Business model. Product posi2oning. Compe22ve review. Silvija Seres
A few words about me IT studies: BSc and MSc in Informa8cs, University of Oslo Academic research: PhD in Maths, Oxford University, Fellow Magdalen College Teaching: Prof in Saudi Arabia, Advisor in China SoFware Development: DEC SRC in Silicon Valley, Alta Vista Business studies: MBA at INSEAD Management: Fast Search 6 Transfer, MicrosoF Business Development: Boards and investments GeoKnowledge, Camo, Sonitor Board Work: StatkraF, Norsk Tipping, Aschehoug, Making Waves, Norman firstname.lastname@example.org www.silvija.net
Business plan Is just an aRrac8ve presenta8on of a business idea. General advice: Be clear Be focused Be short Be convincing Make the few points that count RESONATE!
Don’t read the slides, verba.m… Business plan instead, speak to the key facts and conclusions you want them to take from each slide. Eleven should-‐have slides: 1. Cover – Business posi8oning statement 2. Market – The need and what customers have it 3. Solu8on – Product, core beneﬁt, protectable technology(ies) 4. Compe88ve Posi8on – Who they are and your defenses 5. Marke8ng / Sales / Support – Channels and skills needed 6. Business Strategy – How you plan to grow beyond launch 7. Financial Projec8ons The usual spreadsheets 8. Funding Sought – Amount , comparables, use of funds 9. Management – relevant experience 10. Milestones – e.g.: product launch, next funding, breakeven 11. Exit Strategy – IPO / acquisi8on (who?) Tech Coast Angel’s Guidelines
1 – Business posi8oning statement The ﬁrst slide should posi2on the company so Jury members have a framework for listening… 1. Company name (and graphics, if appropriate) 2. One-‐sentence “what we do” statement (posi.oning or elevator pitch) 3. Presenter’s names
2 – Market… The Need And The Customers Describe the need and the size of the market Common Ques2ons… • What speciﬁc problem or need do • List the drivers for the demand for your customers have? solu2on (the beneﬁt customers pay for) • Why is the problem important? For • Deﬁne the characteris2cs of the companies whom? That is, who, speciﬁcally is or consumers that need a solu2on the customer? • Quan2fy the opportunity… number of • How do we know the market exists? prospects that have the need • What independent evidence can you • Explain how the market is growing and why cite, such as independent market research? Iden2fy the most important 2 – 3 segments of • How large is the speciﬁc (narrowly deﬁned) market for your product? the market, and for each… • What growth is expected in this • Es2mated market size (customers & market? poten2al sales) • Are the market size es2mates • What dis2nguishes the key segments from realis2c? the broad market and each other • How urgently customers need or want the solu2on – the value-‐proposi2on
3 – Solu8on…Your Product or Service 1. Clearly explain your product(s)… what it Common Ques2ons… is that customers will be buying. • How else can the customer solve the problem your products solve? 2. Explain where your product ﬁts within • What are the alterna2ves? the whole solu2on to the customer’s • How does your product compare to each? need, as customers see it. For example: • Why is it beder? Services, technologies or pla^orms • In what ways is it worse? (“enablers”) required to make your • Who are the vendors of these other product eﬀec2ve. System, behavior or solu2ons? procedure conversions required to • How do they compete with each other? realize the key beneﬁts • Where will you ﬁt into the industry? 3. Iden2fy your product’s value-‐added • Why will you be able to compete eﬀec2vely against them for the next ten (what por2on of the whole solu2on you years? provide)… and whether customers will • Why are you conﬁdent that no new see your product as being the main entrant will come along with a beder component of the solu2on solu2on and blow you away? • Why do you think you can dominate your 4. Describe the beneﬁts delivered, jus2fying market niche? the cost of the whole solu2on vs. the expected beneﬁts.
4 – Comp Posi8on… Compe8tors & Barriers Common Ques2ons… Address three barriers to adop2on: 1. Big Dogs – What are huge, well-‐known • How else can the customer solve the problem your products solve? companies that have exis2ng products and well-‐established rela2onships with • What are the alterna2ves? your target customers doing? How will • How does your product compare to each? they react to your ini2a2ves? • Why is it beder? 2. Iner2a – What will it take to get customers to change what they are • In what ways is it worse? using / doing today? • Who are the vendors of these other 3. Innovators – What companies might solu2ons? leapfrog your solu2on with equal or • How do they compete with each other? beder solu2ons? • Where will you ﬁt into the industry? Explain how you propose to win against the • Why will you be able to compete eﬀec2vely against them for the next ten years? best of these. In par2cular, describe your strongest barriers to compe22on… i.e.: if you • Why are you conﬁdent that no new entrant will come along with a beder solu2on and are successful, how you plan to block beder-‐ blow you away? known or beder-‐funded compe2tors from • Why do you think you can dominate your moving in and taking over market niche?
