Expara accelerator program
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This document contains slides from an Expara Accelerator Program discussion. It discusses key topics that will be covered in the program, including understanding scalable entrepreneurship and business models, identifying markets and customers, fundraising, and dealing with failure. It provides examples of successful startups like Facebook, Google, and Instagram to illustrate what is possible. It also discusses the importance of failure for innovation and how attitudes towards failure are evolving to be more accepting of risks and learning from mistakes.
Expara accelerator program
- 1. July 2016 Expara Accelerator Program Discussion slides
- 2. 2 6XXXX About the lecturer Wharton MBA JP Morgan – Vice President IB Technology, GM Internet Marketing Parallax Capital Mgmt – Co-founder and MD Private Equity Extream Ventures – Co-founder and MD S$20 million seed fund Expara – Founder and MD IDM Ventures Incubator, advisory, training NUS – Adjunct Associate Professor, Business School, Entrepreneurship Sasin – Visiting Professor, Venture Capital
- 3. 3 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 4. 4 6XXXX Go big or go home Introduction to scalable entrepreneurship Understanding risk and return Let’s fail
- 5. 5 6XXXX What is an entrepreneur? A person who organizes, operates, and assumes the risk for a business venture. From Old French, from entreprendre, to undertake. Enterprise: An undertaking, especially one of some scope, complication, and risk. Enterprising: Willingness to undertake new ventures; initiative: "Through want of enterprise and faith men are where they are, buying and selling, and spending their lives like serfs" (Henry David Thoreau).
- 6. 6 6XXXX What is a scalable business? Small business: limited scope, complication and risk. Slow growth. Scalable business: significant scope, complication, and risk. Rapid growth.
- 7. 7 6XXXX Present to investor to raise money How to build a scalable business? Identify idea and write business plan The new venture creation process Form a start-up company team
- 8. 8 6XXXX What are the qualities that make a successful entrepreneur? Intelligent Creative problem-solving skills Self-starting Committed Motivated Risk taking
- 9. 9 6XXXX Is entrepreneurship important to the country? The development of a thriving entrepreneurial sector is not just an economic "nice-to-have." In the knowledge- and innovation-driven globalized economy of the 21st century it is a competitive necessity. In one year alone, the small number of venture-backed companies in the US generated $736 billion in revenues, created 4.3 million new jobs, accounting for 3.3% of total jobs in the US and 7.4% of GDP. The more than 4,000 companies started by MIT grads employ more than 1.1 MM people and generate more than $232 B in revenue p.a. Innovative entrepreneurs drive long-term economic growth – creative destruction
- 10. 10 6XXXX Why is entrepreneurship important to you? What type of life do you want to have? – An average life or an extraordinary life? What do you want to do with your life? – Create something of value from nothing or just make money? Do you want to: – Make a difference? – Change the world in some way? – Leave something of value after you are gone?
- 11. 11 6XXXX As an entrepreneur, you can: Have an extraordinary life Create something of value from nothing Become rich Do something meaningful Make a difference Change the world in a positive way Leave something of value behind after you are gone
- 12. 12 6XXXX Obstacles to entrepreneurship Lack of entrepreneurial skills Attitudes toward risk Cultural attitudes toward failure Entrepreneurial success is difficult
- 13. 13 6XXXX This could be you - iTwin BMA5108 – “Cable-less cable” remote access device based on A-Star technology Selected for TechCrunch 50 2009 in Silicon Valley Spin-off company launched in 2010 Raised S$2 MM Series A funding in July 2010
- 14. 14 6XXXX This could be you - Sparefoot 2007 – Chuck Gordon takes TR3002 2008 –Co-founds Ikatoo – Winner, IDM Prize S@S and i.JAM recipient 2008 – Returns to US and resumes work on Sparefoot 2010 – Sparefoot raises US$3 MM VC
- 15. 15 6XXXX This could be you: Pirate 3D
- 16. 16 6XXXX This could be you: Asia’s Top 25 Entrepreneurs
- 17. 17 6XXXX This could be you: Facebook Feb 2004: Mark Zuckerberg, 19, launches The Facebook from his Harvard dorm room, with ~10K investment. Half of Harvard signs up in the first month June 2004: Facebook receives $500K funding from Peter Thiel Mid 2005: Accel partners invests $12.7MM and Greylock $27.5MM Oct 2007: Microsoft buys 1.6% of Facebook for $246MM Nov 2007: Li Ka-shing invests $60MM 2009-10: Elevation partners invests $210MM at valuation $12 - 23B 2011: Goldman Sachs buys shares in the secondary market at an implied valuation of $50B 2012: Goes IPO at valuation ~$100B (now $67B) “The youngest billionaire on earth” - Forbes
- 18. 18 6XXXX This could be you: Instagram 2010 - Kevin Systrom and Mike Krieger focus their multi-featured HTML5 check- in project Burbn on mobile photography Mar 2010 – Close $500K seed funding round from Baseline Ventures and Andreessen Horowitz; est. val. $5 MM Oct 2010 – Product launches on Apple App Store Feb 2012 – Raise $7MM Series A funding; valuation $25 MM Apr 2012 – Raise $50 MM at $500 MM valuation; sold to Facebook, val $1 B 0 5 10 15 20 25 30 35 Millions of Users
- 19. 19 6XXXX This could be you: Google 1995: Sergey Brin and Larry Page, two Stanford University graduate students develop the technology that will become the Google search engine. 1998: Sergey and Larry raise $1 million in funding from family, friends, and angel investors to start Google in a friend's Menlo Park, Calif. garage with four employees. 1999: Google raises $25MM from VCs and angel investors 2004: Google goes IPO at a valuation of US$23.1 billion. Sells 7% to public for $1.67 billion. Market cap Jan 2007 US$149 billion.
