Welcome to Lead to Win          Thursday, October 27, 2011Slide 1                                Lead to Win
Day 3          David Hudson                             Day 3 opportunity          (Carleton)                             ...
Day 3 Opportunity Assessments                   October 27, 2011                    David HudsonSlide 3                   ...
Ottawa-Gatineau experience                                        Jun Aug   Nov   Mar Jun       Nov     Nov Total         ...
Day 3 opportunity reviews          Criteria and process to assess opportunities set by          representatives of nine LT...
28 Reviewers          1. Consumer products           3. Internet services A             (Daisy, 1st floor)              (B...
28 Reviewers (continued)          5. Services                       6. Special             (Violet, 1st floor)            ...
Process          Presentations are made only to panel of reviewers          20 minutes is allocated to each opportunity. 2...
Suggested time allocation          We suggest            Set up time and niceties: 2 minutes            Presentation: 10 m...
Lead to Win Founders Club           Co-chairs: Eric Dormer & Jason DaleySlide 11                                          ...
Blueprint to growth            (one more time)             October 27, 2011               Tony BailettiSlide 12           ...
Distinct functions of entrepreneurs       1. Responds to existing or future profit opportunities, all          of which co...
Four key skills           Make decisions when future is unknowable           Identify, create, shape, develop and refine  ...
Blueprint to grow revenue                                                  Raise bar                           Get house i...
Inventory of growth formulas for smallcompanies       1. Help strong customers grow       2. Bring innovation to market as...
Inventory of growth formulas(continued)       7. Make competition irrelevant by concurrently           delivering 2X the v...
Days 4-6 overview              October 27, 2010                Tony BailettiSlide 18                         Lead to Win
Tasks           Harden and strengthen opportunity              Prepare presentation for Day 6 assessment              Self...
Days 4-6           Day 4              Legal issues              Business models              Entering a market, lessons fr...
Agenda           So, you want to be an entrepreneur           Funding your firm and your family           Your runway     ...
Funding your firm and your family           Upon completion,            You will know . . .             What it means to b...
Becoming an entrepreneur           Pros              Cons            What are these    How high are these                 ...
Becoming an entrepreneur           Pros                              Cons            Living the dream!                 Giv...
Sharing with the family           This is a dialog!           The plan            Describes your thinking and planning    ...
Sharing with the family           Describe the plan            I would like to do this . . . (Start a firm, test equipment...
Find a trusted confidant to talk to when things are going well, so            you can confide when things are bad spouses ...
Setting up the firm           Stock structure capital structure           Shareholder rights, drag alongs           Incorp...
Business corporation basics                                                                     Ownership is separate from...
Different funding for different firms           Consulting firms            Require virtually zero capital to start, usual...
Without cash            Stress? You need a $ platform to keep you whole!           Without cash            How much?! Too ...
Cash Flow and Risk are intertwined           Family            Understand how much it costs to live            Prepare the...
Example : monthly cash flow plan                                   Jan    Feb   Mar   Apr   May   Jun   Jul       Aug   Se...
Example of cash flow projections   Company Name   Forecast operating results & cash flow from operations   Currency $ 000 ...
Sources of funding           You build runway with $$            Angels, friends and family            Venture Capital    ...
Angels, friends and family           Earliest investors           Desire for privacy makes them difficult to identify/find...
Venture capital           Equity investor looking for high growth over 5-10 years           VC Status            Canadian ...
Banks           There are many types: charter (eg big five), quasi-banks,           government (BDC, EDC), investment     ...
Government      Government Funding           Policy based, such as employment driven           Long gestation cycle, may t...
Government (continued)      SDTC         Sustainable Development Technology Canada           Projects must demonstrate new...
Government (continued)      OCE Investment Accelerator Fund        Seed money preparing company for first round funding   ...
Government (continued)           IRAP    Industrial Research Assistance Program            Help small/medium business comm...
R&D tax credit program           Combined tax credits available to qualifying Canadian           Controlled Private Corpor...
Capital Pool Company (CPC)           Capital Pool Company (CPC) publically traded company with           cash and no opera...
Strategic investment           Possibly at later stage           Equity financing form strategic investor           Motiva...
Initial Public Offering (IPO)           Co offers common shares to the general public, in CDN           or US           Ty...
cash?      What is your business model??       No revenue, small costs       No revenue, lots of costs       Revenue from ...
Key Takeaways           Family is as important as the firm           Know your limits           Many sources of funding ex...
Two Friends with a Plan           Person 1   Bill is a new PhD grad who has been doing           low analog signals       ...
