technology-related ventures in all capacities </li></ul><ul><ul><li>Founder/CEO, venture capital firm </li></ul></ul><ul><ul><li>Founder/CEO, early Internet company </li></ul></ul><ul><ul><li>Corporate finance/M&A, global investment bank </li></ul></ul><ul><ul><li>Technology marketing </li></ul></ul><ul><ul><li>Programmer/engineer </li></ul></ul><ul><li>Owner/inventor of 14 issued and pending patents worldwide </li></ul><ul><li>Education </li></ul><ul><ul><li>Bachelor of Industrial and Systems Engineering, Georgia Institute of Technology </li></ul></ul><ul><ul><li>Master of Business Administration, Amos Tuck School at Dartmouth College </li></ul></ul>
    5. 5. Impact of U.S. Small Businesses <ul><li>25.8 million U.S. businesses </li></ul><ul><li>“Small” businesses represent: </li></ul><ul><ul><li>99.9% of total businesses </li></ul></ul><ul><ul><li>50% of the private work force </li></ul></ul><ul><ul><li>41% of high tech jobs </li></ul></ul><ul><ul><li>75% of net new jobs </li></ul></ul><ul><ul><li>41% of private sales </li></ul></ul><ul><ul><li>52% of private sector output </li></ul></ul><ul><ul><li>97% of all U.S. exporters with 29% of export value </li></ul></ul><ul><li>Produce 13-14x patents/employee (and 2x likely to be among the 1% most cited) </li></ul>Source: U.S. Small Business Administration (2002 survey)
    6. 6. Impact of Venture-Backed Companies <ul><li>In the U.S.: </li></ul><ul><ul><li>$1.8 trillion in revenue in 2003 (9.6% of all sales) </li></ul></ul><ul><ul><li>10.1 million jobs in 2003 (9.4% of employment) </li></ul></ul><ul><ul><li>600,000 new net jobs from 2000-2003 </li></ul></ul><ul><li>In Europe: </li></ul><ul><ul><li>1.0 million jobs in 2004 </li></ul></ul><ul><ul><li>630,000 new net jobs created from 2000-2004 </li></ul></ul><ul><ul><li>Highest growth rates in biotech, health care and medical devices </li></ul></ul><ul><ul><li>Largest absolute growth in university spin-offs </li></ul></ul>
    7. 7. Impact of U.S. Universities <ul><li>Established > 4,100 new companies since 1980, 2/3 of which were still operating </li></ul><ul><li>Executed > 30,000 active technology transfer licenses (including > 4,500 in 2003), generating > $1.3 billion in license income </li></ul><ul><li>Launched > 2,200 new commercial products between 1998-2003 </li></ul><ul><li>Performed > $30 billion of R&D in 2001 </li></ul><ul><li>Filed 8,000 U.S. patent applications in 2003 </li></ul>
    8. 8. Lifecycle of a Startup <ul><li>Conception / Invention </li></ul><ul><li>Seed Stage </li></ul><ul><ul><li>Formation / incorporation </li></ul></ul><ul><ul><li>Market research </li></ul></ul><ul><ul><li>Product research </li></ul></ul><ul><li>Early Stage </li></ul><ul><ul><li>Product development </li></ul></ul><ul><ul><li>Team formation </li></ul></ul><ul><ul><li>Infrastructure build-out </li></ul></ul><ul><li>Launch </li></ul><ul><li>Growth Stage </li></ul><ul><li>Expansion Phase </li></ul><ul><li>Exit </li></ul><ul><li>Post-Exit </li></ul>
    9. 9. Lifecycle of a Startup <ul><li>Conception / Invention </li></ul><ul><li>Seed Stage </li></ul><ul><ul><li>Formation / incorporation </li></ul></ul><ul><ul><li>Market research </li></ul></ul><ul><ul><li>Product research </li></ul></ul><ul><li>Early Stage </li></ul><ul><ul><li>Product development </li></ul></ul><ul><ul><li>Team formation </li></ul></ul><ul><ul><li>Infrastructure build-out </li></ul></ul><ul><li>Launch </li></ul><ul><li>Growth Stage </li></ul><ul><li>Expansion Phase </li></ul><ul><li>Exit </li></ul><ul><li>Post-Exit </li></ul>
    10. 10. Startup Fundamentals <ul><li>Solid foundation = best chance of funding your venture </li></ul>
