15.390 Class #5

1 2000-2003 Copyright – MIT

15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

15.390 Class #5

How to Make Presentations of Your Business Plan


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Your Audience

Here we’re going to focus on an investor, But you’ll use this same pitch for:

key hires/co-founderscreditors/supplierspossible partner companiesearly customer prospectsvisits to Sloan once you’ve made it!


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Presentation Style The listener will be judging how you

will sound in front of other audiences. An investor is going to be very

interested in your presentation style. It is a good indication of how well you will play in front of customers, future investors/analysts, etc.

Potential new hires want to know that you can win investors.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

What We’re Going to Talk About

Social dynamics and “performance” techniques.

The PowerPoint presentation itself.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Goals of Presenting Introduce the team (it’s a winning team) Make the business proposition look favorable Answer questions Reduce doubt/risk Show logic trail Be “on stage”: show teamwork, urgency,

charisma, generate excitement (everybody wants to be part of the next hot thing).


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Most Battles Are Won…. ...before the armies take the field

It’s likely that your job is not to convince them of the viability of your business idea/team/market, but rather to reinforce a hunch they already have.

If coming in cold, be conscious of interactions before the meeting begins.

Know what they know about you before your arrival: what holes in the story are they looking to see if you can fill?


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Know Who’s in the Room Don’t underestimate a so-called “junior”

member of the team. Examples of roles for others in the room:

Who is your advocate? Who is going to do the checking-up on you? Who wants to take you under his/her wing? Who is going to object just to sound opinionated,

and who has a real objection? Who might have a similar deal brewing? Who got burned on something similar a few years

ago? Who has good relevant experience in your field?


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

The Dynamics in the Room Your talk is your sales presentation in real

time (they are looking to see how well you sell).

Assume that your audience has read your plan (or whatever you submitted in advance), but not all of them have read it well.

Anticipate questions and discuss before asked:“One question you might have…. is how quickly is the Linux market growing?”


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Presentation Do’s and Don’ts Use humor or try to cut through the

invisible wall, but be careful, and don’t sound like a used car salesman or try to be the VC’s “best friend”.

Have a roll for all the people you bring (ideally, use 2 or 3 team members).

Don’t bring a half-relevant “grey-hair”.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Do’s and Don’ts continued... Make no unsubstantiated claims

wrong: “our drug will sail through the FDA”right: “we’re well poised for the FDA process, as our scientists

have 40 years combined experience getting drugs approved” Don’t exaggerate or use dramatic language

wrong: “this market’s taking off like wildfire”right: “Most analysts agree that the market will grow 85% per year

for the next five years” (and have the sources to show this) Brag about each other, but don’t use

exaggerations or adjectives …wrong: “Now I would like to introduce our awesome CTO who’s

going to rock your world”right: “Now I would like to introduce our CTO, who was a Fulbright

Scholar, and just sold his last company for $20 billion”


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Do’s and Don’ts continued...

Don’t overlook “pre-meeting” and “post-meeting” interactions and socialization.

Don’t leave just because you’re at the end of the presentation.

Don’t try a demo or require special A/V Be prepared for A/V problems, bungling

something you’re trying to say, or a hostile or a dead audience.

Rehearse with friends.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

tDon’t Waste the Time of Your

Audience...

… with dumb mission statements, lectures about how we’re evolving into an information-based society, or a venting of your aspirations to contribute to humanity.

Get into it right away: first 2 minutes are key.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Show Excitement but Not Hype Remember the advice to make no

unsubstantiated claims, even about silly stuff.

Start with conservative statements (you are building trust and believability).

Show realistic expectations, while dangling the possibility of a grand slam win.

Show ability to plan for contingencies.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

The PowerPoint PitchThree sections:1. First 2 or 3 slides: executive summary, key points2. 10-15 more slides: details and further discussion3. Possible appendix: supporting research, Q&A

Use graphics, charts, etc. to build credibility. Make them crisp and reflective of good news, but not flashy or over-produced.

Cite believable sources. Use light text on dark background for presentation, negative

for hand-outs. Don’t hand it out before you begin, don’t send it in advance.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

The First Two or Three Slides

Looks like your Executive Summary This is why we’re a compelling team, why

my/our background and expertise is relevant Here’s the market we are going after, and this

is why it’s a great market Here are the resources we have (people,

technology, head-start) These are the resources we will need ($) and

how and when we’ll spend them, and when they produce results

We’re building a company, not just a product (“category leader”)

use some subset of the above; brevity/simplicity


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

After the First Slides

a few tried-and-true stunts...