Background on James           Age 40           Married for 15 years with two children, a girl 14 and a           boy 10   ...
Becoming an Entrepreneur - James           Pros                              Cons            Living the dream!            ...
Sharing with the family - James           Describe the plan            Describes thinking and planning with spouse and chi...
Personal/Family Budget                              Jan          Feb           March          April           May         ...
Funding - Needs and Sources           Year 1     capital $100k (see spreadsheet)            Bill stays at university to te...
Company                                               Cash Flow Forecast, Yr 1           Company Name                     ...
Company                                        Cash Flow Forecast, Yr 2           Company Name                            ...
Funding - Needs and Sources           Year 3 capital $0k, need another $300k (see           spreadsheet)            Bill j...
Company                                               Cash Flow Forecast, Yr 3       Company Name                         ...
Overall Review           Clearly communicate specifics with your family           Understand the basics of corporate owner...
Slide 63   Lead to Win
Day 3 takeaways           October 27, 2011           Janice Singer and Deborah DexterSlide 64                             ...
Day 3 takeawaysSlide 65          Lead to Win
Lead To Win Bootcamp - Day 3
Lead To Win Bootcamp - Day 3
Lead To Win Bootcamp - Day 3
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Lead To Win Bootcamp - Day 3

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Lead To Win and Lead To Win for Women is a free business bootcamp in the Ottawa Gatineau area for entrepreneurs starting or growing a business.

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Lead To Win Bootcamp - Day 3

  1. 1. Welcome to Lead to Win Thursday, October 27, 2011Slide 1 Lead to Win
  2. 2. Day 3 David Hudson Day 3 opportunity (Carleton) assessments David Hudson Reviewers comments (Carleton) Eric Dormer (Dawnsuite Communications) Founders Club welcome & Jason Daley (UcreateMedia) Tony Bailetti Growth & Days 4-6 (Carleton) Funding your startup (Deloitte & Touche LLP) Janice Singer & Deborah Dexter (IRAP) Day 3 takeaway messages Wrap-upSlide 2 Lead to Win
  3. 3. Day 3 Opportunity Assessments October 27, 2011 David HudsonSlide 3 Lead to Win
  4. 4. Ottawa-Gatineau experience Jun Aug Nov Mar Jun Nov Nov Total 09 09 09 10 10 10 11 Applicants 82 66 98 69 41 49 59 464 123 Day 1 accepts 62 46 55 49 35 29 46 322 4 wks 456 Day 4 accepts 51 35 44 37 22 18 ? 207 Admitted to Phase 3 (passed Day 6) Opportunity development Founders 39 27 34 26 14 13 ? 153 Deal development New startups 30 19 21 18 11 11 ? 110 75 start-ups active as of October 15, 2011Slide 4 Lead to Win
  5. 5. Day 3 opportunity reviews Criteria and process to assess opportunities set by representatives of nine LTW Strategic Associates Part A - scoring 1. CUSTOMER VALUE 2. COMPETITIVE 3. PARTNER VALUE Part B - Part C - substantive feedback to opportunity proponents Scoring of 1/2/3 Green: OK Yellow: OK with a specific action Red: Considerable work still required Reds are not invited to join Days 4-6Slide 5 Lead to Win
  6. 6. 28 Reviewers 1. Consumer products 3. Internet services A (Daisy, 1st floor) (Blue, 2nd floor) Line Brabant (LINE Hanan Anis (uOttawa) International) Mark Antaya (Investors) Chris Cope (City of Ottawa) Rob Collins (YearOne Labs) Dan Istead (Fed Government) Llynne Plante (IRAP) Christine McCrady (RBC) Jonathan Wells (Carleton) 2. HW & SW products 4. Internet services B (Marigold, 1st floor) (Red, 2nd floor) Peter Carbone (PJCI) Elizabeth Gilhooly (Nuvance) John Fielding (OCE) Claude Haw (VentureCoaches) Farzi Khazai (Tech Gemini) Harriet Waterman (IRAP) Raina Sharma (BDC) Michael Weiss (Carleton) Stoyan Tanev (U Southern Denmark)Slide 6 Lead to Win
  7. 7. 28 Reviewers (continued) 5. Services 6. Special (Violet, 1st floor) (Lilac, 3rd floor) Saad Bashir (City of Ottawa) Diane Isabelle (National Candace Enman (Welch Research Council) Group) Carole Lair (OCRI) Fiona Gilligan (Fiona Karen Letain (ETIS Gilligan) Technologies) David Hudson (Carleton) Steven Muegge (Carleton) Sophia Leong (Industry Ian Scott (City of Ottawa) Canada)Slide 7 Lead to Win