    11. 11. Pour a Solid Foundation <ul><li>Market-driven concept </li></ul><ul><ul><li>Talk to prospective customers </li></ul></ul><ul><ul><li>Assess market and competition </li></ul></ul><ul><li>Resolve legal issues upfront </li></ul><ul><ul><li>Satisfy prior employment obligations </li></ul></ul><ul><ul><li>Incorporate properly </li></ul></ul><ul><ul><li>Check intellectual property rights (patents, trademarks, copyrights and NDAs) </li></ul></ul><ul><ul><li>Spin-out cleanly </li></ul></ul><ul><li>Form a solid team </li></ul><ul><ul><li>Management, board, advisors, professionals </li></ul></ul><ul><ul><li>Teamwork begets success </li></ul></ul><ul><li>If possible, kick-start the business </li></ul><ul><ul><li>Spin-out / acquisition </li></ul></ul><ul><ul><li>Key customer </li></ul></ul>
    12. 12. Be Market-Driven! <ul><li>Purchase decisions are based on relationships – understand your customers </li></ul><ul><li>Understand and model your customers’ economic benefit: </li></ul><ul><ul><li>How are they currently solving the problem? </li></ul></ul><ul><ul><li>How will their work processes change by using your product? </li></ul></ul><ul><ul><li>What is their economic benefit / ROI? </li></ul></ul><ul><li>Your product/service must be better, faster and cheaper </li></ul>
    13. 13. Protect Your Assets!
    14. 14. Cash Flow is Your Life Blood! <ul><li>CFIMITYM </li></ul><ul><li>Cash flow comes ultimately and most importantly from customers, NOT from investors </li></ul><ul><li>Profit is not cash flow </li></ul><ul><li>Capitalize properly </li></ul>
    15. 15. Business Planning <ul><li>“The plan is useless; it’s the planning that’s important.” </li></ul><ul><ul><li>General Dwight D. Eisenhower, on the success of his D-Day invasion plan </li></ul></ul><ul><li>The process of uncovering and identifying what creates and drives value in your business, and the risks involved </li></ul><ul><li>A business plan is an output of the business planning process </li></ul>
    16. 16. Output of the Business Planning Process <ul><li>Business plan (narrative) </li></ul><ul><li>Pro forma financial statements </li></ul><ul><li>PowerPoint pitch (12-13 pages) </li></ul><ul><li>Elevator pitch (1-2 minutes) </li></ul>
    17. 17. A Business Plan… <ul><li>Describes all the critical internal and external elements and strategies for guiding the direction of your company </li></ul><ul><li>Communicates how you will create sustainable value </li></ul><ul><li>Identifies risks and uncertainties and communicates how you will manage them </li></ul><ul><li>Describes the company’s structure, objectives and future plans </li></ul>
    18. 18. Uses of a Business Plan (Internal) <ul><li>Refining your product / service strategy </li></ul><ul><li>Identifying key customers </li></ul><ul><li>Identifying milestones and timelines </li></ul><ul><li>Helping set objectives & performance metrics </li></ul><ul><li>Managing risk and uncertainty </li></ul><ul><li>Motivating and focusing employees </li></ul><ul><li>Analyzing capital budgeting decisions </li></ul><ul><li>Facilitating new product development </li></ul><ul><li>Integrating new acquisitions </li></ul><ul><li>Facilitating restarts, restructuring and turnarounds </li></ul>
    19. 19. Uses of a Business Plan (External) <ul><li>Attracting key employees </li></ul><ul><li>Educating potential investors </li></ul><ul><li>Arranging strategic alliances </li></ul><ul><li>Obtaining large contracts with strategic customers </li></ul><ul><li>Facilitating mergers and acquisitions </li></ul>
    20. 20. The 12-13 Page PowerPoint Pitch <ul><li>Summary (1) </li></ul><ul><ul><li>Mission statement </li></ul></ul><ul><ul><li>What is the idea? </li></ul></ul><ul><ul><li>How will it create value? </li></ul></ul><ul><ul><li>Timeline / milestones </li></ul></ul><ul><ul><li>Expected results </li></ul></ul><ul><ul><li>Specific request (e.g., $) </li></ul></ul>
