How to Write a Fundable Business Plan

Investing in SoftwareAnn Winblad

awinblad@humwin.com

Stanford Startup School

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Hummer Winblad Venture Partners

• First Fund Exclusively for Software Investing– Founded September 1989

• $1B Under Management– 8 investment professionals– Fund V:  $420M (raised 2001)

• All Stages, focus on early stage including seed– Usually Part of First Round of Venture Funding– Usually Lead or Co-Lead

• 98+ Investments to Date: 16 IPOs, 31 Acquisitions

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Investing: Steady State,‘Rational’ Exuberance

• 2005:

- $21.7B, 2,939 deals

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Hummer Winblad Active Investments

SUCCESS METRICS

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Software: The Real Boom is Now

New Ira of Innovation

Number of Uses

Economic Value of

Each New Use Case

Architectures

New Uses

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Challenge for Founders

Unfair Competitive

Advantage

Customer Understanding

Team

Software Economics

Product and Technology

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Starting your Software Business Plan

1. What is your IDEA?2. Who are the CUSTOMERS?3. What is the SECRET SAUCE?4. Can you attract

EXCELLENCE?5. Do the NUMBERS make

sense?

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Hooked in 15 Minutes

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1. What is the Business?

“Voltage replaces Public Key Infrastructure (PKI) with

identity based encryption”

VS.

“Voltage Secures Anytime, Anywherebusiness communications”

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2. Do YOU understand the market?

“It’s a billion dollar opportunity”

UNMET CUSTOMER NEED

+GROWTH

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2. Is the Need Real?

OR

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Market Timing

Defining the Market

OR

Jumping Hurdles Already in Place

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2. Up and to the Right?

YOUR COMPANY HERE!

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2. Product or Company?

COMPANIESDo not live only

in the PRODUCTS

Tab!

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3. Will Customers Beg?

“There is an unlimited demand for our unreleased product”

vs.

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3. What is the Secret Sauce?

- Technology / IP - Business Process - Partners - Domain Knowledge

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4. Engineering Roadmap

Can the product be built in less than one year?

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4. Can you Attract Excellence?

VP Eng. Marketing Sales

CEO

CFO President Co-CEO ViceChairmanCFO

CEO

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4. Do you Know what you Don’t Know?

?

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5. Do the #’s Reach Software Economics?

80/20Gross Margin EBITDA

Revenue - Are services a major fraction?Capitalization – Total < 15M ?COGS – Are COGS > 30% ?Sales & Marketing – Commissions and quotas in line?Engineering – Does the Eng. plan match the Op. plan?G & A – Is the G&A < 10%, is it outsourced?P & L – Q over Q growth? Revenue per employee? Model – Enterprise vs. Salesforce modelCash Flow – How long does the initial investment last?

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5. The Market Bats Last

Customers:

- They believe in your product and team- They have a budget- There is a common problem- You know how to reach them

Venture Investors will dive deep with your customers

“I only swing at strikes”- Warren Buffet

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What VC’s Bring to the Table

3 P’s: People, Partners, Process

$

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Business Plan?

“Why should I write a business plan – nobody reads them

anyways”

• Why should I write a plan? • How long should it be? • Who will read it? • Do I need an NDA? • Do I need an exec summary?

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10 Slides to Cover the Basics

1. Executive Summary (Problem + Unfair Advantage)

2. Team3. Market Analysis (Size, Position,

Competitors)4. Secret Sauce Overview/Background5. Key Assumptions6. Customers (Potential or Reference-able)7. Product Plan8. Engineering Plan9. Sales Model and Marketing Outline10. Business Model / Financials/ Cash Flow

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Ann Winbladawinblad@humwin.com

www.humwin.com415- 979-9600