  8. 8. Process Presentations are made only to panel of reviewers 20 minutes is allocated to each opportunity. 20 minutes is a hard limit. Lead reviewer is responsible for: Distributing / collecting Opportunity Assessment Forms Assigning ID codes to reviewers to guarantee reviewer anonymity Keeping time and smooth running of the reviews Ensuring forms are properly completed Dealing with issues Improving the opportunity assessment process Each reviewer rates each opportunity independently before the next group/individual is allowed into the room If reviewers and opportunity proponents wish to exchange cards, arrange follow ups, etc.; they should do so during lunch or the social and not take time away from the assessment processSlide 8 Lead to Win
  9. 9. Suggested time allocation We suggest Set up time and niceties: 2 minutes Presentation: 10 minutes Q & A: 5 minutes Day 3 Opportunity Assessment form completion: 3 minutes Up to Review PanelSlide 9 Lead to Win
  10. 10. Lead to Win Founders Club Co-chairs: Eric Dormer & Jason DaleySlide 11 Lead to Win
  11. 11. Blueprint to growth (one more time) October 27, 2011 Tony BailettiSlide 12 Lead to Win
  12. 12. Distinct functions of entrepreneurs 1. Responds to existing or future profit opportunities, all of which consists of price differentials P1 P2 Sales of: Resources & Decisions to Expects P2 > P1 processes employ resources & processes 2. Acts to move away or destroy her/his present state Seeks autonomy Authors relationships Makes declarationsSlide 13 Lead to Win
  13. 13. Four key skills Make decisions when future is unknowable Identify, create, shape, develop and refine opportunity Acquire and combine resources products, services, solutions, processesSlide 14 Lead to Win
  14. 14. Blueprint to grow revenue Raise bar Get house in Divest what adds no value Get legal, cash, IP & order personal affairs right Act based on results/facts Revenue Secure Close deals for 6+ jobs commitment Implement growth formula Increase # & diversity of Create mind share aroundplayers that make money whenyou sell Overcome does what it does Develop differentiators for consumption Lever talent, technology &which customers pay resources worldwide Keep pace delivering value to barriers Lower cost of customercustomers & players Skills acquisition & go to market Select right competitors $ Access/reach TimeSlide 15 Lead to Win
  15. 15. Inventory of growth formulas for smallcompanies 1. Help strong customers grow 2. Bring innovation to market as complementary offer 3. Apply good technology developed by others to different markets 4. Sell services to niche first & then develop & sell product 5. Demonstrate offer works, sell to first customers, & identify profitable business model at the price first customers are willing to pay 6. Demonstrate that offers provides value to users & economic benefits to customers & can be delivered at a profitSlide 16 Lead to Win
  16. 16. Inventory of growth formulas(continued) 7. Make competition irrelevant by concurrently delivering 2X the value at half the cost 8. Sell to narrow niche, cross-sell, then fill higher order needs 9. Sell to customers in mature markets abandoned by incumbents 10. Fill gaps that occur when migrating from an old to new system 11. Resell services in geographies that are too expensive for other service providersSlide 17 Lead to Win
  17. 17. Days 4-6 overview October 27, 2010 Tony BailettiSlide 18 Lead to Win
  18. 18. Tasks Harden and strengthen opportunity Prepare presentation for Day 6 assessment Self assess presentation using 7 dimensions Expand network Attend social and engage Gain knowledge to establish and grow tech business Review and apply Day 1-3 course material Gain confidence, encouragement and motivation Interact with peers Build foundation to sell to first customers Identify first customersSlide 19 Lead to Win
  19. 19. Days 4-6 Day 4 Legal issues Business models Entering a market, lessons from an entrepreneur Day 5 Team and steering, lessons from an entrepreneur Operations, lessons from an entrepreneur From idea to management to sale, lessons from an entrepreneur Day 6 Day 6 Opportunity Assessment IRAP services to companies Social where we hand out LTW Certificates of AchievementSlide 20 Lead to Win
  20. 20. Agenda So, you want to be an entrepreneur Funding your firm and your family Your runway Sources of funding Key take aways ScenarioSlide 22 Lead to Win
  21. 21. Funding your firm and your family Upon completion, You will know . . . What it means to be an Entrepreneur How to separate family and firm How much money you need and when How much risk is for you Sources of funding You will know how to . . . Take stock of your personal and professional situation Engage your family in the process Understand your funding sourcesSlide 23 Lead to Win
