Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

NVBC Dialing For Dollars 2007


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

NVBC Dialing For Dollars 2007

  1. 1. Dialing for Dollars June 7, 7pm; Segal Graduate School of Business
  2. 2. About Stirling Mercantile <ul><li>Sectors </li></ul><ul><li>Mid market financings </li></ul><ul><li>Early-stage VC financings </li></ul><ul><li>Mergers and acquisitions </li></ul><ul><li>Valuations and fairness opinions </li></ul><ul><li>Public market advisory services </li></ul>
  3. 3. About Stirling Mercantile
  4. 5.
  5. 6. Tell me what you do <ul><li>One sentence - what you sell, to whom and why they should buy. </li></ul><ul><ul><li>We sell [hardware/software] that helps [our target market] [save money or make money] </li></ul></ul><ul><li>“ We make software that helps gas companies account for their production more accurately” </li></ul><ul><li>“ We sell bandwidth to businesses that is more reliable and costs less than it does from telcos” </li></ul>.
  6. 7. Sources of Financing <ul><li>Equity – family, friends, employees, angels & VCs </li></ul><ul><li>Debt – banks, subordinated lenders & others </li></ul><ul><li>Grants – governments and government supported agencies </li></ul><ul><li>Revenue – be careful with ‘consulting’ though, can be too distracting </li></ul>. Early stage financing
  7. 8. The Financing Map F, F & E Seed, Angel Series A Series B Year 1 2 3 4 5 Beta Customers Early Adopters Crossing the Chasm Mainstream Growth Design Beta V. 1 V. 2 IP Roadmap Funding Roadmap . Early stage financing
  8. 9. VC Activity Source: Thomson Financial, Early stage financing
  9. 10. What happens when you bring in equity investors? <ul><li>Dilution </li></ul><ul><li>More governance and oversight </li></ul><ul><li>Additional management </li></ul><ul><li>Capital to accelerate development </li></ul><ul><li>Access to broader network </li></ul><ul><li>Added business insight </li></ul>. Early stage financing
  10. 11. Standard Terms <ul><li>Preferential stock: </li></ul><ul><ul><li>Paid first upon liquidation </li></ul></ul><ul><ul><li>Protection against dilution </li></ul></ul><ul><ul><li>Right to purchase more </li></ul></ul><ul><ul><li>Varying levels of control over business </li></ul></ul><ul><li>Motivated solely by return on investment </li></ul>Early stage financing
  11. 12. What Do VCs Need? <ul><li>Strong team, with integrity </li></ul><ul><li>Clear, lucrative and sustainable value proposition </li></ul><ul><li>Large market opportunity and the ability to scale into it </li></ul><ul><li>Realistic valuation and deal terms </li></ul>. Early stage financing
  12. 13. What Do VCs Need? <ul><li>Traction from the target market </li></ul><ul><li>Appropriate deal size for their fund </li></ul><ul><li>Appropriate market sector for their fund </li></ul><ul><li>Close proximity </li></ul>. Early stage financing
  13. 14. What Do VCs Want? <ul><li>2 or 3 independent board candidates </li></ul><ul><li>Transaction ready due diligence binder </li></ul><ul><li>Close proximity </li></ul>. Early stage financing
  14. 15. What Should You Look For in a VC? <ul><li>More than money </li></ul><ul><li>“Been there, done that” management </li></ul><ul><li>Corporate governance </li></ul><ul><li>Exit strategies </li></ul>. Early stage financing
  15. 16. What Should You Look For in a VC? <ul><li>More than money </li></ul><ul><li>“Been there, done that” management </li></ul><ul><li>Corporate governance </li></ul><ul><li>Exit strategies </li></ul>. Early stage financing
  16. 17. What Should You Look For in a VC? <ul><li>More than money </li></ul><ul><li>Contacts </li></ul><ul><ul><li>for additional management </li></ul></ul><ul><ul><li>for customers </li></ul></ul><ul><ul><li>for partnerships </li></ul></ul>. Early stage financing
