2. 2
FROM IDEA TO BUSINESS PLAN
IDENTIFY A COMPELLING MARKET NEED
HUMBLE BEGINNINGS (THINK BIG, START SMALL)
WHAT WE HOPE TO HEAR FIRST
HI-TECH MARKETING CAN BE DIFFICULT. SOME RESOURCES
A COUPLE OF ANECDOTAL EXAMPLES
WHAT WE HEAR WAY TOO OFTEN
GETTING TO TECHNOLOGY, TEAM, and FINANCE
MEETING MANAGEMENT WITH VCs
SOME COMMON PITFALLS
ENJOYING THE JOURNEY
6. 6
WHAT WE HOPE TO HEAR FIRST…
2.
MARKET
STRATEGY
(UNFAIR
ADVANTAGE)
3.
PRODUCT
&
TECHNOLOG
Y
4.
DEFINING
TEAM
5.
CAPITAL
EFFICIENCY
ENTREPRENEUR’S CHALLENGE
1.
MARKET
POSITIONING
8. 8
For [target customers]
Who have [compelling reason to buy]
Our product is a [new product category]
That provides [key benefit (which solves problem)]
Unlike [competitor in new product category]
We have [key point of differentiation]
*Source: Crossing the Chasm
HELP FROM GEOFFREY MOORE1.
MARKET
POSITIONI
NG
9. 9
For movie producers
Who have post-production special effects
Silicon Graphics provides computer workstations
That integrates digital fantasies with film footage
Unlike IBM or Sun Microsystems
SGI has made a no compromise commitment to
meeting film makers’ post-production needs.
*Source: Crossing the Chasm
TWO DECLARITIVE SENTENCES1.
MARKET
POSITIONI
NG
15. 15
4.
DEFINING
TEAM
NewCo.
555 Main Street Tim Jones
Anywhere, USA CEO
(415) 555-5552
chief2@newco.com
NewCo.
555 Main Street Barney Baker
Anywhere, USA CFO
(415) 555-5553
chief3@newco.com
NewCo.
555 Main Street Ajay Singh
Anywhere, USA COO
(415) 555-5554
chief4@newco.com
NewCo.
555 Main Street Vlad Krunis
Anywhere, USA General
Counsel
(415) 555-5555
chief5@newco.com
NewCo.
555 Main Street Karen Williams
Anywhere, USA President
(415) 555-5556
chief6@newco.com
NewCo.
555 Main Street Bob Smith
Anywhere, USA Chairman
(415) 555-5552
chief2@newco.com
MAGNETS? SCARS? PASSION?
17. 17
DO THE #S MAKE SENSE?
GROSS MARGIN
REVENUE TRAJECTORY
EBITDA
CASH REQUIREMENT VS. OPEX
%’S & RATIOS
5.
CAPITAL
EFFICIENC
Y
CASH FLOW TO BREAK EVEN
18. 18
GRASPING UNIT ECONOMICS?
ABANDONED CART RATE
COST OF CUSTOMER ACQUISITION
LIFETIME VALUE
PRODUCT/BRAND ASSORTMENT
INCENTIVE PROGRAMS
ACTIVE CUSTOMERS/MO.
CUSTOMER CHURN/MO.
FREQUENCY PURCHASE TRENDS
NEW CUSTOMERS/MO.
TICKET SIZE PURCHASE TRENDS
#ITEMS PURCHASE TRENDS
# CLICKS TO CHECK-OUT
REVENUE BY DAY/WEEK/SEASON
GROSS PROFIT/TRANSACTION
COST PER SKUS
INVENTORY TURNS
SHRINKAGE
PICK RATES
DELIVERY TIME
MRR
COST OF CUSTOMER SERVICE
CUSTOMER CONTACT RATE
5.
CAPITAL
EFFICIENC
Y
20. 20
FINANCIALS SAY A GREAT DEAL
ABOUT HOW YOU THINK…
NOT A TIME TO
BE NAÏVE
UNREALISTIC OR
MISLEADING
FRUGALITY
MARKET
STRATEGY
SALES
TACTICS
5.
CAPITAL
EFFICIENC
Y
MARKET
SIZE
MARKET
UPTAKE
MARKET
VELOCITY
REALISM
22. 22
MOST COMMON PITFALLS
GORILLA ALUMNI &
AIRCRAFT CARRIERS
LACK OF FOCUS
OPPORTUNITY EXISTS BEFORE
THE MARKET ARRIVES
TOP HEAVY
COMPELLING?, UNIQUE?