  22. 22. Becoming an entrepreneur Pros Cons What are these How high are these ??????Slide 24 Lead to Win
  23. 23. Becoming an entrepreneur Pros Cons Living the dream! Give up on a full time job and Build a firm my way lose $100k income Possible comfortable living or Go into debt for $100k exit in excess of $1m Work very long hours Innovative IP Not see the family Capitalize on your strengths Learning process out of work for 12 months and a $100k debtSlide 25 Lead to Win
  24. 24. Sharing with the family This is a dialog! The plan Describes your thinking and planning Lets them describe their thoughts (may take weeks) The expectations Articulate your expectations, listen to their expectations Describe the time invested Describe financial expectations and situation The exit Establish your exit plan, with clear exit event or point The contract Take the time and write it down and refer to it monthlySlide 26 Lead to Win
  25. 25. Sharing with the family Describe the plan I would like to do this . . . (Start a firm, test equipment, etc) The expectations Articulates the expectations borrow $100k Work long hours, never home for dinner or always home for dinner but work in the evening?? No vacations etc because of low funds Family response They agree to do . . . (Look after the family single handedly) The exit Establish the clear quit point after 2 years if no sales then will go find a firm to work for . . . The contract Write it all down and everyone signs even the dogSlide 27 Lead to Win
  26. 26. Find a trusted confidant to talk to when things are going well, so you can confide when things are bad spouses are not a good choice Constantly looking for funds Never pass up funds because you think you have enough Ever opportunity must be taken Driving the direction of the firm Dealing with challenging employees Selling to customers Extreme highs and extreme lowsSlide 28 Lead to Win
  27. 27. Setting up the firm Stock structure capital structure Shareholder rights, drag alongs Incorporation What happens if you leave What happens if you fire your partnerSlide 29 Lead to Win
  28. 28. Business corporation basics Ownership is separate from management Appoint Shareholders Board is responsible to manage or supervise the business affairs and may Auditor Elect delegate its authority to management Appoint Board of Directors As a startup, you likely are all three, but need to Appoint understand the different rights and responsibilities Audit Committee Management / Company Appoint Internal Auditor Hire Retain Employees Consultants & AdvisorsSlide 30 Lead to Win
  29. 29. Different funding for different firms Consulting firms Require virtually zero capital to start, usually all intellectual property is in the heads of the employees Intellectual property license firms Require minimal capital to build, usually the first invention (patent) can be built with a couple of people with product launch via license or lawsuit Internet and mobile app firms Require minimal capital to build, usually the product development can be completed by a couple of people with product launch via the web Software firms Require intermediate amounts of capital to build, because of longer product development cycle, however, fixes can be applied after product launch Hardware firms Require the most amount of capital to build, because of the longer cycle coupled with any hardware rework costing significant time and money to implementSlide 31 Lead to Win
  30. 30. Without cash Stress? You need a $ platform to keep you whole! Without cash How much?! Too little you choke, too much you waste it. How much $$ do you need? When do you need the $$ It takes two plans Family and FirmSlide 33 Lead to Win
  31. 31. Cash Flow and Risk are intertwined Family Understand how much it costs to live Prepare the family budget (even if its just you) What can you live with? Business Understand how much it costs to build Prepare a business cash flow forecast Be pessimistic (2x the time and 2x the cost) Know the bottom line costsSlide 34 Lead to Win
