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2007 Edward L. Kaplan New Venture Challenge How to Write a Feasibility Summary Workshop. Linda Darragh Ellen Rudnick January 10, 2007. Proudly Sponsored by:. EDWARD L. KAPLAN, '70 Chairman and CEO Zebra Technologies Corp. GUY P. NOHRA, ‘89. AGENDA. Review of Timeline

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2007 edward l kaplan new venture challenge how to write a feasibility summary workshop

2007 Edward L. Kaplan New Venture ChallengeHow to Write a Feasibility Summary Workshop

Linda Darragh

Ellen Rudnick

January 10, 2007

Proudly Sponsored by:

EDWARD L. KAPLAN, '70

Chairman and CEOZebra Technologies Corp.

GUY P. NOHRA, ‘89


Agenda
AGENDA

  • Review of Timeline

  • Key Elements of a Feasibility Summary

  • Dos and Don’ts

  • Q&A


2007 new venture challenge timeline
2007 New Venture Challenge Timeline

Jan. 10 Guidelines for writing Executive Summaries

Feb. 5 Phase I Summaries due

Feb. 26 Teams advancing to Phase II announced

Mar. 5 Orientation Meeting in Hyde Park 6 – 9 pm

Mar. 26 Bus. 34104, Developing a New Venture, Begins

Apr. 27 Full Business Plans due

May 21 Finalists announced

May 24 Finals at Hyde Park Center, all day


Key elements of a feasibility summary

Company Mission or Objective

Technology or Proprietary Aspects of the Product/Service (if appropriate)

Market Information

Competitive Landscape

Revenue Model

Operation Issues

Management Team

Financial Information (if available)

Business Risks

Key Elements of a Feasibility Summary


Key elements for a feasibility summary

Mission (objective) of the business

What are you selling?

What business problem are you solving?

How big is this problem?

Why should an investor read any further? What is different?

Key Elements for a Feasibility Summary


Which is better

Example 1:

The company has developed the SalivaSac™, a proprietary semi-permeable membrane that enables the collection in saliva of biochemical markers below 12 kilodaltons. The company will focus on finding those applications which meet this criteria and where there is an advantage to collecting a non invasive sample.

Which is better?

Example 2:

The Company’s objective is to develop non invasive medical diagnostic tests. The first application is for using a proprietary saliva collection device

to measure glucose levels in diabetics.


Key elements for a feasibility summary1

Technology

Describe technology if it is a key differentiator / element of plan.

Is it proprietary? Are there patents?

Are there key milestones in terms of development or product testing?

What are the technology risks?

Key Elements for a Feasibility Summary


Key elements for a feasibility summary2

Market Information

How do you define the market?

Who is the customer?

What is the potential size of the market?

How many customers? How much do they buy?

Key Elements for a Feasibility Summary


Frames

Surfaces: 21% or $558 Million

Brushes

75% market is price sensitive

25% Prof artists or $147Million

$ 2.8 Billion art supply industry

Paint


Key elements for a feasibility summary3

Competitive Landscape -- Why will you win?

Who are current players in the market?

Who could be your competition in the future?

What are your competitive advantages / disadvantages

What barriers to entry will protect you?

IP

Customer

Development process

How are you positioned with respect to the competition?

Key Elements for a Feasibility Summary


Analysis -

Main Competitors Feature Comparison

Native Document

Hosting/ In-house

Web-based

Reporting

Tracking

Search

Redaction

*In-house, allow third party hosting


Evaluation of competitive advantages

Best

Evaluation of Competitive Advantages

  • xxx

  • Std Calc

  • Online calc

  • PDA solution

  • Barcode scanners

  • CPOE

  • IV Smart Pump

  • Criteria/Metrics

  • Price

  • Ease of Use

  • Portability

  • Implementation Time

  • Integration w/other Tech

  • Database Integration

  • Functionality


Key elements for a feasibility summary4

Operations Issues:

How will you deliver this product or service?

- Make internally or use external resources?

Do the costs of providing this product or service provide a sufficient profit?

Are there execution risks?

Revenue Model / Go to Market Strategy?

How will you make money?

Why will the customer buy your product?

What will the customer pay?

- Why are you sure the customer will pay this?

- Have you spoken to customers?

How will you get to the customer? i.e., distribution channel.

How many customers will you get?

