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Expara Business Canvas Workshop

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For entreprenuers who want to go from innovative idea to business model canvas to business plan and financial plan.

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Expara Business Canvas Workshop

  1. 1. October 2014 Expara Business Canvas Workshop Organized by ISM
  2. 2. 2 6XXXX About the lecturer  Wharton MBA  JP Morgan – Vice President IB Technology, GM Internet Marketing  Parallax Capital Mgmt – Co-founder and MD Private Equity  Extream Ventures – Co-founder and MD S$20 million seed fund  Expara – Founder and MD IDM Ventures Incubator, advisory, training  NUS – Adjunct Associate Professor, Business School, Entrepreneurship  Sasin – Visiting Professor, Venture Capital
  3. 3. 3 6XXXX Business canvas workshop From business model canvas to investment 9:00 AM Understanding the big picture 10:30AM Break 10:45 AM Business model canvas – Part I 12:15 PM Lunch 1:30 PM Business model canvas – Part II 3:00 PM Break 3:15 PM Fund raising and financial plan 5:00 PM End
  4. 4. 4 6XXXX Expara Business Canvas Workshop  Understanding the big picture  Business model canvas  Financing and fundraising
  5. 5. 5 6XXXX What is a scalable business?  Small business: limited scope, complication and risk. Slow growth.  Scalable business: significant scope, complication, and risk. Rapid growth.
  6. 6. 6 6XXXX This could be you: Facebook  Feb 2004: Mark Zuckerberg, 19, launches The Facebook from his Harvard dorm room, with ~10K investment. Half of Harvard signs up in the first month  June 2004: Facebook receives $500K funding from Peter Thiel  Mid 2005: Accel partners invests $12.7MM and Greylock $27.5MM  Oct 2007: Microsoft buys 1.6% of Facebook for $246MM  Nov 2007: Li Ka-shing invests $60MM  2009-10: Elevation partners invests $210MM at valuation $12 - 23B  2011: Goldman Sachs buys shares in the secondary market at an implied valuation of $50B  2012: Goes IPO at valuation ~$100B (now $67B) “The youngest billionaire on earth” - Forbes
  7. 7. 7 6XXXX This could be you: Instagram  2010 - Kevin Systrom and Mike Krieger focus their multi-featured HTML5 check- in project Burbn on mobile photography  Mar 2010 – Close $500K seed funding round from Baseline Ventures and Andreessen Horowitz; est. val. $5 MM  Oct 2010 – Product launches on Apple App Store  Feb 2012 – Raise $7MM Series A funding; valuation $25 MM  Apr 2012 – Raise $50 MM at $500 MM valuation; sold to Facebook, val $1 B 0 5 10 15 20 25 30 35 Millions of Users
  8. 8. 8 6XXXX This could be you: Google  1995: Sergey Brin and Larry Page, two Stanford University graduate students develop the technology that will become the Google search engine.  1998: Sergey and Larry raise $1 million in funding from family, friends, and angel investors to start Google in a friend's Menlo Park, Calif. garage with four employees.  1999: Google raises $25MM from VCs and angel investors  2004: Google goes IPO at a valuation of US$23.1 billion. Sells 7% to public for $1.67 billion. Market cap Jan 2007 US$149 billion.
  9. 9. 9 6XXXX This could be you: YouTube  Feb 2005: Chad Hurley, Steve Chen, and Jawed Karim found YouTube, Inc.  Nov 2005: YouTube receives funding from Sequoia Capital  Dec 2005: YouTube service is officially launched  Nov 2006: Google acquires YouTube for US$1.65 billion, 20 months after the company was founded
  10. 10. 10 6XXXX This could be you: Dell and Microsoft  Michael Dell, who founded Dell in 1984 with $1,000 when he was 19 years old. The company now employs approximately 41,800 people worldwide and reported revenues of $38.2 billion for the past four quarters.  Bill Gates, who founded Microsoft in 1975 while still an undergraduate at Harvard. Microsoft had revenues of US$32.19 billion for the fiscal year ending June 2003, and employs more than 54,000 people in 85 countries and regions.
