Raising External Equity:Know Your Audience<br />Robert Warren<br />I.H. Asper Executive Director for Entrepreneurship<br /...
Experience<br />Valuation experience – New York<br />Founder of the Winnipeg Angel Organization<br />Founder Prairie Centr...
Guy Kawasaki The TOP 10 LIES OF ENTREPRENEURS<br />Common Things Heard By Investors<br />
An Entrepreneur Enters My Office<br />We’ll easily exceed our projections<br />What’s conservative?<br />Rob’s Rules – Rev...
Are You Still Here?<br />Person X will join us as soon as we can pay them<br />Rob’s Rules – Will they leave a guaranteed ...
Wishing They Would Leave<br />We have other interested investors<br />Rob’s Rule – If you’re telling me this you don’t.<br...
I Really Need a Caipirinhas!<br />We have patents!<br />Rob’s Rules – Can you defend them?  Do you have a patent strategy?...
What Do Investors Want?<br />D – Disruptive<br />You need to change the way things work<br />NOVADAQ Technologies<br />I –...
But They Want More<br />Validated Market<br />Rob Adams “If You Build It, Will They Come”<br />Talk to 100 customers – thr...
Validated Market<br />Who are your end-users?  <br />Are the end-users the customers?  If not, who plays a role in the pur...
Risk Reduction<br />Market<br />Market validation – external<br />Beta sales<br />Management Team<br />Industry experience...
Written Plan and Presentations<br />Building on Strengths and Weaknesses<br />
Stages in the Contact Process<br />References are the keys<br />Lawyers, successful entrepreneurs, incubator managers, men...
Quick Pitch<br />Goal – Opportunity Identification<br />Market<br />Financial <br />Executive Summary<br />Don’t focus on ...
Tradeshow<br />Dragon’s Den<br />Get in front of three or more potential investors<br />More interactive – learn the right...
Written Plan<br />Shorter is better – 10 pages maximum<br />100 plus pages are operational plans<br />Focus on the busines...
Formal Presentation<br />Builds on the written plan<br />Focus on issues that are better presented in-person or have a gra...
Market<br />
Who Are Your Customers?<br />Start with a description of the need<br />Focus on opportunity<br />Develop some identifying ...
Focus on Key Customers<br />Who are the largest customers in a segment?<br />Where are they located?<br />How often do the...
Know the Purchase Process<br />How long does it take a customer to make a decision?<br />Who is involved in the purchase d...
Benefits<br />What’s the core problem they are looking to solve?<br />Time<br />Cost<br />Quality<br />What are the second...
Competition<br />Direct and indirect<br />Overcomes one of the Top 10 Lies Told by Entrepreneurs<br />Do a threat assessme...
Current Products<br />Advantage and disadvantages<br />Rank based on severity of the threat<br />Are your competitors doin...
Tell Me More About the Competition<br />Market share<br />Major customers<br />Relationship with opinion leaders<br />Sale...
Financially Speaking<br />Resources<br />Costs<br />Profitability<br />Profit trend over the last 1, 3, and 5 years<br />
Sales and Market Share<br />Two methods available<br />Top - Down<br />Bottom – Up<br />Top – Down<br />Pro: Easy<br />Con...
Show Your Assumptions<br />Keep track of your resources<br />How many customers can you realistically reach?<br />Trends i...
Don’t Stop<br />Describe how you’ll monitor the market<br />Avoid being blindsided<br />Competitive intelligence system<br />
Market Structure<br />Describe the competitive environment<br />Pure competition or oligopolistic?<br />Buyers - Identify ...
Consider<br />Number of buyers<br />Sensitivity of demand<br />Cost conditions<br />Information gaps<br />Avoid industries...
Market Economics<br />Gross and operating margins<br />Profit potential and durability<br />Discuss barriers to entry<br /...
Who Has the Power?<br />Supplier power<br />How many are there?<br />Do they supply actualpotential competitors<br />Payme...
