Sw seres

Business model. Product posi2oning. Compe22ve review. Silvija Seres

A few words about me

IT studies: BSc and MSc in Informa8cs, University of Oslo

Academic research: PhD in Maths, Oxford University, Fellow Magdalen College

Teaching: Prof in Saudi Arabia, Advisor in China

SoFware Development: DEC SRC in Silicon Valley, Alta Vista

Business studies: MBA at INSEAD

Management: Fast Search 6 Transfer, MicrosoF

Business Development: Boards and investments GeoKnowledge, Camo, Sonitor

Board Work: StatkraF, Norsk Tipping, Aschehoug, Making Waves, Norman

[email protected]

www.silvija.net

Business plan

Is just an aRrac8ve presenta8on of a business idea.

General advice:

Be clear

Be focused

Be short

Be convincing

Make the few points that count

RESONATE!

Business plan

Eleven should-‐have slides:

1.   Cover – Business posi8oning statement

2.   Market – The need and what customers have it

3.   Solu8on – Product, core benefit, protectable technology(ies) 4.   Compe88ve Posi8on – Who they are and your defenses

5.   Marke8ng / Sales / Support – Channels and skills needed

6.   Business Strategy – How you plan to grow beyond launch 7.   Financial Projec8ons The usual spreadsheets

8.   Funding Sought – Amount , comparables, use of funds

9.   Management – relevant experience

10.  Milestones – e.g.: product launch, next funding, breakeven

11.  Exit Strategy – IPO / acquisi8on (who?)

Tech Coast Angel’s Guidelines

Don’t read the slides, verba.m… instead, speak to the key facts

and conclusions you want them to take from each slide.

The first slide should posi2on the company so Jury members have a framework for listening… 1.  Company name (and graphics, if appropriate) 2.  One-‐sentence “what we do” statement (posi.oning or elevator pitch) 3.  Presenter’s names

1 – Business posi8oning statement

Describe the need and the size of the market •  List the drivers for the demand for your

solu2on (the benefit customers pay for) •  Define the characteris2cs of the companies

or consumers that need a solu2on •  Quan2fy the opportunity… number of

prospects that have the need •  Explain how the market is growing and why Iden2fy the most important 2 – 3 segments of the market, and for each… •  Es2mated market size (customers &

poten2al sales) •  What dis2nguishes the key segments from

the broad market and each other •  How urgently customers need or want the

solu2on – the value-‐proposi2on

2 – Market… The Need And The Customers

Common Ques2ons… •  What specific problem or need do customers have?

•  Why is the problem important? For whom? That is, who, specifically is the customer?

•  How do we know the market exists?

•  What independent evidence can you cite, such as independent market research?

•  How large is the specific (narrowly defined) market for your product?

•  What growth is expected in this market?

•  Are the market size es2mates realis2c?

1.  Clearly explain your product(s)… what it is that customers will be buying.

2.  Explain where your product fits within the whole solu2on to the customer’s need, as customers see it. For example: Services, technologies or pla^orms (“enablers”) required to make your product effec2ve. System, behavior or procedure conversions required to realize the key benefits

3.  Iden2fy your product’s value-‐added (what por2on of the whole solu2on you provide)… and whether customers will see your product as being the main component of the solu2on

4.  Describe the benefits delivered, jus2fying the cost of the whole solu2on vs. the expected benefits.

3 – Solu8on…Your Product or Service Common Ques2ons… •  How else can the customer solve the problem your products solve?

•  What are the alterna2ves?

•  How does your product compare to each?

•  Why is it beder? •  In what ways is it worse? •  Who are the vendors of these other solu2ons?

•  How do they compete with each other?

•  Where will you fit into the industry? •  Why will you be able to compete effec2vely against them for the next ten years?

•  Why are you confident that no new entrant will come along with a beder solu2on and blow you away?

•  Why do you think you can dominate your market niche?

Address three barriers to adop2on: 1.  Big Dogs – What are huge, well-‐known

companies that have exis2ng products and well-‐established rela2onships with your target customers doing? How will they react to your ini2a2ves?

2.  Iner2a – What will it take to get customers to change what they are using / doing today?

3.  Innovators – What companies might leapfrog your solu2on with equal or beder solu2ons?

Explain how you propose to win against the best of these. In par2cular, describe your strongest barriers to compe22on… i.e.: if you are successful, how you plan to block beder-‐known or beder-‐funded compe2tors from moving in and taking over

4 – Comp Posi8on… Compe8tors & Barriers

Common Ques2ons…

•  How else can the customer solve the problem your products solve?

•  What are the alterna2ves?

•  How does your product compare to each?

•  Why is it beder?

•  In what ways is it worse?

•  Who are the vendors of these other solu2ons?

•  How do they compete with each other?

•  Where will you fit into the industry?

•  Why will you be able to compete effec2vely against them for the next ten years?

•  Why are you confident that no new entrant will come along with a beder solu2on and blow you away?

•  Why do you think you can dominate your market niche?