  11. 11. 11 6XXXX Exit markets at an inflection point Exit activity in SEA, especially in Singapore, exploded in 2013 • Increased investment in startups since 2007 is beginning to yield results • Number of exits increased from 6 in 2010 to 20 in 2013 • Singapore alone has had 30 exits since 2007, 13 in 2013 • Value of exits increased from 51 MM in 2010 to 400 MM in 2013
  12. 12. 12 6XXXX Some recent exits Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
  13. 13. 13 6XXXX What is the relationship between risk and return?  Risk and return are highly correlated  You cannot increase return without taking more risk Return Risk Potential outcomes
  14. 14. 14 6XXXX Let’s fail: the importance of failure for innovation
  15. 15. 15 6XXXX Why is failure desirable?  Willingness to fail – allows risk-taking and innovation  Risk and return – high risk ventures means they are likely to fail  Innovation – key to scalable ventures – innovators will fail
  16. 16. 16 6XXXX Failure is necessary to achieve success
  17. 17. 17 6XXXX Success from failure – Apple and Steve Jobs
  18. 18. 18 6XXXX Product failures – from Apple III to Apple Newton  1980 - Apple III - 75k units sold  1983 – Apple Lisa - 40K units sold in 1984 vs. 80K forecast  1986 – Pixar Image Computer - < 300 units sold  1990 – NeXT workstation – 50K units sold  1993 – Newton – 100MM spent on development – 80K units sold  Apple clones, NeXT software
  19. 19. 19 6XXXX Market failure - Apple stock price – 1988 to 1998
  20. 20. 20 6XXXX Competitive failure – Apple vs. Microsoft  1980 – Apple’s share of PC market 15%  1996 – 4%  2005 – 2.2%  2011 – Microsoft Windows still has 92% share of operating system market
  21. 21. 21 6XXXX Steve Jobs career timeline Success - 1977 •Apple II Failure – 1980 •Apple III Failure – 1983 •Lisa Success – 1984 •Macintosh Failure – 1985 •Ousted from Apple Failure – 1988 •Pixar Image Computer Failure – 1990 •NeXT Workstation Failure – 1993 •NeXT discontinues HW Success – 1995 •Toy Story; Pixar IPO Success – 1996 •Apple buys NeXT Success – 1997 •Return to Apple Success – 1998 •Apple profitable Success 2001 •IPod Success 2007 •Iphone Success 2010 •iPad
  22. 22. 22 6XXXX Success from failure  Pixar animated films – 1995 (Toy Story) – 26 Oscars, 7 Golden Globes, 3 Grammies – Films have earned > $6.3 billion worldwide  iPod - 2001 – 300 MM units sold – 90% market share  iPhone – 2007 – > 75 MM units sold – 50% of profits from global mobile phone sales  iPad – > 15 MM units sold, more than all other tablets combined – 83% market share
  23. 23. 23 6XXXX Apple stock price 2004 – 2011 +3,700%
  24. 24. 24 6XXXX Why should companies raise investment?  Lifestyle or scalable?  Paycheck or payout?  A big piece of a small pie?  A small piece of a big pie? Founder Investors Investors Founder
  25. 25. 25 6XXXX How to fund growth?  Internally generated  Debt  Hybrid  Equity
  26. 26. 26 6XXXX Cost, control, growth and risk Internal Debt Equity Source of funds Cost Lose Control Growth $ Risk Impact of funding Low Somewhat High
  27. 27. 27 6XXXX Financial leverage and firm value
  28. 28. 28 6XXXX Companies founded with venture capital www.nvca.org
  29. 29. 29 6XXXX Industries created by venture capital www.nvca.org
  30. 30. 30 6XXXX Why invest in venture capital? As of 31-Mar 2014 The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,494 U.S. venture capital funds (962 early stage, 163 late & expansion stage, 363 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2013. 1Pooled end-to-end return, net of fees, expenses, and carried interest. Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc. *Capital change only. Case Shiller Real Estate Index 4.1
  31. 31. 31 6XXXX Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
