1 / 59

In the early stages, market research proceeds in a step-wise manner in which the researcher follows a “funnel” approach

In the early stages, market research proceeds in<br>a step-wise manner in which the researcher<br>follows a “funnel” approach of obtaining general<br>information first, and then specific information<br>last.<br>• The resea

jasmineHOSNI
Download Presentation

In the early stages, market research proceeds in a step-wise manner in which the researcher follows a “funnel” approach

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. LAUNCHING YOUR STARTUPUnderstanding Venture Financing Jim Butterworth Idea to Market WorkshopUkraine, September 2008

  2. Launching Your Startup • Understanding Venture Financing • A Primer on Venture Capital • Financing Your Venture • Other Startup Considerations • Raising Venture Capital • The Transition from Idea to Execution • Business Planning Peace and Prosperity Through Science and Collaboration www.crdf.org

  3. My Background • 28 years in technology-related ventures in all capacities • Founder / CEO, venture capital firm • Founder / CEO, early Internet company • Corporate finance / M&A, global investment bank • Technology marketing • Programmer / engineer • Owner / inventor of 14 issued and pending patents worldwide • Education • Bachelor of Industrial and Systems Engineering,Georgia Institute of Technology • Master of Business Administration,Amos Tuck School at Dartmouth College Peace and Prosperity Through Science and Collaboration www.crdf.org

  4. Impact of U.S. Small Businesses • 25.8 million U.S. businesses • “Small” businesses represent: • 99.9% of total businesses • 50% of the private work force • 41% of high tech jobs • 75% of net new jobs • 41% of private sales • 52% of private sector output • 97% of all U.S. exporters with 29% of export value • Produce 13-14x patents per employee (and 2x likely to be among the 1% most cited) Peace and Prosperity Through Science and Collaboration www.crdf.org

  5. Impact of Venture-Backed Companies • In the U.S.: • $1.8 trillion in revenue in 2003 (9.6% of all sales) • 10.1 million jobs in 2003 (9.4% of employment) • 600,000 new net jobs from 2000-2003 • In Europe: • 1.0 million jobs in 2004 • 630,000 new net jobs created from 2000-2004 • Highest growth rates in biotech, health care and medical devices • Largest absolute growth in university spin-offs Peace and Prosperity Through Science and Collaboration www.crdf.org

  6. Impact of U.S. Universities • Established > 4,100 new companies since 1980, 2/3 of which were still operating • Executed > 30,000 active technology transfer licenses (including > 4,500 in 2003), generating > $1.3 billion in license income • Launched > 2,200 new commercial products between 1998-2003 • Performed > $30 billion of R&D in 2001 • Filed 8,000 U.S. patent applications in 2003 Peace and Prosperity Through Science and Collaboration www.crdf.org

  7. What is Venture Capital? • A cash investment made by professional, institutionally backed investors to emerging growth businesses • Generally made as cash in exchange for equity (ownership) in the investee company • Usually high risk, but with the potential for above-average returns Peace and Prosperity Through Science and Collaboration www.crdf.org

  8. U.S. Venture Capital Market Peace and Prosperity Through Science and Collaboration www.crdf.org

  9. European Venture Capital Market Peace and Prosperity Through Science and Collaboration www.crdf.org

  10. Private Professionally managed Return on investment focused May bring network, business advice, credibility, etc. Corporate Manage risk Distribution networks Product R&D Operational skills Spin-outs Academic Intellectual property Spin-outs Government Create new jobs and grow economy Offer cash, tax incentives, in-kind Stem brain-drain Angels Network, business advice, credibility, etc. Live vicariously The 3Fs Types of Venture Capital Peace and Prosperity Through Science and Collaboration www.crdf.org

  11. Venture Capital Investment Criteria • Management Team • Track record • Relevancy • Bet on the jockey, not the horse! • Concept • Solves real problem • Favorable market dynamics • Disruptive • Unfair advantages & sustainable competitive advantages • Proper capitalization Peace and Prosperity Through Science and Collaboration www.crdf.org