Briefly explain the expected selling cycle Describe how you propose to reach your targeted customers – focusing on the ini2al segments •  Marke2ng – To raise customers’ awareness of

your product and s2mulate their interest in buying

•  Sales – To give buyers (buying decision-‐makers) a convenient way to find out the details and place an order

•  Support – To help customers understand your product before buying, during installa2on and in use

If you rely on indirect channels, explain: •  Your approach to reaching them •  Whose responsibility it is to raise awareness and

generate demand among end-‐customers •  Who provides pre-‐ and post-‐sales support Describe special sales incen2ve programs (if any)

5 – Marke8ng / Sales / Support

Common Ques2ons…

•  What channels of distribu2on will you use to deliver your products to your customers?

•  How will these channels be established? By whom? When?

•  What exper2se does your company have to execute the marke2ng / sales program?

•  How are you going to stand out among all the established compe2tors?

•  How can you boil down the advantages of your sophis2cated technology so prospects will understand it, quickly and easily?

Describe the 3-‐5 year goal of the business Iden2fy the several most important steps you reaching that goal •  Specifically say what you need to do to achieve posi2ve cash flow and how long it will take to get there

•  Iden2fy specific steps to IPO or acquisi2on readiness

•  Place the key steps and milestones on a Gand chart

Explain the development status… how much work remains before it achieves full func2onality? •  Show your intended schedule for major product development on a 2me-‐line (Gand chart) covering the next 18 – 24 months

•  Iden2fy major development risks or challenges •  Provide es2mated levels of effort &/or costs for each product

•  Summarize future products’ fit with market need

6 – Business Strategy… Growth Past Launch

Common Ques2ons…

•  What is the business model? (i.e. what will produce the company’s revenue?

•  Do you have (or plan) any corporate partnerships in place?

•  What are the significant risks your business faces?

•  What needs to be done to finish your first product(s)? What’s your next act?

•  Do you rely on outside contractors? How much do you license from others?

•  What exper2se do you have at developing this kind of product?

•  What development challenges are most important or difficult to overcome? How do you intend to do so?

Provide a P&L similar to this: Be prepared to explain “drama2c” numbers, such as: •  “Instant” market penetra2on & dispersion •  “Hockey s2ck” growth •  Unprecedented margins •  Long periods of nega2ve cashflow

(“goodness” is posi2ve cashflow in 6 – 12 months)

7 – Financial Projec8ons

Common Ques2ons…

• What kind of revenues can the business produce, on an annual basis, over the next five years?

• Profits?

• What investment is required to carry the company to the next major level of valua2on?

• When do you expect the next rounds to take place?

• What specific tasks need to be accomplished to do that?

• How long will it take? (Try to iden2fy a “next level” that can be achieved in less than 18 months.)

• What investment will be required beyond that?

• To the extent possible, explain key assump2ons behind your forecast. And make sure the forecast relates in a logical way to the market forecasts you described previously.

Last 12 Mo. This Year Mo. 13-24 Mo. 25-36 Mo. 37-48New CustomersUnits Shipped

RevenuesGross ProfitGross Margin %SG&AEBITDACashflowCum. Cashflow

Financial Projections ($000s)

8 – Funding… Amount , Valua8ons, Use

Provide a capitaliza2on table similar to this: Iden2fy the major uses of funds for each round prior to IPO or acquisi2on… this round, prior rounds and next round(s) Describe the size and composi2on of your current “burn-‐rate” The “sweet spot” for inves2ng? E.g. a pre-‐money valua2on of $1.5M -‐ $3.0M. Expect tough ques2oning in propor2on to any valua2on higher than this range

Pre-Money Post-Money Round 1 Round 2 Round 3Valuation Raise Valuation Total Founders Investors Investors Investors IPO

Round 1 1,191,892$ 700,000$ 1,891,892$ 100% 63% 37%1,191,892$ 700,000$

Round 2 4,000,000$ 2,500,000$ 6,500,000$ 100% 39% 23% 38%2,520,000$ 1,480,000$ 2,500,000$

Round 3 12,000,000$ 7,000,000$ 19,000,000$ 100% 24% 14% 24% 37%4,652,308$ 2,732,308$ 4,615,385$ 7,000,000$

IPO 45,000,000$ 15,000,000$ 60,000,000$ 100% 18% 11% 18% 28% 25%11,018,623$ 6,471,255$ 10,931,174$ 16,578,947$ 15,000,000$

Common Ques2ons…

• How much hard-‐money (cash) have the founders put in?

• How much cash have Directors and Advisory Board members invested?

• What equity is available to recruit key execu2ves?

• How did you arrive at your pre-‐money valua2on for this round?

• What comparables are you using for your proposed IPO/exit round?

Focus on the management team, in par2cular: •  CEO – Prior entrepreneurial experience in

similar businesses •  CTO – Proven know-‐how in your core

technologies •  CMO – Proven knowledge of the target

markets; strong rela2onships with channel partners &/or key industrial customers

•  CFO – Prior IPO or acquisi2on experience Iden2fy who is full-‐2me and who is part-‐2me or on the sidelines awai2ng funding… Iden2fy BOD and BOA members, highligh2ng any strategic members’ value-‐added

9 – Management Qualifica8ons…

Common Ques2ons…

• What is your background and previous experience?

