Fundraising Series (Part One) - "Building Your Story"
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The document outlines a fundraising series that features multiple experts discussing financial modeling, value propositions, and market analysis for startups. Key topics include creating a three-year financial plan, constructing a compelling value proposition for investors, and understanding competitive landscapes. The presentations emphasize the importance of effective storytelling in financial projections to attract potential funding and support business growth.
![VC’s perspective
What VC’s Say What VC’s Mean
Who do you compete with How are you different from the 15
today? other dating services I this week?
Who will you compete with When does Facebook plan to do
tomorrow? this?
I’d like to better understand how Sorry, I was busy admiring my new
you are different, what’s your iPhone 5 when you told me about it
competitive advantage? just now.
[Insert name here] just raised Your competition has deep
$50M from these 10 firms, how pockets…will anyone be willing to fund
are you differentiated? your next round?
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Fundraising Series (Part One) - "Building Your Story"
- 1. day and The Fundraising Series (Part One) – “Building Your Story” April 10, 2013 Featuring: • David Ehrenberg, Early Growth Financial Services • Arif Janmohamed, Lightspeed Venture Partners • Stephanie Palmeri, SoftTech VC • Sean Jacobsohn, Emergence Capital Partners
- 3. Agenda 8:00 am – 8:05 am Chad Lynch - Introduction 8:05 am – 8:45 am David Ehrenberg – Creating Your 3-Year Financial Plan with Q&A 8:45 am – 9:30 am Arif Janmohamed – Constructing Your Value Proposition with Q&A 9:30 am – 10:10 am Stephanie Palmeri – Understanding Your Competitive Landscape / Market Sizing / Q&A 10:10 am – 11:00 am Sean Jacobsohn – Go-To-Market Strategy / Q&A
- 5. CREATING YOUR 3-YEAR FINANCIAL PLAN David Ehrenberg CEO Early Growth Financial Services
- 6. 2 About Early Growth Financial Services • Extensive experience working with companies at all stages of development • Help startups keep internal resources focused on their business • Specialize in venture funding, debt financing, mergers & acquisitions, strategic planning, corporate strategy, business and financial plans, corporate governance, and creating company infrastructure • Operational expertise includes: accounting, HR, legal, facilities, IT, and administrative functions Early Growth Financial Services: Providing the seeds to help your company grow.
- 7. 3 David Ehrenberg Bio • CEO Early Growth Financial Services • CFO for Abound Logic • Controller for Microsoft • Key member of finance team at Extreme Networks and Voice Stream Wireless • CFO for Radiant Research • Mergers and acquisition work for Deloitte & Touche • CPA • MBA from University of Washington • BS Accounting and Finance from Georgetown University Early Growth Financial Services: Providing the seeds to help your company grow.
- 8. 4 Presentation Overview • What is a financial model? • Process for creating a financial model • Goals, objectives, and milestones • Bottom-up financial projections • Spend • Budgeting • Top-down projections • Cost assumptions • Reforecasting Early Growth Financial Services: Providing the seeds to help your company grow.
- 9. 5 Why a 3-Year Financial Model? • Provides a comprehensive financial picture • Forces you to evaluate key performance drivers • Validates your assumptions • Puts challenges into perspective • Creates iterative process which continuously improves your assumptions • Gives you insight into your business model • Clarifies your decision-making process (short-term and long-term) • Gives you the leverage of an accurate baseline valuation Early Growth Financial Services: Providing the seeds to help your company grow.
- 10. What Goes into a 3-Year Financial Model? Major objectives Timeline Milestones Key Key variables assumptions Trending analysis Early Growth Financial Services: Providing the seeds to help your company grow.
- 11. Identify major objectives for your company Assess where you are and what you want to achieve: Venture funding and Positive cash burn and negative cash burn no venture funding What do you want to What are the goals you want to accomplish with next raise? achieve during this time period? Early Growth Financial Services: Providing the seeds to help your company grow.
- 12. Process for Creating Financial Model 1. Go to stakeholders and members of executive team – what do they need to achieve objectives (revenue, product, market, strategic, etc.)? 2. What is needed from a programmatic perspective? 3. Compile this information and go back to CEO (maybe executive team) to discuss total amount requested relative to milestones 4. Dialogue about what is wanted and tradeoffs 5. Use dialogue to create a bottom-up forecasting budget Early Growth Financial Services: Providing the seeds to help your company grow.