  32. 32. Example : monthly cash flow plan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec CASH OUTFLOWS Rent (600) (600) (600) (600) (600) (600) (600) (650) (650) (650) (650) (650) Utilities 0 (50) 0 (50) 0 (30) 0 (30) 0 (30) 0 (50) Phone and Internet (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) Materials 0 0 0 (200) (500) 0 0 0 0 0 0 0 Testing 0 0 0 0 0 0 (500) 0 0 0 0 0 Advertising 0 0 0 0 0 0 0 (400) 0 0 0 0 TOTAL CASH OUTFLOWS (640) (690) (640) (890) (1140) (670) (1140) (1120) (690) (720) (690) (740) CASH INFLOWS Savings 6000 0 0 0 0 0 0 0 0 0 0 0 Government Grant 0 0 0 0 0 0 0 0 500 0 0 500 Family loan 0 0 0 0 0 0 0 0 0 0 5000 0 TOTAL CASH INFLOWS 6000 0 0 0 0 0 0 0 500 0 5000 500 Opening balance 6000 5360 4670 4030 3140 2000 1330 190 (930) (1120) (1840) 2470 Closing balance 5360 4670 4030 3140 2000 1330 190 (930) (1120) (1840) 2470 2230Slide 35 Lead to Win
  33. 33. Example of cash flow projections Company Name Forecast operating results & cash flow from operations Currency $ 000 s Forecast For Years Ending (Month and Day) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Revenue xxx xxx xxx xxx xxx xxx COGS xxx xxx xxx xxx xxx xxx Gross Profit xxx xxx xxx xxx xxx xxx Operating expenses xxx xxx xxx xxx xxx xxx Operating expenses 1 xxx xxx xxx xxx xxx xxx Operating expenses 2 xxx xxx xxx xxx xxx xxx Operating expenses 3 xxx xxx xxx xxx xxx xxx Total operating expenses xxx xxx xxx xxx xxx xxx Operating income/(loss) EBIT xxx xxx xxx xxx xxx xxx Interest expense xxx xxx xxx xxx xxx xxx Earnings (loss) before tax xxx xxx xxx xxx xxx xxx Income tax xxx xxx xxx xxx xxx xxx Net income (loss) xxx xxx xxx xxx xxx xxx Operating income/(loss) EBIT xxx xxx xxx xxx xxx xxx Add: Depreciation /amortization xxx xxx xxx xxx xxx xxx EBITDA xxx xxx xxx xxx xxx xxx Less: Cash taxes xxx xxx xxx xxx xxx xxx Less: Working capital investment xxx xxx xxx xxx xxx xxx Less: Capital expenditures xxx xxx xxx xxx xxx xxx Cash flow from operations xxx xxx xxx xxx xxx xxxSlide 36 Lead to Win
  34. 34. Sources of funding You build runway with $$ Angels, friends and family Venture Capital Banks Government Strategic Investment Capital Pool Company (CPC) Initial Public Offering (IPO)Slide 37 Lead to Win
  35. 35. Angels, friends and family Earliest investors Desire for privacy makes them difficult to identify/find Deploy small amounts ($10k 500k) Longer term investment horizon, often with high return expectations Provide funds for product development Provide cash for common shares, convertible debt Valuation of shares a question May provide services for shares Need a shareholder agreement to set out the termsSlide 39 Lead to Win
  36. 36. Venture capital Equity investor looking for high growth over 5-10 years VC Status Canadian VC LP system is in distress WW VC funding is reducing to pre-2000 levels (half the current rate) Number of VC firms and funding to be reduced to 50% of current levels Expectation that it will be significantly more difficult raise funding than even today VC Game Experienced teams, large markets, significant traction Eat a share of your firm every time they invest Leave you with 1 or 2%!!! You may be pushed aside RiskSlide 40 Lead to Win
  37. 37. Banks There are many types: charter (eg big five), quasi-banks, government (BDC, EDC), investment Need assets to secure the funds Your house Your receivables They do not take risks they are lenders, not investors They are very useful at various times but look for the collateral After you file income tax, an SRED claim is collateral After you ship, accounts receivable is collateral After you own inventory, its collateral Etc. RISK if the plan fails, you could lose your house! Reward non-dilutive to your ownership, use someone else moneySlide 41 Lead to Win
  38. 38. Government Government Funding Policy based, such as employment driven Long gestation cycle, may take a year Funds arrive in buckets (they can run out part way through the year) Competitive in nature your proposal must be better than others Avoid people who promise to get you funding Watch out for repayable loans, they have expensive reporting requirements RISK As long as you complete the project as outlined, little risk Reward Non-dilutive source of fundsSlide 42 Lead to Win
  39. 39. Government (continued) SDTC Sustainable Development Technology Canada Projects must demonstrate new technology with environmental sustainability Collaborative with industry/academic partner ETF Emerging Technologies Fund For Ontario innovation Clean technology, life sciences, digital media, information communication technology Passive equity investment OCE Ontario Centers for Excellence Funds for research, commercialization and talent Must collaborate with academic initiationSlide 43 Lead to Win