5 – Marke8ng / Sales / Support Brieﬂy explain the expected selling cycle Common Ques2ons… • What channels of distribu2on will Describe how you propose to reach your targeted you use to deliver your products to customers – focusing on the ini2al segments your customers? • Marke2ng – To raise customers’ awareness of • How will these channels be your product and s2mulate their interest in established? By whom? When? buying • What exper2se does your company • Sales – To give buyers (buying decision-‐makers) a have to execute the marke2ng / convenient way to ﬁnd out the details and place sales program? an order • How are you going to stand out • Support – To help customers understand your among all the established product before buying, during installa2on and in compe2tors? use • How can you boil down the advantages of your sophis2cated If you rely on indirect channels, explain: technology so prospects will understand it, quickly and easily? • Your approach to reaching them • Whose responsibility it is to raise awareness and generate demand among end-‐customers • Who provides pre-‐ and post-‐sales support Describe special sales incen2ve programs (if any)
6 – Business Strategy… Growth Past Launch Common Ques2ons… Describe the 3-‐5 year goal of the business Iden2fy the several most important steps you • What is the business model? (i.e. what will produce the company’s reaching that goal revenue? • Speciﬁcally say what you need to do to achieve posi2ve cash ﬂow and how long it will take to get • Do you have (or plan) any corporate partnerships in place? there • Iden2fy speciﬁc steps to IPO or acquisi2on • What are the signiﬁcant risks your business faces? readiness • Place the key steps and milestones on a Gand • What needs to be done to ﬁnish your ﬁrst product(s)? What’s your chart next act? • Do you rely on outside contractors? Explain the development status… how much work How much do you license from remains before it achieves full func2onality? others? • Show your intended schedule for major product • What exper2se do you have at development on a 2me-‐line (Gand chart) covering developing this kind of product? the next 18 – 24 months • What development challenges are • Iden2fy major development risks or challenges most important or diﬃcult to • Provide es2mated levels of eﬀort &/or costs for overcome? How do you intend to each product do so? • Summarize future products’ ﬁt with market need
7 – Financial Projec8ons Common Ques2ons… Provide a P&L similar to this: Financial Projections ($000s) • What kind of revenues can the business produce, on an annual basis, over the next New Customers Last 12 Mo. This Year Mo. 13-24 Mo. 25-36 Mo. 37-48 ﬁve years? Units Shipped • Proﬁts? Revenues Gross Profit • What investment is required to carry the Gross Margin % company to the next major level of SG&A EBITDA valua2on? Cashflow Cum. Cashflow • When do you expect the next rounds to take place? Be prepared to explain “drama2c” numbers, such • What speciﬁc tasks need to be as: accomplished to do that? • “Instant” market penetra2on & dispersion • How long will it take? (Try to iden2fy a • “Hockey s2ck” growth “next level” that can be achieved in less than 18 months.) • Unprecedented margins • What investment will be required beyond • Long periods of nega2ve cashﬂow that? (“goodness” is posi2ve cashﬂow in 6 – 12 • To the extent possible, explain key months) assump2ons behind your forecast. And make sure the forecast relates in a logical way to the market forecasts you described previously.
8 – Funding… Amount , Valua8ons, Use Common Ques2ons… Provide a capitaliza2on table similar to this: • How much hard-‐money Pre-Money Post-Money Round 1 Round 2 Round 3 (cash) have the founders put Valuation Raise Valuation Total Founders Investors Investors Investors IPO in? Round 1 $ 1,191,892 $ 700,000 $ 1,891,892 100% 63% 37% $ 1,191,892 $ 700,000 • How much cash have Round 2 $ 4,000,000 $ 2,500,000 $ 6,500,000 100% 39% 23% 38% $ 2,520,000 $ 1,480,000 $ 2,500,000 Directors and Advisory Board Round 3 $ 12,000,000 $ 7,000,000 $ 19,000,000 100% 24% 14% 24% 37% members invested? $ 4,652,308 $ 2,732,308 $ 4,615,385 $ 7,000,000 IPO $ 45,000,000 $ 15,000,000 $ 60,000,000 100% 18% 11% 18% 28% 25% • What equity is available to recruit key execu2ves? $ 11,018,623 $ 6,471,255 $ 10,931,174 $ 16,578,947 $ 15,000,000Iden2fy the major uses of funds for each round • How did you arrive at your pre-‐money valua2on for this prior to IPO or acquisi2on… this round, prior rounds round? and next round(s) • What comparables are you Describe the size and composi2on of your current using for your proposed IPO/“burn-‐rate” exit round? The “sweet spot” for inves2ng? E.g. a pre-‐money valua2on of $1.5M -‐ $3.0M. Expect tough ques2oning in propor2on to any valua2on higher than this range
9 – Management Qualiﬁca8ons… Common Ques2ons… Focus on the management team, in par2cular: • CEO – Prior entrepreneurial experience in • What is your background and previous experience? similar businesses • Where did the idea for the company come • CTO – Proven know-‐how in your core from? technologies • Who is presently involved in managing the • CMO – Proven knowledge of the target company? markets; strong rela2onships with channel • What are their creden2als? partners &/or key industrial customers • CFO – Prior IPO or acquisi2on experience • Why will they be able to build a successful company? • If not all management spots are ﬁlled, what Iden2fy who is full-‐2me and who is part-‐2me is the plan for ﬁlling them? or on the sidelines awai2ng funding… • What kind of people are we seeking? To ﬁll what roles? Iden2fy BOD and BOA members, highligh2ng • If you do not expect to be the CEO that any strategic members’ value-‐added builds the business to $10 or 20 million, what kind of person would you bring in? When? • Who is on your board of directors? • How does the board func2on?