•  Where did the idea for the company come from?

• Who is presently involved in managing the company?

• What are their creden2als?

• Why will they be able to build a successful company?

• If not all management spots are filled, what is the plan for filling them?

• What kind of people are we seeking? To fill what roles?

• If you do not expect to be the CEO that builds the business to $10 or 20 million, what kind of person would you bring in? When?

• Who is on your board of directors?

• How does the board func2on?

Speak to a milestone chart similar to this:

10 – Milestones… Business And Financial

Common Ques2ons…

• What is your track record at hisng schedules on similar efforts?

• Are you fully-‐staffed for the work indicated in the schedule?

• How are you going to get your partners to meet your schedule?

• What makes you think you can achieve this schedule when “X” failed?

• What con2ngencies have you built into the schedule? The budget?

1.  Company formed

2.  $250K seed round

3.  Product prototype

4.  Field tests

5.  $2M angel round

6.  1st produc2on ship

7.  Posi2ve cashflow

8.  $7M VC round

9.  $75M annualized revenue

10. IPO/Acquisi2on

2002 2003 2004 2005

If shoo2ng for an IPO… •  Cite recent examples of successful

comparable offerings, their offering valua2on and their current market cap

•  Explain why you believe the opportunity will remain when your company is “ready”

If you an2cipate being acquired… •  Iden2fy the two or three most likely buyers •  Explain why they would be interested •  If possible, describe recent acquisi2ons of

comparable companies and the deal value Describe any rela2onships you already have with poten2al acquirers, investment banks or VCs that might facilitate your liquidity plans

11 – Exit Strategy… Liquidity, When & How

Common Ques2ons…

• Why won’t one of your established compe2tors step in and leapfrog you?

• How long do you think you can maintain your lead, thus preserving your company’s value?

• Why would this be an exci2ng business opportunity for an acquirer?

• Why would it an exci2ng IPO opportunity?

• What are the three most serious risks the company faces?

• NOTE: If you aren’t sure how to value the company in the future, use 1 x annual sales in Year-‐2 and 15 or 20 x net profits in Year-‐3 as reasonable es2mates.

Purpose Vision Values

Tools: VISION

FOCUS!

. 1.  "What do we do?" 2.  "For whom do we do it?" 3.  "How do we excel?

Tools: SWOT

Strengths Weaknesses

Opportuni2es Threats

Tools: BCG Matrix

Market growth

Rela2ve market share

Ques2on marks

Dogs Cash cows

Stars

Tools: Red ocean, blue ocean

Tools: Technology adop8on and the chasm

Roles: 1.  The plant 2.  Resource inves2gator 3.  Co-‐ordinator 4.  Shaper 5.  Monitor 6.  Team worker 7.  Implementor 8.  Completer 9.  Specialist

Tools: Team Which are you?

Ac2on oriented

Communica2on oriented Knowledge oriented

3 loops: 1.  Draz plan 2.  Refine plan 3.  Op2mize plan

In each loop: 1.  Gather ideas 2.  Consolidate into a concept 3.  Implement

Tools: Op8miza8on

Tools: More thoughts

Culture eats strategy for breakfast

Speed is no replacement for direc2on.

PASSION eats strategy for breakfast!

Do what you know and care about!

Do not compromise on people.

Acknowledge and appreciate risk takers.

Prima donnas are OK. Nega2ves are not.

Tools: Business Model Genera8on

Tools: Compe88ve Differen8a8on

Being different from compe8tors isn’t enough. Make sure that your key differen2ators actually maEer to customers.

Pick any differen2a2on you want – pricing, features,

target market, market gap, performance, etc. – unless

customers really, really, really care about the difference, it

does not mader!

Tools: Compe88ve Differen8a8on

The compe22on i any alterna2ve that meets the same need. Percep2on is fact. Know the “primary value proposi2on” in your value chain.

Tools: Porters five forces

Tools: Value chain analysis

1.   Ac8vity Analysis, where you iden2fy the ac2vi2es that contribute to the delivery of your product or service.

2.   Value Analysis, where you iden2fy the things that your customers value in the way you conduct each ac2vity, and then work out the changes that are needed.

3.   Evalua8on and Planning, where you decide what changes to make and plan how you will make them.

Relevance: Firstly, the competence must give your customer something that strongly influences him or her to choose your product or service. If it does not, then it has no effect on your compe22ve posi2on and is not a core competence. Difficulty of Imita8on: Secondly, the core competence should be difficult to imitate. This allows you to provide products that are beder than those of your compe22on. And because you're con2nually working to improve these skills, means that you can sustain its compe22ve posi2on. Breadth of Applica8on: Thirdly, it should be something that opens up a good number of poten2al markets. If it only opens up a few small, niche markets, then success in these markets will not be enough to sustain significant growth.

Tools: Core Competence Analysis

Divide the tasks Agree on the leadership Agree on the overall vision

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5 minute working session for your table:

Sw seres

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