  40. 40. Government (continued) OCE Investment Accelerator Fund Seed money preparing company for first round funding Joint between MARS in Toronto & ministry For Ontario innovation, clear path to commercialization IDF Innovation Demonstration Funds Environmentally friendly technologies Ontario based, global market, tested technology Combined grant and debt vehicle SADI Strategic Aerospace Defense Initiative Aerospace & defense activities Working with research and academic institutions Promotes innovation Contributes % of expenses, repayable royaltySlide 44 Lead to Win
  41. 41. Government (continued) IRAP Industrial Research Assistance Program Help small/medium business commercialize IP Typically provide < $200k Market Access Program Global expansion for small/medium business in Ontario More than 5 employees and minimum $500k Eligible for trade shows, market research etc. up to $30k per project to a max of 50% of costsSlide 45 Lead to Win
  42. 42. R&D tax credit program Combined tax credits available to qualifying Canadian Controlled Private Corporations (CCPCs): Claim is filed annually via corporate tax return (after money is spent) 35% enhanced refundable credit on first $3 million 20% on balance (may be partially refundable) Taxable income and taxable capital tests must be met to qualify Additional credits available from Provinces Deadline to file a claim is 18 months after fiscal year end Must have documentation & evidence that criteria are metSlide 46 Lead to Win
  43. 43. Capital Pool Company (CPC) Capital Pool Company (CPC) publically traded company with cash and no operations Exists as vehicle for small business to obtain funds and become public A TSX Venture Exchange program Filing and clearing of a prospectus, completion of an IPO and Agreement in principle in respect of a proposed qualifying transaction Provides entry-level public vehicle for small businesses Public offering is a minimum of $200K and maximum of $1,900K. Gives access to future equity financing Expensive process legal and compliance requirementsSlide 47 Lead to Win
  44. 44. Strategic investment Possibly at later stage Equity financing form strategic investor Motivated by business/strategy/fit as opposed to financial opportunity Complementary to your business? Consider whether this might limit potential for future financing/exitSlide 48 Lead to Win
  45. 45. Initial Public Offering (IPO) Co offers common shares to the general public, in CDN or US Typically when revenue growth & profitability trending very positive Need underwriter, lawyers, accountants Complex, costly legal process involving filing of Process takes 3-6 months, completion depends on market conditions Provides liquidity exit to investors and cash to company for growth acquisitions, etc.Slide 49 Lead to Win
  46. 46. cash? What is your business model?? No revenue, small costs No revenue, lots of costs Revenue from services while concurrently developing product One partner has a job and pays the rest to develop product Revenue from customers at the outset Revenue from R&D and selling IP Revenue from selling product or service that complements a large firms product or service There are many business models!Slide 50 Lead to Win
  47. 47. Key Takeaways Family is as important as the firm Know your limits Many sources of funding exist Plan for it to take 2x in time and cost 2x in funds than your forecast Things change as you grow, be prepared to exploit changes communitySlide 51 Lead to Win
  48. 48. Two Friends with a Plan Person 1 Bill is a new PhD grad who has been doing low analog signals Person 2 James is a test and measurement industry veteran with experience in selling and marketing products to semiconductor firms world wide Opportunity the emerging green automobile market. Implementation to create, build and sell a new sectorSlide 52 Lead to Win
  49. 49. Background on James Age 40 Married for 15 years with two children, a girl 14 and a boy 10 Comfortable life, low debt load (can afford a $100k loan) No significant retirement savings for James Spouse works for Fed Gov ($60k per year) Always talked about starting his own business Met Bill through a university industry project and liked him and his technologySlide 53 Lead to Win
  50. 50. Becoming an Entrepreneur - James Pros Cons Living the dream! Give up on a full time job and Build a firm my way lose $100k income Possible comfortable living or Go into debt for $100k exit in excess of $1m Work very long hours Innovative IP Not see the family Knows how to sell industry out of work for 12 months and a $100k debtSlide 54 Lead to Win
