marketing to investors 2~17~16 - gw new venture …€¢ • • • • • •
TRANSCRIPT
MarketingYourBusinesstoInvestors
CanYouManageMoney?
StevenRogers,[email protected]
2/14/16 1CopyrightRedstones LLC
AlwaysRemember
• Thisismyperspectiveoffindingmoneybasedonmyexperience
• Therearenorulesandlotsofexceptions• Seekotheropinions• Thereisnosecretpathtosuccess– Hardwork– Consumesallyourresources– Verylowchanceofsuccess– Followeverypieceofstring
• Expecttheunexpected
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PrepareABusinessPlan• AbusinessplanisadocumentthatexplainstoSOMEONE thereasonWHY yourbusinessshouldexist
• ThinkcarefullyabouttheWHY first– Makemoney?– Solveworldhunger?
• ThenidentifytheSOMEONE andwhatyouwantfromthem– Anequityinvestment(AngelsandVCs)– Aphilanthropicinvestment(foundations)
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TheSOMEONEincludesYOU
WhatDoesTheSOMEONEWantToKnow?
• Thisisnotaboutyourbettermousetrap• Thisisnotagrantoraloan• ThisisaboutthecompellingWHY• Thisisaboutyourteamsabilitytorunabusiness• Canyoutakeinput?• Canyoupivot?• Thisisaboutyourassumptions• Theywillassessyourbusinessability• Otherswillassessyourinnovation
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InvestorsPriorities• TheTeam– Businessexperience– Domainexperience
• Theidea– Theircomfortzone
• Anewandgrowingmarketthatwillbebig– TheirROI
• Barriers toentry– Protectingtheirinvestment
• Potentialexit– TheirROI
2/14/16 5CopyrightRedstones LLCCantheteamdeliverthebusinessmodel?
KeyTeamAbilities• CEO– Anexperiencedleader– Responsibleforvisionandstrategy– Chieffundraiser
• COO– Managesresources(cash,people,commitments)– Dailytacticaldecisions(many)
• Founders– Createdtheoriginalidea– Theyarethesourceofthepassion
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Veryraretofindalltheseattributesinoneperson
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QuoteFromGrotech“AtGrotech,weseekoutcompaniesthathavethepotentialtomakeamassiveimpact,"saidFredrick."ThefoundersofWhiteOpsarewellknownfortheconsiderablepositiveeffectthey'vehad-- andcontinuetohave-- onthesecurityindustry.Inaveryshorttime,they'vedevelopedthe'Go-To'solutionforadindustryplayerstocombatfraud,whilebecominganauthoritativevoiceandanintegralresourceforsettingdirectionintheadvertising industryasawhole.Thiscombinationofinfluenceandinnovationenablesthecompanytofundamentallychangethegameinonlinefraud.”
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Pro-FormaIncomeStatement• ItisthecoreofyourBusinessPlan• Capturesyourbusinessmodel• Whatareyougoingtodowiththeirmoney?• Yourviewofthefuture• Assumptions• Embodiesyourstrategy• Revealsyourteam’sthinkingandabilities
Itisastrategic lookatthefuturenotafinancialstatement
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Yourpro-forma incomestatementshouldanswertheequityinvestor’squestion………
“Whatwillyoudowithmymoneyandhowwillitmakemerich?”
Orthedonor’squestion…......“Willthissocialventurebefinancially
sustainable?”
Ifitdoesn’t, itisabigredflag2/14/16 CopyrightRedstones LLC 9
TheSOMEONEHasExpectations
HowToBuildaPro-Forma• Startwiththeproduct/servicedevelopmenttimeline
• Whenwillbetaproductbeready?• Release1featuresandprice(minimumviableproduct)
• Release2featuresandprice,etc.• Numberofdevelopersandexpense• Whentobeginmarketingproduct?• Whentoaddsalesresources• Howmuchsalesexpensetocreaterevenues?
Itmustalllinktogether2/14/16 10CopyrightRedstones LLC
Pro-FormaIncomeStatement
• Thisisaforecast• Itillustratesyourplans• Itisbasedonyourbestassumptions• Itisatestofconsistency• Itisnotmeanttomeetaccountingrules
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Pro-FormaPlusCash
AdditionallinesconveyimportantinformationaboutCASH2/14/16 12CopyrightRedstones LLC
Sales• Mostimportantline,nosales,nobusiness• Salesofproductsand/orservices,donorrevenue• Licenseincome,royalties• Grants,investmentsetc.arenotsales• Notopdownnumbers(e.g.%marketsharegoals)• Explainbottomupassumptions– Whowillbuyitandwhy?– What/whoareyoucompetingwith?– Howwillyougetfirstsale?
• Betacustomers,referenceaccounts– Howwillyougrowannually?
• Howdidyousetyourprice?AreSalesConsistentWithProduct/FeatureAvailabilityandPrice?