  32. 32. 32 6XXXX How does a venture capital fund work? Fund Investors VC 8 $ 10 mm 2 $ 10 mm $ 58 mm 25% 75% Fund size10,000,000$ Life of the fund7Management fee2.5% Investable8,250,000$ Investment size1,031,250$ Companies8Fail450% Break even225% Exit225% Investor's required ROI35% Fund multiple return5.76Fund size at exit57,600,000$ Carry @ 20%9,520,000 Distribution48,080,000$ Fund return multiple4.81Fund ROI35% Required return per exit28 timesEquity per company F/D15% Required value of equity at exit28,800,000$ Required co value at exit192,000,000$
  33. 33. 33 6XXXX GVMs for all first-round investments 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
  34. 34. 34 6XXXX How do VCs make money?  Trade sale – sell to another company  IPO – sell to the public through listing on an exchange
  35. 35. 35 6XXXX Trade sale or IPO? www.nvca.org
  36. 36. 36 6XXXX The investor’s decision tree Innovative? Yes Value proposition? Yes Fast-growing market? Yes Exit No No No
  37. 37. 37 6XXXX Product or service: which scales better?  Product-based start-ups – Value proposition is delivered via product  Service-based start-ups – Value proposition is delivered via people
  38. 38. 38 6XXXX Getting to gatekeepers  It’s not what you know; it’s who you know  Network, network, network  Strong ties and loose ties
  39. 39. 39 6XXXX Connecting to my network  My company websites: www.expara.com  My blog: www.douglasabrams.com  E-mail: dka@expara.com; lanie@expara.com  Facebook: bizadk@nus.edu.sg  Linked-In: dka@parallaxcapital.com  Twitter: twitter.com/douglaskabrams
  40. 40. 40 6XXXX Expara Business Canvas Workshop  Understanding the big picture  Business model canvas  Financing and fundraising
  41. 41. 41 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  42. 42. 42 6XXXX Key elements for success  Develop an innovative product – Innovation  Solve a problem for customers – Value proposition  Identify your customers – Market identification and analysis  Reach your customers – Marketing strategy  Compete when others enter - Sustainable competitive advantage  Make money – Business model and financial plan  Team – A team or B team
  43. 43. 43 6XXXX Writing a model business plan 1. Executive summary 2. Value proposition and innovation 3. Market identification and analysis 4. Marketing and sales strategy 5. Sustainable competitive advantage Overview, innovation, market 6. Company products and services 7. Team 8. Expansion plan 9. Operational plan 10. Finances – Revenue and cash flow, valuation, funding required, equity offered, ROI Execution and financials
  44. 44. 44 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  45. 45. 45 6XXXX Value proposition – how much does it hurt?  Painkiller  Vitamin  Candy
  46. 46. 46 6XXXX Value proposition – degrees of recognition  Latent problem – they have a problem but don’t know it  Passive problem – they know they have a problem but not looking for a solution yet  Active or urgent problem – they know they have a problem, are actively looking for a solution but no serious work done yet to solve  A vision – they have an idea for solving the problem and a home- grown solution but are prepared to pay for a better solution
  47. 47. 47 6XXXX Business model innovation: Diamond Rio vs iPod
  48. 48. 48 6XXXX Disruptive business model or disruptive tech  Diamond is the first mover in portable MP3 in 1998  Apple enters in 2003 and captures 90% of the market  Business model innovation – hardware + software + service
  49. 49. 49 6XXXX Disruptive models from Gillette to Google  Gillette – razor and blade  Southwest Airlines – budget airlines  Dell Computer – mass customization  Charles Schwab – on-line broker  Amazon – ecommerce  eBay – peer to peer marketplace  Google – search-based advertising
  50. 50. 50 6XXXX Innovation and value proposition 1. What is your product and what is innovative about it? 2. What is the painful problem you are solving for customers? 3. What are the shortfalls of the current solutions? 4. How do you solve this problem and can you quantify your benefit? 5. How does your innovation enable you to accomplish this?
