altaf khan university of management & technology raising for developing it products venture...

Altaf KhanAltaf KhanUniversity of Management & TechnologyUniversity of Management & Technology

raisingraising

for developing for developing IT productsIT productsventure capitalventure capital

?Would you Would you persuade,persuade,

speak of speak of interest,interest,not of not of reasonreason..

Benjamin Franklin.Benjamin Franklin.

AssumptionsAssumptions1.1. Software Software productproduct or or

Internet-based businessInternet-based business

2.2. Pre-seed, seed, or start-Pre-seed, seed, or start-up stageup stage

Sources Sources of Capitalof Capital

• Own fundsOwn funds• Friends and familyFriends and family• Angel investorsAngel investors

– LocalLocal– OverseasOverseas

• Venture capital companiesVenture capital companies• BanksBanks• OtherOther

– PSEB ???PSEB ???– International organizationsInternational organizations

GICTGICT (IFC - World Bank)(IFC - World Bank)Global Information & Communication Technology DeptGlobal Information & Communication Technology Dept

• Stage-independent investmentsStage-independent investments

• Typical investment $2-10MTypical investment $2-10M

• Value-added services:Value-added services:

– Participation on boards of directorsParticipation on boards of directors

– Co-investorsCo-investors

– Introductions to strategic partnersIntroductions to strategic partners

– Follow-on financingsFollow-on financings

• Business plans can be submitted onlineBusiness plans can be submitted online

GICT Investment ExamplesGICT Investment Examples• Provide IT services to developing countries, such as Provide IT services to developing countries, such as

locally based systems integrators and SW developers locally based systems integrators and SW developers

• Deliver SW solutions or new technologies from a base Deliver SW solutions or new technologies from a base in the emerging marketsin the emerging markets

• Deliver ITES, such as offshore SW development and Deliver ITES, such as offshore SW development and BPO, to global markets from emerging markets BPO, to global markets from emerging markets

• Provide solutions for e-governance applicationsProvide solutions for e-governance applications

• Design and manufacture IT components & productsDesign and manufacture IT components & products

to get what you to get what you want, you have to want, you have to

knowknow what the what the investor wantsinvestor wants

The investor wants …The investor wants …

… … to to assistassist the entrepreneurs the entrepreneurs

in transforming their great ideas in transforming their great ideas

into world-class businesses …into world-class businesses …

So that the investor …So that the investor …

… … can make lots of moneycan make lots of money

Chances of making lots of money increase Chances of making lots of money increase if the proposed business is based on …if the proposed business is based on …

• An innovative ideaAn innovative idea

• Unbounded target marketUnbounded target market

• Entry barriersEntry barriers

• A reasonable execution strategyA reasonable execution strategy

• A persistent, energetic, smart teamA persistent, energetic, smart team

Moreover, the investor also requires …Moreover, the investor also requires …

an an exit exit strategystrategy

Exit StrategyExit Strategy

• IPOIPO

• Merger/AcquisitionMerger/Acquisition

to get the investment, to get the investment, you have to you have to outline a outline a reasonable scenarioreasonable scenario in in which the investor ends which the investor ends up making a lot of moneyup making a lot of money

Write a Business PlanWrite a Business Plan

One

Pag

e B

usin

ess

Pla

nO

ne P

age

Bus

ines

s P

lan VisionVision

Within the next five years grow Innofy into a $47 million provider of quality assurance services that Within the next five years grow Innofy into a $47 million provider of quality assurance services that cover the complete life-cycle of financial and telecommunications softwarecover the complete life-cycle of financial and telecommunications software

Innofy – headquartered in Dubai – will have sales and support offices in Singapore, Washington and Innofy – headquartered in Dubai – will have sales and support offices in Singapore, Washington and London, and engineering centers in Dubai, Lahore, Karachi and IslamabadLondon, and engineering centers in Dubai, Lahore, Karachi and Islamabad

MissionMission Enable the client companies get premium rates for their services by measurably enhancing the quality of Enable the client companies get premium rates for their services by measurably enhancing the quality of

he software they develophe software they develop Cultural Mission: Cultural Mission: Speed through innovation; CraftsmanshipSpeed through innovation; Craftsmanship

