Jim Goetz of Sequoia Capital at Stanford
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Jim Goetz of Sequoia Capital explains to Stanford students what they look for in business plans - great pres.
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Jim Goetz of Sequoia Capital at Stanford
- 1. THINK BIG BUT START SMALL FEBRUARY 27, 2008
- 3. HUMBLE BEGINNINGS Larry & Sergey Steve Chad Jawed Jerry & David
- 4. HUMBLE BEGINNINGS Steve & Steve Trip Sandy & Len
- 6. WHAT WE HOPE TO HEAR FIRST… 2. MARKET STRATEGY (UNFAIR ADVANTAGE) 3. PRODUCT & TECHNOLOGY 4. DEFINING TEAM 5. CAPITAL EFFICIENCY ENTREPRENEUR’S CHALLENGE 1. MARKET POSITIONING
- 7. THE BIGGEST CHALLENGE…. A.K.A. THE “ELEVATOR” PITCH We networks networks. Sandy Lerner/Len Bozak Cisco “ “ 1. MARKET POSITIONING
- 8. HELP FROM GEOFFREY MOORE For [target customers] Who have [compelling reason to buy] Our product is a [new product category] That provides [key benefit (which solves problem)] Unlike [competitor in new product category] We have [key point of differentiation] *Source: Crossing the Chasm 1. MARKET POSITIONING
- 9. TWO DECLARITIVE SENTENCES For movie producers Who have post-production special effects Silicon Graphics provides computer workstations That integrates digital fantasies with film footage Unlike IBM or Sun Microsystems SGI has made a no compromise commitment to meeting film makers’ post-production needs. *Source: Crossing the Chasm 1. MARKET POSITIONING
- 10. INTIMATE WITH TARGET MARKET & BULLSEYE CUSTOMER? STRUCTURE SPEED LEVERAGE TRENDS VITAMIN? OR ASPIRIN? HOW PLUGGED IN ARE YOU? 2. MARKET STRATEGY
- 11. CHANGE OR CREATE CATEGORY? MARKET DYNAMICS JOIN EXISTING CATEGORY DEFINE NEW CATEGORY Large Size, Strong Growth Small Size, Explosive Growth ADVANTAGE Price/Performance IP, Functionality, Brand CUSTOMERS Opportunistic Loyal MARKET SHARE Lower (often less than 10%) Higher (often greater than 50%) GROSS MARGIN Lower (often less than 50%) Higher (often greater than 65%) ACHIEVABLE GOAL Acquisition Public Company LEGACY Single Generation Reign Dynasty 2. MARKET STRATEGY
- 12. YOUR PLAN OF ATTACK? 2. MARKET STRATEGY
- 13. CREDIBLE DIFFERENTIATION? Y 1 Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competitor 7 Competitor 8 Competitor 9 Competitor 10 Competitor 11 Y 2 X 1 X 2 New Co 2. MARKET STRATEGY
- 14. DEFENSIBLE BARRIERS? 3. PRODUCT & TECHNOLOGY TECHNOLOGY PARTNERSHIPS SIMPLICITY BUSINESS PROCESS DOMAIN KNOWLEDGE NETWORK EFFECT
- 15. MAGNETS? SCARS? PASSION? NewCo . 555 Main Street Tim Jones Anywhere, USA CEO (415) 555-5552 [email_address] NewCo. 555 Main Street Barney Baker Anywhere, USA CFO (415) 555-5553 [email_address] NewCo . 555 Main Street Ajay Singh Anywhere, USA COO (415) 555-5554 [email_address] NewCo . 555 Main Street Vlad Krunis Anywhere, USA General Counsel (415) 555-5555 [email_address] NewCo . 555 Main Street Karen Williams Anywhere, USA President (415) 555-5556 [email_address] NewCo. 555 Main Street Bob Smith Anywhere, USA Chairman (415) 555-5552 [email_address] 4. DEFINING TEAM
- 16. CENTRAL CASTING 4. DEFINING TEAM
- 17. DO THE #S MAKE SENSE? GROSS MARGIN REVENUE TRAJECTORY EBITDA CASH REQUIREMENT VS. OPEX %’S & RATIOS CASH FLOW TO BREAK EVEN 5. CAPITAL EFFICIENCY
- 19. TAKES LONGER, COSTS MORE 5. CAPITAL EFFICIENCY
- 20. FINANCIALS SAY A GREAT DEAL ABOUT HOW YOU THINK… NOT A TIME TO BE NAÏVE UNREALISTIC OR MISLEADING FRUGALITY MARKET STRATEGY SALES TACTICS MARKET SIZE MARKET UPTAKE MARKET VELOCITY REALISM 5. CAPITAL EFFICIENCY
- 21. MEETING MANAGING WITH VCS CHAOS? CONTROLLED?