Key Elements for a Feasibility Summary


Basic channel segmentation
Basic Channel Segmentation

High

Sales Force

Value-Added Partners

Value-Add of Sale

Distributors

Retail Outlet

Telemarketing

Internet

Low

Cost Per Transaction

Low

High

Source: Friedman and Furey, The Channel Advantage


Key elements for a feasibility summary5

Management Team/Advisors/Partners

Who are they?

Why are they relevant for this business?

Do you have any holes in the management team?

How do you plan on filling these gaps?

e.g. Frank Smith, our CTO, has extensive experience in managing and building data warehouses. He previously served as Vice President in charge of Thompson Financial’s database management systems, and worked as a consulting manager with IBM for organizations building data warehouses. Frank received a B.S. in computer science from MIT and an MBA from the Chicago GSB with a concentration in operations.

e.g. We currently are looking for a Director of Sales. We have identified several individuals in data/information companies also selling to the Fortune 500 companies, consulting and investment firms that would be interested once we have secured our financing.

Key Elements for a Feasibility Summary


Key elements for a feasibility summary6

Financial Information (if available)

What are your economics? (use unit model analysis if appropriate)

What are your key assumptions?

Why will you eventually make money / go cash flow positive?

- When will this happen?

How much money do you think you will need?

How big will you get?

Eventually, this section will need to get very detailed.

Business Risks

What are you worried about / unsure of?

What do you plan to do about it?

Key Elements for a Feasibility Summary


Unit economics
Unit Economics

Customer Service

13%

Sales & Marketing

19%

Sensors, Gateways and Other Technology

11%

Maintenance, Insurance and Overhead

11%

% of Company ABC Revenue

Transaction Processing and Wireless Data

8%

Operating Profit

38%


Financial projections

Management

Contracts: 3 45 135 267

Markets:SF LA Seattle Houston

Financial Projections

$17 M

Revenue

$17 M

$15 M

Cash flow positive in Q4Y2

$13 M

$11 M

Expenses

$9 M

$7 M

Net Income

and

Cash Flow

$4.1 M

$5 M

$3 M

$1 M

($1 M)

Year 1

Year 2

Year 3

Year 4



Assumptions

Revenue:

Sales cycle: 6 months

Installation: 50% at contract signing, 30% mid-term, 20% upon completion

Annual subscription fee: $xx per seat

2 contracts signed by x/x/0x; 4 by x/x/0x, …..

Expenses

Payroll: see attached table of payroll and benefits for founders, new hires and independent contractors

Work virtually until x/x/ox, then move into incubator

Marketing plan for ‘0x includes 2 trade shows in Feb and Sept., new trade booth purchased in January, development of collateral material, ……..

Assumptions


Comparables

Are there comparables in the industry or other industries that validate your business model?

Who are they and why have they been successful?

How are they valued and how did they get funded?

Have there been successful exits? Multiples

Also look for the ‘corpses’. Have similar businesses failed? Why?

Comparables


Dos and don ts

Clichés to Avoid: that validate your business model?

We have no competition.

We are the low cost provider.

We only need a 5% market share.

Our numbers are conservative.

We have the first mover advantage.

Avoid Acronyms (or at least explain them)

Don’t assume everyone reading plan has your knowledge base

Make sure the car has a driver.

Someone should be the current CEO. OK to say you will find a permanent / better one later.

Dos and Don’ts


Dos and don ts1

Be Clear and Brief that validate your business model?

Yes: Middleware for wireless networks

No: Develops and delivers an integrated suite of packaged applications for web and wireless deployment. Global enterprises use these applications to become more competitive and profitable by establishing and sustaining high-yield interactions and transactions with customers, suppliers, and employees.

Be Realistic

Avoid the hockey stick effect unless you have assumptions to back it up

Dos and Don’ts


Dos and don ts2

Capture the reader’s attention – fast that validate your business model?

Typical VC will not read past the first page

Should answer the following questions in the first page

- What is the opportunity?

- Why does anyone care?

- How will it be achieved?

- What is your unique differentiator?

Provide tangible examples / experiences wherever possible:

Reference customers,

- Actual customers best. Potential customers next best.

- TALK TO CUSTOMERS. Describe what you discovered.

- There is nothing more important than a customer! Focus on how you are going to get that first customer.

Credible partners, suppliers, advisors, etc.

Identify comparable businesses or business models

Dos and Don’ts


Questions
Questions? that validate your business model?


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