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Fundraising Series (Part One): Building Your Story

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Includes: …

Includes:
"Building Your Financials" with Glenn McCrae, Early Growth Financial Services
"Value Propositions" with Noah Lichtenstein, Cowboy Ventures
"Market Sizing & Competitive Landscape" with Steph Palmeri, SoftTech VC
"Go-To-Market & Competitive Landscape" with Niko Bonatsos, General Catalyst Partners

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  • 1. day and The Fundraising Series (Part One) – “Building Your Story”“Building Your Story” April 8, 2014 Featuring: • Niko Bonatsos, General Catalyst Partners • Noah Lichtenstein, Cowboy Ventures • Glenn McCrae, Early Growth Financial Services • Stephanie Palmeri, SoftTech VC
  • 2. Agenda 8:00 am – 8:05 am Chad Lynch - Introduction 8:05 am – 8:40 am Glenn McCrae – Creating Your 3-Year Financial Plan with Q&A 8:45 am – 9:15 am Noah Lichtenstein – Constructing Your Value Proposition with Q&ANoah Lichtenstein – Constructing Your Value Proposition with Q&A 9:20 am – 9:55 am Stephanie Palmeri – Understanding Your Competitive Landscape / Market Sizing / Q&A 10:00 am – 10:35 am Niko Bonatsos – Go-To-Market Strategy / Q&A
  • 3. Building Your Financials: Creating Your 3-Year Financial Plan 1 Creating Your 3-Year Financial Plan Glenn McCrae Partner and Chief Strategy Officer Early Growth Financial Services
  • 4. About Early Growth Financial Services • Outsourced financial services firm that provides small to mid- sized companies with an integrated financial solutionsized companies with an integrated financial solution • 4 platforms of services and support: transactional accounting, CFO, tax, and valuation • Services include: AP/AR, financial forecasts, cash management, financial statements, monthly close, 409a valuations, corporate taxes, investor relations, fundraising support • 300+ successfully funded clients nationwide • #5 Silicon Valley Business Journal Fastest Growing Private Company Award 2013 2
  • 5. Building Your Story with Numbers “The point of financial projections is to tell a story with numbers—a story about opportunity, resource requirements, market forces, growth, milestone achievements, and profits.achievements, and profits. Your job is to create a numerical framework that complements and reinforces the vision you’ve painted with words.” – Guy Kawasaki www.earlygrowthfinancialservices.com 3
  • 6. Presentation Overview The essentials of startup financial management • What are investors looking for in your finances? • What is a financial model? • Setting financial goals and objectives • Milestone funding• Milestone funding • Bottom-up financial projections • Spend • Budgeting • Top-down projections • Cost assumptions • Reforecasting www.earlygrowthfinancialservices.com 4
  • 7. Why a 3-Year Financial Model? A comprehensive financial pictures serves as the road-map for your business • Helps you understand your cash burn • Forces you to evaluate key performance drivers • Validates your assumptions Puts challenges into perspective• Puts challenges into perspective • Iterative process continuously improves your assumptions • Insight into your business model • Clarifies decision-making process (short-term and long-term) • Gives you leverage of accurate baseline valuation www.earlygrowthfinancialservices.com 5
  • 8. What Goes Into a 3-Year Financial Model? Essential components to your model Major objectives MilestonesTimeline www.earlygrowthfinancialservices.com 3 Key assumptions Trending analysis Key variables
  • 9. Identify Major Objectives for Your Company Assess where you are and what you want to achieve Venture funding and negative cash burn Positive cash burn and no venture funding www.earlygrowthfinancialservices.com What do you want to accomplish with next raise? What are the goals you want to achieve during this time period?
