Cc event 130410_cc


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Cambridge Consultants and Angel News event for startups, 13/4/10, talk by Duncan Smith of Cambridge Consultants

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Cc event 130410_cc

  1. 1. Demonstrators – why, when, and….. …how they can help you raise investment for your venture Paste an Paste an image over the image over the circle and use ‘Send circle and use ‘Send Backward’ tool 3 times Backward’ toolpicture OR delete the 3 times OR delete the picture frame and the white frame andno image square if the white square if no image is required. is required. Bathtub to warehouse event, April 2010 Duncan Smith 20 April 2010 S3908-P-083 v1.0 Duncan Smith, Head of Consumer Products at CC. 50% of my part of the business is working with fast-growing startup companies. I’m going to talk about demonstrators and models, when and why to build them, and how they can help you raise money and ultimately get to market faster. Page 1
  2. 2. Cambridge Consultants – 50 years of Innovation 2 20 April 2010 S3908-P-083 v1.0 We are a product design and development company For 50 years we have been developing products for companies across a wide variety of market sectors We work with both large blue chips and dynamic, fast growth startups, either developing innovative parts of products or the whole product through to manufacturing handover. Why are we doing this talk? Many of the startups that come to us are facing the same issues, whatever their market, and we always give similar advice to them while we are finding out whether to work together. So we wanted to try sharing some of this with a larger audience. Also we wanted to give you the opportunity to hear both from an investor and from another company that has been through the same process. Page 2
  3. 3. The investment ladder 3 20 April 2010 S3908-P-083 v1.0 The product development cycle maps onto the funding ladder To raise more money, you need to credibly answer the tough questions your investors will ask. In other words, at each stage, you will need to demonstrate that you have reduced the risks that are barriers to their investment. The diagram shows three different generic stages, and the key questions that characterise each stage. There are lots of other detailed questions beneath these. Your potential investors will do due diligence on you and will send a junior analyst with a shiny new MBA to crawl all over your business and technology, looking for weaknesses and putting them in a spreadsheet. Your investors will use this to ask lots of awkward questions. Good demonstrators and models can help you answer these. Also they can help reduce upfront spend by answering questions in the right order. We’ll be concentrating at the front end – seed and round a funding – for this talk. Page 3
  4. 4. Types of demonstrator 4 20 April 2010 S3908-P-083 v1.0 We’ll cover these in more detail but types of demonstrator include…. Sketches and storyboards Looks-like models that don’t work but help communicate your message Works-like models that don’t look like the real thing but prove aspects of your technology Looks-like works-like models that both work and look the part and Made like models that are ready to start commercialisation Page 4
  5. 5. The investment ladder 5 20 April 2010 S3908-P-083 v1.0 Different demonstrators are very powerful at different stages to answer different investor questions. Questions are all covered in more detail in the booklet we are going to give you at the end. We aren’t going through all of it we have picked the ones directly addressed by demonstrators. Let’s talk through the different types of demonstrator…… Page 5
  6. 6. Types of demonstrator: works-like models 6 20 April 2010 S3908-P-083 v1.0 There are tough technical questions that were going to be asked before the investment in the development stage would go ahead. Works-like rigs demonstrate the technical principles. Works like rigs don’t necessarily look anything like the product but answer the difficult questions. You should be able to put them in front of investors, but bear in mind they are good for a technical audience NOT a marketing one – they may be off-putting to a marketing audience. Tune your level of polish to the audience. Ask yourself……. What are the tough technical questions you will be asked? Page 6
  7. 7. Risk assessment Level of Effort/Cost of Action risk mitigation High Low These are risks you should address in the first phase – easy wins that will build credibility Low High These are risks that will tend to get answered in the development phase and should be included in the plans for that phase Low Low Consider whether to mitigate or not – however if they are not important they may be a distraction at this stage High High These are the risks you cannot afford to address at this stage, but that you will need to have credible plans to address early in development 7 20 April 2010 S3908-P-083 v1.0 There are several approaches to working out what the tough questions will be. One is to use a risk assessment. These are not just for health and safety! List all the risks you can think of and how you would ideally mitigate them. Try being devils advocate…… ask questions like: how would your competitors dismiss your technology? What will your investors disbelieve in your pitch? What will make them raise their eyebrows? You can then prioritise as shown here…. This will help you focus where you spend your precious budget to get maximum value Ask yourself……. What are your key risks? Page 7