Regulatory Hurdles<br />Regulatory bodies involved<br />Markets involved<br />Approval process<br />Steps involved and doc...
Marketing Strategy<br />What is your marketing philosophy?<br />Who are your actual customers?<br />Potential customers?<b...
Pricing<br />What will you charge?<br />Payback time for the customer?<br />Compare your prices with the competition<br />...
More on Pricing<br />How will your proposed price:<br />Help get your lead product accepted<br />Maintain or increase your...
Sales Tactics<br />What method will you use?<br />What margins will your pricing policy allow for the other members of the...
Advertising and Promotion<br />How will customers know you exist?<br />What are the key tradeshows and journals in your in...
Distribution<br />Describe your proposed channels<br />Is shipping cost an issue?<br />Do you face any special problems in...
Management Team<br />
The Basics<br />Think of the team as interlocking bricks<br />Lead entrepreneur<br />Supporting team<br />Board of Advisor...
Lead Entrepreneur<br />Commitment and determination<br />Leadership<br />Opportunity obsession<br />Tolerance of risk, amb...
Commitment and Determination<br />Tenacious and decisive, able to recommit/commit quickly<br />Intensely competitive in ac...
Leadership<br />Self-starter; high standards but not a perfectionist<br />Team builder and hero maker; inspires others<br ...
Opportunity Obsession<br />Intimate knowledge of customers’ needs and wants<br />Market driven<br />Obsessed with value cr...
Tolerance of Risk<br />Calculated risk taker<br />Risk minimizer<br />Risk sharer<br />Manages paradoxes and contradiction...
Creativity<br />Non-conventional, open-minded, lateral thinker<br />Restless with the status quo<br />Able to adapt and ch...
Motivation to Excel<br />Goal and results oriented; high but realistic goals<br />Drive to achieve and grow<br />Low need ...
Lead Entrepreneur: Desirable Attributes<br />Capacity to inspire<br />Values<br />Energy, health and emotional stability<b...
Avoid Being . . .<br />Macho<br />Perfectionist<br />Impulsive<br />Authoritarian<br />Know it all<br />Invulnerable<br />...
Management Competencies<br />Administrative <br />Law and taxes<br />Marketing<br />Operations/Production<br />Finance<br />
Administrative <br />Problem solving<br />Communications<br />Planning<br />Decision making<br />Project management<br />N...
Law and Taxes<br />Corporate and securities law<br />Contract law<br />IP laws<br />Tax law<br />Real estate law<br />Bank...
Marketing<br />Market research and evaluation<br />Marketing planning<br />Product pricing<br />Sales management<br />Dire...
Operations/Production<br />Manufacturing management<br />Inventory control<br />Cost analysis and control<br />Quality con...
Finance <br />Raising capital<br />Managing cash flow<br />Credit and collection management<br />Public and private offeri...
The Team<br />Cohesion<br />Teamwork<br />Integrity<br />Commitment to the long haul<br />Harvest mind-set<br />Commitment...
Building a TeamBuilds Off the Lead Entrepreneur<br />Relevant industry, market and technological know-how<br />Contacts an...
Rewards and Incentives<br />Lead – you’ll have to give up some of the pie<br />Rewards<br />Differentiation<br />Performan...
Determining Value<br />Idea<br />Business plan preparation<br />Commitment and risk<br />Skills, experience, track record ...
Board of Directors<br />Fill some of the gaps still in existence<br />Networks<br />Experience raising cash<br />Be object...
Other Issues<br />Technical board of directors<br />Reviews your scientific progress<br />Informal board of advisors<br />...
Merchandise<br />
Merchandise<br />What is it?<br />Discuss the key features and their importance<br />How is it used?<br />Primary and seco...
Ups and Downs<br />What are the downsides of your product?<br />What is your current state of development?<br />How long a...
Development Status and Tasks<br />What competencies or expertise is needed to finish development?<br />List customer invol...
Proprietary Issues<br />IP<br />Contractual agreements giving you exclusive rights<br />What happens if these disappear?<b...