ObjectivesObjectives Grow revenue-per-SQA-engineer from $30k to $36k to $47k to $56k to $62k during the first five yearsGrow revenue-per-SQA-engineer from $30k to $36k to $47k to $56k to $62k during the first five years Grow the number of professionals from 50 to 130 to 262 to 513 to 800 during the first five yearsGrow the number of professionals from 50 to 130 to 262 to 513 to 800 during the first five years Grow revenue from $0.63M to $3.9M to $11M to $26M to $47M during the first five yearsGrow revenue from $0.63M to $3.9M to $11M to $26M to $47M during the first five years Achieve profits before tax of $4.0M and $13M in the fourth and fifth years, respectivelyAchieve profits before tax of $4.0M and $13M in the fourth and fifth years, respectively Raise investments amounting $1.4M, $2.1M and $1.4M during the first, second and the third yearsRaise investments amounting $1.4M, $2.1M and $1.4M during the first, second and the third years

StrategiesStrategies Sell to Asian operations of US businesses; Leverage those relationships to get work from their parentsSell to Asian operations of US businesses; Leverage those relationships to get work from their parents Focus on: i) Small-to-medium sized projects. ii) Companies in a hurry. iii) Telecom and finance sectorsFocus on: i) Small-to-medium sized projects. ii) Companies in a hurry. iii) Telecom and finance sectors Focus on Focus on verification verification assurance initially; Expand into higher value-adding assurance initially; Expand into higher value-adding validation validation assuranceassurance laterlater Attract, retain excellent individuals by ensuring their professional growth, equity sharingAttract, retain excellent individuals by ensuring their professional growth, equity sharing Hire non-computing graduates with analytical skills or domain expertiseHire non-computing graduates with analytical skills or domain expertise Leverage the under-utilized, attractively-priced HR available in PakistanLeverage the under-utilized, attractively-priced HR available in Pakistan Train, tirelessly; Ensure an expanding supply of SQA-engineers through a separate training operationTrain, tirelessly; Ensure an expanding supply of SQA-engineers through a separate training operation Give new clients the assurance of working with a world-class player through certificationsGive new clients the assurance of working with a world-class player through certifications Build an organizational culture rooted in shared-values, and keep on enhancing itBuild an organizational culture rooted in shared-values, and keep on enhancing it

PlansPlans Recruit a chief sales/marketing officer (2002)Recruit a chief sales/marketing officer (2002) Establish a temporary headquarters and the main engineering center in Lahore (2002)Establish a temporary headquarters and the main engineering center in Lahore (2002) Establish a sales & support offices in Singapore (2002) and Washington (2003)Establish a sales & support offices in Singapore (2002) and Washington (2003) Move headquarters to Dubai and establish a engineering center there (2003-4)Move headquarters to Dubai and establish a engineering center there (2003-4) Establish a sales & support office in London (2003-4)Establish a sales & support office in London (2003-4) Establish engineering centers in Islamabad (2004-5) and Karachi (2005-6)Establish engineering centers in Islamabad (2004-5) and Karachi (2005-6) Hire 90% of SQA-engineers with analytical training or domain expertise, e.g. engineering, financeHire 90% of SQA-engineers with analytical training or domain expertise, e.g. engineering, finance Focus on Focus on verification verification assurance services initially, then expand into assurance services initially, then expand into validation validation assuranceassurance in 2006in 2006 To ensue continuous improvement of training, spin it off into a separate business-unit (2003)To ensue continuous improvement of training, spin it off into a separate business-unit (2003) ISO9000 quality certification (2003); CMM-L3 (2005); CMM-L4 in (2006); CMM-L5 (2007)ISO9000 quality certification (2003); CMM-L3 (2005); CMM-L4 in (2006); CMM-L5 (2007)

oneonepagepagebusinessbusinessplanplan.com.com

Conventional Business PlanConventional Business Plan

Write the biz plan that Write the biz plan that includes:includes:

1.1. Executive summaryExecutive summary2.2. Company descriptionCompany description3.3. Product/serviceProduct/service4.4. Market analysis Market analysis 5.5. Competitive analysisCompetitive analysis6.6. Execution of biz planExecution of biz plan7.7. Management teamManagement team8.8. Capital requirementsCapital requirements9.9. Financial analysisFinancial analysis

Contents of the Biz PlanContents of the Biz Plan


1.1. Executive summaryExecutive summary2.2. Company descriptionCompany description3.3. Product/serviceProduct/service4.4. Market analysis Market analysis 5.5. Competitive analysisCompetitive analysis6.6. Execution of biz planExecution of biz plan7.7. Management teamManagement team8.8. Capital requirementsCapital requirements9.9. Financial analysis Financial analysis

A concise summary of the entire business plan




Background info about the company, including capital structure




What will the company provide its customers?