- 23. LEARN FROM OUR MISTAKES MISREAD TEA LEAVES CLUTTERED MARKETS CAPITAL INTENSIVE SLOPPY DUE DILIGENCE MOMENTUM INVESTING WEAK SYNDICATE UNPREDICTABLE DIRECTORS DAZZLED BY SCIENCE BOY SCOUT REFERENCES TOO MUCH MONEY LONG EVALUATION CYCLES SLOW PAYING CUSTOMERS GOING NATIVE TOO EARLY TOO LATE DECEIVED BY COMPARABLES DILUTIVE IPOs FEELING TOO WEAK FEELING TOO STRONG POOR CUSTOMER SELECTION STRETCHED TOO THIN NOT ADDRESSING A TRUE PAIN CAN’T ARTICULATE THE BUSINESS SMALL GROSS MARGINS SMALLER OPERATING MARGINS NO MODEL FOR MAKING MONEY A FEATURE, NOT A PRODUCT A PRODUCT, NOT A BUSINESS LACK OPERATING CONTROLS GROWING TOO FAST WRONG DNA BAD LISTENERS POOR CUSTOMER SERVICE DECEIVED BY SUCCESSES DRUNKEN PARADE LEADERS EYEBALLS CONVERTS TO $s CAPEX CONVERTS TO $s IGNORING FUNDAMENTALS REPEATING HISTORY
- 25. WE’RE ONLY AS GOOD AS OUR NEXT INVESTMENT.
Editor's Notes
- DO YOU UNDERSTAND HOW THE PIECES FIT TOGETHER? Don’t assume we’re expert in your markets (although, we do apply previous experience in yours or related markets to make sure what you’re saying makes sense). We’re looking to be educated and inspired (if not deluded). Do you understand the underlying market dynamics and how those different pieces work together? What is occurring in the market that sets the stage for your opportunity? ARE YOU PLUGGED INTO THE PROBLEM? IS THE PROBLEM BIG ENOUGH? To then be able to clearly, succinctly, compellingly articulate the agonizing pain being experienced by the customer. Maybe you’ve been the customer. Maybe you’ve served the customer. Maybe you’ve researched the heck out of the customer. We’re looking for a penetrating, insightful and thoughtful understanding of the customer’s needs. Because, for a business to have a chance, your offering must be a “must have” not a “nice to have”. Otherwise, you’ll be spending significant time and money convincing them that they need the product.
- We’re tired of seeing these BCG grids.
- We’re looking for hard to do and hard to replicate. It’s the only thing a little company has in the face of an inhospitable environment. And, even if you have this, it only gives you a 6 to (maybe) 18 lead. Explain each section. WHEN YOU CLICK - ANIMATION It is a red flag to hear “there is unlimited demand for our unreleased product.” There are plenty of embarrassing examples, some of them ours, that had a big splash and a big crash – WebVan. They were built in advance of demand. The spent millions upon millions promoting and creating brands in an effort to convince customers that they needed this product.
- Do you really understand the business? Explain each section.
- Now that we’ve read the entire plan or listened to the entire presentation (the claims you’ve made), we’re now going to look at the numbers to see if you were telling the truth. Does it all make sense? Does it all tie together? Will the line items in the financials correlate with everything you’ve said about the market, the business and the model?