- 20. 20 6XXXX This could be you: YouTube Feb 2005: Chad Hurley, Steve Chen, and Jawed Karim found YouTube, Inc. Nov 2005: YouTube receives funding from Sequoia Capital Dec 2005: YouTube service is officially launched Nov 2006: Google acquires YouTube for US$1.65 billion, 20 months after the company was founded
- 21. 21 6XXXX Founded by undergrads: Dell and Microsoft Michael Dell, who founded Dell in 1984 with $1,000 when he was 19 years old. The company now employs approximately 41,800 people worldwide and reported revenues of $38.2 billion for the past four quarters. Bill Gates, who founded Microsoft in 1975 while still an undergraduate at Harvard. Microsoft had revenues of US$32.19 billion for the fiscal year ending June 2003, and employs more than 54,000 people in 85 countries and regions.
- 22. 22 6XXXX SEA exit markets at an inflection point Exit activity in SEA, especially in Singapore, has exploded • Increased investment in startups since 2007 is beginning to yield results • Number of exits increased from 5 or less pre-2011 to 60 in last three years • Singapore alone has had 40 exits since 2007 • Value of exits increased from 51 MM in 2010 to 1.2 B in 2014
- 23. 23 6XXXX Some recent exits Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
- 24. 24 6XXXX Go big or go home Introduction to scalable entrepreneurship Understanding risk and return Let’s fail
- 25. 25 6XXXX What is the relationship between risk and return? Risk and return are highly correlated You cannot increase return without taking more risk Return Risk Potential outcomes
- 26. 26 6XXXX Go big or go home Introduction to scalable entrepreneurship Understanding risk and return Let’s fail
- 27. 27 6XXXX Let’s fail: the importance of failure for innovation
- 28. 28 6XXXX 3 key elements for success Do something you love to do – something meaningful Create opportunities – don’t wait for them Don’t give up – stay the course
- 29. 29 6XXXX What about luck? Luck by definition is random In the long run, luck should even out for most Luck plays an important role in initial conditions but after that much less than you imagine Don’t wait to get lucky; make your own luck Chance favors the prepared mind
- 30. 30 6XXXX Evolving cultural attitudes toward failure Failure is bad; avoid at all costs Traditional
- 31. 31 6XXXX Evolving cultural attitudes toward failure Failure is bad; avoid at all costs Failure is acceptable; leads to learning Traditional Current
- 32. 32 6XXXX Evolving cultural attitudes toward failure Failure is bad; avoid at all costs Failure is acceptable; leads to learning Failure is desirable; necessary for innovation Traditional Current Future
- 33. 33 6XXXX Why is failure desirable? Willingness to fail – allows risk-taking and innovation Risk and return – high risk ventures means they are likely to fail Innovation – key to scalable ventures – innovators will fail
- 34. 34 6XXXX Rate of tech change is increasing exponentially 1 10 100 1,000 10,000 100,000 1,000,000 10,000,000 100,000,00 0 First Humanoids Language Agriculture Abacus Calculating machine Telegraph Stock Ticker Light Bulb Recording sound Television General purpose computer Stored program computer Integrated circuit Mini computer Microprocessor Personal computer IBM PC Pentium World Wide Web Deep Blue defeats Kasparov
- 35. 35 6XXXX The rate of innovation is increasing
- 36. 36 6XXXX Ever-shorter product cycles = more innovation Phonograph - invented in 1877 by Thomas Edison 33 rpm/45 rpm discs - 1948 (71 years) Cassette tapes - 1966 (18 years) Compact disc - 1982 (16 years) MP3 files - 1991 (9 years) MP4 files - 1998 (7 years)
- 37. 37 6XXXX Sometimes failure itself is innovation Post-It notes - failed glue Scotchgard - spilled on shoes Combat - failed additive for cattle feed
- 38. 38 6XXXX The essence of risk is failure
- 39. 39 6XXXX Failure is necessary to achieve success
- 40. 40 6XXXX Why are people afraid to risk failure? Fear of the unknown - “Why take a chance?” Fear of looking stupid - “What will they think?” Judging too quickly - “That will never work” Attachment to the old - “We have always done it this way” Attachment to past successes - “This approach got us here”
- 41. 41 6XXXX Do not let fear stop you Why are you afraid to try? The outcome must be important to you; otherwise no fear This makes you afraid to fail If you do not try, then you have already failed “You miss 100% of the shots you do not take” - Wayne Gretzky Fear causes you to fail at the things that are most important to you
- 42. 42 6XXXX Why fear? Fear is good when it helps us stay alive It is rational to be risk-averse in life-and-death situations Most investment decisions are not life-and-death situations
- 43. 43 6XXXX Conquering your fear Everyone is afraid It is OK to be afraid Don’t try to eliminate your fear Work through your fear
- 44. 44 6XXXX If you don’t fail, you are not trying hard enough Most learning and progress are achieved through failure The top scientists in the world fail more than average scientists Everyone who is now highly successful took significant risk to get there We don't regret the things that we do and fail at; we regret the things that we fail to do. A life lived in fear is a life half lived
- 45. 45 6XXXX Success from failure – Apple and Steve Jobs
- 46. 46 6XXXX Product failures – from Apple III to Apple Newton 1980 - Apple III - 75k units sold 1983 – Apple Lisa - 40K units sold in 1984 vs. 80K forecast 1986 – Pixar Image Computer - < 300 units sold 1990 – NeXT workstation – 50K units sold 1993 – Newton – 100MM spent on development – 80K units sold Apple clones, NeXT software
- 47. 47 6XXXX Market failure - Apple stock price – 1988 to 1998
- 48. 48 6XXXX Competitive failure – Apple vs. Microsoft 1980 – Apple’s share of PC market 15% 1996 – 4% 2005 – 2.2% 2011 – Microsoft Windows still has 92% share of operating system market
- 49. 49 6XXXX Steve Jobs career timeline Success - 1977 • Apple II Failure – 1980 • Apple III Failure – 1983 • Lisa Success – 1984 • Macintosh Failure – 1985 • Ousted from Apple Failure – 1988 • Pixar Image Computer Failure – 1990 • NeXT Workstation Failure – 1993 • NeXT discontinues HW Success – 1995 • Toy Story; Pixar IPO Success – 1996 • Apple buys NeXT Success – 1997 • Return to Apple Success – 1998 • Apple profitable Success 2001 • IPod Success 2007 • Iphone Success 2010 • iPad
- 50. 50 6XXXX Success from failure Pixar animated films – 1995 (Toy Story) – 26 Oscars, 7 Golden Globes, 3 Grammies – Films have earned > $6.3 billion worldwide iPod - 2001 – 300 MM units sold – 90% market share iPhone – 2007 – > 75 MM units sold – 50% of profits from global mobile phone sales iPad – > 15 MM units sold, more than all other tablets combined – 83% market share