  • 10. Process for Creating Your Financial Model How to approach the process and get buy-in 1. Go to stakeholders and members of executive team – what do they need to achieve objectives (revenue, product, market, strategic, etc.)? 2. What is needed from a2. What is needed from a programmatic perspective? 3. Compile information and discuss with CEO (maybe executive team): total amount requested relative to milestone 4. Dialogue about wants and tradeoffs 5. Use dialogue to create bottom-up forecasting budget www.earlygrowthfinancialservices.com 8
  • 11. Bottom-Up Financial Projection Forecast for realistic revenue potential www.earlygrowthfinancialservices.com 9
  • 12. Spend for Bottom-Up Projections Consider relevant operational costs • Customer/Cost details • Human resource costs • Consultant and professional services• Consultant and professional services • Research and development • Office and admin • Sales and marketing • Capital spending www.earlygrowthfinancialservices.com 10
  • 13. Budgeting Use your budget to plan your actions • Budgeting created on accrual basis: budgeting versus actual results • Difference between cash and accrual is around capital expenditures • Report budget by department and major cost drivers (expense categories and revenue www.earlygrowthfinancialservices.com 11 drivers (expense categories and revenue categories) • Plan actions: how quickly will this impact revenue and what will you be able to achieve based on spending • Identify key variables • Identify key revenue assumptions • Run different scenarios
  • 14. Budgeting Exercise Start from a milestone perspective • If company has been around for a while, look at historical costs • What do you need to accomplish before you run outaccomplish before you run out of money, or in a specific time period • Ask budget owners what they need to accomplish goals • Tradeoffs • Trending analysis • Trending initiative www.earlygrowthfinancialservices.com 12
  • 15. Top-Down Projection? Not particularly useful, but necessary for investors to show market potential www.earlygrowthfinancialservices.com 13
  • 16. Reforecasting Your financial plan is always evolving • Don’t do a 5-year plan, at most 3-year • Update your budget on a quarterly basis (at least)quarterly basis (at least) • For investors budget on a quarterly basis for first year and then annually • What’s realistic in terms of timeline and reforecasting on monthly or quarterly basis? www.earlygrowthfinancialservices.com 14
  • 17. Thank You and Q&A Glenn McCrae 415.320.5753 www.earlygrowthfinancialservices.com 15 gmccrae@earlygrowthfinancialservices.com www.earlygrowthfinancialservices.com Follow us @EarlyGrowthFS
  • 18. Value Proposition Noah Lichtenstein Partner, Cowboy Ventures April 8, 2014
  • 19. At a Glance: Cowboy Ventures •  Founded in late 2012, $40m seed stage fund •  2 partners, 6 ninjas, focus on community •  Our mission: to back the most beloved new consumer + enterprise companies at seed stage – companies re-imagining “Life 2.0” Confiden'al  -­‐  Cowboy  Ventures  2014   2  
  • 20. The “Re-Imagination of Everything” Life 2.0, via Web/Mobile New Content & Commerce Mobile-first Consumer New Connected Devices Consumerization of Enterprise 16 investments to date* New Gaming *does not include some of our Stealth and “non-anchor” investments Cowboy Ventures Current Portfolio Confiden'al  -­‐  Cowboy  Ventures  2014   3  
  • 21. Brief Bio: Noah Lichtenstein •  Partner, Cowboy Ventures (2013-present) •  Founding Team, HomeRun (2009-2012) –  Acquired by Rearden Commerce (Sept. 2011) –  Raised from Foundation, First Round, Founder Collective, Angels •  Business Development, Climate Corp (2008-2010) –  Acquired by Monsanto (MON) for ~$1bn (Oct. 2013) –  Raised from Index, NEA, Khosla, GV, First Round, etc. •  Other: –  Board of Directors, United Way –  Advisor, Life360 –  Stanford University (B.A. 2004) Confiden'al  -­‐  Cowboy  Ventures  2014   @Noah_L   noah@cowboy.vc     4  
  • 22. What We’ll Cover Today 1.  Company Value Proposition 2.  Investor Value Proposition Confiden'al  -­‐  Cowboy  Ventures  2014   5  
  • 23. What We’ll Cover Today 1.  Company Value Proposition 2.  Investor Value Proposition Confiden'al  -­‐  Cowboy  Ventures  2014   6  
  • 24. Company Value Prop – What is it? Purpose of the Value Proposition: To help inform the customer so that he or she can make a choice. Confiden'al  -­‐  Cowboy  Ventures  2014   7  
  • 25. Value Proposition is… A positioning statement that explains WHAT benefit you provide for WHO and HOW you do it uniquely well. --Michael Skok, North Bridge Venture Partners Value Proposition is not… A mission statement or company vision Confiden'al  -­‐  Cowboy  Ventures  2014   Company Value Prop – What is it? 8  
  • 26. Value Prop – Examples Uber provides on-demand personal transportation through a simple mobile application that enables users* to request, ride, and pay for transportation at the push of a single button. Unlike with taxis, Uber passengers get reliable pickups, clear pricing, and convenient cashless transactions. *Because Uber is a marketplace, there is a distinct value proposition for Drivers Confiden'al  -­‐  Cowboy  Ventures  2014   9  