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CostofSales
• Coststomanufacture, deliver,installetc.– s/wproductcanincludeservercosts(delivery),outsourcedbilling,licensingetc.
• Canincludewarrantyprovisions• Costofgoodsnotsoldbutobsolete/scrapped• Doyouunderstandyourcosts
Caution:Youwillhavetoincurthecostswellaheadofbeingpaidfortheproduct
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GrossMargin• $sales– $costofsales=$margin• ($margin/$sales) x100=%margin• Keymetric, theproductmarginfundsyouroperatingexpenses
• Marginschangeovertime– Competitiondrivespricedown– Premiumfeaturescanraiseprice– Costscandropduetovolume– Costscanriseifyouhaveproductreliabilityissues
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Selling,GeneralandAdmin(SG&A)
• SalariesandbenefitsofallbutR&Dteam• Tradeshows,advertising,marketingcollateral• Rent• Lap-tops, desk-tops• Phone,internet• Legalcosts• Bankcharges• Etc.
Isyourspendingonsalesandmarketing
consistentwithrevenuegrowth?
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ResearchandDevelopment(R&D)
• SalariesandbenefitsofR&Dteam• Includenon-capitalized labtools/eqpt• Includecontractwork
IsyourR&Dspendconsistentwiththenewfeaturesrequiredtostayaheadofcompetition
andsellatacompetitiveprice?
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OperatingEarnings
• $Grossmargin- $SG&A- $R&D=OperatingEarnings• OperatingMargin%isakeymetric– OperatingMargin%=(Op’g Earnings/sales)x100
• Typicalerrors– Hugemargins– Insufficientspendingtostayaheadofmarketandcompetition
– Rapidrevenuegrowth,despitebeing“conservative”– Betterearningsthananylargecorporation
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RealityCheckApple Pfizer Facebook GM
Sales $171B $51.6B $7.9B $155BGrossMargin 37.6% 81.4% 76.2% 11.6%SG&A 6.3% 27.9% 22.6% 7.9%R&D 2.6% 13% 18% 0%Op’g Margin 28.7% 27.3% 35.6% 3.2%
• Isyourpro-formaconsistentwithsimilarbusinesses?• Compareindustry• Directsalesvs.distributorsalesvs.licensingetc.
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Source:YahooFinance2012
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CapitalSpending• Forthepurposesofthisexercisecapitalspendingismoneyspentonbuying,notrenting,assetsneededtoproducetheproduct.
• Couldbeanyequipmentormachinery thatwillbedepreciatedovertime.
• Couldalsobebuildings,vehiclesetc.ifnecessary
Caution:Capitalequipmentneedstobepurchased,delivered,installedandcommissionedbeforeyoucanmakeanything
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CashOnHand
• Youwillalwaysneedsomecashonhand– Payroll– Rawmaterials
• Suppliersdon’tgivestart-upscredit• IfOperatingEarnings+CapitalSpendisnegativeyouneedinvestmentmoney.
• Totalinvestmentrequiredbeforethebusinessisselfsupportingisanimportantmetricforyourinvestors.
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InvestmentRequired• Lookslike$6Minvestment required– Forthepurposesofthisexercisethereisnosuchthingasnegativecash
• Domonthlyanalysis tomakesure• Atleast$2Mneededforfirstyear• Askfor18monthsto2yearsrunway• Trytworaisesof$3Meach– Couldgofor$6Mintwotranches
• Aslowerstartmightattract angelseedmoney
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Pro-FormaResultIfyouhaveputalltheinitialeffortintoawellthoughtoutpro-forma thenwritingabusinessplanofanysizeoraPowerPointofanylengthwillbeeasy.
FollowthebusinessplantemplateNOTthepro-formasequence.
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HaveyousatisfiedtheWHY?HaveyoudemonstratedtoSOMEONEyoucan
managecash?
Summary• Youarecompetingwithothersforthefunds• Alldealsaredifferent,therearenorules• Expecttheunexpected• Getadvicefromanyonethathasbeenthroughthis,ignorehearsay
• Network,network,network• Theprocesscanbelongandverystressful• Takeinputaftereveryencounterandadjust
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WhatwillyoudowithmymoneyandhowwillitsatisfytheWHY?
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FindingSOMEONE
• Youcanimproveyourchancesbybeingtherightpersonintherightplaceattherighttime.
• Areyoutherightperson?• Areyoueverinaplacetobediscovered?• Howmuchtimedoyoumakeavailabletobediscovered?
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WheretoLook• www.crunchbase.com• http://thomsonreuters.com/pratts-guide/• www.pitchbook.com• www.mattermark.com• www.cbinsights.com• www.massinvestor.com• www.potomactechwire.com• http://citybizlist.com• www.mava.org• https://dc.tie.org• www.meetup.com/TechBreakfast/• http://tedco.md
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