  12. The Venture Capital Numbers Game • Receive 1000s of business plans each year • Read 100s of plans • Meet with dozens of companies • Fund a handful • Portfolio expectations: • 60% die or go nowhere (living dead) • 30% yield 2-4x in 4-7 years • 10% (hopefully 20%) are tremendous successes (e.g., 10x, 100x, 1000x!) Peace and Prosperity Through Science and Collaboration www.crdf.org

  13. How Venture Capital Funds Work • General partners (GPs) manage the fund • Capital comes from institutional “limited partners” (LPs) • Singularly focused: ROI • GPs get an annual fee • Once LPs get investment back, GPs get a portion of the profits • LPs get the remaining profits Peace and Prosperity Through Science and Collaboration www.crdf.org

  14. Venture Capital Economics LP 3 GP 2% LP 1 LP 4 LP 2 $100 Management VC Fund IX, L.P. $10 $10 PortfolioCompany 1 PortfolioCompany 10 $10 $10 PortfolioCompany 2 PortfolioCompany 9 $10 $10 PortfolioCompany 3 PortfolioCompany 8 $10 $10 $10 $10 PortfolioCompany 4 PortfolioCompany 7 PortfolioCompany 5 PortfolioCompany 6 Peace and Prosperity Through Science and Collaboration www.crdf.org

  15. Venture Capital Economics LP 3 GP LP 1 LP 4 LP 2 $180 $20 VC Fund IX, L.P. PortfolioCompany 1 PortfolioCompany 10 $100 $35 PortfolioCompany 9 PortfolioCompany 2 PortfolioCompany 8 PortfolioCompany 3 $40 $25 PortfolioCompany 4 PortfolioCompany 7 PortfolioCompany 5 PortfolioCompany 6 Peace and Prosperity Through Science and Collaboration www.crdf.org

  16. Financing Your Venture • Not all startups require external funding • Cash flow comes ultimately and most importantly from customers, NOT from investors • Benefits of external funding • Cash • Faster growth • Staying power • Competitive positioning • Credibility • Value-add investors • Credibility • Customer/partner introductions (“Keiretsu” effect) • Management expertise Peace and Prosperity Through Science and Collaboration www.crdf.org

  17. Non-Equity Personal funds Personal debt Grants and awards Customer pre-sales Venture leasing Receivables financing Business loans In-kind contributions Joint ventures Equity Venture capital Angels The “3Fs” – Friends, Family and Fools Corporate direct investment Financing Options Equity is the most expensive form of capital! Peace and Prosperity Through Science and Collaboration www.crdf.org

  18. Major Financing Questions • How much? • When? • From where / whom? • What terms? • Security • Valuation • Control • Timing Peace and Prosperity Through Science and Collaboration www.crdf.org

  19. Raise Money from a Position of Strength • Have cash in the bank • Prepare to build your company without any outside investment (bootstrap) • Seek to secure multiple competing offers • Raise money when you can, not when you have to (Sun Tzu – “In times of war, prepare for peace”) • Have a call to action Peace and Prosperity Through Science and Collaboration www.crdf.org

  20. Seek True Value-Added Investors • Understand your business • Operating experience • Domain and/or geographic experience • Rolodex / network • Relevant portfolio • Relevant limited partners (in your space) • Deep pockets / courage to stay the course Peace and Prosperity Through Science and Collaboration www.crdf.org

  21. Fundraising Process Investor Presentations Final Documentation 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Business Plan Submissions Term Sheet Negotiations Funding Budget 4-5 months, or more Peace and Prosperity Through Science and Collaboration www.crdf.org

  22. LAUNCHING YOUR STARTUPUnderstanding Venture Financing Jim Butterworth Idea to Market WorkshopUkraine, September 2008

  23. LAUNCHING YOUR STARTUPRaising Venture Capital Jim Butterworth Idea to Market WorkshopUkraine, September 2008

  24. Launching Your Startup • Understanding Venture Financing • A Primer on Venture Capital • Financing Your Venture • Other Startup Considerations • Raising Venture Capital • The Transition from Idea to Execution • Business Planning Peace and Prosperity Through Science and Collaboration www.crdf.org