- 13. 9 Bottom-Up Financial Projection 3. Headcount projections / milestone funding 2. Calculate spending necessary to achieve revenue/development 1. Project revenue growth over the next one to three years Early Growth Financial Services: Providing the seeds to help your company grow.
- 14. Spend for Bottom-Up Projections • Customer/Cost details • Human resource costs • Consultant and professional services • Research and development • Office and admin • Capital spending Early Growth Financial Services: Providing the seeds to help your company grow.
- 15. Budgeting • Budgeting created on accrual basis: budgeting versus actual results • Difference between cash and accrual is around capital expenditures • Report budget by department and major cost drivers (expense categories and revenue categories) • Plan actions: how quickly will this impact revenue and what will you be able to achieve based on spending • Identify key variables • Identify key revenue assumptions • Run different scenarios (need to be able to easily adjust key assumptions to do this) Early Growth Financial Services: Providing the seeds to help your company grow.
- 16. Budgeting Exercise • If company has been around for a while, look at historical costs • Start from a milestone perspective: what do you need to accomplish before you run out of money or in a specific time period • Ask budget owners what they need to accomplish goals • Tradeoffs • Trending analysis • Trending initiative Early Growth Financial Services: Providing the seeds to help your company grow.
- 17. Why Top-Down Projection? • Bogus projection as compared to bottom-up projections • Requested as part of investment pitch deck to prove venture opportunity • VCs want to make sure there is a major opportunity – big potential market • Exercise to sit down with CEO and head strategy folks • Use data to see how quickly you can get penetration Early Growth Financial Services: Providing the seeds to help your company grow.
- 18. 14 Top-Down Financial Projections 1. Start with market size 2. Identify your particular segment 3. Extrapolate to calculate total potential revenue Early Growth Financial Services: Providing the seeds to help your company grow.
- 19. Check Cost Assumptions • Finance team has obligation to check cost assumptions: • Salary • Recruiting costs • Cost per square feet for real estate • Etc. Early Growth Financial Services: Providing the seeds to help your company grow.
- 20. Reforecasting • Don’t do a 5-year plan, at most 3-year plan • Every year is an annual budgeting exercise • Update your budget on a quarterly basis (at least) • For investors do it on a quarterly basis for first year and then annually after that • What’s realistic in terms of timeline and reforecasting on monthly or quarterly basis? Early Growth Financial Services: Providing the seeds to help your company grow.
- 21. 17 Final Thoughts “The point of financial projections is to tell a story with numbers—a story about opportunity, resource requirements, market forces, growth, milestone achievements, and profits. Your job is to create a numerical framework that complements and reinforces the vision you’ve painted with words.” – Guy Kawasaki Early Growth Financial Services: Providing the seeds to help your company grow.
- 22. 18 Contact Info Early Growth Financial Services David Ehrenberg dehrenberg@earlygrowthfinancialservices.com http://earlygrowthfinancialservices.com/ (415) 234-EGFS (3437) Follow us @EarlyGrowthFS Early Growth Financial Services: Providing the seeds to help your company grow
- 23. 19 Providing the Seeds to Help Your Company Grow Early Growth Financial Services: Providing the seeds to help your company grow.
