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How to write your business plan - Rob Moffat, Balderton Capital

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As presented at campus EDU, London, 31 May

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How to write your business plan - Rob Moffat, Balderton Capital

  1. 1. How to write a business planCampus EDU31 May 2013
  2. 2. • Invest $0.1 - 10M in tech companies with $B potential• Invest across Europe, help businesses go international• Have invested in >100 companies over last 10 years2Balderton Capital – what we do
  3. 3. We back great entrepreneurs & disruptive companies3Europe’s leadingvacation rentalmarketplaceTop 2 global musicpublisher from zero:Prince, McCartney1 Million loanapplications permonth1M products soldper month
  4. 4. Me419962000200420072009
  5. 5. You5Written a business plan?Have an idea?Working on a business right now?Looked at their business plan this week?
  6. 6. • Pitch deck• Excel• Business plan• For you• For your co-founders / employees6Scope for today
  7. 7. 7We’re not writing a dissertation…
  8. 8. 9Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  9. 9. 10Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  10. 10. 11What is a problem?• Unmet need• Unmet want• Too expensive• Too time-consumingHow many other people really care about this problem?
  11. 11. 12What was the problem?
  12. 12. 13Solution without a problem…
  13. 13. 14Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  14. 14. 15Your solutionFor… (target customer)who… (statement of the need or opportunity),we are a… (product type)that… (key benefit).Unlike… (main competitor),our product… (how we are different).
  15. 15. 16Which company?For young travellersWho need somewhere cheap to stay,We are a marketplace for accommodationThat gives you a better room for half the price.Unlike hotels or hostelsOur product gives you the personality of the city
  16. 16. 17Two acronymsBHAGMVPBig Hairy Audacious GoalMinimum Viable Product
  17. 17. 18Which company?BHAGMVPThe social networkOnline student directory
  18. 18. 19Why now?
  19. 19. 20Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  20. 20. 21“We have no competitors”#1 reason for a VC to ditch your business plan?
  21. 21. 22Know your competitionWhere are the weaknesses?What are they good at?Common mistake: Compare where you will be in twoyears with where they are today
  22. 22. 23Disruptive innovationFilm cameras -> Digital -> SmartphonesTV -> YoutubeServers -> CloudMSFT Office -> Google Docs
  23. 23. 24Good & bad competitive advantages• Disruptive innovation• Speed• Unique technology / IP / data• Exclusive partnerships• Substantially lower cost• Quality of your teamGood Bad• Features• Better service• Lower margins• Better for client but not for users
  24. 24. 25How will you sustain your advantage?
  25. 25. 26How will you sustain your advantage?• Network effects• Virtuous circles• More/better data• Brand• Depth of tech expertise
  26. 26. 27Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  27. 27. 28#2 reason for a VC to ditch your business plan?“Our market opportunity is $100B”
  28. 28. 29Bottom up market sizingNumber of potential users of your product% who are willing/able to payYour annual revenue per userxx
  29. 29. 30Example: LovefilmNumber of potential users of your product% who are willing/able to payYour annual revenue per userxx24 MUK households40% ?Sky TV penetration(as a proxy)£120£1.1BAddressable market=
  30. 30. 31Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  31. 31. 32Unit economics = can you make money?Contributionper orderRevenue perorderVariable Cost perorder= -Cost PerAcquisition(CPA)Cost per lead% of leads thatconvert= ÷CustomerLifetime value(CLV)Contributionper orderAverage # orders percustomer before theyleave= xLifetime value(LTV)MakingmoneyCost PerAcquisition(CPA)>=
  32. 32. 33Unit economics = can you make money?Contributionper orderRevenue perorder= -Cost PerAcquisition(CPA)Cost per lead% of leads thatconvert= ÷CustomerLifetime value(CLV)Contributionper order= xLifetime value(LTV)MakingmoneyCost PerAcquisition(CPA)>=Variable Cost perorderAverage # orders percustomer before theyleave
  33. 33. 34Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  34. 34. 35The necessaries: Product, Team, CapitalProduct• Minimum Viable Product• Make use of third party tech• ‘Mechanical turk’?Team• Skills that you need• Raw talent vs. experience?• Want VC investment? You need a CTOCapital• Running costs for 18 months, plus 25%• Sufficient runway to prove the product?• Use client work to help build product?
  35. 35. 36Contents of a (software/internet) business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  36. 36. 37Milestones
  37. 37. 38MilestonesProve the hard stuff firstPostpone big costsPrioritize constantly
  38. 38. 39First milestoneTest the plan!
  39. 39. 40Some ways to test a business plan• Talk to …• Potential clients / partners / similar companies• Smart 3rd parties (including investors)• Dummy ad campaigns to test messaging & CPC• Landing page & waiting list• Kickstarter• Minimum viable product• Work at your competitors
  40. 40. 41Read this book
  41. 41. 42Your turn1. Write a simple business plan for yourbusiness/idea• If you don’t have an idea, pick your favourite startup2. Get your neighbour to critique it15 mins10 mins
  42. 42. 43Reminder: Contents of a business plan• The problem• Your solution• Competition, and why you win• Size of the opportunity• Unit economics• The necessaries: Product, Team, Capital• Milestones
  43. 43. 44DiscussionWhich was the weakest part of your plan?What is the area that most needs more testing?
  44. 44. 45Advice• Re:work: Guess not a plan – keep short & revisit often• Be clear on what problem you are solving. It’s best todo one thing really, really well• Cost is a disease• People don’t like giving ‘negative feedback’. Pushthem to find the weak points, and listen• Be optimistic (but not blindly so)
  45. 45. Questions?rmoffat@balderton.com@robmoff
  46. 46. Further readinghttp://blog.guykawasaki.com/2012/01/how-to-create-an-enchanting-business-plan-officeandguyk.htmlhttp://37signals.com/reworkhttp://theleanstartup.com/http://www.avc.com/a_vc/mba-mondays/http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-versionhttp://www.seedcamp.com/resources/the-product-market-fit-cyclehttp://ycombinator.com/lib.htmlhttp://www.forbes.com/sites/bruceupbin/2012/08/30/the-dangerous-seduction-of-the-lifetime-value-ltv-formula/
  47. 47. Your business planThe problem Competition / why you win Size of the opportunityYour solutionUnit economics Necessaries: Product, Team, Capital Milestones

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