- 51. 51 6XXXX Apple stock price 2004 – 2015 +7,910%
- 52. 52 6XXXX What makes Silicon Valley different? A different attitude toward failure Many Silicon Valley VCs will only invest in entrepreneurs who have already failed “I got my education on the mean streets of Silicon Valley, where I got to see how huge mistakes are made. Knowing what doesn’t work is perhaps more valuable than knowing what should work. Failure is just tuition. If you are in a failing start-up, take notes.” - successful start-up founder
- 53. 53 6XXXX Only do things that are difficult to do Everything that is worth doing is difficult If it is easy, it is probably not worth doing Therefore, you should never hesitate to do something difficult Start-up entrepreneur is one of the most difficult jobs in the world The more difficult it is to do, the greater the return when you succeed (risk/return correlation) Returns to successful start-up entrepreneurs are the highest in the world
- 54. 54 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 55. 55 6XXXX Investment: why and how Why entrepreneurs raise money Why investors invest in startups How to raise venture funding
- 56. 56 6XXXX Why should companies raise investment? Lifestyle or scalable? Paycheck or payout? A big piece of a small pie? A small piece of a big pie? Founder Investors Investors Founder
- 57. 57 6XXXX How to fund growth? Internally generated Debt Hybrid Equity
- 58. 58 6XXXX Cost, control, growth and risk Internal Debt Equity Source of funds Cost Lose Control Growth $ Risk Impact of funding Low Somewhat High
- 59. 59 6XXXX Financial leverage and firm value
- 60. 60 6XXXX Companies founded with venture capital www.nvca.org
- 61. 61 6XXXX Industries created by venture capital www.nvca.org
- 62. 62 6XXXX Investment: why and how Why entrepreneurs raise money Why investors invest in startups How to raise venture funding
- 63. 63 6XXXX Why invest in venture capital? As of 31-Dec 2014 The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,569 U.S. venture capital funds (1,002 early stage, 175 late & expansion stage, 386 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. 1Pooled end-to-end return, net of fees, expenses, and carried interest. Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc. *Capital change only Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03
- 64. 64 6XXXX Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
- 65. 65 6XXXX Early-stage tops long-term performance
- 66. 66 6XXXX How does early-stage out-perform? 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry Gross value multiples at all stages of investment
- 67. 67 6XXXX 65% of the portfolio will deliver less than 1x Gross value multiples for losers 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
- 68. 68 6XXXX Early-stage winners will have more home-runs Gross value multiples for winners 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
- 69. 69 6XXXX Early-stage has 450% more 50x and 800% more 100x than later rounds Gross value multiples for home runs 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
- 70. 70 6XXXX How does a venture capital fund work? Fund Investors VC 8 $ 10 mm 2 $ 10 mm $ 58 mm 25% 75% Fund size 10,000,000$ Life of the fund 7 Management fee 2.5% Investable 8,250,000$ Investment size 1,031,250$ Companies 8 Fail 4 50% Break even 2 25% Exit 2 25% Investor's required ROI 35% Fund multiple return 5.76 Fund size at exit 57,600,000$ Carry @ 20% 9,520,000 Distribution 48,080,000$ Fund return multiple 4.81 Fund ROI 35% Required return per exit 28 times Equity per company F/D 15% Required value of equity at exit 28,800,000$ Required co value at exit 192,000,000$
- 71. 71 6XXXX GVMs for all first-round investments 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
- 72. 72 6XXXX How do VCs make money? Trade sale – sell to another company IPO – sell to the public through listing on an exchange
- 73. 73 6XXXX Trade sale or IPO? www.nvca.org
- 74. 74 6XXXX Investment: why and how Why entrepreneurs raise money Why investors invest in startups How to raise venture funding
- 75. 75 6XXXX The investor’s decision tree Innovative? Yes Value proposition? Yes Fast-growing market? Yes Exit No No No
- 76. 76 6XXXX Product or service: which scales better? Product-based start-ups – Value proposition is delivered via product Service-based start-ups – Value proposition is delivered via people
- 77. 77 6XXXX Getting to gatekeepers It’s not what you know; it’s who you know Network, network, network Strong ties and loose ties
- 78. 78 6XXXX Connecting to my network My company websites: www.expara.com My blog: www.douglasabrams.com E-mail: dka@expara.com; lanie@expara.com Facebook: bizadk@nus.edu.sg Linked-In: dka@parallaxcapital.com Twitter: twitter.com/douglaskabrams
- 79. 79 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 80. 80 6XXXX Key elements for success Develop an innovative product – Innovation Solve a problem for customers – Value proposition Identify your customers – Market identification and analysis Reach your customers – Marketing strategy Compete when others enter - Sustainable competitive advantage Make money – Business model and financial plan Team – A team or B team
- 81. 81 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
- 82. 82 6XXXX Writing a model business plan 1. Executive summary 2. Value proposition and innovation 3. Market identification and analysis 4. Marketing and sales strategy 5. Sustainable competitive advantage Overview, innovation, market 6. Company products and services 7. Team 8. Expansion plan 9. Operational plan 10. Finances – Revenue and cash flow, valuation, funding required, equity offered, ROI Execution and financials
- 83. 83 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 84. 84 6XXXX Innovation and value proposition Sources of innovation – Trend-driven: forces, trends and mega-trends – Technological, macro, social, demographic, political Types of innovation – Technology, product, process, positioning, paradigm, operational, cost, customer experience, management, business model, industry, attribute-driven (Blue Ocean) Degrees of innovation – Incremental, disruptive
- 85. 85 6XXXX Types of innovation Trend-driven: forces, trends and mega-trends – Technological, macro, social, demographic, political Business model: changing market and industry structures & needs – Market inefficiencies Attribute-driven – Blue Ocean strategy
