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Tcn fast track nov 2012 pitching the plan

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  • 1. Nutter McClennen & Fish LLP Attorneys at LawPitching the Plan: The DeckJeremy HalpernPartner
  • 2. Jeremy HalpernBiography› Nutter, McClennen & Fish, LLP - Partner; Director of Business Development, Emerging Companies Team • Attorney in the Emerging Companies Market since 1998 • Represent clients across industries: technology, hardware, software, mobile, medical devices, health IT, biotechnology, cleantech, CPG, consumer electronics & sports› MassVentures– Director ; Investment Committee • Commonwealth’s VC fund providing early stage high growth equity capital› The Capital Network – Director; Past Chairman • Providing education & resources to entrepreneurs seeking early stage capital› Tufts University; Professor of Entrepreneurial Leadership • Educating students in the art and science of leading entrepreneurial teams› Past Entrepreneurial Experience: • Co-Founder, EVP, MobileTek Corporation • Executive Chairman, SUPERB Productions 2
  • 3. Nutter’s Emerging Companies GroupAs a full service firm with a dedicated team of lawyers in the Emerging Companies Group, Nutter supportsventures across the innovation economy:• Software • Cleantech• Hardware • Mobile• Information Technology • Consumer Products• Biomedical Devices • Analytics• Biotechnology • New Media• Pharmaceuticals • Robotics• Life sciencesWe provide entrepreneurs will the full spectrum of support that they need to build their businesses and realizetheir visions:• Entity Formation • Employment support• Founders Agreements • Equity Compensation• Financing Strategy and Key Introductions • Tax Strategy• Angel & Venture Capital • Litigation• Debt Financing • Licensing• Private Equity • Distribution• Initial Public Offerings • Manufacturing• Private Placements • Supply Agreements• Strategic Partnering • Electronic Commerce• Mergers & Acquisitions • Patent and Trademark Strategy & Prosecution 3
  • 4. Marketing MaterialsMatching Materials and Process to Investor Type and Setting› Pre-first meeting/ Investor Conferences • The 1 Page Summary (the “Teaser”) • The 5 Page “Executive Summary” • The 15 – 20 page “Slide Deck” - foundation • The 10 second oral presentation pitch (the “Elevator Pitch) • The 30 sec – 2:00 min oral presentation (the “Quick Conversation”)› One-on-one VC meeting • The full Business Plan – Formal presentation • Back up materials • Financials› Tailoring the emphasis of materials for the specific investor (similar to tailoring a resume) vs. Consistency across all iterations› Tracking distribution of materials (remember the “systems”) 4
  • 5. Presentation and Slide Deck Organization1. Cover Slide 9. Competitive Landscape/2. Company Value Proposition + Competitive Advantage Investment Rationale 10. Defensibility / Barriers to Entry/IP3. Problem or Opportunity + 11. Team Metrics + Core Customer 12. Current Status4. Product/Service Solution 13. Funding Requirements, Cash and5. Product/Service Value Use of Proceeds Proposition 14. Risks and Plans6. Addressable Market 15. Exit Strategy and Options7. Business and Revenue Model 16. Investment Rationale/Summary8. Sales and Distribution Model Slide + Appendices or backup slides 5
  • 6. Cover Slide Introduction› 1 Minute Elevator Pitch • Get their attention! • Introduce company without distracting from spoken introduction • Sets the tempo› Content: • Logo • Tag Line – should explain business and begin to differentiate • Contact information • Name of the investor/group to whom presentation is delivered • Possibly a non-distracting picture› Be enthusiastic – people buy from people not PowerPoint 6
  • 7. Company Value Proposition (*Zoom Out)› Argued to be most important slide in presentation – a 1 slide summary • Important enough to repeat 3 times • Bookend the deck – begin and end presentation› Content objective – why should investors invest • 5-7 bullets outlining strengths and direction of presentation • Core technology • Product candidates • Market opportunity • Key partnerships • Management strengths 7
  • 8. The Problem a/k/a the Opportunity› What is the unsolved problem or need?› Who has this problem? Define your Core Customer and their attributes.› How serious is it? Do you have Metrics? • Magnitude: How significant is it? Can you quantify it? • Frequency: How often is pain experienced (life insurance vs. coffee)? • Criticality: Will the pain disrupt the business (e.g., IT outage). • Cancer Drug vs. Aspirin vs. Vitamin?› How have the alternative offerings failed to meet the need?› Analysis of why has the problem not been solved until now?› Remember! • Customers buy if they experience need, not if society does. • Business customers buy to make money or solve problems. 8
  • 9. Product/Service Solution› Describe your product or service?› What does it do and how does it work? • Do not get too detailed? Assume technical matters will be validated later. • Use pictures or diagrams where possible. • Demo / screen shots, etc. if necessary.› How does it fit within the customer’s environment?› What proof of concept have you achieved? • Prototype? Beta test? Etc.› What proof do you have of its effectiveness?› Use accurate words to describe phase/stage of development • ex. “it does” vs. “it will” vs. “it may” 9