    21. 21. The Mission Statement <ul><li>To create [value/EVA] by [product/service] for/to [customer(s)] by… </li></ul>Strategic Objective 1 Strategic Objective 2 Strategic Objective 3
    22. 22. The Mission Statement
    23. 23. Mission Statement Example <ul><li>To be Kazakhstan’s leading producer of “A-class” widgets to the natural gas sector by: </li></ul><ul><ul><li>Securing exclusive purchase contracts with 3 of the top 10 customers of A-class widgets in Kazakhstan; </li></ul></ul><ul><ul><li>Creating proprietary manufacturing methods for the highest yield of A-class widgets; and </li></ul></ul><ul><ul><li>Building a world-class team of research & development scientists and engineers. </li></ul></ul>
    24. 24. The 12-13 Page PowerPoint Pitch <ul><li>Summary (1) </li></ul><ul><ul><li>Mission statement </li></ul></ul><ul><ul><li>What is the idea? </li></ul></ul><ul><ul><li>How will it create value? </li></ul></ul><ul><ul><li>Timeline / milestones </li></ul></ul><ul><ul><li>Expected results </li></ul></ul><ul><ul><li>Specific request (e.g., $) </li></ul></ul><ul><li>Market Overview (2) </li></ul><ul><ul><li>Substantiation of need </li></ul></ul><ul><ul><li>The opportunity (size, trends, etc.) </li></ul></ul><ul><ul><li>Market validation </li></ul></ul><ul><ul><li>Identification of prospective customers </li></ul></ul>
    25. 25. Major Pain Points <ul><li>What is the major pain your customers face currently and/or in the future? </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Convenience </li></ul></ul><ul><ul><li>Growth </li></ul></ul><ul><ul><li>Focus </li></ul></ul><ul><ul><li>Time-to-market </li></ul></ul><ul><ul><li>Regulatory compliance </li></ul></ul><ul><li>Why are alternative products/services not addressing the pain (fully)? </li></ul><ul><li>Why won’t this change? </li></ul>
    26. 26. Favorable Market Dynamics <ul><li>The market is large for our product/service: </li></ul><ul><ul><li>Size stat 1 </li></ul></ul><ul><ul><li>Size stat 2 </li></ul></ul><ul><ul><li>Size stat 3 </li></ul></ul><ul><li>The market is growing for our product / service: </li></ul><ul><ul><li>Growth stat 1 </li></ul></ul><ul><ul><li>Growth stat 2 </li></ul></ul><ul><ul><li>Growth stat 3 </li></ul></ul><ul><li>Market trends favor us: </li></ul><ul><ul><li>Trend 1 </li></ul></ul><ul><ul><li>Trend 2 </li></ul></ul><ul><ul><li>Trend 3 </li></ul></ul>
    27. 27. The 12-13 Page PowerPoint Pitch <ul><li>Summary (1) </li></ul><ul><ul><li>Mission statement </li></ul></ul><ul><ul><li>What is the idea? </li></ul></ul><ul><ul><li>How will it create value? </li></ul></ul><ul><ul><li>Timeline / milestones </li></ul></ul><ul><ul><li>Expected results </li></ul></ul><ul><ul><li>Specific request (e.g., $) </li></ul></ul><ul><li>Market Overview (2) </li></ul><ul><ul><li>Substantiation of need </li></ul></ul><ul><ul><li>The opportunity (size, trends, etc.) </li></ul></ul><ul><ul><li>Markey validation </li></ul></ul><ul><ul><li>Identification of prospective customers </li></ul></ul><ul><li>Description of Product/Service (2) </li></ul><ul><ul><li>Overview of product / service, including high-level technology description </li></ul></ul><ul><ul><li>Specific value proposition (including qualitative & quantitative customer benefits) </li></ul></ul><ul><ul><li>Correlate product / service features & benefits with market needs </li></ul></ul><ul><ul><li>Value chain dynamics </li></ul></ul>
    28. 28. The 12-13 Page PowerPoint Pitch <ul><li>Operating Plan (2) </li></ul><ul><ul><li>Production / manufacturing </li></ul></ul><ul><ul><li>Marketing / distribution </li></ul></ul><ul><ul><li>Sales & marketing plan </li></ul></ul><ul><li>Competitive Environment (2) </li></ul><ul><ul><li>Sustainable competitive advantages </li></ul></ul><ul><ul><li>Alternatives </li></ul></ul><ul><ul><li>Competition (existing and potential </li></ul></ul>