  51. 51. Sharing with the family - James Describe the plan Describes thinking and planning with spouse and children Lets them describe their thoughts (may take weeks) The expectations Articulates the expectations borrow $100k Work long hours, never home for dinner or always home for dinner but work in the evening?? No vacations etc. because of low funds The exit Establish the clear quit point after 2 years if no sales then will go find a firm to work for . . . The contract Write it all down and everyone signs even the dogSlide 55 Lead to Win
  52. 52. Personal/Family Budget Jan Feb March April May June July Aug Sept Oct Nov Dec YearINCOMEWages 3,000.00 3,000.00Interest/dividends 0.00Miscellaneous 0.00Income totals 3,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,000.00EXPENSESHomeMortgage/rent/taxes 0.00Utilities 500.00 500.00Home and mobile telephone 150.00 150.00Food 700.00 700.00Clothes and cleaning 0.00Entertainment 500.00 500.00Car, Bus, Fuel 500.00 500.00Insurance 300.00 300.00Health 50.00 50.00Subscriptions 0.00Dues 0.00Charity 0.00Recreation 0.00Team dues 0.00Courses 0.00Kids Stuff 400.00 400.00Vacations 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Home totals 3,100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,100.00Financial obligationsLong-term savings 0.00Retirement (401k, Roth IRA) 0.00Credit card payments 0.00Line of Credit 0.00Other obligations 0.00Financial obligation totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Misc. payments Other 0.00 Other 0.00 Other 0.00 Other 0.00 Other 0.00Misc. payments totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total expenses 3,100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,100.00Cash short/extra -100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -100.00 Slide 56 Lead to Win
  53. 53. Funding - Needs and Sources Year 1 capital $100k (see spreadsheet) Bill stays at university to teach and continue research (prototype) Applies for NSERC to pay him for 1 year James consults half time (all goes into firm) Builds business plan, researches funding options Firm applies for IRAP support, meets with OCE Firm is incorporated, shareholder agreements, etc prepared, taxes filed All costs deferred by lawyers and accountants IRAP supports technical intelligence search, OCRI supports business intelligence search firm closes in on marketing plan and business plan Year 2 capital $100k (see spreadsheet) Bill stops teaching, works on product full time, paid by OCE research James stops consulting, leads firm full time, draws no salary Firm hires first two key technical people, rest on contracts Firm completes prototype to show to potential customers (auto parts) IRAP supports project to 75% of salaries and contractors Capital is used to pay for rent (cheap building), material etcSlide 57 Lead to Win
  54. 54. Company Cash Flow Forecast, Yr 1 Company Name In Thousands Cash Flow Projection Prepared By: For the Year Ending: Date: Month -1 1 2 3 4 5 6 7 8 9 10 11 12 Total Cash Receipts: Cash Receipts: Act Pay Receipts 0 Loans 0 Government Forecast 0 Other (James contract) 10 10 10 10 10 10 10 10 10 10 10 120 Total Cash Receipts 0 0 10 10 10 10 10 10 10 10 10 10 10 120 Cash Disbursements: Company - Direct Labour 0 Fringe Benefits 0 Material Purchases 0 Overheads - Utilities 0 Rent / Mortgage 0 Insurance 0 Property Taxes 0 Office Supplies 0 Automobile 0 Travel 0 Maintenance 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.3 Admin - Salaries 0 Professional Fees 0 Advertising 0 Interest & Bank Charge 0 Income Taxes 0 Fixed Asset Additions 0 Loan Repayment 0 Other Company Costs 0 Company Exp Sub-Total 0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.3 Employee Expenses Salaries - Position 1 0 Salaries - Position 2 Salaries - Position 3 0 0 ! Salaries - Position 4 0 Salaries - Position 5 0 Subcontractor / Cons 1 0 Subcontractor / Cons 2 0 Project Material 0 Rental Equipment 0 Project Travel 0 Project Overhead 0 Other Project Costs 0 Exp Sub-Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total Disbursements 0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.3 Net Cash Over (Short) 0 -0.1 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 118.7 Cash Balance, Beginning 100 100 99.9 109.8 119.7 129.6 139.5 159.3 169.2 179.1 189 198.9 208.8 Cash Balance, Ending 100 99.9 109.8 119.7 129.6 139.5 149.4 169.2 179.1 189 198.9 208.8 218.7Slide 58 Lead to Win