- 25. Constructing your value proposition Fundraising Series Part One Arif Janmohamed @arifj April 10, 2013
- 26. What is a value proposition? The purpose of a value proposition is To ultimately inform a choice/decision A customer value proposition should Articulate the purpose of the product Identify the relevant target audience Capture the significance to the prospective user Specify the category as a reference point Explain the uniqueness of the offering Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 2
- 27. Say again? Attribute Points to consider Purpose What does the product or service do? Audience Who will use, buy, etc. the product or service? How large is the addressable market? Significance What are the key benefits from using the product now? Why will the user care? Is it a painkiller or vitamin? Category In what category does the product compete? Is this a favorable or unfavorable category definition? Uniqueness How does this offering differ from substitutes? What are the key dimensions for differentiation? Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 3
- 28. 3 key investor considerations Is the team equipped to build and sell this product? Is the market worth going after? Does the plan have sustainable leverage? Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 4
- 29. The opening act You have 3 minutes… What have you accomplished Why is your product important How can you do this better than others … before a decision is made (if you’re so lucky) The rest of the hour you’re either Changing his/her mind Supporting the decision (Remember, good investors should stay engaged and ask questions, but it’s your job to make sure they do – through bold statements, informative facts, etc.) Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 5
- 30. Why is a value prop important? The value proposition is key for investors to understand your business It is your elevator pitch – the simpler, the better It forms the storyline for the investor presentation It eventually becomes a part of the investment thesis The investor is not an expert in your business… YOU are! Teach them as much as you can without reinventing the wheel And the investor uses it to do his/her job Is the purpose worth taking on startup risk? Is the audience large enough, but targeted? Is the significance valuable enough to customers? Is this an attractive category for investment? Is there something particularly unique about this startup? Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 6
- 31. Takeaway The value proposition is ALL an investor needs to know about your business. So, make sure you concisely emphasize the points that make your business a compelling investment opportunity Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 7
- 32. Back to the 3 considerations People, market, product Exceptional entrepreneurs passionate about customers Large, rapidly growing market demanding a solution Innovative and differentiated product with sustainable advantage What do you need? A plan to get to market and reach profitability The team to execute on this plan Technology / product that will win Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 8
- 33. Remember their checklist Exceptional team Compelling product value Passionate entrepreneurs Technical/market advantage Driven to succeed Clear value proposition Unique insights Focus, focus, focus Desire world-class mgmt Leverages trends/standards Founderitis-free Roadmap for expansion Operate ethically Defensible barriers Large, rapidly growing market Realistic go-to-market plan Total addressable market Marketing, sales, Acute pain demands solution distribution, pricing Devotion to customer Operating plan consistent Business model profitability Financing and milestones Competitive landscape clear Liquidity options Low/efficient burn Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 9
- 34. Manage the process Step 1: Step 3: Step 5: Contact VC Firm Due Diligence Close Financing Day 21 Day 60 Day 1 Day 90 Step 0: Step 2: Step 4: Decision to raise Initial Presentation Sign Term Sheet Ask yourself if you need venture financing Sell the story about your vision The goal is to convince others of your business Raising financing is about managing a process Listen to feedback along the way, iterate Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 10
- 35. To cap it off… Articulate your business value Think like an investor Create the story and tell it Begin with the customer value proposition Construct an investor value proposition: team, market, and product Manage fundraising as a process Reminders Focus on the business fundamentals Emphasize the points of validation Be transparent about challenges Iterate, iterate, iterate! Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 11
- 36. Arif Janmohamed arif@lightspeedvp.com @arifj
- 37. MARKET SIZING & COMPETITIVE LANDSCAPE Steph Palmeri, SoftTech VC / @stephpalmeri TOTAL ACCESS Fundraising Series, Part I April 10, 2013 Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 38. Our Three Asses Rule This Presentation’s Focus Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 39. proprietary & blackbox.vc Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute confidential
- 40. Big-Ass Market * “Big enough” stress test – Greater than $1B market opportunity – Company, not feature – How does your startup get to $100M in revenue? • 10% of $1B market v. 50% of $200M (unrealistic!) * By raising capital, you commit to match return expectations Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 41. Market Types Existing Resegmented New Market Market Market better, faster, fundamental brave new cheaper shifts, niche world which one is you? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 42. Market Analysis 101 * Problem definition: – What are the underlying needs you solve? * Identify your customers – What do they look like? – How are you helping them? – Are your users also your buyers? (who pays?!) * Addressable Market = # Customers * LTV – What is the relevant market? – Your expected share? (be reasonable, its not 100%!!) – Growth / overall market potential? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 43. Top Down Market Sizing Addressable Market 1. Industry, analysts estimates, ≠ Total Market Size market data, etc. Total Apparel 2. Broken down to appropriate Market (US) sub-segment by: 1. Product Category 2. Geography Total Kid’s Apparel Market (US) 3. Vertical 4. Sales Channel 5. Customer Total Online Kid’s 6. Etc….. Apparel Market (US) Total Address Market (topdown) Your revenue if you captured 100% of your addressable market. Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 44. Bottom Up Approach Identify & multiply the following: # of potential customers x est. revenue per user per year Total Addressable Market(bottom up) Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 45. Now Compare Top Down Bottom Up V. Addressable Addressable Market Market …. are they reasonably close? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 46. Market Sizing Tips * Existing: Known customer + understood need – Know entities make it ‘easier’, for you and investors – Understand market nuances, don’t be careless * New markets: New customer + new use case – Emerging macro trends – Adoption rate assumptions – Timing matters creativity + basic algebra + educated guesses = bullshit but shows us how you think about your space Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 47. proprietary & blackbox.vc Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute confidential