Operational Issues<br />Operating cycle<br />Lead/lag times impacting your business<br />Seasonal variations<br />Potentia...
Facilities and Equipment <br />What do you need to produce your product?<br />Purchase or lease <br />Impact on profitabil...
Money<br />
Money - Requirements<br />How much do you need?<br />When do you need it?<br />What’s it for?<br />When will I get it back...
Money - Reporting<br />Cash Flow<br />Timing issues<br />Tie to your financial requirements<br />Income Statement<br />Bal...
Valuation<br />Know your comparables<br />What value will produce the needed return to an investor?<br />Typically looking...
Questions and Comments<br />Robert WarrenI.H. Asper Executive Director for EntrepreneurshipStu Clark Centre for Entreprene...
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Raising External Equity - Business Plan Workshop presented at I2P Latin America

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Workshop on Business Planning, presented by professor Robert Warren (University of Manitoba) at the Idea to Product Competition Latin America at FGV.

Workshop de planos de negócios apresentado pelo professor Robert Warren (Universidade de Manitoba), durante a competição de inovação Idea to Product Latin America na Fundação Getulio Vargas.

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Raising External Equity - Business Plan Workshop presented at I2P Latin America

  1. 1. Raising External Equity:Know Your Audience<br />Robert Warren<br />I.H. Asper Executive Director for Entrepreneurship<br />University of Manitoba<br />
  2. 2. Experience<br />Valuation experience – New York<br />Founder of the Winnipeg Angel Organization<br />Founder Prairie Centre for Business Intelligence<br />Founder of the Manitoba Venture Challenge<br />Supported over 20 equity-backed start-ups<br />5 exits involving a combined return of over $400 million CAD<br />Currently working with Israeli incubators to launch new ventures<br />
  3. 3. Guy Kawasaki The TOP 10 LIES OF ENTREPRENEURS<br />Common Things Heard By Investors<br />
  4. 4. An Entrepreneur Enters My Office<br />We’ll easily exceed our projections<br />What’s conservative?<br />Rob’s Rules – Revenue X 0.5 and Expenses X 5<br />It’s a $50 billion USD market!<br />Total versus addressable market<br />Rob’s Rule - Tell me about the market you can reach<br />An industry leader will buy from us within a week<br />Project Whitecard – I’ve heard this story 5 times<br />Rob’s Rule – Call me when you have a signed purchase agreement<br />
  5. 5. Are You Still Here?<br />Person X will join us as soon as we can pay them<br />Rob’s Rules – Will they leave a guaranteed job? Have they heard of you? If they love you so much why aren’t they in now and why aren’t they invested?<br />We have no competition!<br />Is there no market?<br />Rob’s Rule – If it’s a great opportunity they are 10 other people in Brazil doing it and 10 in the US – China and India 30 each<br />
  6. 6. Wishing They Would Leave<br />We have other interested investors<br />Rob’s Rule – If you’re telling me this you don’t.<br />The big industry player is too big or too slow<br />Rob’s Rule – They are probably your customer – not to mention your biggest threat. Beware the do nothing approach<br />Our management team is top notch<br />Rob’s Rule – 4 exits that made money<br />
  7. 7. I Really Need a Caipirinhas!<br />We have patents!<br />Rob’s Rules – Can you defend them? Do you have a patent strategy?<br />1% of the market will make us a success!<br />Rob’s Rules – 1% of the market means the investor makes little to no money. Think big. Do you know how tough it is to reach 1%<br />
  8. 8. What Do Investors Want?<br />D – Disruptive<br />You need to change the way things work<br />NOVADAQ Technologies<br />I – Innovative<br />Something new and exciting. The iPod.<br />D – Defensible<br />Intellectual property with a number of claims<br />IP strategy – Freedom to Operate<br />Blackberry<br />S – Scalable<br />Can we produce this by the thousands with little effort?<br />Paypal<br />
