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![VC ’s share Valuation bracket at exit = [$ 21,8-22,0m] If series A of $1,5m for 30% equity Then VC ’s value at exit is $22m x 30% = $6,6m That ’s a cash-on-cash return of : 6,6 / 1,5 = 4,4x (excluding tax impact) GREAT, but that ’s only $5,1m made for the VC in 5 years (too small !) cost of opportunity is too high Nota: if you ’re financing the company alone, then it’s a different story : $22m-$1,5m financing = $20,5m profit in 5 years = $4m/year](https://image.slidesharecdn.com/110308marketssfo-110308214615-phpapp02/85/Market-entry-strategy-presenter-deck-9-320.jpg)
Uploaded byRodrigo Sepúlveda Schulz
Market entry strategy - presenter deck
The document outlines the importance of understanding market size and type for assessing revenue potential and competitive positioning. It describes various strategies for estimating market size and entry, emphasizing the significance of targeting large markets and identifying unique opportunities. Additionally, it highlights the use of valuation techniques for fundraising endeavors and stresses the need for a comprehensive market entry strategy.
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Market entry strategy - presenter deck
- 1. Founder Institute –March 8 th , 2011 Pix (cc) BY NC SA, Rodrigo SEPÚLVEDA
- 2. Summary Why isit important ? Understand your market type How do you estimate it ? Design a market entry strategy
- 3. 1. Why isit important ? Gives you A potential target for your revenue (therefore also EBIT) A valuation Assessment of market players, hence your competition
- 4. Potential target revenueLet ’s say your market is $1b Everyone wants/says a 1% market-share That means you ’re targeting $1b x 1% = $10m of revenues Impact: You ’re a tiny fish in a pond with 99% revenue elsewhere. No barrier to entry (there are other players) Competitive edge is key (geography, product, customers…) Only 2 ways to grow Grow the market size (either by yourself, or the market grows as a whole) Grow your market-share
- 5. Potential valuation /fundraising VCs are only interested in risk-controlled returns, usually in 5 years. Hence we need to estimate your valuation in 5 years. Usually 3 techniques: Multiples (turnover, EBIT, …) DCF (for going-concerns, not startups) Open market (early stage, or if Ricardian rent)
- 6. Multiples Former Frenchtech stock market Alternext used to trade with these multiples on average for tech companies: 2,2x turnover 23x EBIT Maybe your industry has different metrics From original example: Your valuation is $10m x 2,2 = $22m
- 7. DCF Note :Let’s assume here the currency is irrelevant
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- 9. VC ’s shareValuation bracket at exit = [$ 21,8-22,0m] If series A of $1,5m for 30% equity Then VC ’s value at exit is $22m x 30% = $6,6m That ’s a cash-on-cash return of : 6,6 / 1,5 = 4,4x (excluding tax impact) GREAT, but that ’s only $5,1m made for the VC in 5 years (too small !) cost of opportunity is too high Nota: if you ’re financing the company alone, then it’s a different story : $22m-$1,5m financing = $20,5m profit in 5 years = $4m/year
- 10. Advice you ’vealready heard: Problem: either target market is too small, or target market-share is too small, or profit is too small, or asset created is too small, or there are too many competitors. Target a BIG MARKET Aim to be the #1 in your (BIG) market
- 11. 2. Understand yourmarket type 3 options An existing market A market that doesn ’t exist yet An mature market : an opportunity to re-shape it
- 12. Examples of enteringan existing market Richard Branson and all Virgin brands in air travel, finance, rail Steve Jobs and Apple : telephony, music, personal computers, feature software Bill Gates on OS, office software, gaming, etc. Mark Zuckerberg (facebook) : social networks, the Internet Google : Android @jack with Square: payments Innovation and a differentiating factor are key
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- 16. A market thatdoesn ’t exist yet Tons on literature on this Very risky, because No available numbers No guarantee you ’ll find a market But maybe best way to reach #1 position, globally, because you know something competition doesn ’t know yet : 1 st mover advantage You define the rules
- 17. Sample new marketsClassic examples : Walkman Post-its Netbooks, then tablets Space travel Twitter (?)
- 18. A word ofadvice about innovation Feature company Product company Solution company Nice-to-have Got-to have
- 19. A mature market#1 or #2 strategy Not enough: redefine your market as 10% max of revenue
- 20. 3. How doyou estimate your market size? Many different techniques: Guesstimate (à la McKinsey) Published numbers (always a bracket) Sum of all players in a market
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- 22. Existing markets Pressarticles Competitor ’s literature (presentations, website, financial statements) Industry publications Research institutes (IDC, Forrester, eMarketer, comscore, etc.) < beware though SlideShare is great !
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- 25. Sum of allplayers Hard not to compare oranges and apples Take only direct competitors Gives you a current picture, not a projected one
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- 28. 4. Market entrystrategy (in a nutshell) 4C : Customer Company (SWOT) Competition Community (PEST) 4P: Product Price Place Promotion Positioning: We sell THIS PRODUCT To THIS CUSTOMER At THIS PRICE To solve THIS PROBLEM PnL
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- 30. How big isyour market ? Reality check #1
- 31. What problem areyou solving ? Reality check #2
- 32. Why will someonePAY for your product ? Reality check #3
- 33. 1 strategy isNOT enough You need to assess different scenarii 4C 4P POS P&L 4C ’ 4P ’ POS ’ P&L ’ 4C ” 4P ” POS ” P&L ” 4C ’” 4P ’” POS ’” P&L ’”
- 34. What you endup doing depends both on your RISK profile and SWOT X Pos ” X Pos ’ X Pos ’” X Pos Return (m€) Risk (wacc) 10% 20% 30% 40%
- 35. Summary : enteringa market Why is it important ? Understand your market type How do you estimate it ? Design a market entry strategy
- 36. www.rodrigosepulveda.com twitter: @rodrigo www.slideshare.com/rodrigo1971 Pix (cc) BY NC SA, Rodrigo SEPÚLVEDA