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Clunky Legacy stuff

competitor 1competitor 2

Simple translator boxes

competitor 3competitor 4competitor 5

True next generation enterprise-class multi-scaling ultra-cool stuff

us!

1. “Box ‘em in”: (put everybody else in a bland category, you’re a new exciting category):

“Food salting and preserving”

“Water-bound manual ice solutions”

“Constant-Temp™ Refrigeration”


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t“Box ‘em in” example: everybody else in a

has-been box, you’re the next wave

StorageHostingBroadcastCachingStreaming

Content

EGENERA

Transactions

RoutersModemsBroadbandOptical Networks

Bandwidth

The Internet Infrastructure Build-Out


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Brokentechnology

Good technology

Point product Comprehensivesolution

competitor 2

competitor 3

competitor 1

You!

IBM

2. The Upper Right Quadrant

competitor 4


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Egenera

Sun

IBM

Windows

Other Linux

manageabilityprice/performeasy upgrade

service

proc. densityhot-pluggable

packaging

open3. The Features Checklist


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

4. The Pyramid

Ice shipments today

$20b

World ice market $80b

Available untapped market

$7 trillion All refrigeration and air conditioning applications


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Get Into Tactics...

Right away. Show predilection for action.

Show list of prospects, or early adopters.

Show familiarity with the market. Described protected technology “secret

sauce”, discuss patents/barriers(defensible,sustainable)


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Have Detailed Finances Show Business Model

SalesCost of Goods SoldCost of SaleG&AR&Dnet

Cite comparables with other industries


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Show a Schedule

Technology milestones you’ve already reached, and those you’ll need to hit (show awareness of an action plan and schedule);. Risks. Dependencies (good and bad); Insourcing/outsourcing.Good if you have a track record of delivering

complex projects on time and on budget


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Show Capitalization Plan Raise money one year at a time Calculate monthly burn rates, major capital

equipment, milestones. Example:Round One: $950,000,Burn rate: $80,000 per month for

10 months, finish the product and launch first beta testsRound Two: Product proven, x beta customers

converted, raise $5m to finance the roll-out, sales will kick in during month x, run-rate will be x

Round Three (IPO?): Sales will be at $x, having grown x% over the past x quarters, forward year projected sales of x. Company will sell 20% at a market cap of ...


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Assume Some Negotiation Don’t get hung up in this first meeting

on terms. Appear easy to do business with; but

not pushovers. Don’t ask for too much “advice”; show

that you know what you are doing…. and why you are doing it.

Keep certain things quiet… for now.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

NDA’s Good VC’s won’t sign them. Be careful what you reveal. Ask the VC’s where are they

conflicted... or might be conflicted.

Let the VC present his company. Ask for references of companies he has worked with.


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Ask to see...

The VC’s track record… how many funds… which investments… how many winners….

Who are the limiteds (the source of VC’s $) How many did this particular partner

originate…sit on the board of…. Which partner/associate will devote time? What does the VC bring besides money…

what other relationships...


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Ways a VC Might Say “Maybe”

“Show this to my friend at [xyz fund] so we can co-invest”

Go fetch: “come back when you have [xyz]”(but don’t confuse this with legitimate “due diligence”, which any interested VC will need to do)


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

15.390A – New Enterprises

The VC Pitch

Chuck [email protected]

(781) 676-6701


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Personal Entrepreneurial Index

Texas Instruments,

1977

Lotus, 1983

Beyond, 1989

MathSoft, 1994

Applied Messaging,

2002

1

2

3

4

5


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Credentials

Beyond Inc. $3.0m 1st round in 1990 (Matrix, Merrill Pickard) 3 rounds in total for $14m (NEA, Atlas, Trinity, Greylock,

Highland, Novell, Banyan) FreeScholarships.com Inc.