  9. 9. But They Want More<br />Validated Market<br />Rob Adams “If You Build It, Will They Come”<br />Talk to 100 customers – three times (Ready, Aim Fire)<br />Opportunity<br />Competitive assessment – third party<br />Risk Reduction<br />Real management team<br />Staged-Gate Approach to Growth<br />Return<br />10X minimum<br />Strategy<br />How are you going to take advantage of the opportunity?<br />
  10. 10. Validated Market<br />Who are your end-users? <br />Are the end-users the customers? If not, who plays a role in the purchase process?<br />ImrisTechnolgies<br />How much are they willing to pay?<br />How often will they buy?<br />Who are your competitors? What are their relative strengths? Weaknesses?<br />How likely are they to shift? What will it take?<br />Outside validation<br />
  11. 11. Risk Reduction<br />Market<br />Market validation – external<br />Beta sales<br />Management Team<br />Industry experience – gets sales quicker<br />Exit experience<br />Set key accomplishments<br />First customer or distributor<br />First re-order<br />Tied to financial requirements<br />
  12. 12. Written Plan and Presentations<br />Building on Strengths and Weaknesses<br />
  13. 13. Stages in the Contact Process<br />References are the keys<br />Lawyers, successful entrepreneurs, incubator managers, mentors, bankers and accountants<br />Credibility<br />Quick Pitch<br />Elevator<br />One page executive summary<br />Tradeshow<br />Venture showcase<br />Dragon’s Den<br />Written Plan<br />Formal<br />
  14. 14. Quick Pitch<br />Goal – Opportunity Identification<br />Market<br />Financial <br />Executive Summary<br />Don’t focus on the product – think return<br />Avoid technical/industry jargon<br />Elevator Pitch<br />Max. Of 60 seconds<br />Pick 4 things you want to cover<br />End - Ask for a follow-up meeting<br />
  15. 15. Tradeshow<br />Dragon’s Den<br />Get in front of three or more potential investors<br />More interactive – learn the right questions<br />Tradeshow<br />Opportunity to really go into depth<br />Be prepared to switch between business and technical issues<br />
  16. 16. Written Plan<br />Shorter is better – 10 pages maximum<br />100 plus pages are operational plans<br />Focus on the business and not the technical<br />Technical comes in due diligence <br />Sales brochure<br />Limit the appendices to key financial information<br />Key Components<br />Market<br />Management<br />Merchandise<br />Money<br />
  17. 17. Formal Presentation<br />Builds on the written plan<br />Focus on issues that are better presented in-person or have a graphical component<br />Think of it as a 10 minute commercial<br />Key – Question and Answer Section<br />
  18. 18. Market<br />
  19. 19. Who Are Your Customers?<br />Start with a description of the need<br />Focus on opportunity<br />Develop some identifying questions or attributes<br />Will help you focus on the most likely customer<br />What’s missing in the current options available?<br />Rank in order of importance<br />
  20. 20. Focus on Key Customers<br />Who are the largest customers in a segment?<br />Where are they located?<br />How often do they buy?<br />What are they used to spending per unit or per purchase?<br />Identify floor and ceiling prices<br />Why is this critical to a new venture?<br />
  21. 21. Know the Purchase Process<br />How long does it take a customer to make a decision?<br />Who is involved in the purchase decision process?<br />Understand the various roles played<br />Where are they located?<br />When is the last time they made a major change?<br />Why?<br />
  22. 22. Benefits<br />What’s the core problem they are looking to solve?<br />Time<br />Cost<br />Quality<br />What are the secondary benefits they seek?<br />What product features will provide these benefits?<br />Value: what is your value added benefit?<br />
  23. 23. Competition<br />Direct and indirect<br />Overcomes one of the Top 10 Lies Told by Entrepreneurs<br />Do a threat assessment <br />Consider all pertinent features, e.g. price, market share <br />Who’s a likely competitor?<br />Think similar product in a different market or ease with which they could access a competing product <br />
