Nscc hackathon
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This document summarizes Douglas Abrams' presentation on "From Idea to Investment". It provides an overview of business models and how to prepare an idea for investment. Key elements for success include developing an innovative product, identifying customers, and making money. The presentation addresses questions investors will ask about the value proposition, market, marketing strategy, competitive advantage, and financials. It also discusses funding stages and sources, as well as effective entrepreneur-investor communication.
Nscc hackathon
- 1. August 2016 From Idea to Investment NSCC Hackathon Douglas Abrams
- 2. 2 6XXXX Douglas Abrams About the facilitator • Wharton MBA • JP Morgan – Vice President - IB Technology, Global Markets Internet Marketing • Parallax Capital Management – Co-founder and MD - Venture Capital • Extream Ventures – Co-founder and MD - S$20 million VC fund • Expara – Founder and MD - IDM Ventures Incubator, fund, advisory, training • NUS – Adjunct Associate Professor, Business School, Entrepreneurship • Sasin – Visiting Professor, Venture Capital
- 3. 3 6XXXX Douglas Abrams From Idea to Investment • Overview of business models • Preparing the idea for investment
- 4. 4 6XXXX Douglas Abrams Why do ventures seek investment? • A big piece of a small pie? • A small piece of a big pie? • Risk and return? Founder Investors Investors Founder
- 5. 5 6XXXX Douglas Abrams Why do investors invest in ventures? • Risk and return are highly correlated • You cannot increase return without taking more risk Return Risk Potential outcomes
- 6. 6 6XXXX Douglas Abrams Risk and return – small versus scalable business • Small business: limited scope, complication and risk. Slow growth. • Scalable business: significant scope, complication, and risk. Rapid growth.
- 7. 7 6XXXX Douglas Abrams How do entrepreneurs fund growth? • Internally generated • Debt • Hybrid • Equity
- 8. 8 6XXXX Douglas Abrams Cost, control, growth and risk Internal Debt Equity Source of funds Cost Lose Control Growth $ Risk Impact of funding Low Somewhat High
- 9. 9 6XXXX Douglas Abrams Companies founded with venture capital www.nvca.org
- 10. 10 6XXXX Douglas Abrams Industries created by venture capital www.nvca.org
- 11. 11 6XXXX Douglas Abrams The investor’s decision tree Innovative? Yes Value proposition? Yes Fast-growing market? Yes Exit No No No
- 12. 12 6XXXX Douglas Abrams Problem Solution Key Metrics Cost drivers Revenue model Value proposition and innovation 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
- 13. 13 6XXXX Douglas Abrams 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
- 14. 14 6XXXX Douglas Abrams Diamond Rio versus iPod
- 15. 15 6XXXX Douglas Abrams 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
- 16. 16 6XXXX Douglas Abrams Business model innovation: 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
- 17. 17 6XXXX Douglas Abrams From Idea to Investment • Overview of business models • Preparing the idea for investment
- 18. 18 6XXXX Douglas Abrams Questions to answer • Innovation • Value proposition • Market identification and analysis • Marketing strategy • Sustainable competitive advantage • Financials
- 19. 19 6XXXX Douglas Abrams Value proposition and innovation 1. What is the painful problem you are solving for customers? 2. What is your product and what is innovative about it? 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?
- 20. 20 6XXXX Douglas Abrams Market timing – entering at the inflection point Measure of performance Measure of effort invested The technology adoption S curve
- 21. 21 6XXXX Douglas Abrams Types of markets • Existing markets • Re-segmented markets/niche market • New market • Clone market
- 22. 22 6XXXX Douglas Abrams Top-down market sizing Total addressable market Target market Target segment Market share
- 23. 23 6XXXX Douglas Abrams Bottom-up market sizing
- 24. 24 6XXXX Douglas Abrams 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?
- 25. 25 6XXXX Douglas Abrams 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?
- 26. 26 6XXXX Douglas Abrams Questions: creating and sustaining advantage 1. How is your product better than your competitors? 2. How are you positioned in your market? 3. What are your IP and competitive strategies to create barriers to entry for small followers and large companies?
- 27. 27 6XXXX Douglas Abrams In the financial section of the business plan 1. Business model – Revenue model – Cost structure 2. Financial projections 3. Valuation 4. Funding required and equity offered 5. Use of Proceeds 6. Exit Strategy and ROI
- 28. 28 6XXXX Douglas Abrams Stages and sources of funds 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
- 30. 30 6XXXX Douglas Abrams Key elements of a term sheet • 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
- 31. 31 6XXXX Douglas Abrams Entrepreneur and investor communication • Executive summary – 1-3 pages • Business plan – 25 – 50 pages • Investor presentation slides • Verbal presentations to investors – informal and formal
- 32. 32 6XXXX Douglas Abrams Getting to gatekeepers • It’s not what you know; it’s who you know • Network, network, network • Strong ties and loose ties
- 33. 33 6XXXX Douglas Abrams Getting past gatekeepers • Why are presentations important? • Understand gatekeepers’ incentives • Avoid raising red flags • Attention to detail • Get it right the first time
- 34. 34 6XXXX Douglas Abrams Effective presentations are simple • Your message needs to be clear, concise and simple • Clean visual design – avoid chart junk and “design-itis” • On presentation slides, less is more – slides, bullet points, text • Use meaningful titles • Do not read your slides
- 35. 35 6XXXX Douglas Abrams 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
- 36. 36 6XXXX Douglas Abrams Nailing the Q&A • 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
- 37. 37 6XXXX Douglas Abrams 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