  • 27. Value Prop – Examples Dropbox enables users to store and access their photos, docs, and videos anywhere and share them easily. Unlike local storage solutions, it does this by storing digital copies of these files in the Cloud, and automatically synchronizing them across a user’s multiple devices. Confiden'al  -­‐  Cowboy  Ventures  2014   10  
  • 28. Company Value Prop – The What The What •  What is the specific problem you are solving? •  Do consumers view this as a problem? •  How big is the problem? Confiden'al  -­‐  Cowboy  Ventures  2014   11  
  • 29. Company Value Prop – The Who The Who •  Who will benefit from your product or service? •  Why do they care? •  How many are there? Confiden'al  -­‐  Cowboy  Ventures  2014   12  
  • 30. Company Value Prop – The How The How •  What is your unique solution to the problem •  What are other existing solutions to the problem? •  Why is this better than existing alternatives? Confiden'al  -­‐  Cowboy  Ventures  2014   13  
  • 31. Quick Recap: Company Value Prop Confiden'al  -­‐  Cowboy  Ventures  2014   The Company Value Proposition is… The What, Who and How of your company that helps inform the customer so that he or she can make a choice. 14  
  • 32. 1.  Company Value Proposition 2.  Investor Value Proposition Confiden'al  -­‐  Cowboy  Ventures  2014   15   What We’ll Cover Today
  • 33. Investors: A bit of Background •  What keeps investors up at night? •  Needles in a (growing) haystack •  It’s not personal •  There is no right investor; there is only the right investor for you Confiden'al  -­‐  Cowboy  Ventures  2014   16  
  • 34. What do Investors Care About? The Four Things Investors Care Most About: •  Team •  Market •  Plan •  Traction (or some proof you can rock it) Confiden'al  -­‐  Cowboy  Ventures  2014   17  
  • 35. What do Investors Care About? The Team •  Team make-up •  Relevant skills + background •  Unfair advantage •  The intangibles Confiden'al  -­‐  Cowboy  Ventures  2014   18  
  • 36. What do Investors Care About? The Market •  Think big – market size >$1bn •  Addressable vs. total market size •  Growing market •  Comparable exits + strong multipliers Confiden'al  -­‐  Cowboy  Ventures  2014   19  
  • 37. What do Investors Care About? The Plan •  Product roadmap •  Metrics and milestones •  Financials / projections •  Hiring plan Confiden'al  -­‐  Cowboy  Ventures  2014   20  
  • 38. What do Investors Care About? Traction (or some proof you can rock it) •  Traction •  Other “proof” Confiden'al  -­‐  Cowboy  Ventures  2014   21  
  • 39. Meeting with Investors What to do and expect… •  Before •  During •  After Confiden'al  -­‐  Cowboy  Ventures  2014   22  
  • 40. Meeting with Investors Before •  Do your homework •  Reaching investors •  Arranging a time Confiden'al  -­‐  Cowboy  Ventures  2014   23  
  • 41. Meeting with Investors During •  The goal of the first meeting à get a second meeting •  Start strong •  Show > tell •  Know and mention potential competitors •  Concrete next steps Confiden'al  -­‐  Cowboy  Ventures  2014   24  
  • 42. Meeting with Investors After •  Send a follow-up note thanking them and summarizing any next steps or action items •  The investor’s process Confiden'al  -­‐  Cowboy  Ventures  2014   25  
  • 43. Other Thoughts •  Is VC right for you? •  Every investor meeting is an opportunity to get better Confiden'al  -­‐  Cowboy  Ventures  2014   26  
  • 44. Common Mistakes •  Settling for a cold intro •  Asking an investor to sign an NDA •  Thinking too small / not selling the dream •  Discussing exits in an early stage pitch •  Focusing too much on valuation in the early stage •  Not knowing the VC’s investment thesis •  Making the investor do all the work •  Game-playing •  Huge spikes in revenue from year to year Confiden'al  -­‐  Cowboy  Ventures  2014   27  
  • 45. Some Things I Love •  Be data driven –  If you have data already, speak to what it is telling you –  If you don’t have data, speak to what data is important and what metrics you will be tracking •  CAC, WoW growth, churn, DAUs/MAUs, etc. •  Run tests –  Run a limited test to see if data will help you prove a hypothesis or help demonstrate product-market fit •  Product roadmap –  A well thought-out roadmap for building and executing on product development Confiden'al  -­‐  Cowboy  Ventures  2014   28  
  • 46. Closing Thoughts •  A strong company value proposition is a pre- requisite for seeking investment •  Team, Market, Plan, and Traction (or some proof you can rock it) are the four most important things to investors when evaluating an opportunity Confiden'al  -­‐  Cowboy  Ventures  2014   29  
  • 47. THANK YOU Questions? Confiden'al  -­‐  Cowboy  Ventures  2014   30  
  • 48. MARKET SIZING & COMPETITIVE LANDSCAPE& COMPETITIVE LANDSCAPE Steph Palmeri, SoftTech VC / @stephpalmeri TOTAL ACCESS Fundraising Series, Part I April 8, 2014 Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
  • 49. Our Three Asses Rule This Presentation’s Focus Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
  • 50. Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistributeproprietary & confidential blackbox.vc