  24. 24. Current Products<br />Advantage and disadvantages<br />Rank based on severity of the threat<br />Are your competitors doing anything that will result in new/improved products?<br />Check patent applications<br />Check local newspaper articles and relevant trade journals<br />Google them<br />US publicly traded companies – 10K’s<br />What’s their past history of innovation?<br />
  25. 25. Tell Me More About the Competition<br />Market share<br />Major customers<br />Relationship with opinion leaders<br />Sales<br />Growth and distribution<br />Distribution<br />Methods and core partners<br />Production capabilities<br />
  26. 26. Financially Speaking<br />Resources<br />Costs<br />Profitability<br />Profit trend over the last 1, 3, and 5 years<br />
  27. 27. Sales and Market Share<br />Two methods available<br />Top - Down<br />Bottom – Up<br />Top – Down<br />Pro: Easy<br />Cons: Prone to error and doesn’t account for your resource constraints<br />Leads to another famous lie told by entrepreneurs<br />Bottom – Up<br />Pro: Produces more accurate and achievable targets<br />Con: Time consuming and requires a better description of the target market<br />
  28. 28. Show Your Assumptions<br />Keep track of your resources<br />How many customers can you realistically reach?<br />Trends in the market<br />How much of your growth comes from:<br />Growth in the market?<br />Acquiring customers?<br />Repurchases<br />VC’s love to see recurring revenue<br />
  29. 29. Don’t Stop<br />Describe how you’ll monitor the market<br />Avoid being blindsided<br />Competitive intelligence system<br />
  30. 30. Market Structure<br />Describe the competitive environment<br />Pure competition or oligopolistic?<br />Buyers - Identify the key players<br />Market power they exert<br />Trends impacting this structure<br />Regulatory<br />Technological changes<br />Consolidation<br />
  31. 31. Consider<br />Number of buyers<br />Sensitivity of demand<br />Cost conditions<br />Information gaps<br />Avoid industries with these characteristics:<br />Concentrated<br />Perfectly competitive<br />Mature or declining<br />
  32. 32. Market Economics<br />Gross and operating margins<br />Profit potential and durability<br />Discuss barriers to entry<br />Technological and market lead time<br />First Mover Advantage?<br />Fixed, variable and semi-variable costs<br />Benchmark to industry norms<br />Months to break even<br />Months to positive cash flow<br />When will you run out of cash?<br />Asset intensity<br />
  33. 33. Who Has the Power?<br />Supplier power<br />How many are there?<br />Do they supply actualpotential competitors<br />Payment terms and structure<br />Distributors<br />Terms for getting picked up<br />Credit options<br />Why use a distributor?<br />
  34. 34. Regulatory Hurdles<br />Regulatory bodies involved<br />Markets involved<br />Approval process<br />Steps involved and documentation required<br />Understand what can go wrong and prepare<br />Role of consultants<br />Time required for approval<br />What’s the impact on your business if there’s a glitch?<br />
  35. 35. Marketing Strategy<br />What is your marketing philosophy?<br />Who are your actual customers?<br />Potential customers?<br />What will you do innovatively?<br />Where will you first introduce your lead product? Why?<br />Will you face any seasonal trends?<br />How can you use government contracts to provide cash flow? <br />
  36. 36. Pricing<br />What will you charge?<br />Payback time for the customer?<br />Compare your prices with the competition<br />What’s your gross margin?<br />Is this enough?<br />What net will you end up with?<br />
  37. 37. More on Pricing<br />How will your proposed price:<br />Help get your lead product accepted<br />Maintain or increase your market share as competition comes on line<br />Produce profits<br />What’s the relationship between price, market share and profits?<br />
  38. 38. Sales Tactics<br />What method will you use?<br />What margins will your pricing policy allow for the other members of the value chain?<br />What are your expected sales per rep? dealer?<br />Discuss a potential selling schedule<br />
  39. 39. Advertising and Promotion<br />How will customers know you exist?<br />What are the key tradeshows and journals in your industry?<br />How will you use these?<br />Design a promotional schedule and budget<br />Include expected outcomes of these activities<br />