  51. 51. 51 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  52. 52. 52 6XXXX Market and competitive analysis  Identifying favorable markets  Analyzing markets
  53. 53. 53 6XXXX Choose an industry favorable to start-ups  Increasing returns business: up-front costs are high relative to marginal costs  Network externalities  Complementary technologies are important to use  Producer learning is strong, switching costs are high
  54. 54. 54 6XXXX Look for fast-growing, segmented markets  The cost gap between new and established firms is smaller in larger markets  In fast-growing markets, new firms can serve new customers rather than customers of existing firms  Segmented market provide niches for new firms to enter and reduce retaliation by existing firms
  55. 55. 55 6XXXX Market timing – entering at the inflection point Measure of performance Measure of effort invested The technology adoption S curve
  56. 56. 56 6XXXX Industry life cycles and structures  Choose a young industry – more demand and less competition  Enter before a dominant design has been adopted  Labor intensive rather than capital intensive  Advertising and branding less important  Less concentrated industries – smaller competitors
  57. 57. 57 6XXXX Market and competitive analysis  Identifying favorable markets  Analyzing markets
  58. 58. 58 6XXXX Market identification and analysis 1. What is your market type? 2. How big is your market and how fast is it growing? – Top-down approach – Bottom-up approach 3. What are trends in your market are favourable for you? – Technological, social, demographic, regulatory 4. Who are your direct and indirect competitors?
  59. 59. 59 6XXXX Types of markets  Existing markets  Re-segmented markets/niche market  New market  Clone market
  60. 60. 60 6XXXX Top-down market sizing Total addressable market Target market Target segment Market share
  61. 61. 61 6XXXX Bottom-up market sizing
  62. 62. 62 6XXXX Customer segments • For whom are we creating value? • Who are our most important customers? Key questions • Mass market • Niche market • Segmented • Diversified • Multi-sided platform or market Types of customer segments
  63. 63. 63 6XXXX Customer segments: who/problem  Customer problem – Latent – Passive – Active or urgent – Vision  Customer types – End user – Influencer – Recommender – Economic buyer – Decision maker  Customer archetype  A day in the life of a customer  Organizational/influence maps  Consumer/web influence map
  64. 64. 64 6XXXX Customer archetype
  65. 65. 65 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  66. 66. 66 6XXXX Competitors will enter  How to compete with followers?  How to compete with existing companies?  Sustainability of technological lead – Competitors cannot duplicate the technology – Firm can innovate as fast or faster than competitors  First-mover disadvantages  Last-mover advantage
  67. 67. 67 6XXXX Competitive advantage – barriers to entry  Proprietary intellectual property  Network effects or externalities  Customer lock-in/switching costs
  68. 68. 68 6XXXX First mover advantage?
  69. 69. 69 6XXXX Creating last-mover advantage  Reputation  Preempting positioning  Switching costs/Lock-in/Network effects  Unique channel access  Move down learning curve  Favorable access to inputs  Definition of standards  Institutional barriers – IP protection First Mover Advantages  Pioneering costs  Demand uncertainty  Changes in buyer needs  Specificity of investments to early generations  Technological discontinuities  Low-cost imitation Disadvantages
  70. 70. 70 6XXXX Strategies to create last-mover advantage  IP strategy – patents, copyrights, trademarks, trade secrets  Create barriers to entry – Network effects and externalities – Lock-in effects
  71. 71. 71 6XXXX Established company strengths and weaknesses  Learning curve  Reputation effect  Cash flow  Economies of scale  Complementary assets Advantages  Difficult to innovate  They need to satisfy existing customers, partners and supply chain  Existing organizational structure is appropriate to current tasks  Risk aversion Weaknesses
  72. 72. 72 6XXXX Opportunities that favor new firms  Existing firms frozen in the headlights  Disruptive technologies and business models  Uncertainty: existing firms’ advantages in market research are neutralized; risk propensity  Technologies: Discrete versus systemic technologies, based on human capital, general purpose rather than specific  Bad customers: Enter market that is unattractive to existing competitors due to established cost structure
  73. 73. 73 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  74. 74. 74 6XXXX Do you love to sell?