    29. 29. What’s Proprietary About Your Idea? <ul><li>Competitive Advantages </li></ul><ul><ul><li>Proprietary IPR </li></ul></ul><ul><ul><li>Exclusive distribution </li></ul></ul><ul><ul><li>Exclusive content / sources </li></ul></ul><ul><ul><li>Proprietary manufacturing </li></ul></ul><ul><ul><li>Proprietary integration </li></ul></ul><ul><ul><li>Installed base / customer contracts </li></ul></ul><ul><ul><li>Unparalleled capital structure </li></ul></ul><ul><ul><li>Unparalleled scale, scope and/or focus </li></ul></ul><ul><ul><li>Team with unique expertise and/or access </li></ul></ul><ul><ul><li>First mover advantage </li></ul></ul><ul><li>Distinguish between momentary and sustainable </li></ul><ul><li>Must correlate to strategic objectives </li></ul>
    30. 30. The 12-13 Page PowerPoint Pitch <ul><li>Operating Plan (2) </li></ul><ul><ul><li>Production / manufacturing </li></ul></ul><ul><ul><li>Marketing / distribution </li></ul></ul><ul><ul><li>Sales & marketing plan </li></ul></ul><ul><li>Competitive Environment (2) </li></ul><ul><ul><li>Sustainable competitive advantages </li></ul></ul><ul><ul><li>Alternatives </li></ul></ul><ul><ul><li>Competition (existing and potential </li></ul></ul><ul><li>The Team (1) </li></ul><ul><ul><li>Management expertise & relevance </li></ul></ul><ul><ul><li>Board, advisors, professionals & others </li></ul></ul><ul><ul><li>Identify key hiring needs </li></ul></ul><ul><li>Financials (1-2) </li></ul><ul><ul><li>Pro forma snapshot </li></ul></ul><ul><ul><li>Key metrics / drivers </li></ul></ul><ul><ul><li>Funding requirements (optional) </li></ul></ul>
    31. 31. Financial Projections <ul><li>Notes </li></ul><ul><li>Assumption 1 </li></ul><ul><li>Assumption 2 </li></ul><ul><li>Assumption 3 </li></ul><ul><li>Assumption 4 </li></ul><ul><li>Assumption 5 </li></ul>Numbers will prove wrong! Key is to understand drivers and assumptions since … Cost driver 1 (3) Net Revenue 2010 – SG&A (5) = Pre-tax Income (Loss) = Gross Profit – Cost of Sales (4) Revenue driver 2 (2) Revenue driver 1 (1) 2009 2008 2007 (in thousands)
    32. 32. Funding Requirements <ul><li>Does your venture need external financing? </li></ul><ul><ul><li>How much & when? </li></ul></ul><ul><ul><li>Venture capital, debt, etc. </li></ul></ul><ul><li>Capital structure considerations </li></ul><ul><ul><li>Options plans, etc. </li></ul></ul><ul><ul><li>Position vis-à-vis in-kind contributions </li></ul></ul><ul><li>Use of proceeds; e.g.: </li></ul>$750,000 100,000 100,000 200,000 150,000 $200,000 Reserve (net of cash on hand) Total Other legal, operations, SG&A and misc. Equipment & facilities Technology & IPR development Staff
    33. 33. The 12-13 Page PowerPoint Pitch <ul><li>Operating Plan (2) </li></ul><ul><ul><li>Production / manufacturing </li></ul></ul><ul><ul><li>Marketing / distribution </li></ul></ul><ul><ul><li>Sales & marketing plan </li></ul></ul><ul><li>Competitive Environment (2) </li></ul><ul><ul><li>Sustainable competitive advantages </li></ul></ul><ul><ul><li>Alternatives </li></ul></ul><ul><ul><li>Competition (existing and potential </li></ul></ul><ul><li>The Team (1) </li></ul><ul><ul><li>Management expertise & relevance </li></ul></ul><ul><ul><li>Board, advisors, professionals & others </li></ul></ul><ul><ul><li>Identify key hiring needs </li></ul></ul><ul><li>Financials (1-2) </li></ul><ul><ul><li>Pro forma snapshot </li></ul></ul><ul><ul><li>Key metrics / drivers </li></ul></ul><ul><ul><li>Funding requirements (optional) </li></ul></ul><ul><li>Road Map (1) </li></ul><ul><ul><li>Major accomplishments </li></ul></ul><ul><ul><li>90-day plan </li></ul></ul><ul><ul><li>Horizon </li></ul></ul>