  17. 18. Business Plan <ul><li>Executive Summary </li></ul><ul><li>Product or Service Description </li></ul><ul><li>Industry and Opportunities </li></ul><ul><li>Marketing and Sales Plans </li></ul><ul><li>Competition, Competitive Advantages </li></ul><ul><li>Management and Board Members </li></ul><ul><li>Financials and ProFormas </li></ul>Packaging
  18. 19. Executive Summary <ul><li>“Put it at the beginning but write it at the end” </li></ul><ul><li>Start with a simple description of who your clients are and why they will buy from you </li></ul><ul><li>Keep it down to about 2 pages – just enough to stimulate questions of interest </li></ul>. Packaging
  19. 20. Position Value to Customer Sales Unit Volume You Comp Comp Packaging
  20. 21. Keep It Concise! <ul><li>Use grade 8 English, and test it </li></ul><ul><li>Ask yourself if each paragraph helps to explain why this company has value </li></ul>. Packaging
  21. 22. Avoid Saying… <ul><li>Our projections are conservative </li></ul><ul><li>We have no competition </li></ul><ul><li>We have a first mover advantage </li></ul><ul><li>We only need to capture x% of the market share </li></ul>. Packaging
  22. 23. Presentation <ul><li>A picture tells a thousand words, but… </li></ul><ul><li>… don’t spend time or money on graphics and eye-candy </li></ul><ul><li>Docs in PDF, available for download from your site </li></ul>. Packaging
  23. 24. Due Dilly Binder/Folder <ul><li>All material contracts </li></ul><ul><li>Details of financials </li></ul><ul><ul><li>Inventory and valuable assets </li></ul></ul><ul><ul><li>HR tables and analysis </li></ul></ul><ul><ul><li>Comments on liabilities or notes to the Financials </li></ul></ul><ul><li>Don’t leave out anything salient </li></ul>. Packaging
  24. 25. Due Diligence Folder/Binder A great example of a due dilly map, made available in the root of the folder or binder Packaging
  25. 26. Financial Models <ul><li>“ Plans are useless, but planning is indispensable” </li></ul><ul><li>Dwight D. Eisenhower </li></ul><ul><li>Not intended to be carved in stone </li></ul><ul><li>Represents your plan, expected to change </li></ul>. Packaging, Financials
  26. 27. Purpose <ul><li>Explain how the company scales </li></ul><ul><li>Must clarify price and sales growth </li></ul><ul><li>Estimate how much capital will be required </li></ul><ul><li>Shows you can plan to be fiscally responsible </li></ul>. Packaging, Financials
  27. 28. Price <ul><li>Support your price based on competition </li></ul><ul><li>Get client validation, in writing if possible </li></ul><ul><li>Consider how your price may change going forward </li></ul>. Packaging, Financials
  28. 29. Expenses <ul><li>Spend a lot of time on being accurate about your cost of sales and profit margin </li></ul><ul><li>Spend very little time getting the fixed expenses right, unless your business is different </li></ul><ul><li>Showing losses in the first 2 years is ok, assuming you have the cash to do so </li></ul>. Packaging, Financials
  29. 30. Cash Flows <ul><li>Must detail working capital requirements </li></ul><ul><li>Must show how much money the company will need and when </li></ul><ul><li>Can be simply added to the bottom of the income projection </li></ul>. Packaging, Financials
  30. 31. Scope <ul><li>Run out 60 months </li></ul><ul><li>First two years for cash flow </li></ul><ul><li>Last three for size of opportunity </li></ul><ul><li>Show prior actuals if you have them </li></ul>. Packaging, Financials