- 86. 86 6XXXX Generating innovations Alternative approaches to existing innovations – Second mover advantage Personal experience, hobbies and pastimes, personal passions, annoyances De-commoditize a commodity – Starbucks Drive an innovation down-market – Spinbrush Import geographically isolated innovations, cross regional, discipline or industry – Red Bull, Starbucks Identify small companies with niche products with broader market appeal potential – Gyration and Nintendo
- 87. 87 6XXXX Value propositions • What value do we deliver to customers? • Which one of our customer’s problems are we helping to solve? • What bundles of products and services are we offering to each Customer Segment? • Which customer needs are we satisfying? Key questions • Newness • Performance • Customization • Getting the job done • Design • Brand/status • Price • Cost reduction • Risk reduction • Accessibility • Convenience/usability Types of values
- 88. 88 6XXXX Value proposition – how much does it hurt? Painkiller Vitamin Candy
- 89. 89 6XXXX Value proposition – degrees of recognition Latent problem – they have a problem but don’t know it Passive problem – they know they have a problem but not looking for a solution yet Active or urgent problem – they know they have a problem, are actively looking for a solution but no serious work done yet to solve A vision – they have an idea for solving the problem and a home- grown solution but are prepared to pay for a better solution
- 90. 90 6XXXX Business model innovation: Diamond Rio vs iPod
- 91. 91 6XXXX Disruptive business model or disruptive tech Diamond is the first mover in portable MP3 in 1998 Apple enters in 2003 and captures 90% of the market Business model innovation – hardware + software + service
- 92. 92 6XXXX Disruptive models from Gillette to Google Gillette – razor and blade Southwest Airlines – budget airlines Dell Computer – mass customization Charles Schwab – on-line broker Amazon – ecommerce eBay – peer to peer marketplace Google – search-based advertising
- 93. 93 6XXXX Innovation and value proposition 1. What is your product and what is innovative about it? 2. What is the painful problem you are solving for customers? 3. What are the shortfalls of the current solutions? 4. How do you solve this problem and can you quantify your benefit? 5. How does your innovation enable you to accomplish this?
- 94. 94 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 95. 95 6XXXX Market and competitive analysis Identifying favorable markets Analyzing markets
- 96. 96 6XXXX Choose an industry favorable to start-ups Increasing returns business: up-front costs are high relative to marginal costs Network externalities Complementary technologies are important to use Producer learning is strong, switching costs are high
- 97. 97 6XXXX Look for fast-growing, segmented markets The cost gap between new and established firms is smaller in larger markets In fast-growing markets, new firms can serve new customers rather than customers of existing firms Segmented market provide niches for new firms to enter and reduce retaliation by existing firms
- 98. 98 6XXXX Market timing – entering at the inflection point Measure of performance Measure of effort invested The technology adoption S curve
- 99. 99 6XXXX Industry life cycles and structures Choose a young industry – more demand and less competition Enter before a dominant design has been adopted Labor intensive rather than capital intensive Advertising and branding less important Less concentrated industries – smaller competitors
- 100. 100 6XXXX Market and competitive analysis Identifying favorable markets Analyzing markets
- 101. 101 6XXXX Market identification and analysis 1. What is your market type? 2. How big is your market and how fast is it growing? – Top-down approach – Bottom-up approach 3. What are trends in your market are favourable for you? – Technological, social, demographic, regulatory 4. Who are your direct and indirect competitors?
- 102. 102 6XXXX Types of markets Existing markets Re-segmented markets/niche market New market Clone market
- 103. 103 6XXXX Top-down market sizing Total addressable market Target market Target segment Market share
- 105. 105 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 107. 107 6XXXX The customer discovery process Phase 1 State Hypothesis Draw Business model canvas Phase 2 Test the problem Phase 4 Verify or pivot Phase 3 Test the solution Customer validation
- 108. 108 6XXXX Phase 1: Business model hypothesis Market size hypothesis Value proposition hypothesis – Product vision – Product features and benefits – Minimum viable product Value proposition 1: low fidelity MVP – Do customers care about the problem? – Write a user story
- 109. 109 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 110. 110 6XXXX What are the elements of marketing strategy? Differentiation – how is your product different from competition – Product - superior customer value – better, faster closer – Cost leadership Positioning – market selection + differentiation – Image for the product that embodies its values Marketing Execution – the 4 Ps – Product, pricing, place, promotion
- 111. 111 6XXXX Marketing strategy 1. How is your product differentiated from your competitors’ product? Use a comparison matrix to illustrate. 2. What is your position in the market? Use a positioning map or Blue Ocean Strategy canvas to illustrate 3. What are your price, place, product, promotion and initial sales plans 4. What is your tagline?
- 112. 112 6XXXX Comparison matrix Competitor 1 Competitor 2 Competitor 3 Competitor 4 Your company Benefit 1 Benefit 2 Benefit 3 Benefit 4 Benefit 5 Benefit 6
- 113. 113 6XXXX Positioning map Portability Value Competitor 2 Your company Competitor 1 Competitor 3 Competitor 4
- 114. 114 6XXXX Value innovation – reduce costs & increase value Costs Buyer value Value innovation www.blueoceanstrategy.com
- 116. 116 6XXXX Blue Ocean strategy canvas www.blueoceanstrategy.com
- 118. 118 6XXXX Develop a tagline Clear, strong, authentic Describes your unique offering to customers Provides focus and differentiation
- 119. 119 6XXXX Elements of the 4 Ps Product – Name, functionality, styling, quality, safety, packaging, repairs and support, warranty, accessories and service Price – Pricing strategy, MSRP, volume discounts and wholesale pricing, cash and early payment discounts, seasonal pricing, bundling, flexibility Place – Distribution channels, market coverage, specific channel members, inventory management, logistics Promotion – Push/pull, advertising, selling and sales force, sales promotions, PR and publicity, budget. – How will you make your first sale?