    34. 34. The 12-13 Page PowerPoint Pitch <ul><li>Appendix (as long as you want) </li></ul><ul><ul><li>Market details (e.g., surveys) </li></ul></ul><ul><ul><li>Product details </li></ul></ul><ul><ul><li>Operating & financial details </li></ul></ul><ul><ul><li>Résumés (CVs) </li></ul></ul><ul><ul><li>Articles / research reports </li></ul></ul><ul><ul><li>Patents & IPRs </li></ul></ul><ul><ul><li>Key contracts </li></ul></ul><ul><ul><li>Brochures </li></ul></ul>
    35. 35. The Elevator Pitch <ul><li>One of the most important “outputs” of business planning </li></ul><ul><li>Convinces the “target person” to schedule a longer meeting with you </li></ul><ul><li>Empowers and enables the “target person” to convince other appropriate people to become interested in your idea </li></ul><ul><li>Resonates, demonstrates sincerity </li></ul><ul><li>Communicates a sense of value, empathy and urgency </li></ul><ul><li>No more than 1-2 minutes! </li></ul>
    36. 36. Part I Summary <ul><li>Pour a solid foundation </li></ul><ul><li>Protect your strategic assets (like IPRs) </li></ul><ul><li>Value is in the business planning, not the business plan </li></ul><ul><li>Be concise and to the point with pitch materials </li></ul><ul><li>Be top-down customer-driven, not bottom-up product-driven </li></ul>
    37. 37. LAUNCHING YOUR STARTUP — Financing Your Venture — by Jim Butterworth U.S. Civilian Research & Development Foundation Idea to Market Workshop Kazakhstan, June 2007
    38. 38. Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution </li></ul></ul><ul><ul><li>Business Planning </li></ul></ul><ul><li>Part II </li></ul><ul><ul><li>A Primer on Venture Capital </li></ul></ul><ul><ul><li>Financing Your Venture </li></ul></ul><ul><ul><li>Other Startup Considerations </li></ul></ul>
    39. 39. Review of Part I <ul><li>Pour a solid foundation </li></ul><ul><li>Protect your strategic assets (like IPRs) </li></ul><ul><li>Value is in the business planning, not the business plan </li></ul><ul><li>Be concise and to the point with pitch materials </li></ul><ul><li>Be top-down customer-driven, not bottom-up product-driven </li></ul>
    40. 40. Agenda <ul><li>Part I </li></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>The Transition from Idea to Execution </li></ul></ul><ul><ul><li>Business Planning </li></ul></ul><ul><li>Part II </li></ul><ul><ul><li>A Primer on Venture Capital </li></ul></ul><ul><ul><li>Financing Your Venture </li></ul></ul><ul><ul><li>Other Startup Considerations </li></ul></ul>
    41. 41. A Primer on Venture Capital <ul><li>What is venture capital? </li></ul><ul><ul><li>A cash investment made by professional, institutionally backed investors to emerging growth businesses </li></ul></ul><ul><ul><li>Generally made as cash in exchange for equity (ownership) in the investee company </li></ul></ul><ul><ul><li>Usually high risk, but with the potential for above-average returns </li></ul></ul>
    42. 42. U.S. Venture Capital Market PLACEHOLDER
    43. 43. European Venture Capital Market PLACEHOLDER
    44. 44. Types of Venture Capital <ul><li>Private </li></ul><ul><ul><li>Professionally managed </li></ul></ul><ul><ul><li>Return on investment focused </li></ul></ul><ul><ul><li>May bring network, business advice, credibility, etc. </li></ul></ul><ul><li>Corporate </li></ul><ul><ul><li>Manage risk </li></ul></ul><ul><ul><li>Distribution networks </li></ul></ul><ul><ul><li>Product R&D </li></ul></ul><ul><ul><li>Operational skills </li></ul></ul><ul><ul><li>Spin-outs </li></ul></ul><ul><li>Academic </li></ul><ul><ul><li>Intellectual property </li></ul></ul><ul><ul><li>Spin-outs </li></ul></ul><ul><li>Government </li></ul><ul><ul><li>Create new jobs and grow economy </li></ul></ul><ul><ul><li>Offer cash, tax incentives, in-kind </li></ul></ul><ul><ul><li>Stem brain-drain </li></ul></ul><ul><li>Angels </li></ul><ul><ul><li>May bring network, business advice, credibility, etc. </li></ul></ul><ul><ul><li>Live vicariously </li></ul></ul><ul><li>The 3Fs </li></ul>