10 – Milestones… Business And Financial Common Ques2ons… Speak to a milestone chart similar to this: • What is your track record at 2002 2003 2004 2005 hisng schedules on similar 1. Company formed eﬀorts? 2. $250K seed round • Are you fully-‐staﬀed for the 3. Product prototype work indicated in the schedule? 4. Field tests • How are you going to get your partners to meet your schedule? 5. $2M angel round 6. 1st produc2on ship • What makes you think you can achieve this schedule when “X” 7. Posi2ve cashﬂow failed? 8. $7M VC round • What con2ngencies have you 9. $75M annualized revenue built into the schedule? The budget? 10. IPO/Acquisi2on
11 – Exit Strategy… Liquidity, When & How Common Ques2ons… If shoo2ng for an IPO… • Cite recent examples of successful • Why won’t one of your established compe2tors step in and leapfrog you? comparable oﬀerings, their oﬀering • How long do you think you can maintain valua2on and their current market cap your lead, thus preserving your company’s • Explain why you believe the opportunity value? will remain when your company is “ready” • Why would this be an exci2ng business If you an2cipate being acquired… opportunity for an acquirer? • Iden2fy the two or three most likely buyers • Why would it an exci2ng IPO opportunity? • Explain why they would be interested • What are the three most serious risks the • If possible, describe recent acquisi2ons of company faces? comparable companies and the deal value Describe any rela2onships you already have with poten2al acquirers, investment banks or VCs that might facilitate your liquidity plans • NOTE: If you aren’t sure how to value the company in the future, use 1 x annual sales in Year-‐2 and 15 or 20 x net proﬁts in Year-‐3 as reasonable es2mates.
Tools: VISION 1. "What do we do?" . Purpose 2. "For whom do we do it?" 3. "How do we excel? Vision Values FOCUS!
Tools: Team Which are you? Roles: 1. The plant Ac2on oriented 2. Resource inves2gator Communica2on oriented 3. Co-‐ordinator Knowledge oriented 4. Shaper 5. Monitor 6. Team worker 7. Implementor 8. Completer 9. Specialist
Tools: Op8miza8on 3 loops: 1. Draz plan 2. Reﬁne plan 3. Op2mize plan In each loop: 1. Gather ideas 2. Consolidate into a concept 3. Implement
Tools: More thoughts Culture eats strategy for breakfast PASSION eats strategy for breakfast! Speed is no replacement for direc2on. Do what you know and care about! Do not compromise on people. Acknowledge and appreciate risk takers. Prima donnas are OK. Nega2ves are not.
Tools: Compe88ve Diﬀeren8a8on Being diﬀerent from compe8tors isn’t enough. Make sure that your key diﬀeren2ators actually maEer to customers. Pick any diﬀeren2a2on you want – pricing, features, target market, market gap, performance, etc. – unless customers really, really, really care about the diﬀerence, it does not mader!
Tools: Compe88ve Diﬀeren8a8on The compe22on i any alterna2ve that meets the same need. Percep2on is fact. Know the “primary value proposi2on” in your value chain.
Tools: Value chain analysis 1. Ac8vity Analysis, where you iden2fy the ac2vi2es that contribute to the delivery of your product or service. 2. Value Analysis, where you iden2fy the things that your customers value in the way you conduct each ac2vity, and then work out the changes that are needed. 3. Evalua8on and Planning, where you decide what changes to make and plan how you will make them.
Tools: Core Competence Analysis Relevance: Firstly, the competence must give your customer something that strongly inﬂuences him or her to choose your product or service. If it does not, then it has no eﬀect on your compe22ve posi2on and is not a core competence. Diﬃculty of Imita8on: Secondly, the core competence should be diﬃcult to imitate. This allows you to provide products that are beder than those of your compe22on. And because youre con2nually working to improve these skills, means that you can sustain its compe22ve posi2on. Breadth of Applica8on: Thirdly, it should be something that opens up a good number of poten2al markets. If it only opens up a few small, niche markets, then success in these markets will not be enough to sustain signiﬁcant growth.
email@example.com 5 minute working session for your table: Divide the tasks Agree on the leadership Agree on the overall vision