15.390 class #5
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15.390 Class #5. How to Make Presentations of Your Business Plan. Your Audience. Here we’re going to focus on an investor, But you’ll use this same pitch for: key hires/co-founders creditors/suppliers possible partner companies early customer prospects visits to Sloan once you’ve made it!. - PowerPoint PPT PresentationTRANSCRIPT
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15.390 Class #5
How to Make Presentations of Your Business Plan
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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!
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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.
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What We’re Going to Talk About
Social dynamics and “performance” techniques.
The PowerPoint presentation itself.
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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).
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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?
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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?
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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?”
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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”.
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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 $20 billion”
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Do’s and Don’ts continued...
Don’t overlook “pre-meeting” and “post-meeting” interactions and socialization.
Don’t leave just because you’re at the end of the presentation.
Don’t try a demo or require special A/V Be prepared for A/V problems, bungling
something you’re trying to say, or a hostile or a dead audience.
Rehearse with friends.
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tDon’t Waste the Time of Your
Audience...
… with dumb mission statements, lectures about how we’re evolving into an information-based society, or a venting of your aspirations to contribute to humanity.
Get into it right away: first 2 minutes are key.
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Show Excitement but Not Hype Remember the advice to make no
unsubstantiated claims, even about silly stuff.
Start with conservative statements (you are building trust and believability).
Show realistic expectations, while dangling the possibility of a grand slam win.
Show ability to plan for contingencies.
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The PowerPoint PitchThree sections:1. First 2 or 3 slides: executive summary, key points2. 10-15 more slides: details and further discussion3. Possible appendix: supporting research, Q&A
Use graphics, charts, etc. to build credibility. Make them crisp and reflective of good news, but not flashy or over-produced.
Cite believable sources. Use light text on dark background for presentation, negative
for hand-outs. Don’t hand it out before you begin, don’t send it in advance.
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The First Two or Three Slides
Looks like your Executive Summary This is why we’re a compelling team, why
my/our background and expertise is relevant Here’s the market we are going after, and this
is why it’s a great market Here are the resources we have (people,
technology, head-start) These are the resources we will need ($) 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
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After the First Slides
a few tried-and-true stunts...
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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”
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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
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Brokentechnology
Good technology
Point product Comprehensivesolution
competitor 2
competitor 3
competitor 1
You!
IBM
2. The Upper Right Quadrant
competitor 4
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Egenera
Sun
IBM
Windows
Other Linux
manageabilityprice/performeasy upgrade
service
proc. densityhot-pluggable
packaging
open3. The Features Checklist
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4. The Pyramid
Ice shipments today
$20b
World ice market $80b
Available untapped market
$7 trillion All refrigeration and air conditioning applications
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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)
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Have Detailed Finances Show Business Model
SalesCost of Goods SoldCost of SaleG&AR&Dnet
Cite comparables with other industries
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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
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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 ...
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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.
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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.
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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...
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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)
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15.390A – New Enterprises
The VC Pitch
Chuck [email protected]
(781) 676-6701
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Personal Entrepreneurial Index
Texas Instruments,
1977
Lotus, 1983
Beyond, 1989
MathSoft, 1994
Applied Messaging,
2002
1
2
3
4
5
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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