What Stage is Your Business:Where to go Next?1 June 18, 2013
Agenda• Entrepreneurship and Business Stage– A few slides to set the stage for discussing “Stage”– As a business moves from concept to revenue risk isreduced• Lessons Learned– Mentoring and Coaching … find people who know thestage– Types of help … what do you need when• Case Studies – What we see– Investor’s View2
Evolution of your business by stage• Build the Business: – Key is to move the business through diﬀerent stages of growth not to design for fund raising – But building a business is about gathering resources to push the company along – One class of resource is cash …. But the message of this session and the day is: ﬁnd advisors and mentors to help • you oAen ﬁnd these folks focused along the path to investment – Why? .. Many high growth companies are innovaFve and solving the problems together is fun … • Understand the Lingo: – Today lots of info will be about ﬁnancing terms – This session is about business stage – Coaches, mentors & investors expectaFon are set by the stage of your business 3
Many types of Entrepreneurship:Don’t raise money until you know who you will beHigher Lower 5 year growth rate $2-‐5M >> >> Investment required to reach breakeven Project ﬁnance, etc. “Normal growth” business (MOST COMMON) Mostly bank debt Maybe new crowd funding 50– 100% High Growth Cheap fast growing business (RARE!) Angel Funding (and some VC) Extreme High Growth Home run long shot (VERY RARE!) VC Funding
Capital Needs Time High Risk Low Risk Friends, Family & Founders Formal Venture Capital M&A or IPO Crystallize Ideas Demonstrate Product Early Scaling Growth Sustained Growth Angels or Accelerators or Micro-‐cap funds CF, Angels or Accelerators or Micro-‐cap funds Angels or Accelerator CF Market Entry M&A Later VC Rounds Extreme High Growth High Growth Angel Group (or Micro-‐cap) SyndicaQon Different paths to exit…
Equity - VC and Angel• VCs invest other people’s money, from pension funds etc. – Returns are measured on a per fund basis – ~$26B, ~ 3,700 new investments 2012 • Angels invest own money • ~$23B, ~ 56,000 new investments 2012 • 22 New England, 9 greater Boston – Angel groups ~10-‐15%, – Informal networks & one-‐Fme-‐investors ~15-‐20%, – Super angels ~25-‐30%, – Family oﬃces ~35-‐45% • Lots of styles -‐ Club style, fund, mix • Must have exits for equity model to work!! – IPOs – M&A – Private Equity
Focus on Stage …Key Factors by Stage• Purpose of this Session: – Learn to communicate your business ideas as it goes through diﬀerent stages of growth • The Reality: – At each stage, there are 100s of things “needing to be done” – Picking what most important is the key – This session is to help discuss how to think about the steps in order – (The truth is that 40 pennies need to be pushed up the hill at the same Fme – but because the posiFon you need to assume to do this is unaoracFve – we all pretend that there is a raFonal order) • Coaches, mentors & investors expect things will be aligned by phase – If you know what phase you are in, you can communicate more quickly and accurately with folks who want to help • Spending 13 of your 15 minute coaching session to explain is a waste of Fme • When the entrepreneur tries to present one aspect as being complete and has no info on other important factors, investors, etc. will undoubtedly get confused 8
Equity Capital Sources:High Growth Companies9 Stage Crystallize Idea and Early DemonstraQon Demonstrate Product & Market Interest Market Entry and Early Growth Early Scaling Growth Repeatable Growth Capital Source Founders, Friends, Family, Grants, Kickstarter, etc. Accelerators, Individual Angels, many others now “exploring” Angel Groups, Angel Group SyndicaFon, Micro-‐Cap Funds VCs, Angel Group SyndicaFon, Micro-‐Cap Funds VCs Investment $25K -‐ $100K $100K -‐ $500K $500K -‐ $1M $5M – as needed as needed These 2 need sophisFcated growth plans This is the stage where advice can make you eligible for outside funding later Accelerators and a few individual angels play here … unless it is a big idea This is where Angel Groups do most 1st investments….
10 What Investors (and others) Need to Know• 5 P’s of investment – Product – diﬀerenFated technology or service that serves market need for a signiﬁcant, large market product – PromoFon –market entry strategy, with detailed plan – Proﬁts – a business model that has margins and distribuFons costs that are proﬁtable – People – a team to meet the needs of the business – Plan – good idea of the steps needed to create a repeatable business model • Some key concepts to convey: – What our poten-al customers are saying to us: is this a nice to have or must have – How we plan to run a series of market entry tests delivering meaningful metrics – How the team matches the needs of the business – How we will scale against a repeatable business model
Crystal: Idea to Business Plan• Goal of Stage: Think out the issues– No one wants to read a plan … but organizing your thinking in a structuredway will help you get things done at the right time• The Team– Why do you folks have unique knowledge to understand this market opening• The Key Stage Specific Information– Product: How big is the market, the product nice to have or is there a need• How will we learn the answers– What do we know about this industry• What is the margin structure and how buying is done, how competitive,etc.– At the highest level … how long to reach a shippable product and how muchmoney does that take11
Crystal: Idea to Business Plan12 #2 Is it a big market, with a big need … when will the product be done? #4 What are total expenses #3 Can this industry be penetrated and have we talked to potenFal customers #1 How much experience ?
Demonstrate:Product & Market Entry Plan• Goal of Stage: Think out the issues to drive market– Show the product works, show your path to market is working• Traditionally called Beta test– You want lots use so you can find patterns especially in how to findand match with customers• The Team– Path to market is the … key– Time to fill out team to reach the market … marketing andselling skills• The Key Stage Specific Information– Customers want it, … can we fell customers leaning in … goal at end of stage is equivalent of pipeline – Product Fit… understand use of product – PromoFon – start market trails … develop a detail list of ideal metrics and then start ﬁlling in the grid 13
Demonstrate:Product & Market Entry Plan14 #3 Build metrics to show sales and markeFng cost? #2 Fill in team .. Start to build external team #1 Understand customer ….lots of market trials #4 Market dynamics
Market Entry & Early Growth StageEarly Repeatable Business Model• Goal of Stage: Think out the issues to drive scale– Show market metrics are scalable– Goal of the stage: what resources will drive growth … exactmetrics for the immediate plan … big ideas for the “add-on”products and markets– Execution• The Team– Can this team scale• The Key Stage Specific Information– Refine metrics and build “what-if” plans– Details plans for varying market conditions based on scaling knowledge– Work with industry partners– Find other market gaps15
Market Entry & Early Growth StageEarly Repeatable Business Model16 #3 How to hit the rest of the market #2 Can this team scale #4 Asses proﬁtability of business and eﬀect on capital needs #1 Understand growth metrics
Agenda• Entrepreneurship and Business Stage – A few slides to set the stage for discussing “Stage” – As a business moves from concept to revenue risk is reduced • Lessons Learned – Mentoring and Coaching … ﬁnd people who know the stage – Types of help … what do you need when • Case Studies – What we see – Investor’s View 18