  8. 8. Types of demonstrator: concept sketches and storyboards 8 20 April 2010 S3908-P-083 v1.0 You don’t necessarily have to use works-like models for all the risks – story boards or sketches can also help communicate the answer ….. One of the tough questions is often “what is the user experience?” and in this case a story board was used to show that that question had been answered. Ask yourself whether you need a storyboard to explain how your technology is going to work for your target customer in a real- world situation Page 8
  9. 9. Types of demonstrator: looks-like model 9 20 April 2010 S3908-P-083 v1.0 Looks-like models are not just “smoke and mirrors” Answering the question “what will it look like”? They communicate your value proposition AND it is very powerful being able to put it in the hands of a stakeholder. In some cases you make something look DIFFERENT to get your message across. In the case of our radio being portable instantly communicated that this technology was low power and small compared to the competition. In other cases it may be important that the appearance is familiar- the customer might reject something that looked out of the ordinary. Ask yourself what you need to communicate with your model. Beware of making them look to real as your investors might think it is finished! Page 9
  10. 10. Types of demonstrator: assembly sketches 10 20 April 2010 S3908-P-083 v1.0 Assembly sketches – If you are going to make a looks like model it’s important it fits in the box! Ask yourself how much effort you need to go to to show how it is going to integrate into the final product Page 10
  11. 11. 11 20 April 2010 S3908-P-083 v1.0 If you are starting to work our what all the bits are, you can start to work out how much is it going to cost You might be thinking it is far too early, we don’t know what all the parts are yet. It is never too early to do a back of an envelope costing You can ask yourself how much the market can afford it to cost, given the competition. If nothing else you will find out where there are gaps in your knowledge that need to be filled in the next stage. This will help support your business case as well as the product development Ask yourself what your market can afford it to cost Page 11
  12. 12. The investment ladder 12 20 April 2010 S3908-P-083 v1.0 All these questions are at the front end concept stage…. Page 12
  13. 13. Types of demonstrator: looks-like works-like models 13 20 April 2010 S3908-P-083 v1.0 By the end of that first stage you might even have made a looks-like works like demonstrator, to help answer the critical question: Can you show me it working? It may not be beautiful, not ready for mass manufacture, not even complete, but we’ve reduced the risk in the key areas, both business case and technical for an investor to see that this can be a real product…. Ask your self what do you need to show working? It’s not going to be complete but remember the risk assessment and try to show that you’ve reduced the KEY risks with this demo. It may even need to be different from a final product for you to do the market testing you need. You might want an all singing all dancing machine but it wasn’t the right thing to do with your budget. Page 13
  14. 14. It works! 14 20 April 2010 S3908-P-083 v1.0 And the investment was received to develop it into CSR’s RadioPro platform. It works! Page 14
  15. 15. Summary 15 20 April 2010 S3908-P-083 v1.0 So to summarise the product development cycle maps onto the funding cycle To raise more money, you need to credibly answer the tough questions your investors will ask (or at least anticipate them and explain when and how they are going to be answered) This means demonstrating that you have reduced the risks that are barriers to their investment Smart use of good demonstrators and models can help you be successful Every single one of our startup clients has had to address these questions – think about how you are going to answer them. Page 15
  16. 16. Who we are 16 20 April 2010 S3908-P-083 v1.0 - Questions Page 16
  17. 17. Contact details: Cambridge Consultants Ltd Cambridge Consultants Inc Science Park, Milton Road 101 Main Street Cambridge, CB4 0DW Cambridge MA 02142 England USA Tel: +44(0)1223 420024 Tel: +1 617 532 4700 Fax: +44(0)1223 423373 Fax: +1 617 737 9889 Registered No. 1036298 England © 2010 Cambridge Consultants Ltd, Cambridge Consultants Inc. All rights reserved. 17 20 April 2010 S3908-P-083 v1.0 Page 17