    45. 45. Venture Capital Investment Criteria <ul><li>Management Team </li></ul><ul><ul><li>Track record </li></ul></ul><ul><ul><li>Relevancy </li></ul></ul><ul><ul><li>Bet on the jockey, not the horse! </li></ul></ul><ul><li>Concept </li></ul><ul><ul><li>Solves real problem </li></ul></ul><ul><ul><li>Favorable market dynamics </li></ul></ul><ul><ul><li>Disruptive </li></ul></ul><ul><li>Unfair advantages & sustainable competitive advantages </li></ul><ul><li>Proper capitalization </li></ul>
    46. 46. The Venture Capital Numbers Game <ul><li>Receive 1000s of business plans each year </li></ul><ul><li>Read 100s of plans </li></ul><ul><li>Meet with dozens of companies </li></ul><ul><li>Fund a handful </li></ul><ul><li>Portfolio expectations: </li></ul><ul><ul><li>60% die or go nowhere (living dead) </li></ul></ul><ul><ul><li>30% yield 2-4x in 4-7 years </li></ul></ul><ul><ul><li>10% (hopefully 20%) are tremendous successes (e.g., 10x, 100x, 1000x!) </li></ul></ul>
    47. 47. How Venture Capital Funds Work <ul><li>General partners (GPs) manage the fund </li></ul><ul><li>Capital comes from institutional “limited partners” (LPs) </li></ul><ul><li>Singularly focused: ROI </li></ul><ul><li>GPs get an annual fee </li></ul><ul><li>Once LPs get investment back, GPs get a portion of the profits </li></ul><ul><li>LPs get the remaining profits </li></ul>
    48. 48. Venture Capital Economics VC Fund IX, L.P. LP 1 GP LP 2 LP 3 Portfolio Company 1 Portfolio Company 2 Portfolio Company 3 Portfolio Company 4 Portfolio Company 5 LP 4 $100 Management $10 Portfolio Company 10 Portfolio Company 9 Portfolio Company 8 Portfolio Company 7 Portfolio Company 6 $10 $10 $10 $10 $10 $10 $10 $10 $10 2%
    49. 49. Venture Capital Economics VC Fund IX, L.P. LP 1 GP LP 2 LP 3 Portfolio Company 1 Portfolio Company 2 Portfolio Company 3 Portfolio Company 4 Portfolio Company 5 LP 4 $180 Portfolio Company 10 Portfolio Company 9 Portfolio Company 8 Portfolio Company 7 Portfolio Company 6 $100 $25 $40 $35 $20
    50. 50. Financing Your Venture <ul><li>Not all startups require external funding </li></ul><ul><li>Cash flow comes ultimately and most importantly from customers, NOT from investors </li></ul><ul><li>Benefits of external funding </li></ul><ul><ul><li>Cash </li></ul></ul><ul><ul><ul><li>Faster growth </li></ul></ul></ul><ul><ul><ul><li>Staying power </li></ul></ul></ul><ul><ul><ul><li>Competitive positioning </li></ul></ul></ul><ul><ul><ul><li>Credibility </li></ul></ul></ul><ul><ul><li>Value-add investors </li></ul></ul><ul><ul><ul><li>Credibility </li></ul></ul></ul><ul><ul><ul><li>Customer/partner introductions (“Keiretsu” effect) </li></ul></ul></ul><ul><ul><ul><li>Management expertise </li></ul></ul></ul>
    51. 51. Financing Options <ul><li>Non-Equity </li></ul><ul><ul><li>Personal funds </li></ul></ul><ul><ul><li>Personal debt </li></ul></ul><ul><ul><li>Grants and awards </li></ul></ul><ul><ul><li>Customer pre-sales </li></ul></ul><ul><ul><li>Venture leasing </li></ul></ul><ul><ul><li>Receivables financing </li></ul></ul><ul><ul><li>Business loans </li></ul></ul><ul><ul><li>In-kind contributions </li></ul></ul><ul><ul><li>Joint ventures </li></ul></ul><ul><li>Equity </li></ul><ul><ul><li>Venture capital </li></ul></ul><ul><ul><li>Angels </li></ul></ul><ul><ul><li>The “3Fs” – Friends, Family and Fools </li></ul></ul><ul><ul><li>Corporate direct investment </li></ul></ul>Equity is the most expensive form of capital!