SALES MODEL AND ASP
DIVERGENCE
INCINERATOR SCHEMES
23. 23
MISREAD TEA LEAVES
CLUTTERED MARKETS
CAPITAL INTENSIVE
SLOPPY DUE DILIGENCE
MOMENTUM INVESTING
WEAK SYNDICATE
UNPREDICTABLE DIRECTORS
DAZZLED BY SCIENCE
BOY SCOUT REFERENCES
TOO MUCH MONEY
LONG EVALUATION CYCLES
SLOW PAYING CUSTOMERS
GOING NATIVE
TOO EARLY
TOO LATE
DECEIVED BY COMPARABLES
DILUTIVE IPOs
FEELING TOO WEAK
FEELING TOO STRONG
POOR CUSTOMER SELECTION
STRETCHED TOO THIN
NOT ADDRESSING A TRUE PAIN
CAN’T ARTICULATE THE BUSINESS
SMALL GROSS MARGINS
SMALLER OPERATING MARGINS
NO MODEL FOR MAKING MONEY
A FEATURE, NOT A PRODUCT
A PRODUCT, NOT A BUSINESS
LACK OPERATING CONTROLS
GROWING TOO FAST
WRONG DNA
BAD LISTENERS
POOR CUSTOMER SERVICE
DECEIVED BY SUCCESSES
DRUNKEN PARADE LEADERS
EYEBALLS CONVERTS TO $s
CAPEX CONVERTS TO $s
IGNORING FUNDAMENTALS
REPEATING HISTORY
LEARN FROM OUR MISTAKES
24. 24
WHAT WE LOOK FOR IN A PLAN
1. UNIQUE VALUE PROPOSITION/MARKET POSITIONING
CLEAR, CONCISE, ABOVE THE NOISE; CUSTOMER
VALIDATION?
2. EXPLOSIVE MARKET SECTORS, FULL OF DISCONTINUITIES
AMBIGUITY AND CONFUSION ARE GOOD. HOW BIG?
DEFINING? STRUCTURE/ACCESSIBILITY? READINESS?
DISCONTINUITY—WHAT’S DIFFERENT? VALUE CAPTURE
POTENTIAL? NO COMPETITION – OFTEN NO MARKET;
ENTRENCHED PLAYERS: INNOVATOR’S DILEMMA?
STARTUPS: HOW MANY? OUR TEAM? SOURCES FOR
DIFFERENTIATION?
3. BREAKTHROUGH PRODUCTS/TECHNOLOGY
SOURCES FOR DEEP SEPARATION AND ADVANTAGE? ORDER
OF MAGNITUDE? DEGREE OF DIFFICULTY? ADOPTABILITY?
COMPLETENESS? DEFENSIBILITY?
4. DEFINING TEAMS
MAGNET QUALITIES? DOMAIN EXPERTISE? INTENSITY? DNA
BLEND? SCAR TISSUE?
5. CAPITAL EFFICIENCY
WHAT IS THE FULLY FUNDED PLAN? MARGIN? BUSINESS
MODEL? DIRECT VS INDIRECT? EXPENSE MODEL? REVENUE
DO YOU UNDERSTAND HOW THE PIECES FIT TOGETHER?Don’t assume we’re expert in your markets (although, we do apply previous experience in yours or related markets to make sure what you’re saying makes sense).
We’re looking to be educated and inspired (if not deluded).
Do you understand the underlying market dynamics and how those different pieces work together?
What is occurring in the market that sets the stage for your opportunity?
ARE YOU PLUGGED INTO THE PROBLEM? IS THE PROBLEM BIG ENOUGH?
To then be able to clearly, succinctly, compellingly articulate the agonizing pain being experienced by the customer.
Maybe you’ve been the customer. Maybe you’ve served the customer. Maybe you’ve researched the heck out of the customer. We’re looking for a penetrating, insightful and thoughtful understanding of the customer’s needs.
Because, for a business to have a chance, your offering must be a “must have” not a “nice to have”. Otherwise, you’ll be spending significant time and money convincing them that they need the product.
We’re tired of seeing these BCG grids.
We’re looking for hard to do and hard to replicate. It’s the only thing a little company has in the face of an inhospitable environment. And, even if you have this, it only gives you a 6 to (maybe) 18 lead.
Explain each section.
WHEN YOU CLICK - ANIMATION
It is a red flag to hear “there is unlimited demand for our unreleased product.”
There are plenty of embarrassing examples, some of them ours, that had a big splash and a big crash – WebVan. They were built in advance of demand. The spent millions upon millions promoting and creating brands in an effort to convince customers that they needed this product.
Do you really understand the business?
Explain each section.
Now that we’ve read the entire plan or listened to the entire presentation (the claims you’ve made), we’re now going to look at the numbers to see if you were telling the truth.
Does it all make sense? Does it all tie together? Will the line items in the financials correlate with everything you’ve said about the market, the business and the model?