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raising. venture capital. for developing IT products. Altaf Khan University of Management & Technology. ?. Would you persuade, speak of interest, not of reason . Benjamin Franklin. Assumptions. Software product or Internet-based business Pre-seed, seed, or start-up stage.

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altaf khan university of management technology
raising

venture capital

for developing IT products

Altaf Khan

University of Management & Technology

slide2
?

Would you persuade,

speak of interest,

not of reason.

Benjamin Franklin.

assumptions
Assumptions
  • Software product or Internet-based business
  • Pre-seed, seed, or start-up stage
sources of capital
Sources of Capital
  • Own funds
  • Friends and family
  • Angel investors
    • Local
    • Overseas
  • Venture capital companies
  • Banks
  • Other
    • PSEB ???
    • International organizations
gict ifc world bank global information communication technology dept
GICT(IFC - World Bank)Global Information & Communication Technology Dept
  • Stage-independent investments
  • Typical investment $2-10M
  • Value-added services:
    • Participation on boards of directors
    • Co-investors
    • Introductions to strategic partners
    • Follow-on financings
  • Business plans can be submitted online
gict investment examples
GICT Investment Examples
  • Provide IT services to developing countries, such as locally based systems integrators and SW developers
  • Deliver SW solutions or new technologies from a base in the emerging markets
  • Deliver ITES, such as offshore SW development and BPO, to global markets from emerging markets
  • Provide solutions for e-governance applications
  • Design and manufacture IT components & products
the investor wants
The investor wants …

… to assist the entrepreneurs in transforming their great ideas into world-class businesses …

so that the investor
So that the investor …

… can make lots of money

chances of making lots of money increase if the proposed business is based on
Chances of making lots of money increase if the proposed business is based on …
  • An innovative idea
    • Unbounded target market
      • Entry barriers
        • A reasonable execution strategy
          • A persistent, energetic, smart team

Moreover, the investor also requires …

exit strategy
Exit Strategy
  • IPO
  • Merger/Acquisition
slide13
to get the investment, you have to outline a reasonable scenario in which the investor ends up making a lot of money
slide14
to get the investment, you have to outline a reasonable scenario in which the investor ends up making a lot of money
conventional business plan
Conventional Business Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis
contents of the biz plan
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

A concise summary of the entire business plan

contents of the biz plan20
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

Background info about the company, including capital structure

contents of the biz plan21
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

What will the company provide its customers?

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

contents of the biz plan22
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

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

Growth rate?

Marketing strategy?

contents of the biz plan23
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

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?

contents of the biz plan24
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

How will the business plan be implemented?

Strategies?

Timeline?

Budget?

Tactics?

Alliances?

contents of the biz plan25
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

Who are the people in the company?

What experience, track record, expertise do they bring?

contents of the biz plan26
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

How much does the company require to implement the plan?

How does the company value itself to investors?

Expected burn-rate?

contents of the biz plan27
Contents of the Biz Plan

Write the biz plan that includes:

  • Executive summary
  • Company description
  • Product/service
  • Market analysis
  • Competitive analysis
  • Execution of biz plan
  • Management team
  • Capital requirements
  • Financial analysis

Financial projections, including cash-flow analysis

company valuation
Company Valuation
  • An art; not a science
  • May vary drastically from one investor to another; do 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?
  • Are they flexible about their roles?
  • Are they smart, energetic, persistent?
  • Do they work with a sense of urgency?
  • Are they worthy of my trust?
slide32
Be very open with the investor about the risks involved and your weaknesses

Try to develop strategies for overcoming/minimizing each

you are developing something that will come to market 1 5 years down the road during that time
You are developing something that will come to market 1-5 years down the road. During that time:
  • The targeted market may disappear
  • Someone may come up with the same product, first!
things to look for in investors
Things to look for in investors
  • Their track record
  • Their contacts
  • Their people
mentor investors
Mentor-Investors
  • Individual investors who bring added value to your venture due to their:
    • Inside knowledge of the target industry
    • Industry contacts
  • They can:
    • Lower your risk
    • Reduce your time-to-market
improving the odds
Improving the Odds
  • Actively seek value-adding partners & affiliates
  • Build an unfair advantage
  • Look for smart capital, mentor-investors
  • Leverage Pakistani expatriates
  • Focus on the customer
  • Outsource non-core tasks
  • Successful marketing is critical
  • Stay focused on your business objective
  • Be flexible; change your biz plan, if required
  • Create a high-energy organizational culture
  • Form a core team which is:
    • Homogeneous in terms of the vision
    • Heterogeneous in terms of skills and experiences
slide41
!

Would you persuade,

speak of interest,

not of reason.

Benjamin Franklin.

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