Entrepreneurial Finance & Business Plans

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The second of three lectures given at Brandeis University by Evangelos Simoudis.

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Entrepreneurial Finance & Business Plans

  1. 1. Entrepreneurial Finance & Business Plans Evangelos Simoudis, Ph.D. Managing Director Trident Capital [email_address] Blog: blog.tridentcap.com Twitter: @esimoudis
  2. 2. During the last 12 months VCs spent most of their time managing and pruning their portfolios <ul><li>Survival implied timely cost-cutting, evaluating customer quality and risk, reducing debt, and slowing down new initiatives </li></ul><ul><li>Growth came as some business models proved particularly strong, e.g., branded response e-commerce </li></ul><ul><li>Shut down was the result of unscalable business models, capital intensity, weak management, e.g., ad-driven content </li></ul>
  3. 3. Conclusions from the last 12 months <ul><li>Stronger management teams were quicker to react </li></ul><ul><li>New financing was harder to obtain </li></ul><ul><ul><li>For valuations, flat became the new up </li></ul></ul><ul><ul><li>Several inside rounds (30% of investments) </li></ul></ul><ul><ul><li>Less money for new investments </li></ul></ul><ul><li>Investors realized they have to hold companies longer (by as many as 2-3 years) </li></ul><ul><li>A W-shaped recovery will further complicate our decisions. 1Q10 is critical </li></ul>
  4. 4. Creating, funding and building a company <ul><li>Identify the founding team </li></ul><ul><li>Create the product idea and establishing the business model </li></ul><ul><li>Understand the market opportunity </li></ul><ul><li>Seed (bootstrapping, angels) or Series A (institutional investor(s)) </li></ul><ul><li>Use the first 3 customers to refine the product and the business model </li></ul><ul><li>Release V1 of the product </li></ul><ul><li>Series A </li></ul><ul><li>Create a repeatable sales process and sales model (3->10->50) </li></ul><ul><li>Hire the first 20 employees </li></ul><ul><li>Form the board of directors and a customer advisory board </li></ul><ul><li>Series B </li></ul>12-18 months
  5. 5. Stages of venture risk <ul><li>Series A : Product Risk </li></ul><ul><ul><li>Does it work in the lab? </li></ul></ul><ul><ul><li>Does it work in the real world? </li></ul></ul><ul><li>Series B : Market Risk </li></ul><ul><ul><li>If you build it, will they buy it? </li></ul></ul><ul><ul><li>Did you get the product ‘right’? </li></ul></ul><ul><ul><li>Can you develop a repeatable sales and marketing engine? </li></ul></ul><ul><li>Series C : Execution/Management Risk </li></ul><ul><ul><li>Can you build a highly scalable and profitable business? </li></ul></ul><ul><li>Series D : Expansion Risk </li></ul><ul><ul><li>Can you dominate a market assisted via expansion capital for M&A or global expansion? </li></ul></ul>
  6. 6. We decide on a Series A or Series B opportunity by answering 4 questions <ul><li>Is this the right team to support? </li></ul><ul><ul><li>How has the exec team come together and how was it enhanced? </li></ul></ul><ul><ul><li>How long have they been working together? </li></ul></ul><ul><li>Is this a feature, a product, or a business? </li></ul><ul><li>Is the market big enough, could it become big, what will it take for the company to dominate it? </li></ul><ul><li>Is this the right time to fund this company? </li></ul>
  7. 7. Zuora

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