How will customers benefit from the company's product/ services compared to what they currently use/have?



1.1. Executive summaryExecutive summary2.2. Company descriptionCompany description3.3. Product/serviceProduct/service4.4. Market analysisMarket analysis 5.5. Competitive analysisCompetitive analysis6.6. Execution of biz planExecution of biz plan7.7. Management teamManagement team8.8. Capital requirementsCapital requirements9.9. Financial analysis Financial analysis

How many potential customers benefit from the company's product/ services compared to what they currently use/ have?

Growth rate?

Marketing strategy?




Who are the key competitors?

In what areas are you stronger/weaker than them?

Are there barriers to entry that can stop others enter the market?




How will the business plan be implemented?

Strategies?Timeline?Budget?Tactics?Alliances?




Who are the people in the company?

What experience, track record, expertise do they bring?




How much does the company require to implement the plan?

How does the company value itself to investors?

Expected burn-rate?




Financial projections, including cash-flow analysis

?What’s your current valuationWhat’s your current valuation

How much are you seekingHow much are you seeking

Company ValuationCompany Valuation

• An art; An art; not a sciencenot a science

• May vary drastically from one investor to May vary drastically from one investor to another; another; do shop arounddo shop around

What do investors look for in a team?What do investors look for in a team?

• Do they share a common vision, values?Do they share a common vision, values?

• Are they flexible about their roles?Are they flexible about their roles?

• Are they smart, energetic, persistent?Are they smart, energetic, persistent?

• Do they work with a sense of urgency?Do they work with a sense of urgency?

• Are they worthy of my trust?Are they worthy of my trust?

how to how to build trustbuild trust??

Be very open with the investor Be very open with the investor about the risks involved and about the risks involved and your weaknessesyour weaknesses

Try to develop strategies for Try to develop strategies for overcoming/minimizing eachovercoming/minimizing each

You are developing something that will come to market 1-5 years down the road. During that time:

• The targeted market The targeted market may disappearmay disappear

• Someone may come Someone may come up with the same up with the same product, first!product, first!

Things to look for in investorsThings to look for in investors

• Their track recordTheir track record

• Their contactsTheir contacts

• Their peopleTheir people

Mentor-InvestorsMentor-Investors

• Individual investors who bring added value Individual investors who bring added value to your venture due to their:to your venture due to their:– Inside knowledge of the target industryInside knowledge of the target industry– Industry contactsIndustry contacts

• They can:They can:– Lower your Lower your riskrisk– Reduce your Reduce your time-to-markettime-to-market

Impr

ovin

g th

e Im

prov

ing

the

Odd

sO

dds • Actively seek value-adding partners & affiliatesActively seek value-adding partners & affiliates

• Build an unfair advantageBuild an unfair advantage• Look for Look for smartsmart capital, mentor-investors capital, mentor-investors• Leverage Pakistani expatriatesLeverage Pakistani expatriates• Focus on the customerFocus on the customer• Outsource non-core tasksOutsource non-core tasks• Successful marketing is criticalSuccessful marketing is critical• Stay focused on your business objectiveStay focused on your business objective• Be flexible; change your biz plan, if requiredBe flexible; change your biz plan, if required• Create a high-energy organizational cultureCreate a high-energy organizational culture• Form a core team which is:Form a core team which is:

– HomogeneousHomogeneous in terms of the vision in terms of the vision– HeterogeneousHeterogeneous in terms of skills and experiences in terms of skills and experiences

networknetwork tirelesslytirelessly

be be business-driven,business-driven, not technology-drivennot technology-driven

investors fund investors fund people,people, not ideas not ideas!!

RewardReward excellent failures excellent failures

PunishPunish mediocre successes mediocre successes

Phil Daniels, Sydney execPhil Daniels, Sydney exec

!Would you Would you persuade,persuade,

speak of speak of interest,interest,not of not of reasonreason..

Benjamin Franklin.Benjamin Franklin.

altaf khan university of management & technology raising for developing it products venture...

Documents

stage slide

online slide

business plan slide

exit strategy slide

lot of money slide

years strategies

products venture capital

valueadded services