    52. 52. Major Financing Questions <ul><li>How much? </li></ul><ul><li>When? </li></ul><ul><li>From where / whom? </li></ul><ul><li>What terms? </li></ul><ul><ul><li>Security </li></ul></ul><ul><ul><li>Valuation </li></ul></ul><ul><ul><li>Control </li></ul></ul><ul><ul><li>Timing </li></ul></ul>
    53. 53. Raise Money from a Position of Strength <ul><li>Have cash in the bank </li></ul><ul><li>Prepare to build your company without any outside investment (bootstrap) </li></ul><ul><li>Seek to secure multiple competing offers </li></ul><ul><li>Raise money when you can, not when you have to (Sun Tzu – “In times of war, prepare for peace”) </li></ul><ul><li>Have a call to action </li></ul>
    54. 54. Seek True Value-Added Investors <ul><li>Understand your business </li></ul><ul><li>Operating experience </li></ul><ul><li>Domain and/or geographic experience </li></ul><ul><li>Rolodex / network </li></ul><ul><li>Relevant portfolio </li></ul><ul><li>Relevant limited partners (in your space) </li></ul><ul><li>Deep pockets / courage to stay the course </li></ul>
    55. 55. Fundraising Process Budget 4-5 months, or more 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Business Plan Submissions Investor Presentations Term Sheet Negotiations Final Documentation Funding
    56. 56. Fundraising Lessons <ul><li>Network to gains access to VCs </li></ul><ul><li>Don’t get hung-up on confidentiality </li></ul><ul><li>Be persistent </li></ul><ul><li>Be humble yet confident, and always courteous and professional </li></ul><ul><li>Embrace and learn from rejection </li></ul><ul><li>Be greedy in the long-run (any % of something > 100% of nothing!) </li></ul>
    57. 57. Believe In Your Idea! “ The wireless music box has no imaginable commercial value.” <ul><li>David Sarnoff Associates, in rejecting a proposal for investment in the radio in the 1920s </li></ul>“ We don't like their sound, and guitar music is on the way out.” <ul><li>Decca Recording Co., rejecting the Beatles in 1962 </li></ul>“ Many of our stockholders have asked me about this new invention by Alexander Graham Bell called the telephone. While we think it’s an interesting curiosity, there’s never going to be a market for that technology, and therefore we have declined the offer to take a license.” <ul><li>Chairman of Western Union, in its annual report from the late 1800s </li></ul>“ Who the hell wants to copy a document on plain paper?” <ul><li>National Inventors Council, as told in 1940 to Chester Carlson, founder of XEROX </li></ul>
    58. 58. Attributes of a Successful Entrepreneur <ul><li>Problem solver </li></ul><ul><li>Decisive </li></ul><ul><li>Leader & motivator </li></ul><ul><li>Humble </li></ul><ul><li>Passionate </li></ul><ul><li>Persistent </li></ul><ul><li>Optimistic </li></ul><ul><li>Professional </li></ul><ul><li>High integrity </li></ul><ul><li>Critical path doer </li></ul><ul><li>Impatient / bias toward action (with analysis) </li></ul><ul><li>Rejoices in others’ victories </li></ul><ul><li>Focused on the long-term goal </li></ul>
    59. 59. Closing thoughts… <ul><li>Focus on the long-run </li></ul><ul><ul><li>What goes around comes around </li></ul></ul><ul><ul><li>Friendships last longer than jobs </li></ul></ul><ul><ul><li>Don’t let greed blind the objective </li></ul></ul><ul><li>Make the most of the experience </li></ul><ul><ul><li>Listen & learn </li></ul></ul><ul><ul><li>Failure or rejection is what you make of it </li></ul></ul><ul><li>Entrepreneurship is a lifestyle choice </li></ul><ul><ul><li>Balance your risk & return </li></ul></ul><ul><ul><li>Seize opportunities </li></ul></ul><ul><ul><li>Life’s short, have fun! </li></ul></ul>
    60. 60. LAUNCHING YOUR STARTUP — Financing Your Venture — by Jim Butterworth U.S. Civilian Research & Development Foundation Idea to Market Workshop Kazakhstan, June 2007
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×