  40. 40. Distribution<br />Describe your proposed channels<br />Is shipping cost an issue?<br />Do you face any special problems in distributing your product?<br />Describe any international regulations you’ll have to address<br />What does it take to ship food products into the US?<br />
  41. 41. Management Team<br />
  42. 42. The Basics<br />Think of the team as interlocking bricks<br />Lead entrepreneur<br />Supporting team<br />Board of Advisors (can be multiple)<br />External experts – consultants and professionals<br />Who are you?<br />Where do you want to end up?<br />Roles that need to be filled<br />Velma Kelly in Chicago – “I Just Can’t Do It Alone”<br />
  43. 43. Lead Entrepreneur<br />Commitment and determination<br />Leadership<br />Opportunity obsession<br />Tolerance of risk, ambiguity and uncertainty<br />Creativity, self-reliance and adaptability<br />Motivation to excel<br />
  44. 44. Commitment and Determination<br />Tenacious and decisive, able to recommit/commit quickly<br />Intensely competitive in achieving goals<br />Persistent in solving problems, disciplined<br />Willing to undertake personal sacrifice<br />Immersed <br />
  45. 45. Leadership<br />Self-starter; high standards but not a perfectionist<br />Team builder and hero maker; inspires others<br />Treats others as you want to be treated<br />Shares the wealth<br />Honest and reliable; builds trust; practices fairness<br />Not a lone wolf<br />Superior learner and teacher<br />Patient and urgent<br />
  46. 46. Opportunity Obsession<br />Intimate knowledge of customers’ needs and wants<br />Market driven<br />Obsessed with value creation and enhancement<br />
  47. 47. Tolerance of Risk<br />Calculated risk taker<br />Risk minimizer<br />Risk sharer<br />Manages paradoxes and contradictions<br />Tolerates uncertainty and lack of structure<br />Tolerates stress and conflict<br />Able to resolve problems and integrate solutions<br />
  48. 48. Creativity<br />Non-conventional, open-minded, lateral thinker<br />Restless with the status quo<br />Able to adapt and change; creative problem solver<br />Quick learner<br />No fear of failure<br />Able to conceptualize and “sweat details”<br />
  49. 49. Motivation to Excel<br />Goal and results oriented; high but realistic goals<br />Drive to achieve and grow<br />Low need for status and power<br />Interpersonally supporting (versus competitive)<br />Aware of strengths and weaknesses<br />Has perspective and sense of humour<br />
  50. 50. Lead Entrepreneur: Desirable Attributes<br />Capacity to inspire<br />Values<br />Energy, health and emotional stability<br />Creativity and innovativeness<br />Intelligence <br />
  51. 51. Avoid Being . . .<br />Macho<br />Perfectionist<br />Impulsive<br />Authoritarian<br />Know it all<br />Invulnerable<br />Outer control<br />Dependent on others <br />
  52. 52. Management Competencies<br />Administrative <br />Law and taxes<br />Marketing<br />Operations/Production<br />Finance<br />
  53. 53. Administrative <br />Problem solving<br />Communications<br />Planning<br />Decision making<br />Project management<br />Negotiating<br />Managing outside professionals<br />Personnel administration <br />
  54. 54. Law and Taxes<br />Corporate and securities law<br />Contract law<br />IP laws<br />Tax law<br />Real estate law<br />Bankruptcy law<br />
  55. 55. Marketing<br />Market research and evaluation<br />Marketing planning<br />Product pricing<br />Sales management<br />Direct selling<br />Service management<br />Distribution management<br />Product management<br />New product planning<br />
  56. 56. Operations/Production<br />Manufacturing management<br />Inventory control<br />Cost analysis and control<br />Quality control<br />Production scheduling and flow<br />Purchasing<br />Job evaluation<br />
  57. 57. Finance <br />Raising capital<br />Managing cash flow<br />Credit and collection management<br />Public and private offerings<br />Ability to read and prepare financial statements<br />
  58. 58. The Team<br />Cohesion<br />Teamwork<br />Integrity<br />Commitment to the long haul<br />Harvest mind-set<br />Commitment to value creation<br />Equal inequality<br />Fairness<br />Sharing of the harvest<br />