  31. 32. Bottom Up vs. Top Down <ul><li>Market = 100,000,000 </li></ul><ul><li>We will get 5% </li></ul><ul><li>At a price of $2,000 </li></ul><ul><li>We will sell $10,000,000 </li></ul><ul><li>Incredible! </li></ul><ul><li>Sales cycle = 60 days </li></ul><ul><li>Sales training = 60 days </li></ul><ul><li>We will hire 20 effective sales people… </li></ul><ul><li>… who will sell 21 per month </li></ul><ul><li>At a price of $2,000 </li></ul><ul><li>We will sell $10,000,000 </li></ul><ul><li>Credible! </li></ul>. Packaging, Financials
  32. 33. Assumptions <ul><li>Separate tab </li></ul><ul><li>Include most trigger cells on the same page for investor adjustment </li></ul><ul><li>First Things First </li></ul><ul><ul><li>Highlight key assumptions </li></ul></ul>. Packaging, Financials
  33. 34. Packaging, Financials
  34. 35. Packaging, Financials
  35. 36. Formatting Suggestions <ul><li>Use a different colour for triggers </li></ul><ul><li>Add simple graphs </li></ul><ul><li>Provide ratios </li></ul>. Packaging, Financials
  36. 37. Sales Growth <ul><li>Add a realistic monthly figure for growth in the first 18 to 24 months </li></ul><ul><li>Multiply that by your prices(s) to generate revenue </li></ul><ul><li>Scale it up in the last 3 years </li></ul>. Packaging, Financials
  37. 38. Total Revenue <ul><li>At critical mass, revenues should be significant </li></ul><ul><li>Don’t reverse engineer with unrealistic assumptions for sales growth </li></ul><ul><li>Find a way to get to $30 to $50 million in 5 to 7 years, with defendable assumptions, ie: </li></ul><ul><ul><li>Expand your markets </li></ul></ul><ul><ul><li>Add value for a higher price </li></ul></ul>. Packaging, Financials
  38. 39. Cap Table <ul><li>Not required, but good practice </li></ul><ul><li>Show pre-money, post money and fully diluted with the investment you are seeking </li></ul><ul><li>Include an ESOP of about 15% and room for directors </li></ul>. Packaging, Financials
  39. 40. Cap Table Sample . Packaging, Financials
  40. 41. Cap Table Sample . Packaging, Financials
  41. 42. Valuation <ul><li>Start-ups are very hard to value rationally </li></ul><ul><ul><li>Not based on investments previously made or discounted cash flows </li></ul></ul><ul><ul><li>Based on ROI to the investor and incentive for management/founders </li></ul></ul><ul><li>Be realistic </li></ul><ul><li>Usually $1 to $3 million </li></ul>. Packaging, Financials
  42. 43. Format for the Presentation <ul><li>One slide for assumptions </li></ul><ul><ul><li>Identify the key variables, likely price and take-up </li></ul></ul><ul><li>One slide for results </li></ul><ul><ul><li>Include ratios </li></ul></ul><ul><li>One slide for deal structure or closing cap table </li></ul>. Packaging, Financials
  43. 44. Target the Best VCs <ul><li>Learn who’s who from your lawyer, an entrepreneur, an agent like me and </li></ul><ul><li>Find the right person at each firm – based on their background and portfolio </li></ul>Marketing
  44. 45. Prepare and Practice <ul><li>List the questions and answers you think are relevant and add to the list as you meet investors </li></ul><ul><li>Get your presentation down to 20 minutes and practice live at least 10 times </li></ul>Marketing
  45. 46. First Contact <ul><li>Get an introduction </li></ul><ul><li>Don’t go in for a presentation, go for a coffee first </li></ul><ul><li>Talk about the business - who you sell to, why they buy, etc – not the technology </li></ul><ul><li>Ask about his/her portfolio and deals s/he would like to do </li></ul>Marketing
  46. 47. Follow-up <ul><li>Write back the same day, 2am is better than next day </li></ul><ul><li>Answer all questions you couldn’t earlier and ask a few of your own </li></ul><ul><li>Suggest another meeting and primary topic </li></ul>Marketing
  47. 48. Summary .
  48. 49. Thank you <ul><li>A copy of this presentation is available at: </li></ul><ul><li> </li></ul>