  75. 75. 75 6XXXX Sales and distribution  Great sales and distribution vs great product  Best sales is hidden  Products don’t sell themselves
  76. 76. 76 6XXXX Metrics for effective distribution  CLV: total net profit earned over the course of relationship with customer  CAC: cost to acquire a new customer  CLV>CAC
  77. 77. 77 6XXXX Sales channels
  78. 78. 78 6XXXX Complex sales  Seven figure deals  CEO must sell  50-100% YoY growth over 10 years  Enterprise sales must start small
  79. 79. 79 6XXXX Personal sales  10K-100K  Sales team can sell  Need to establish a process so sales team can move to mass
  80. 80. 80 6XXXX Sales dead-zone  Product needs a personal sales effort  Resources are not available or too expensive  Underserved SME markets
  81. 81. 81 6XXXX Marketing and advertising  Work for products with mass appeal but not viral – FMCG  Can work for start-ups but  Only when CLV-CAC make all other channels uneconomical
  82. 82. 82 6XXXX Viral marketing  Core functionality encourages users to invite their friends  Move first to dominate most important segment of market with viral potential  Get the most valuable users first  Paypal – initial focus on 20K Ebay PowerSellers
  83. 83. 83 6XXXX Power law of distribution  Select one - one distribution channel will be more powerful than all others combined  Most businesses get zero distribution channels to work  Poor sales rather than bad product is most common cause of failure  Sell your company to the media  Everyone sells
  84. 84. 84 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  85. 85. 85 6XXXX Revenue model questions • For what value are our customers really willing to pay? • For what do they currently pay? • How are they currently paying? • How would they prefer to pay? • How much does each Revenue Stream contribute to overall revenues? Key questions • Asset sale • Usage fee • Subscription Fees • Lending/Renting/ Leasing • Licensing • Brokerage fees • Advertising Types • List price • Product feature dependent • Customer segment • dependent • Volume dependent Fixed pricing • Negotiation (bargaining) • Yield Management • Real-time-Market Dynamic pricing
  86. 86. 86 6XXXX Key revenue model issues  Subscription/membership  Volume or unit-based sales  Advertising-based  Licensing & syndication  Transaction fee  Pay-per-use  Referrals  Affiliate/revenue sharing  Selling data  Back-end offers Revenue models  Single stream  Multiple streams  Interdependent  Loss leader Revenue streams  Value pricing  Competitive  Volume  Portfolio  Razor/blade  Subscription  Leasing  Product based Pricing models
  87. 87. 87 6XXXX Other revenue model issues  Total cost of ownership (TCO)  Return on investment (ROI)  Multi-sided markets have multiple revenue models  Distribution channel affects revenue streams  Consider lifetime value
  88. 88. 88 6XXXX Cost structure • What are the most important costs inherent in our business model? • Which Key Resources are most expensive? • Which Key Activities are most expensive? Key questions • Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) • Value Driven (focused on value creation, premium value proposition) Is your business more • Fixed Costs (salaries, rents, utilities) • Variable costs • Economies of scale • Economies of scope Sample characteristics
  89. 89. 89 6XXXX Revenue and cost model diagram
  90. 90. 90 6XXXX Expara Business Canvas Workshop  Understanding the big picture  Business model canvas  Financing and fundraising
  91. 91. 91 6XXXX Forms of organization  Sole proprietorship  Partnership  Limited Liability Partnership  Companies – Private Limited companies – Public companies – Listed public companies
  92. 92. 92 6XXXX Key agreements  Shareholder agreement  Employment agreement  Director’s responsibilities  Investment agreement
  93. 93. 93 6XXXX VCs invest at multiple stages Founder’s CapitalSeed/ AngelSeries A, B, CMezzaninePre-ExitExitVC hurdle rates60-100%40-60%20% OM F,F&FIncubators corporations governmentCustomers, suppliers, strategic partnersVCs, Banks for VC loansR&D Establishment GTM/Rollout Accelerated Expansion MaturityEnablement growth