  • 51. Big-Ass Market * “Big enough” stress test – Greater than $1B market opportunity – Company, not feature – How does your startup get to $100M in revenue? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute – How does your startup get to $100M in revenue? • 10% of $1B market v. 50% of $200M (unrealistic!) * By raising capital, you commit to match return expectations
  • 52. Market Types Existing Market Resegmented Market New Market Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute better, faster, cheaper fundamental shifts, niche brave new world which one is you?
  • 53. Market Analysis 101 * Problem definition: – What are the underlying needs you solve? * Identify your customers – What do they look like? – How are you helping them? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute – How are you helping them? – Are your users also your buyers? (who pays?!) * Addressable Market = # Customers * LTV – What is the relevant market? – Your expected share? (be reasonable, its not 100%!!) – Growth / overall market potential?
  • 54. Top Down Market Sizing 1. Industry, analysts estimates, market data, etc. 2. Broken down to appropriate sub-segment by: 1. Product Category Addressable Market ≠ Total Market Size Total Apparel Market (US) Total Kid’s Apparel Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute 1. Product Category 2. Geography 3. Vertical 4. Sales Channel 5. Customer 6. Etc….. Total Address Market (topdown) Your revenue if you captured 100% of your addressable market. Total Kid’s Apparel Market (US) Total Online Kid’s Apparel Market (US)
  • 55. Bottom Up Approach Identify & multiply the following: Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute # of potential customers x est. revenue per user per year Total Addressable Market(bottom up)
  • 56. Now Compare Top Down Addressable Market Bottom Up Addressable Market V. Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute Market Market …. are they reasonably close?
  • 57. Market Sizing Tips * Existing: Known customer + understood need – Know entities make it ‘easier’, for you and investors – Understand market nuances, don’t be careless * New markets: New customer + new use case Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute * New markets: New customer + new use case – Emerging macro trends – Adoption rate assumptions – Timing matters creativity + basic algebra + educated guesses = bullshit but shows us how you think about your space
  • 58. Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistributeproprietary & confidential blackbox.vc
  • 59. Market Attractiveness Size matters… (but don’t overlook) * Competition Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute * Competition * Monetization potential * Market Growth * Market Share * Timing
  • 60. Competitive landscape Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
  • 61. You’ll probably have a slide that looks something like this… Feature list YOU! Giant Incumbent Fledging Competition Not even in your market Feature everyone has Feature that ✓✓ ✓✓ ✓✓ ✓✓ Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute Feature that some of the competition has Unnecessary feature your competition cut Feature you think you have Feature you wish you had ✓✓ ✓✓ ✓✓ ✓✓ ✓✓ ✓✓ ✓✓
  • 62. … or this... Fast Your Logo Here! Others Others Others Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistributeproprietary & confidential blackbox.vc Slow Traditional Modern Others Others Others Others Others Others
  • 63. … or more recently this... Adjacent Market Segment Adjacent Market Segment Adjacent Market Segment Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute Your Logo Here Adjacent Market Segment Adjacent Market Segment
  • 64. but regardless… explain your startup in the context of the environment in which you operate including those who you Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute operate including those who you partner with and those who you compete against and those who keep you awake at night proprietary & confidential blackbox.vc
  • 65. overview * Competitive Landscape – Examine the macro business environment – Review your competition (past, present, future) – Benchmark yourself Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute – Benchmark yourself * Competitive analysis – The classic SWOT analysis * Competitive advantage
  • 66. Classic completive analysis * Examine the macro business environment – Economic + political trends – Cultural + social shifts – Technological innovation – Regulations + legislation Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute – Regulations + legislation * Know the industry ecosystem surrounding your startup – Competitors (direct, indirect, potential entrants) – Suppliers/Partners – Substitutes – Customers
  • 67. Pop Quiz Q: Is your industry one or more of the following: a. Considered crowded? b. Fairly complex? c. Scary to investors? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute c. Scary to investors? A: Consider making an ecosystem slide Show investors how much you know (and they don’t) about your space… OWN IT!