- 120. 120 6XXXX Competitors will enter How to compete with followers? How to compete with existing companies? Sustainability of technological lead – Competitors cannot duplicate the technology – Firm can innovate as fast or faster than competitors First-mover disadvantages Last-mover advantage
- 121. 121 6XXXX Competitive advantage – barriers to entry Proprietary intellectual property Network effects or externalities Customer lock-in/switching costs
- 123. 123 6XXXX Creating last-mover advantage Reputation Preempting positioning Switching costs/Lock-in/Network effects Unique channel access Move down learning curve Favorable access to inputs Definition of standards Institutional barriers – IP protection First Mover Advantages Pioneering costs Demand uncertainty Changes in buyer needs Specificity of investments to early generations Technological discontinuities Low-cost imitation Disadvantages
- 124. 124 6XXXX Strategies to create last-mover advantage IP strategy – patents, copyrights, trademarks, trade secrets Create barriers to entry – Network effects and externalities – Lock-in effects
- 125. 125 6XXXX Established company strengths and weaknesses Learning curve Reputation effect Cash flow Economies of scale Complementary assets Advantages Difficult to innovate They need to satisfy existing customers, partners and supply chain Existing organizational structure is appropriate to current tasks Risk aversion Weaknesses
- 126. 126 6XXXX Opportunities that favor new firms Existing firms frozen in the headlights Disruptive technologies and business models Uncertainty: existing firms’ advantages in market research are neutralized; risk propensity Technologies: Discrete versus systemic technologies, based on human capital, general purpose rather than specific Bad customers: Enter market that is unattractive to existing competitors due to established cost structure
- 127. 127 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 128. 128 6XXXX Customer segments • For whom are we creating value? • Who are our most important customers? Key questions • Mass market • Niche market • Segmented • Diversified • Multi-sided platform or market Types of customer segments
- 129. 129 6XXXX Customer segments: who/problem Customer problem – Latent – Passive – Active or urgent – Vision Customer types – End user – Influencer – Recommender – Economic buyer – Decision maker Customer archetype A day in the life of a customer Organizational/influence maps Consumer/web influence map
- 131. 131 6XXXX Customer relationships • What type of relationships does each of our customer segments expect us to establish and maintain with them? • Which ones have we established? • How are they integrated with the rest of our business model? • How costly are they? Key questions • Personal assistance • Dedicated Personal Assistance • Self-Service • Automated Services • Communities • Co-creation Examples
- 132. 132 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 133. 133 6XXXX Do you love to sell?
- 134. 134 6XXXX Sales and distribution Great sales and distribution vs great product Best sales is hidden Products don’t sell themselves
- 135. 135 6XXXX Metrics for effective distribution CLV: total net profit earned over the course of relationship with customer CAC: cost to acquire a new customer CLV>CAC
- 137. 137 6XXXX Complex sales Seven figure deals CEO must sell 50-100% YoY growth over 10 years Enterprise sales must start small
- 138. 138 6XXXX Personal sales 10K-100K Sales team can sell Need to establish a process so sales team can move to mass
- 139. 139 6XXXX Sales dead-zone Product needs a personal sales effort Resources are not available or too expensive Underserved SME markets
- 140. 140 6XXXX Marketing and advertising Work for products with mass appeal but not viral – FMCG Can work for start-ups but Only when CLV-CAC make all other channels uneconomical
- 141. 141 6XXXX Viral marketing Core functionality encourages users to invite their friends Move first to dominate most important segment of market with viral potential Get the most valuable users first Paypal – initial focus on 20K Ebay PowerSellers
- 142. 142 6XXXX Power law of distribution Select one - one distribution channel will be more powerful than all others combined Most businesses get zero distribution channels to work Poor sales rather than bad product is most common cause of failure Sell your company to the media Everyone sells
- 143. 143 6XXXX Channels • Through which channels do our customer segments want to be reached? • How are we reaching them now? • How are our channels integrated? • Which ones work best? • Which ones are most cost-efficient? • How are we integrating them with customer routines? Key questions • Awareness: How do we raise awareness about our company’s products and services? • Evaluation: How do we help customers evaluate our organization’s Value Proposition? • Purchase: How do we allow customers to purchase specific products and services? • Delivery: How do we deliver a Value Proposition to customers? • After sales: How do we provide post- purchase customer support? Channel phases
- 144. 144 6XXXX Channel hypothesis – physical products Does your product fit the channel? Physical channel choices – Direct sales – Independent sales rep firms – SI/VAR – Distributors/resellers – Dealers/Retailers – Mass merchandisers – OEMs Which channel should I use?