  25. Conception / Invention Seed Stage Formation / incorporation Market research Product research Early Stage Product development Team formation Infrastructure build-out Launch Growth Stage Expansion Phase Exit Post-Exit Lifecycle of a Startup Peace and Prosperity Through Science and Collaboration www.crdf.org

  26. Conception / Invention Seed Stage Formation / incorporation Market research Product research Early Stage Product development Team formation Infrastructure build-out Launch Growth Stage Expansion Phase Exit Post-Exit Lifecycle of a Startup Peace and Prosperity Through Science and Collaboration www.crdf.org

  27. Startup Fundamentals Solid foundation = best chance of funding your venture Peace and Prosperity Through Science and Collaboration www.crdf.org

  28. Pour a Solid Foundation • Market-driven concept • Talk to prospective customers • Assess market and competition • Resolve legal issues upfront • Satisfy prior employment obligations • Incorporate properly • Check intellectual property rights • Spin-out cleanly • Form a solid team • Management, board, advisors, professionals • Teamwork begets success • If possible, kick-start the business • Spin-out / acquisition • Key customer Peace and Prosperity Through Science and Collaboration www.crdf.org

  29. Be Market-Driven! • Purchase decisions are based on relationships – understand your customers • Understand and model your customers’ economic benefit: • How are they currently solving the problem? • How will their work processes change by using your product? • What is their economic benefit / ROI? • Your product / service must be better, faster and cheaper Peace and Prosperity Through Science and Collaboration www.crdf.org

  30. Protect Your Assets! Peace and Prosperity Through Science and Collaboration www.crdf.org

  31. Cash Flow is Your Life Blood! • CFIMITYM • Cash flow comes ultimately and most importantly from customers, not from investors • Profit is not cash flow • Capitalize properly Peace and Prosperity Through Science and Collaboration www.crdf.org

  32. Business Planning • “The plan is useless; it’s the planning that’s important.” • General Dwight D. Eisenhower,on the success of his D-Day invasion plan • The process of uncovering and identifying what creates and drives value in your business, and the risks involved • A business plan is an output of the business planning process Peace and Prosperity Through Science and Collaboration www.crdf.org

  33. Output of the Business Planning Process • Business plan (narrative) • Pro forma financial statements • PowerPoint pitch (12-13 pages) • Elevator pitch (1-2 minutes) Peace and Prosperity Through Science and Collaboration www.crdf.org

  34. A Business Plan… • Describes all the critical internal and external elements and strategies for guiding the direction of your company • Communicates how you will create sustainable value • Identifies risks and uncertainties and communicates how you will manage them • Describes the company’s structure, objectives and future plans Peace and Prosperity Through Science and Collaboration www.crdf.org

  35. Refining your product / service strategy Identifying key customers Identifying milestones and timelines Helping set objectives & performance metrics Managing risk and uncertainty Motivating and focusing employees Analyzing capital budgeting decisions Facilitating new product development Integrating new acquisitions Facilitating restarts, restructuring and turnarounds Uses of a Business Plan (Internal) Peace and Prosperity Through Science and Collaboration www.crdf.org

  36. Uses of a Business Plan (External) • Attracting key employees • Educating potential investors • Arranging strategic alliances • Obtaining large contracts with strategic customers • Facilitating mergers and acquisitions Peace and Prosperity Through Science and Collaboration www.crdf.org

  37. Summary (1) Mission statement What is the idea? How will it create value? Timeline / milestones Expected results Specific request (e.g., $) The 12-13 Page PowerPoint Pitch Peace and Prosperity Through Science and Collaboration www.crdf.org

  38. The Mission Statement To create [value/EVA]by [product/service] for/to [customer(s)] by… Strategic Objective 2 Strategic Objective 3 Strategic Objective 1 Peace and Prosperity Through Science and Collaboration www.crdf.org

  39. The Mission Statement Peace and Prosperity Through Science and Collaboration www.crdf.org

  40. Mission Statement Example To be Ukraine’s leading producer of “A-class” widgets to the _______ sector by: • Securing exclusive purchase contracts with 3 of the top 10 customers of A-class widgets in Ukraine; • Creating proprietary manufacturing methods for the highest yield of A-class widgets; and • Building a world-class team of research & development scientists and engineers. Peace and Prosperity Through Science and Collaboration www.crdf.org