  • 68. Competitive analysis * Comparisons you might put in a competitive grid: – Products / feature set – Customers – Market share You Them Feature #1 Feature #2 Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute – Distribution strategy – Technology – Pricing – Resources  are they well funded? Feature #2 Feature #3 Wow, your startup takes all the boxes on your arbitrary grid!
  • 69. SWOT Analysis – Your Competitive Position Strengths: why you kick ass - Team - Technology - Scalability - Execution - Customer acquisition & retention Weaknesses: why you don’t kick ass - Team - Lack of Technology - Scalability issues - Inability to execute - Unreliable product/service Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute - Customer acquisition & retention - Distribution Opportunities: why you might kick ass - Early mover - Emerging segments - New technology - New distribution channel - Changing tastes - Etc. - Unreliable product/service - Poor distribution Threats: why you might not kick ass - Competitors w/ more $ - Emerging segments - New technology - New distribution channel - Changing tastes - Etc.
  • 70. Competitive advantage * Barriers to entry * Create a long-term sustainable advantage – Continuous learning & innovation Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute – Continuous learning & innovation – Excellence and speed in execution * Don’t obsess about others – A little competition is healthy – Keep an eye on competition but don’t loose focus on what’s really important … the customer
  • 71. VC’s perspective What VC’s MeanWhat VC’s Say Who will you compete with tomorrow? When does Facebook plan to do this? How are you different from the 15 other dating services I this week? Who do you compete with today? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute tomorrow? [Insert name here] just raised $50M from these 10 firms, how are you differentiated? this? Your competition has deep pockets…will anyone be willing to fund your next round?
  • 72. How to reach Steph Palmeri: w: www.softtechvc.com b: www.stephpalmeri.com t: @stephpalmeri Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
  • 73. Niko Bonatsos @bonatsos General Catalyst Partners
  • 74. @bonatsos General Catalyst Partners
  • 75.  You always face competition ◦ It gets worse over time. ◦ Copying is the best form of flattery.  Why will your company break out?  What is your real advantage? What is your real advantage? ◦ Is it a technology advantage? ◦ Unique insights about the market? ◦ Timing re: seizing regulatory changes? ◦ Unique growth model? @bonatsos
  • 76. @bonatsos
  • 77. @bonatsos
  • 78.  $20 billion @bonatsos
  • 79. @bonatsos
  • 80. @bonatsos
  • 81. @bonatsos
  • 82. @bonatsos
  • 83. @bonatsos General Catalyst Partners
  • 84. @bonatsos
  • 85. @bonatsos
  • 86.  Seek for FREE PR ◦ Techcrunch et al need to report on something ◦ Recruiting ◦ Fundraising ◦ Early Adopters  Facebook Mobile Ads, New channels (e.g. Snapchat) Facebook Mobile Ads, New channels (e.g. Snapchat) ◦ “Golden Time” -> Cheap  NEVER pay for users/customers early on ◦ Spend that $$ improving your product/dating life @bonatsos
  • 87.  Invest in growth and strategic value ◦ Revenue and profit$ will follow in time (we hope) ◦ Leverage your strengths  Don’t focus on breaking even ◦ Diminish profits and slow growth◦ Diminish profits and slow growth  Set personal goals (be realistic) ◦ Funding requirements ◦ Exit expectations ◦ Time horizon ◦ Social life @bonatsos
  • 88.  Iterate all the time  Every business is different  Great product is “table-stakes” today  Advisors & experts vs. customers & market Startup = Growth (Paul Graham) Startup = Growth (Paul Graham) @bonatsos
  • 89. @bonatsos General Catalyst Partners

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