Subsidiary of MathSoft Inc. Failed to raise venture capital in mid-2000

Applied Messaging Corporation $7.4m 1st round in 2002 (North Bridge, Polaris) Now raising $10m Series B


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Personal Considerations

Take enough time off before you jump Rally your supporters early and often Think really hard about your founding

partners Plan to spend several years longer than

you would ideally prefer Forget about building the next Microsoft


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Product Planning

Do something difficultDon’t bother with quick, “test the waters”

productsShould take at least 15 months from first

engineersMust have patentable IP

Spend time with customers early in development


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Team Building

Don’t be pennywiseFill out the executive team early enoughHire only “A” players

Hire at least one sounding board executive

Be very selectiveCheck multiple referencesUse your VC’s heavily


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Applied Messaging Case Study

Began working on ideas in late Oct ‘01Short pitch to NBVP in early DecemberFull NBVP partnership in early JanuaryTerm sheet a week later

Found a co-lead by April ‘02Spoke with only 5 firmsClosed 1st round on June 4


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

The Pitch Content

Customer painLarge, growth market 2 to 4 years outTechnology-based differentiationDemonstrate fiscal restraint

TipsPreview with your championBrevityBring your partner(s) and let them talkCheck your ego at the door


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

1st Round VC Pitch Outline (1)1. Applied Messaging2. Company Overview3. Instant Messaging Explosion4. IM Industry Roadmap5. Problem Statement6. System Overview7. Directory Services8. Conversation Switch9. Communications Topology10.Conversation Templates


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

1st Round VC Pitch Outline (2)11.Target Customer Attributes12.Application Sweet Spot13.Product and Market Roadmap14.Market Entry Strategy15.Revenue Model16.Competitive Landscape17.Partner Targets18.Financials19.1st Round Coverage20.5 Year Summary ($000)21.Summary

IM Industry Roadmap

Consumer IM infiltration

Early adopter IT acceptance; build-out infrastructure

2001

2002

2003

2004

2005

.NET deployment; app servers

Consumer IM client

Fragmented corporate IM client offerings

First real applications appear; ISV integration

Client consolidation; major new app vendors emerge

20M

Corporate users

300M

Problem Statement

1. Most corporate knowledge is in peoples’ heads

2. Many time-critical issues are best resolved in groups

But it’s difficult to get what you want when you want it

But it’s just too hard to get people together in a timely fashion

Need: System to connect with the relevant people in real time, regardless of where they may be

Application Sweet SpotEx

pert

Sel

ectiv

ity*

Corporate Crises

HR Information

Premium Support

Channel Support

Client PortalPartner Relations

Corporate Memory

Ad hoc

Product Design

Supply Chain MgmtEvent Planning

Time Sensitivity

Investor Relations

Customer ServiceTech Support

Sales Force Support

*Level of specialization; group input rqmt

Market Entry Strategy

Get close to the money, enhance revenue

High ROI and short term payback Sales force productivity Customer satisfaction

Core product components1. Sales lifeline2. Client portal3. Sales situation room


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

What Happens After 1st Nod?

Evolve the conceptListen to your VC championSharpen and narrow the initial conceptTalk to lots of people, customersDemonstrate your ongoing creativity,

strategic insights and flexibility Meet the specified conditions Don’t spend any money


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

1st Round Observations

Only extraordinary VC’s will fund 2 guys and 21 PowerPoint slides

Most want a team, a prototype and early customers with whom to speak

Take your time choosing a CTO A well-placed “mole” can tip the deal Sleep on your final term sheet; the sun

will rise the next day


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

2nd Round VC Pitch Outline (1)1. Business Plan Summary2. Company Overview3. Market Growth Drivers4. Management Team5. Global Problem Statements6. Applied Messaging’s Unique Value7. Application Sweet Spots8. Web Conferencing Segmentation9. MeetASAP™10.Real Time Convocation


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

2nd Round VC Pitch Outline (2)11.Competitive Barriers to Entry12.Sales and Marketing13.MeetASAP Offerings14.High ROI Solutions15.Sources of Customer ROI16.Active Customer Pipeline17.Target Global Partnerships18.Revenue Mix19.Financial Plan20.Strategic Plan21.Summary

Market Growth DriversInstant Messaging Users Web Conferencing Revenue

$0

$500

$1,000

$1,500

$2,000

$2,500

2002 2003 2004 2005 2006 2007 20080

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2000 20001 2002 2003 2004 2005

Corporate Consumer

High ROI Solutions Sales Management

Sales force help deskAccount management sales tool

Professional ServicesExpertise networksEngagement and project management

Line ManagementManagers’ communication centerCrisis management


15.3

90 N

ew E

nter

pris

es, A

nder

son/

Zolo

t

Conclusions Don’t settle for 2nd best

Deep pockets Well networked Rich experience

Raise enough money in the first round Complete development First paying customers

Don’t raise too much more than you need Liquidation preferences may significantly reduce returns However, you do need some “rainy day” money

Minimize number of VC’s on your Board

15.390 Class #5

Documents

Transcript of 15.390 Class #5