  59. 59. Building a TeamBuilds Off the Lead Entrepreneur<br />Relevant industry, market and technological know-how<br />Contacts and networks<br />Look for “A” team players<br />People that will sacrifice and commit<br />Risks and rewards<br />Define roles<br />
  60. 60. Rewards and Incentives<br />Lead – you’ll have to give up some of the pie<br />Rewards<br />Differentiation<br />Performance<br />Flexibility<br />Timing<br />
  61. 61. Determining Value<br />Idea<br />Business plan preparation<br />Commitment and risk<br />Skills, experience, track record or contacts<br />Responsibility<br />
  62. 62. Board of Directors<br />Fill some of the gaps still in existence<br />Networks<br />Experience raising cash<br />Be objective and take your time<br />Used as part of an investment package<br />Define expectations and minimum requirements<br />9-10 days of time per year are required<br />
  63. 63. Other Issues<br />Technical board of directors<br />Reviews your scientific progress<br />Informal board of advisors<br />Good place to look for potential board members<br />Liability<br />Harassment<br />Beware unsophisticated investors and their expectations<br />Time and risk<br />You’ll need lots of director time and offer plenty of risk<br />
  64. 64. Merchandise<br />
  65. 65. Merchandise<br />What is it?<br />Discuss the key features and their importance<br />How is it used?<br />Primary and secondary uses<br />What pain are you addressing?<br />Where do you derive value?<br />What differentiates you from the others?<br />What’s the customer’s payback period?<br />
  66. 66. Ups and Downs<br />What are the downsides of your product?<br />What is your current state of development?<br />How long and how much will it take you to complete development?<br />Do you have any type of technology lead?<br />How long is it?<br />What is your IP?<br />
  67. 67. Development Status and Tasks<br />What competencies or expertise is needed to finish development?<br />List customer involvement in the product’s development<br />What’s the greatest risk in your product development process?<br />How will you lessen this risk?<br />What will it cost if your product is delayed?<br />Airbus 380 – a costly wiring problem<br />
  68. 68. Proprietary Issues<br />IP<br />Contractual agreements giving you exclusive rights<br />What happens if these disappear?<br />Costs <br />Business impact – Will you still have a business?<br />
  69. 69. Operational Issues<br />Operating cycle<br />Lead/lag times impacting your business<br />Seasonal variations<br />Potential impact on revenues, costs, profits<br />Is geography an issue in your business decision process?<br />
  70. 70. Facilities and Equipment <br />What do you need to produce your product?<br />Purchase or lease <br />Impact on profitability<br />Is there a tipping point?<br />Describe the production process<br />Discuss how costs and inventory levels vary over different sales figures<br />Quality issues<br />
  71. 71. Money<br />
  72. 72. Money - Requirements<br />How much do you need?<br />When do you need it?<br />What’s it for?<br />When will I get it back?<br />How will I get it back?<br />
  73. 73. Money - Reporting<br />Cash Flow<br />Timing issues<br />Tie to your financial requirements<br />Income Statement<br />Balance Sheet<br />Importance of industry norms<br />Prepare under a variety of conditions<br />Realize the investor has their own ideas<br />
  74. 74. Valuation<br />Know your comparables<br />What value will produce the needed return to an investor?<br />Typically looking for a minimum of 10X<br />Portfolio management issue<br />Use a couple of methods<br />Free cash flow<br />Multiple of sales or earnings<br />Produce a range of values – back to comparables<br />Be prepared to negotiate – value is in the eyes of the purchaser <br />
  75. 75. Questions and Comments<br />Robert WarrenI.H. Asper Executive Director for EntrepreneurshipStu Clark Centre for EntrepreneurshipUniversity of ManitobaWinnipeg, Manitoba, Canada R3P 1E3Robert_Warren@Umanitoba.ca<br />

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