- 145. 145 6XXXX Channel hypothesis – web/mobile Pick one distribution channel – use tests to choose Web/mobile channel choices – Dedicated e-commerce – your website – Two-step e-distribution - Amazon – Aggregators - Lendingtree – Platform app store – Apple – Social commerce - Facebook – Flash sales - Groupon – Free-to-paid channel Multi-sided markets need unique channel plans
- 146. 146 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 148. 148 6XXXX Get customers strategy Who is your audience and where are they? What content will they like? Make sure your content works in location Participate in their communities Create content that people want to link to
- 149. 149 6XXXX Get customers tactics Earned or free – Public relations – Viral marketing – SEO – Social networking Paid – Pay-per-click advertising – Online or traditional media advertising – Affiliate marketing – Online lead generation; permission-based emailing
- 150. 150 6XXXX Keep customers Interact, retain Customization User groups Blogs Online help Product tips/bulletins Outreach, affiliates
- 151. 151 6XXXX Grow customers Get current customers to spend more – Cross-sell – Up-sell – Next selling – Unbundling Get customers to send more customers – Encourage likes – Discounts or free trials to share – Enable email to friends to create mailing lists – Contests or incentives for viral activities – Highlight social networking action buttons – Encourage bloggers to write about the product
- 152. 152 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 153. 153 6XXXX Revenue models • For what value are our customers really willing to pay? • For what do they currently pay? • How are they currently paying? • How would they prefer to pay? • How much does each Revenue Stream contribute to overall revenues? Key questions • Asset sale • Usage fee • Subscription Fees • Lending/Renting/ Leasing • Licensing • Brokerage fees • Advertising Types • List price • Product feature dependent • Customer segment • dependent • Volume dependent Fixed pricing • Negotiation (bargaining) • Yield Management • Real-time-Market Dynamic pricing
- 154. 154 6XXXX Key revenue model issues Subscription/membership Volume or unit-based sales Advertising-based Licensing & syndication Transaction fee Pay-per-use Referrals Affiliate/revenue sharing Selling data Back-end offers Revenue models Single stream Multiple streams Interdependent Loss leader Revenue streams Value pricing Competitive Volume Portfolio Razor/blade Subscription Leasing Product based Pricing models
- 155. 155 6XXXX Other revenue model issues Total cost of ownership (TCO) Return on investment (ROI) Multi-sided markets have multiple revenue models Distribution channel affects revenue streams Consider lifetime value
- 156. 156 6XXXX Revenue diagram – Grateful Dead From Note on Business Model Analysis for the Entrepreneur – HBS Publishing
- 157. 157 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 158. 158 6XXXX Cost structure • What are the most important costs inherent in our business model? • Which Key Resources are most expensive? • Which Key Activities are most expensive? Key questions • Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) • Value Driven (focused on value creation, premium value proposition) Is your business more • Fixed Costs (salaries, rents, utilities) • Variable costs • Economies of scale • Economies of scope Sample characteristics
- 159. 159 6XXXX Cost drivers Payroll-centered (Direct) Payroll-centered (Support) Inventory Space/Rent Marketing/advertising Cost structures Fixed Semi-variable Variable Non-recurring Types of cost drivers
- 160. 160 6XXXX Costs diagram – 7-11 Japan From Note on Business Model Analysis for the Entrepreneur – HBS Publishing
- 161. 161 6XXXX Complete business model diagram
- 162. 162 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 163. 163 6XXXX Customer acquisition and activation workshop
- 164. 164 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 165. 165 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 166. 166 6XXXX Key roles in a start-up company team Position Skills 1 CEO (Chief Executive Officer) Leadership, vision, presentation 2 CFO (Chief Finance Officer) Financial 3 COO (Chief Operating Officer) Operations and HR 4 CTO (Chief Technology Officer) Technical/product background 5 CMO (Chief Marketing Officer) Sales and marketing
- 167. 167 6XXXX Beyond the management team Board of advisors Strategic partners Suppliers
- 168. 168 6XXXX Key partnerships • Who are our key partners? • Who are our key suppliers? • Which key resources are we acquiring from partners? • Which key activities do partners perform Key questions • Optimization and economy • Reduction of risk and uncertainty • Acquisition of particular resources and activities Motivations for partnership
- 169. 169 6XXXX Partners hypothesis Strategic alliances Cooperation with competitors Joint business development efforts Key supplier relationships Traffic partners (web/mobile) Other partners – app stores, payment providers
- 170. 170 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 171. 171 6XXXX IP Strategy Patents Copyrights Trade Marks Registered Designs Trade secrets
- 172. 172 6XXXX Patents Technical inventions Novelty, inventiveness & industrial application Registration system – national & PCT systems Novelty & infringement searches 20 years, if continuously renewed Exclusive monopoly Business methods & computer programs, algorithms, ideas
- 173. 173 6XXXX Copyrights Exists on creation, no registration procedures Searches are therefore not available Expression not ideas – words, music, art, film, sound, broadcast, cable, publishing, live performance Life or author/ creator+ 50 years; or 50 years Copy, publish, perform, broadcast, cable, adapt Software, databases, GUI, multimedia International protection e.g.., Berne, TRIPs
- 174. 174 6XXXX Trade Marks Registration system – national, CTM & Madrid treaties Capable of distinguishing & earlier marks Substantive examination Searches? – national or CTM 10 years, renewable indefinitely Right to use in the course of trade Domain names, marketing, web partnerships
- 175. 175 6XXXX Design registration National registration system Novelty and mass-produced articles Formal examination only 15 years / 25 years protection, if continuously renewed Exclusive monopoly Computer icons Register or almost no protection, not even copyright
- 176. 176 6XXXX Trade Secrets Formula (e.g. Coca Cola formula) Pattern, Plan, Customer Lists, etc Process, R&D Data Device, Apparatus, Machinery etc
- 177. 177 6XXXX Advantage of Trade Secrets No fees No time limits Information not available to competitor for improvements No blocking patents Freedom to operate Proprietary position
- 178. 178 6XXXX Forms of organization Sole proprietorship Partnership Limited Liability Partnership Companies – Private Limited companies – Public companies – Listed public companies
- 179. 179 6XXXX Key agreements Shareholder agreement Employment agreement Director’s responsibilities Investment agreement
- 180. 180 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 181. 181 6XXXX Who are the players? Entrepreneurs – Lifestyle entrepreneurs - limited scope, complication and risk. Slow growth. – High-growth entrepreneurs (scalable business) Significant scope, complication, and risk. Rapid growth. Venture investors – Venture capitalists (VCs) – Seed investors/incubators – Angel investors – Corporate VCs and investors – Banks, government
- 182. 182 6XXXX What roles do they play? Identify opportunities Provide funding Oversee finances Assist with growth Generate returns for themselves or their investors Venture investors Create opportunities Raise funding Manage finances Increase value Generate returns for investors Entrepreneurs
- 183. 183 6XXXX VCs invest at multiple stages Founder’s Capital Seed/ Angel Series A, B, C Mezzanine Pre-Exit Exit VC hurdle rates 60-100% 40-60% 20% OM F,F&F Incubators corporations government Customers, suppliers, strategic partners VCs, Banks for VC loans R&D Establishment GTM/Rollout Accelerated Expansion Maturity Enablement growth
- 184. 184 6XXXX How much funding is required? What are sources of funds – debt, equity, retained earnings How much money do you need to raise and how much equity will the investor receive? You should generally be raising around $0.6MM to $1.5MM at this stage. Remember that if you are raising less than $1MM, you will likely be seeking investment from Angel investors rather than from VCs.
