Vision - Defining the opportunity Market Research Market Testing Stuart W. Hillston

1. Vision - Defining the opportunity Market Research Market Testing Stuart W. Hillston CEO, Constellation Capital Supported by

2. Semester 3 – Session 1 • Vision • Do you have one? • Can you articulate it? • Do you want to be the best? • What is your right to exist, to succeed, to exceed? • Market Research • Driven by a market need to create a solution; or • Looking for a market for a solution you created? • Market Testing • How do you know anyone will actually pay for your product/service?

3. Vision • Your right to exist! • It is a competitive landscape • Lowering barriers to entry • Investors are spoilt for choice • A great many ideas/companies looking for money • Your vision will differentiate you • Your vision will convey passion, enthusiasm, scale & ambition • Your competition is the company in front of the investor before you, and the one after you

4. What is your right to exist? • Investors want to know why you are investable • You need to know why you are investable • Could “anyone” do what you do? • Is this just a hobby? • What is your motivation? • What are your goals? • The tallest tree in the forest gets the most light

5. What do investors want? • Clearly identified target market (Market research, testing, vision) • Committed, focussed management TEAM (Vision) • Scalable business – huge growth potential (Market research, testing, vision) • Revenues – either now, or credible plan to get them (Market research, vision) • Valuation – a credible valuation (Market research) • An exit strategy (Market research, vision)

6. What do investors want? • Clearly identified target market • Who specifically will buy your products? • What price will they pay? • How will you get to them? • How will they know about you? • How will you expand over time? • Think: • Geography • Age/sex/income/location/employment/education/health/dwelling/work… • Relate to existing products/services/routes to market • Surveys, trial products, social media, research, reading, asking, observing

7. What do investors want? • Committed, focussed management TEAM • How skilled, experienced are the individuals in the team? • How well do they work as a time? • Do you know your strengths and weaknesses? • How will you improve, grow? • How will you fill the gaps? • How will you cope with change, growth, stress, failure? • How have you proven your commitment? • Have you invested cash? • Do you have other commitments? • Have you done it before?

8. What do investors want? • Scalable business – huge growth potential • Will your product (or service) fulfill the needs of a very large market? • Is it globally applicable? • Can the margins get better with scale? • Are you dependent on the number of staff for growth? • Will you sell directly or indirectly? • Can your product work in any language? • How will you cope with growth? • How long with the management team last? • Do you have succession plans?

9. What do investors want? • Revenues – either now, or credible plan to get them • Do you have current revenues (if “no”, skip forward!) • How big are they – are they significant? • What is the quality of those revenues? • Were they from early adopters? • How did you achieve them? • Can they be reproduced? • Are your revenue forecasts credible? • Is the growth rate achievable? • Do you have a detailed sales & marketing plan? • Do they scale? • Do you understand cash flow, margins, P&L, profit? • Are you dependent on a third party to make money?

10. What do investors want? • Valuation – a credible valuation • You will raise money at a valuation which is negotiated between you and your investors • Is your starting point credible? • How do you know? • What have other companies raised early money at? • What did they exit it? • Do you understand IRR, RoI, RoCD? • Do you understand fully-diluted valuations? • Are you SEIS, EIS eligible? • What is your personal goal?

11. What do investors want? • An exit strategy • Every business plan says “flotation or trade sale in 3-5 years” • Research flotations – AIM, Plus, NASDAQ, main list • How are they achieved, by which companies, what do they cost? • What valuations? • What happens post flotation? • Which sectors are floating on which markets? • At what point in their growth (how big)? • Research trade sales • Who will by you – what type of company? • Name some typically companies • What valuations? • Who has been acquisitive? • The third way – MBO to provide investors with an exit

12. Defining the market • Can you clearly articulate: • What you do, what problem you solve • Who you do it for • Why they need it • What they will pay for it • Who else will solve the problem • What is different about you

13. Defining the market • Do you know: • Your target customer(s) • The size of the market • Route to market • Best price point • Future trends • The barriers to entry (for you & your competitors) • Top conferences, exhibitions, networking events, commentators, blogs, key opinion leaders

14. Market Research • The three main areas of research: • Commercial • Product • Investor • What research have you done? • How thorough was it? • The better you know your market, your customers & your investors, the higher the chance of investment.

15. Market Research • Did you: • Develop a solution & then research the available (possible) market(s) or; • Research a market and identify a gap which you develop a solution for? • What do you think the relative merits are of each approach?

16. Commercial Research • Demand • Revenue • Market creation • Truly unique solutions can be a problem • Competitors (differentiation) • Price/demand curve • Target customer knowledge • Route to market

17. Commercial Research • Route(s) to market • Direct • Distribution • White label • Alliance(s) • Component of a bigger solution • What do your competitors do? • Market “shapers” • Bloggers, commentators, thought leaders • Complementary products/services • Big buyers/users/market influencers • Investors

18. Product Research • Position – where you fit in the competitive landscape • Fit for market • R&D • Features/benefits/needs • Supporting requirements (training, technical support, service, reseller support, maintenance) • Product roadmap • Minimum viable product

19. Investor Research • Sector expertise • Current investees • Scale of investment • Stage of investment • Competitive threat – who funded your competitors? • Differentiation • Exit strategies • References

20. Summary • Your Vision defines you as an investable opportunity – or not! • Understand how and why investors invest • Know your market – now and for the next 3-5 years • Understand your competition • Understand your customers needs/wants/pain • Understand how you will make (lots of) money!