  • 10. Solution Value Proposition and CompetitiveAdvantage (*Zoom In)› How is your solution better, faster or cheaper than the existing solutions for your customer? **Remember Different ≠ Better** • Saves costs • Drives revenue or customer acquisition • Allows customer to offer its customers a superior value proposition • Decreases risks • Leverages customer’s existing customers or solutions • Provides enjoyment, recreation, education, time saving… (consumer product)› How much better, faster, cheaper? Can you quantify the value proposition to the customer? • Can you validate that your solution is better? Do you have data to indicate that such items are meaningful to the customer? • Can you quantify a Return on Investment (ROI) for your customer? 10
  • 11. Strategy: Business and Revenue Model› Answer the question on the VC’s mind upfront: How and when will you make money?› Who is going to pay? Explain who YOUR customers are. Explain plan to penetrate target markets. Market adoption.› Manufacturing and commercialization strategies› How do you get paid? When do you get paid: Periodically? In advance? Upon resale? Is each buying decision separate? Which revenue line is the main one (customer concentration)?› How much do you get paid? Average $/customer? Is this sustainable (is this a commodity or at risk of becoming one)? What happens if competitors come in? 11
  • 12. Strategy: Business and Revenue Model› What is your cost structure – fixed vs. variable? What do you expect it to be? • Examples: • Direct Sales • Professional Services • VAR • Indirect Sales • SAAS • Multi-level marketing • Razor and blades business • Licensing business model model • Maintenance Contracts • Cost Savings Share • Auction / Arbitrage • Insurance • MLM • Digital Marketplace • Loyalty business models • Franchise • Publishing / Digital • Freemium business model • Data Broker Publishing • Premium business model • Sponsorship • Subscription • Professional open-source • Government Contractor • Advertising model 12
  • 13. Sales and Distribution Model› How you get your customers (customer acquisition cost)› How you actually deliver solution to customers (trucks, download, distributors, FedEx?)› Go-to-Market and General Marketing strategy› How you create customer relationships› How you incentivize and compensate sales (if applicable)› Explain geography and expansion strategy (scaling or growth issues)› Discuss critical distribution partners, options and roadblocks› Core business vs. non-core business • potential licensing or spin-off opportunity 13
  • 14. Competitive Landscape› Questions to answer: • Who is competing with you? • Why have others not jumped into the space? Why can you get into the game? • Why will you be able to win– i.e., customers and revenue – not “cooler”. • Why existing and new competitors won’t quickly adapt?› Barriers to entry (Blocking IP, cost, geography, contract structures, limited licenses, market dominating companies (“800lb Gorillas”)› Revolutionary vs. evolutionary – are you timed for the market?› Ease / Difficulty of displacement / replacement of existing solutions 14
  • 15. Competitive Landscape (cont.)› Points solution vs. total solutions› Current major competitors and why you will beat them • Avoiding the “no-competition trap” • Explaining their trends of growth or contraction • Better at what: some things or at everything?› On a matrix – show advantages and areas where you don’t compete • Pick 5-7 metrics your customers care most about; not just those you “win” at! • Avoid upper right quadrant graphs 15
  • 16. The Addressable Market› Market size = the total revenue generated in a segment of the economy. • These are what are tracked by Forrester, Gartner, Thomson etc. • Only useful for trend analysis, not for evaluating investment proposition. • Avoid quoting market sizes: • Example: “The internet advertising industry is an $X billion industry”› Addressable Market = the total amount of revenue that your company could generate if it acquired every potential customer (the “Addressable Population”). 16
  • 17. The Addressable Market (cont.)› Explain the following (and understand the differences) • Addressable Market: those who are likely to buy, who have the means to buy, who can be reached by reasonable distribution, etc. • Initial Target Market: subset of the addressable market for whom the value proposition is truly compelling and obvious at product introduction. • Annual Sales: that subset of the addressable market or the initial target market who buy or who are likely to buy each year.› Explain how the market is growing and why.› Explain other relevant trends: pricing, competition, new technology, etc.› $500m TAM vs. $50m TAM – know your investors! 17
  • 18. Defensibility› More than Intellectual Property› Start with IP: Patents, Trademarks, Copyrights • Patent strategy • Know-how and trade secrets • R&D development lead • Licenses and contracts • Term vs. Terminable at will contracts • Month-to-month billing vs. MTM contract› Relationships 18