- 48. Market Attractiveness Size matters… (but don’t overlook) * Competition * Monetization potential * Market Growth * Market Share * Timing Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 49. Competitive landscape Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 50. You’ll probably have a slide that looks something like this… Feature list YOU! Giant Fledging Not even in Incumbent Competition your market Feature everyone has ✓ ✓ ✓ ✓ Feature that some of the ✓ ✓ competition has Unnecessary feature your ✓ competition cut Feature you think you have ✓ ✓ Feature you wish you had ✓ ✓ Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 51. … or this... Fast Your Logo Here! Others Others Others Traditional Others Modern Others Others Others Others Slow proprietary & blackbox.vc Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute confidential
- 52. Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 53. but regardless… explain your startup in the context of the environment in which you operate including those who you partner with and those who you compete against and those who keep you awake at night proprietary & blackbox.vc Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute confidential
- 54. overview * Competitive Landscape – Examine the macro business environment – Review your competition (past, present, future) – Benchmark yourself * Competitive analysis – The classic SWOT analysis * Competitive advantage Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 55. Classic completive analysis * Examine the macro business environment – Economic + political trends – Cultural + social shifts – Technological innovation – Regulations + legislation * Know the industry ecosystem surrounding your startup – Competitors (direct, indirect, potential entrants) – Suppliers/Partners – Substitutes – Customers Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 56. Pop Quiz Q: Is your industry one or more of the following: a. Considered crowded? b. Fairly complex? c. Scary to investors? Show investors A: Consider making an how much you know (and they ecosystem slide don’t) about your space… OWN IT! Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 57. Competitive analysis * Comparisons you might put in a competitive grid: – Products / feature set You Them – Customers Feature #1 – Market share Feature #2 – Distribution strategy Feature #3 – Technology – Pricing Wow, your startup – Resources are they well funded? takes all the boxes on your arbitrary grid! Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 58. SWOT Analysis – Your Competitive Position Strengths: why you kick ass Weaknesses: why you don’t kick ass - Team - Team - Technology - Lack of Technology - Scalability - Scalability issues - Execution - Inability to execute - Customer acquisition & retention - Unreliable product/service - Distribution - Poor distribution Opportunities: why you might kick ass Threats: why you might not kick ass - Early mover - Competitors w/ more $ - Emerging segments - Emerging segments - New technology - New technology - New distribution channel - New distribution channel - Changing tastes - Changing tastes - Etc. - Etc. Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 59. Competitive advantage * Barriers to entry * Create a long-term sustainable advantage – Continuous learning & innovation – Excellence and speed in execution * Don’t obsess about others – A little competition is healthy – Keep an eye on competition but don’t loose focus on what’s really important … the customer Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 60. VC’s perspective What VC’s Say What VC’s Mean Who do you compete with How are you different from the 15 today? other dating services I this week? Who will you compete with When does Facebook plan to do tomorrow? this? I’d like to better understand how Sorry, I was busy admiring my new you are different, what’s your iPhone 5 when you told me about it competitive advantage? just now. [Insert name here] just raised Your competition has deep $50M from these 10 firms, how pockets…will anyone be willing to fund are you differentiated? your next round? Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 61. How to reach Steph Palmeri: w: www.softtechvc.com b: www.stephpalmeri.com t: @stephpalmeri Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute
- 63. Go-To-Market for Startups Sean Jacobsohn @sjacobsohn April 10, 2013
- 64. Types of Business Development Referral partnerships Product integrations Corporate development Reseller partnerships
- 65. Referral Partnerships Typically product and services companies Co-marketing investment Equitable referral volume Examples: Trustnode, Workday
- 66. Product Integrations Extend product capabilities Build vibrant developer ecosystem Desired partner has become a market leader at significant scale Examples: Salesforce, Box, Yammer
- 67. Corporate Development Expand into new geographies Add product capability quicker Eliminate competition Examples: WageWorks, Xactly
- 68. Reseller Partnerships Outflank competition Broader market coverage Cost-effective customer acquisition Examples: Cornerstone, Adaptive Planning
- 69. Challenges with Reseller Partnerships Value proposition for the partner Channel conflict Negotiation of terms Enablement of the partner post-signing
- 70. Partner Enablement Executive sponsorship Build a business plan with metrics Training Start with small wins
- 71. Tips for Launching Business Development Organizational alignment and expectations Dedicate sufficient resources Leverage partners who’ve had success with a 3rd party product Focus on meaningful partnerships with fewer companies