- 185. 185 6XXXX Equity offered – how much do you need? What percentage does the company want to sell? – Often too much or too little – This is the wrong question Set performance and fund-raising milestones – How much money do you need to achieve the next milestone? – Divide defensible firm value by funds needed to determine percentage to sell Equity offered in the seed stage should usually be in the range of 15-30%
- 186. 186 6XXXX Use the funds to fuel company growth How are you going to use the money you are raising? Show a detailed breakdown Minimize investment in fixed assets No big salaries for founders
- 187. 187 6XXXX Exit strategy and ROI How will your investors make money and how much will they make? The most likely exit strategies are IPOs (sell to the public) and trade sale (sell to another company), with trade sale the first choice in most cases. For VCs, ROI should be at least 10 times and preferably 30-100 times over 5 years.
- 188. 188 6XXXX How do VCs make money? Trade sale – sell to another company IPO – sell to the public through listing on an exchange
- 189. 189 6XXXX Trade sale or IPO? www.nvca.org
- 190. 190 6XXXX Exit markets at an inflection point Exit activity in SEA, especially in Singapore, exploded in 2013 • Increased investment in startups since 2007 is beginning to yield results • Number of exits increased from 6 in 2010 to 20 in 2013 • Singapore alone has had 30 exits since 2007, 13 in 2013 • Value of exits increased from 51 MM in 2010 to 400 MM in 2013
- 191. 191 6XXXX Recent exits in SEA Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
- 192. 192 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 193. 193 6XXXX In the financial section of the business plan Business model Financial projections Valuation Funding required and equity offered Use of Proceeds Exit Strategy and ROI
- 194. 194 6XXXX Business model – how will you make money? Revenue sources Cost drivers
- 195. 195 6XXXX Complete business model diagram
- 196. 196 6XXXX Create financial projections 3-5 years of projected balance sheet, income statement and cash flow statements. Project from bottom up and top down Sales growth and market share are key Project cash requirements using a detailed budget Yr 1 Yr 2 Yr 3 Yr 4 Gross Revenues Operating Expenses EBITDA Metric: Ex: Units sold/leased Scalability necessary for VC investment - $50MM in annual rev
- 198. 198 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 199. 199 6XXXX Company valuation methods Price to earnings (p/e) Dividend yield Multiple of book value Comparables Discounted Cash Flow (DCF) VC method
- 200. 200 6XXXX Valuation – how much is your business worth? How much is your business worth, based on comparables and a DCF valuation of your projected cash flows at an 80% discount rate? Make sure that you can explain how you arrived at this valuation. For seed stage companies, this should generally be in the range of $2-4 MM. Pre-money valuation - worth of the business before VC investment Post-money valuation – after VC investment
- 201. 201 6XXXX VC method of valuation Variation on NPV/IRR method Founders expect to sell company for $25 MM in 4 years Need to raise $3MM; investors require 50% return (discount rate) Post-money valuation = $4.9 MM ($25MM/(1.54) Pre-money valuation = $1.9MM ($4.9MM-$3MM) Equity required = $3MM/$4.9MM = 60.75%
- 202. 202 6XXXX How much equity does the investor receive? Pre-money valuation – Amount invested by VC ÷ (Agreed pre-money value of business + Amount invested by VC) – $3MM pre + 1 MM VC = 25% VC equity Post-money valuation – Amount invested by VC ÷ post-money valuation – $4MM post = 25% VC equity
- 203. 203 6XXXX Pro-forma DCF valuation model
- 204. 204 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 205. 205 6XXXX Key elements of the deal Board of directors Protective provisions Drag-along agreement Conversion Control Price-per-share Valuation Amount of financing Liquidation preference Vesting Options pool Anti-dilution Pay-to-play Economics
- 206. 206 6XXXX Calculate investor’s ROI including dilution
- 207. 207 6XXXX Cap table
- 208. 208 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 209. 209 6XXXX VC vs. entrepreneur - interests Solve sorting problem Minimize agency costs/problems Maximize financial returns Maintain option to abandon Be able to force entrepreneur to exit and distribute proceeds Maintain reputation VC Get outside capital Maximize financial gains from equity stake Retain control, minimize constraints on behavior and decision making Build successful firm Build reputation Get outside expertise and contacts Entrepreneur From Venture Capital Negotiations: VC versus Entrepreneur – HBS Publishing
- 210. 210 6XXXX VC versus entrepreneur Entrepreneur compensation increases when value of VC's stake increases Vesting of entrepreneur's stake Key-person agreements Ability to fire managers Ways to align incentives Due diligence Repeated relationships Monitoring/information rights Ways to reduce information asymmetries From Venture Capital Negotiations: VC versus Entrepreneur – HBS Publishing
- 211. 211 6XXXX VC versus entrepreneur Equity stake senior to that of entrepreneur Option to abandon through staging of investments across financing rounds Forcing exit through decision-making control Convertible debt Puts rights and anti-dilution provisions Ways for VC to protect downside Seat on board of directors Covenants in agreement limiting entrepreneur's ability to use capital in undesirable ways Involvement in operations Super-majority rights Ways for VC to control decision making From Venture Capital Negotiations: VC versus Entrepreneur – HBS Publishing
- 212. 212 6XXXX Entrepreneur versus investor Maximize financial returns Maintain option to abandon Be able to force entrepreneur to exit and distribute proceeds Maintain reputation VC Get outside capital Maximize financial gains from equity stake Retain control, minimize constraints on behavior and decision making Build successful firm Build reputation Get outside expertise and contacts Entrepreneur
- 213. 213 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 215. 215 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 216. 216 6XXXX Communicating with investors Business plan Executive summary Investor presentation Formal and informal presentations
- 217. 217 6XXXX Use meaningful titles The title of each slide should communicate the key message for that slide. For example, if you have a slide that shows projected sales, do not make the title "Projected Sales." Instead, make the title something like, "Projected Sales in 2003 are $3 Million."