  55. 55. Company Cash Flow Forecast, Yr 2 Company Name In Thousands Cash Flow Projection Prepared By: For the Year Ending: Date: Month -1 1 2 3 4 5 6 7 8 9 10 11 12 Total Cash Receipts: Cash Receipts: Act Pay Receipts 0 Loans 0 Government Forecast 18 18 18 18 18 10 10 10 10 10 10 168 Other (specify) 0 Total Cash Receipts 0 0 18 18 18 18 18 10 10 10 10 10 10 168 Cash Disbursements: Company - Direct Labour 0 Fringe Benefits 0 Material Purchases 0 Overheads - Utilities 0 Rent / Mortgage 2 2 2 2 2 2 2 2 2 2 2 2 26 Insurance 0 Property Taxes 0 Office Supplies 2 2 2 2 2 2 2 2 2 2 2 2 26 Automobile 0 Travel 0 Maintenance 2 2 2 2 2 2 2 2 2 2 2 2 26 Admin - Salaries 0 Professional Fees 0 Advertising 0 Interest & Bank Charge 0 Income Taxes 0 Fixed Asset Additions 0 Loan Repayment 0 Other Company Costs 0 Company Exp Sub-Total 0 6 6 6 6 6 6 6 6 6 6 6 6 78 Employee Expenses Salaries - Position 1 Salaries - Position 2 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 65 65 ?? Salaries - Position 3 0 Salaries - Position 4 0 Salaries - Position 5 0 Subcontractor / Cons 1 7 7 7 7 7 7 42 Subcontractor / Cons 2 7 7 7 7 7 7 42 Project Material 30 30 60 Rental Equipment 3 3 3 3 3 3 3 3 3 30 Project Travel 0 Project Overhead 0 Other Project Costs 0 Exp Sub-Total 0 24 24 24 57 57 27 13 13 13 13 13 13 304 Total Disbursements 0 30 30 30 63 63 33 19 19 19 19 19 19 382 Net Cash Over (Short) 0 -30 -12 -12 -45 -45 -15 -9 -9 -9 -9 -9 -9 -214 Cash Balance, Beginning 218.7 218.7 188.7 176.7 164.7 119.7 74.7 58.7 49.7 40.7 31.7 22.7 13.7 Cash Balance, Ending 218.7 188.7 176.7 164.7 119.7 74.7 59.7 49.7 40.7 31.7 22.7 13.7 4.7Slide 59 Lead to Win
  56. 56. Funding - Needs and Sources Year 3 capital $0k, need another $300k (see spreadsheet) Bill joins firm full time, no salary James with firm full time, no salary Firm signs first customer order but product needs a complete redesign Contract worth $100k Funding from??, Angels, customer, supplier? Year 4 capital $500k Bill and James draw a modest salary, $40k ea Firm ramps business to $1m Firm signs second customer EDC and BDC and bank support SRED, accounts receivable, etc Capital is used to pay for rent (cheap building), material, salaries etc Still cash flow negative but burn is reducingSlide 60 Lead to Win
  57. 57. Company Cash Flow Forecast, Yr 3 Company Name In Thousands Cash Flow Projection Prepared By: For the Year Ending: Date: Month -1 1 2 3 4 5 6 7 8 9 10 11 12 Total Cash Receipts: Cash Receipts: Act Pay Receipts 50 50 100 Loans 0 Government Forecast 40 10 10 10 80 Other (ANGEL) 30 30 30 30 30 30 30 30 30 300 Total Cash Receipts 0 40 30 30 30 30 90 40 40 80 30 0 0 480 Cash Disbursements: Company - Direct Labour 0 Fringe Benefits 0 Material Purchases 0 Overheads - Utilities 0 Rent / Mortgage 2 2 2 2 2 2 2 2 2 2 2 2 26 Insurance 0 Property Taxes 0 Office Supplies 2 2 2 2 2 2 2 2 2 2 2 2 26 Automobile 0 Travel 0 Maintenance 2 2 2 2 2 2 2 2 2 2 2 2 26 Admin - Salaries 0 Professional Fees 0 Advertising 0 Interest & Bank Charge 0 Income Taxes 0 Fixed Asset Additions 0 Loan Repayment 0 Other Company Costs 0 Company Exp Sub-Total 0 6 6 6 6 6 6 6 6 6 6 6 6 78 Employee Expenses Salaries - Position 1 5 5 5 5 5 5 5 5 5 5 5 60 Salaries - Position 2 5 5 5 5 5 5 5 5 5 5 5 60 Salaries - Position 3 5 5 5 5 5 5 5 5 5 5 5 60 Salaries - Position 4 0 Salaries - Position 5 0 Subcontractor / Cons 1 7 7 7 7 7 7 42 Subcontractor / Cons 2 7 7 7 7 7 7 42 Project Material 30 30 90 Rental Equipment 3 3 3 3 3 3 3 3 27 Project Travel 0 Project Overhead 0 Other Project Costs 0 Exp Sub-Total 0 29 29 29 32 32 32 48 48 18 18 18 0 381 Total Disbursements 0 35 35 35 38 38 38 54 54 24 24 24 6 459 Net Cash Over (Short) 0 5 -5 -5 -8 -8 52 -14 -14 56 6 -24 -6 21 Cash Balance, Beginning 4.7 4.7 9.7 4.7 -0.3 -8.3 -16.3 21.7 7.7 -6.3 49.7 55.7 31.7 Cash Balance, Ending 4.7 9.7 4.7 -0.3 -8.3 -16.3 35.7 7.7 -6.3 49.7 55.7 31.7 25.7Slide 61 Lead to Win
  58. 58. Overall Review Clearly communicate specifics with your family Understand the basics of corporate ownership Amount of funding depends on business model risk/reward tradeoff Sources of funding - at each stage of life cycle Angels, friends and family Venture capital Banks Government R&D tax incentives Capital pool company Strategic investment IPO Calculate your personal budget and corporate cash flow forecastSlide 62 Lead to Win
  59. 59. Slide 63 Lead to Win
  60. 60. Day 3 takeaways October 27, 2011 Janice Singer and Deborah DexterSlide 64 Lead to Win
  61. 61. Day 3 takeawaysSlide 65 Lead to Win
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