  41. Summary (1) Mission statement What is the idea? How will it create value? Timeline / milestones Expected results Specific request (e.g., $) Market Overview (2) Substantiation of need The opportunity (size, trends, etc.) Markey validation Identification of prospective customers The 12-13 Page PowerPoint Pitch Peace and Prosperity Through Science and Collaboration www.crdf.org

  42. Major Pain Points • What is the major pain your customers face currently and/or in the future? • Cost • Convenience • Growth • Focus • Time-to-market • Regulatory compliance • Why are alternative products/services not addressing the pain (fully)? • Why won’t this change? Peace and Prosperity Through Science and Collaboration www.crdf.org

  43. Favorable Market Dynamics • The market is large for our product/service: • Size stat 1 • Size stat 2 • Size stat 3 • The market is growing for our product / service: • Growth stat 1 • Growth stat 2 • Growth stat 3 • Market trends favor us: • Trend 1 • Trend 2 • Trend 3 Peace and Prosperity Through Science and Collaboration www.crdf.org

  44. Summary (1) Mission statement What is the idea? How will it create value? Timeline / milestones Expected results Specific request (e.g., $) Market Overview (2) Substantiation of need The opportunity (size, trends, etc.) Markey validation Identification of prospective customers Description of Product / Service (2) Overview of product / service, including high-level technology description Specific value proposition (including qualitative & quantitative customer benefits) Correlate product / service features & benefits with market needs Value chain dynamics The 12-13 Page PowerPoint Pitch Peace and Prosperity Through Science and Collaboration www.crdf.org

  45. Operating Plan (2) Production / manufacturing Marketing / distribution Sales & marketing plan Competitive Environment (2) Sustainable competitive advantages Alternatives Competition (existing and potential The 12-13 Page PowerPoint Pitch Peace and Prosperity Through Science and Collaboration www.crdf.org

  46. What’s Proprietary About Your Idea? • Competitive Advantages • Proprietary IPR • Exclusive distribution • Exclusive content / sources • Proprietary manufacturing • Proprietary integration • Installed base / customer contracts • Unparalleled capital structure • Unparalleled scale, scope and/or focus • Team with unique expertise and/or access • First mover advantage • Distinguish between momentary and sustainable • Must correlate to strategic objectives Peace and Prosperity Through Science and Collaboration www.crdf.org

  47. Operating Plan (2) Production / manufacturing Marketing / distribution Sales & marketing plan Competitive Environment (2) Sustainable competitive advantages Alternatives Competition (existing and potential The Team (1) Management expertise & relevance Board, advisors, professionals & others Identify key hiring needs Financials (1-2) Pro forma snapshot Key metrics / drivers Funding requirements (optional) The 12-13 Page PowerPoint Pitch Peace and Prosperity Through Science and Collaboration www.crdf.org

  48. Financial Projections Key is to understand drivers and assumptions since… Numbers will prove wrong! • Notes • Assumption 1 • Assumption 2 • Assumption 3 • Assumption 4 • Assumption 5 Peace and Prosperity Through Science and Collaboration www.crdf.org

  49. Funding Requirements • Does your venture need external financing? • How much & when? • Venture capital, debt, etc. • Capital structure considerations • Options plans, etc. • Position vis-à-vis in-kind contributions • Use of proceeds; e.g.: Peace and Prosperity Through Science and Collaboration www.crdf.org

  50. Operating Plan (2) Production / manufacturing Marketing / distribution Sales & marketing plan Competitive Environment (2) Sustainable competitive advantages Alternatives Competition (existing and potential The Team (1) Management expertise & relevance Board, advisors, professionals & others Identify key hiring needs Financials (1-2) Pro forma snapshot Key metrics / drivers Funding requirements (optional) Road Map (1) Major accomplishments 90-day plan Horizon The 12-13 Page PowerPoint Pitch Peace and Prosperity Through Science and Collaboration www.crdf.org

More Related