- 218. 218 6XXXX Less is more Your message needs to be clear and concise Clean visual design – avoid chart junk and “design-itis” On presentation slides, less is more – slides, bullet points, text If you can't explain your message simply, you need to re-formulate your message.
- 219. 219 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 220. 220 6XXXX How long does it take to make a first impression? First impressions are critical You make yours in the first 7 seconds of your presentation How long to feel someone is trust-worthy? 0.1 second How can people decide so quickly? Appearance and body language.
- 221. 221 6XXXX You can’t judge a book by its cover, can you? Appearance counts Attractive people are viewed as more interesting, credible, trustworthy and persuasive Good looking people get better jobs, tall men perceived as powerful
- 222. 222 6XXXX Which one is more likely to be the CEO? In the U.S. population, about 14.5 percent of all men are six feet or over Among CEOs of Fortune 500 companies, that number is 58 percent 3.9 percent of adult men are 6'2" or taller Among CEOs, 30 percent were 6'2" or taller An inch of height is worth $789 a year in salary From Blink – Malcolm Gladwell
- 223. 223 6XXXX You can’t judge a book by its cover: Part II
- 224. 224 6XXXX You can’t judge a book by its cover: Part III You can’t judge a book by its cover; appearance doesn’t matter Everyone judges books by their cover; appearance matters a lot We can be seriously misled by this approach – Susan Boyle So why does everyone judge a book by its cover?
- 225. 225 6XXXX All stereotypes are wrong, aren’t they? Beauty is not in the eye of the beholder – standards of beauty are innate One-week old babies look longer at attractive faces Beauty is not only skin-deep Bi-lateral symmetrical and composite appearance are correlated with genetic and developmental fitness Tall and strong men were more successful in our ancestral environment
- 226. 226 6XXXX Presentation dos and don'ts Rock back and forth - nervous Fidget - nervous Shake leg while sitting – bored, nervous Too many um and uh Voice too soft – shy; too loud – overbearing Rubbing back of the neck – bored Don’t Stand up straight, open body language – nothing crossed Arms at side - relaxed and proper gesticulation – hands below chin and within shoulder ranger Be aware of hands and feet Face smiling and inviting Silent pause – thoughtful and confident Do
- 227. 227 6XXXX Maintain proper eye contact Too little eye contact – lying Too much eye contact – stalker stare Look directly at the audience for emphasis or conviction Sweep and click to create connections Handshake – strong and confident. Pump 2-3 times, then release. Don’t use two hands
- 229. 229 6XXXX Getting past gatekeepers Why are presentations important? Understand gatekeepers’ incentives Avoid raising red flags Attention to detail Get it right the first time
- 230. 230 6XXXX Why are presentations important? You’re fired!
- 231. 231 6XXXX What causes choking? Top performance under pressure requires focus and relaxation Too much focus on performance causes skill to break down Forget about your bad shots; remember your good shots
- 232. 232 6XXXX Create takeaway messages People remember the first or last things that you say, so start and end the presentation strong Communicate your important points clearly, concisely and memorably. People remember stories more easily than lists of facts, so if you can make any of your key points in story form, that can be helpful.
- 233. 233 6XXXX Do not read your slides Do not just stand and read your presentation slides. Makes your presentation redundant and therefore uninteresting, since the audience can just then read the slides. Try to pick out one or two important points on each slide to discuss in more detail.
- 234. 234 6XXXX Practice and test Analyze the details of your presentation, then master those details by practice, practice, practice. Arrive early and if you are using any technology, test it If you can not get in early, try to test the night before It is OK to be nervous before you begin
- 235. 235 6XXXX Q&A is the most important part Audience has a chance to ask you about what is on their mind. Q&A is do or die time. Prepare for Q&A by studying your material in-depth Anticipate likely difficult questions and formulate answers Note questions you are asked and if you did not have a good answer to a specific question, formulate one for next time. Don’t disagree - agree
- 236. 236 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 238. 238 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
- 239. 239 6XXXX Demo day
- 241. 241 6XXXX The customer discovery process Phase 1 State Hypothesis Draw Business model canvas Phase 2 Test the problem Phase 4 Verify or pivot Phase 3 Test the solution Customer validation
- 242. 242 6XXXX Testing the problem • Do we really understand the customers problem? • Do enough people care about the problem for the business to scale? • Will they care enough to tell their friends? Key questions • Designing experiments for customer tests • Preparing for customer contacts and engagements • Testing customers understanding of the problem and assessing its importance to customers • Gaining understanding of customers • Capturing competitive and market knowledge Key steps
- 243. 243 6XXXX Design tests and pass/fail experiments
- 244. 244 6XXXX Prepare for customer contacts – physical Start with 50 target customers Develop a reference story Start the appointment setting process
- 245. 245 6XXXX Build low-fidelity MVP – web/mobile Makes sure the problem or need is an urgent one Presents the problem Asks for a response Can use multiple MVPs
- 246. 246 6XXXX Test understanding of problem and assess its importance - physical Develop a problem presentation The problem meeting Understand how they solve the problem today Collect information on everything Amalgamate and score customer data
- 247. 247 6XXXX Low fidelity MVP problem test – web/mobile Push – push contacts need referral sources Pull – pull strategies Pay – pay for contacts Drive traffic and start counting Consider scalability Use traffic measurement tools
- 248. 248 6XXXX Gain customer understanding Participate in their culture Get to know real customers Internalize customer experience Understand how they discover new ways to spend their time
- 249. 249 6XXXX Contact us Douglas Abrams Expara Pte. Ltd. dka@expara.com www.expara.com 65-6323-3084, 65-9780-5381 (hp) Block 71 Ayer Rajah Crescent, #02-10/11 Singapore 139951