  • 19. Defensibility (cont.)› How unique is your solution?› Ease of replication?› How unique is your solution? • Monopoly • First Mover› Cost/Ability of customer to replace your Solution 19
  • 20. Management Team and Advisors› List top executives and key advisors • Include choice words about them • Experience with startups, domain experience and customers • Don’t put their whole resume on the slide› Show current staffing gaps and strategy for filling› Board of Directors • Scientific Advisory Board • Key Opinion Leaders› Don’t list advisors unless they are actively involved› Can you show: • Balanced Group • Passion • Prior Success • Orientation towards success not control (“Rich” not “King”) 20
  • 21. Current Status: Achievements andUpcoming Milestones› Demonstrate progress and achievement of milestones • Key Solution development milestones • Context of development timeline • Development partnerships • Distribution partnerships • Customer acquisition progress (conversion rates) • Publications • Financing • Team Developments› Challenges • How you will overcome the challenges/weakness • E.g. key hire • List milestones you expect to deliver on including a few near-term items 21
  • 22. Funding, Cash and Use of Proceeds› Existing ownership capital structure› What do you owe – any debt outstanding?› Cash in the bank› Cash burn – at present and at scale (6 months, 12 months, growth) • How much of burn is variable vs. fixed • Lowest you can the Burn without killing the company› Time to cash flow positive› Additional investment required before cash flow positive› How much do you want and need (now and later)?› Use of proceeds - what will it be used for? What will it buy?› Optimal deal structure› Dangers of including suggested valuations› Dangers of not knowing the appropriate valuations 22
  • 23. Risks and Plans› Technology / Product – Will the solution work? Can you build it?› Business Model – Can you sell the solution at margin?› Supply – Can you acquire and manage critical vendors?› Customer Adoption Risk – Will the Dogs eat the Dog Food?› Market Dynamics – Do customers have cash and the will to spend?› Distribution Risk - Can you acquire and run critical distribution and sales points?› Competition Risk – Is there an opportunity in the marketplace? Will an 800lb gorilla eat your lunch? 23
  • 24. Risks and Plans (cont.)› Financial risks – Will you have positive cash flow? Will you have sufficient capital? Will investors be interested in you down the road?› Legal risks – Do you have freedom to operate? Do you have the ability to defend your IP?› Regulatory risks – Are there barriers beyond your ability to influence?› Team risks – Is our product or customer knowledge distributed and accessible?› Exit Risk – Are there willing buyers (or a public market) for your company? 24
  • 25. Exit Strategy and Options› Length to liquidity & IPO vs. M&A› Assuming M&A: Explain why and when the company (not just the technology) will be an attractive acquisition candidate› Identify Potential Acquirers • Acquirer characteristics and rationale for acquisition› How frothy is the current/expected market› Recent exits for similarly situated companies • Valuations (if available)› Counterpoint: Building a company vs. building an exit – Show how you will build real value with an orientation for liquidity (not perpetual control) 25
  • 26. Summary Slide / Investment Rationale› Begin with a summary of what you are about to say and end with a summary of what you have just said.› Leave them with the key message points you are trying to convey.› Be prepared for questions› Appendices • All of the information that may backstop your conclusions • Case studies • Customer testimonials • More detailed technical or product information • More detailed market or customer information 26
  • 27. Financials and Projections› P&L / Cash Flow / Balance Sheet – Historical + 3yrs of projections› Segment revenue by type of revenue› Fixed vs. Variable cost structure› Revenue and Margin Ratios • Think about cash flow timing issues – see revenue model (e.g., direct/reimbursement)› Bottom-Up vs. Top-Down projections • % of China Problem› Assumptions tab in the Excel build 27
  • 28. Financials and Projections (cont.)› What does “conservative” mean› Use of High / Medium / Low› Perfect vs. Functional – Running your business vs. Building an Excel model› Anticipating investor cutback› Risks of projections being tied to equity and compensation› Valuation Issues 28
  • 29. General Dos and Don’ts“Presentation is a visual not a reference”Do Don’t› Use one topic per slide › Use sounds with slide transitions› Limit text on each slide › Overdo the ALL CAPS, bolded, italicized or underlined text› Use pictures, graphs, videos • Not all bullets › Use too many different fonts › Overuse special effects – focus on› Choose fonts and colors that are the content easy to read› PowerPoint is the accessory to › Have technical difficulties – test before the meeting YOUR presentation› Spell Check› Generate and sustain credibility!!! 29
  • 30. Nutter McClennen & Fish LLP Attorneys at LawPitching the Plan: The DeckJeremy HalpernPartnerDirector of Business DevelopmentEmerging Companies TeamT: (617) 439-2943M: (617) 905-1893jhalpern@nutter.comwww.linkedin.com/in/jdhalpern2033833.1