  94. 94. 94 6XXXX In the financial section of the business plan  Business model  Financial projections  Valuation  Funding required and equity offered  Use of Proceeds  Exit Strategy and ROI
  95. 95. 95 6XXXX Complete business model diagram
  96. 96. 96 6XXXX Company valuation methods  Price to earnings (p/e)  Dividend yield  Multiple of book value  Comparables  Discounted Cash Flow (DCF)  VC method
  97. 97. 97 6XXXX How much equity does the investor receive?  Pre-money valuation – Amount invested by VC ÷ (Agreed pre-money value of business + Amount invested by VC) – $3MM pre + 1 MM VC = 25% VC equity  Post-money valuation – Amount invested by VC ÷ post-money valuation – $4MM post = 25% VC equity
  98. 98. 98 6XXXX Entrepreneur versus investor  Maximize financial returns  Maintain option to abandon  Be able to force entrepreneur to exit and distribute proceeds  Maintain reputation VC  Get outside capital  Maximize financial gains from equity stake  Retain control, minimize constraints on behavior and decision making  Build successful firm  Build reputation  Get outside expertise and contacts Entrepreneur
  99. 99. 99 6XXXX Key elements of the deal  Board of directors  Protective provisions  Drag-along agreement  Conversion Control  Price-per-share  Valuation  Amount of financing  Liquidation preference  Vesting  Options pool  Anti-dilution  Pay-to-play Economics
  100. 100. 100 6XXXX Communicating with investors  Business plan  Executive summary  Investor presentation  Formal and informal presentations
  101. 101. 101 6XXXX Use meaningful titles  The title of each slide should communicate the key message for that slide.  For example, if you have a slide that shows projected sales, do not make the title "Projected Sales."  Instead, make the title something like, "Projected Sales in 2003 are $3 Million."
  102. 102. 102 6XXXX Less is more  Your message needs to be clear and concise  Clean visual design – avoid chart junk and “design-itis”  On presentation slides, less is more – slides, bullet points, text  If you can't explain your message simply, you need to re-formulate your message.
  103. 103. 103 6XXXX How long does it take to make a first impression?  First impressions are critical  You make yours in the first 7 seconds of your presentation  How long to feel someone is trust-worthy? 0.1 second  How can people decide so quickly? Appearance and body language.
  104. 104. 104 6XXXX Getting past gatekeepers  Why are presentations important?  Understand gatekeepers’ incentives  Avoid raising red flags  Attention to detail  Get it right the first time
  105. 105. 105 6XXXX What causes choking?  Top performance under pressure requires focus and relaxation  Too much focus on performance causes skill to break down  Forget about your bad shots; remember your good shots
  106. 106. 106 6XXXX Do not read your slides  Do not just stand and read your presentation slides.  Makes your presentation redundant and therefore uninteresting, since the audience can just then read the slides.  Try to pick out one or two important points on each slide to discuss in more detail.
  107. 107. 107 6XXXX Practice and test  Analyze the details of your presentation, then master those details by practice, practice, practice.  Arrive early and if you are using any technology, test it  If you can not get in early, try to test the night before  It is OK to be nervous before you begin
  108. 108. 108 6XXXX Q&A is the most important part  Audience has a chance to ask you about what is on their mind.  Q&A is do or die time.  Prepare for Q&A by studying your material in-depth  Anticipate likely difficult questions and formulate answers  Note questions you are asked and if you did not have a good answer to a specific question, formulate one for next time.  Don’t disagree - agree
  109. 109. 109 6XXXX Contact us  Douglas Abrams  Expara Pte. Ltd.  dka@expara.com  www.expara.com  65-6323-3084, 65-9780-5381 (hp)  Block 71 Ayer Rajah Crescent, #02-10/11 Singapore 139951

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