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Plan for Funding


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Plan for Funding

  1. 1. What Stage is Your Business:Where to go Next?1  June 18, 2013
  2. 2. 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  
  3. 3. 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
  4. 4. 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  
  5. 5. 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…
  6. 6. A Summary of Capital Sources6  
  7. 7. 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  
  8. 8. 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
  9. 9. 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. 10. 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  
  11. 11. 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  
  12. 12. 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  ?  
  13. 13. 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  
  14. 14. 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  
  15. 15. 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  
  16. 16. 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  
  17. 17. Factors defining a Business17  Factors Crystal Stage Demo Stage GrowthProduct /Service andMarket#2 #4 #3Promotion andMarketStrategy#3 #1 #1Profits andBusinessModel#3 #4People#1 #2 #2Plan#4
  18. 18. 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