1.PITCHING INVESTORS Helsinki , May 9, 2012BILL PAYNEFinnvera / StartupSaunawww.fiban.org/billpayne

2. Bill Payne is an active angel investor, board member, and advisor to entrepreneurs.He assisted in founding four angel groups: the Frontier Angel Fund (2005), TechCoast Angels (San Diego 2000), Vegas Valley Angels (2003) and Aztec VentureNetwork (1999).For three decades, Bill Payne has successfully founded or invested in over 50 start-up companies. He served as an Entrepreneur-in-Residence to the KauffmanFoundation for twelve years. While there, he directed the development of thePower of Angel Investing education series for entrepreneurs and angel investors.He has served as lead instructor for over 100 seminars in seven countries.In 2009, Bill was named the Hans Severiens Award winner as the outstanding angelinvestor in America. 3. AGENDABusiness plans for startup entrepreneursBusiness plan contentsPitching Investors PowerPoint PresentationsCopyright BillPayne.com 2012 4. Classic CompaniesLife Style Businesses Single store retail is typical Most service businesses are lifestyle Personal income is objective not building equity(Value of business) Job creation become steady stateHigh Impact Businesses Product companies (seldom service companies) Growth is key (jobs and revenue) Building Equity High personal income is not the goal 5. Product and Capital LifecycleIdea Innovation PrototypeIntroduction Growth Maturity Proof of Pre-SeedSeed & Early Later conceptStart-up Government SourcesPROFITFriends & FamilyVenture Capital Self Angel Investors &IPO, BankSeed Stage VCsFirst sRevenuesVALLEY OF DEATH TIME 6. Typical Investment Size Friends and Familyo $1000 to $10,000 o Seldom larger than $100,000 Angel investors and Seed Stage VCs o Typically $150,000 to $1 million o Seldom larger than $1.5 million Classic venture capital investors o Typically greater than $2-4 million, depending on location 7. Angel Rating System Management team 30% Size of opportunity 25% Product & technology15% Competitive Environment 10%Sales channels, marketing10%Need for more funding 5%Other 5% 8. Business Plansfor Startup Entrepreneurs 9. What is a Business Plan A complete description of your businessNOT solely a description of your product or technology Comes in several flavors each used for differentpurposes Must be written by you, but Use a template Employ editors Engage advisors 10. Do you need a Business Plan?Ignore investors who say I never read plansThe business plans is written for: You do you really understand all aspects of the business For employees, partners and investors Clarity of purpose and direction Alignment of interests 11. Business Plans for StartupsBusiness Plan Description of Form Use of Form with InvestorsElevator Pitch2-5 minute verbal summary First introductionVideo Pitch Covers entire planCapture interestNot use product/technologyGoal: Another meetingExecutive Summary 2-page summary of planIntro to opportunityComprehensive but brief Capture interestInclude contact information Goal: Another meetingPowerPointFor multiple investorsPresentation plus Q&APresentationFull plan, not just product Discuss: Investment offering10 slides, 20 minutes Goal: Enter Due DiligenceFull Business PlanFull plan with financials Prepared for entrepreneur20 -50 pagesand investorsWritten first/by entrepreneur Due diligence guide 12. When to Use Which PlanATTRACTING INVESTORS (casting the lure) First contact Elevator pitch (verbal) Video pitch (video) Executive summary (written) Investors never write checks when pitched Objective: Get a meeting Provide contact information Get a business card Ask for meeting or to follow up 13. When to Use Which PlanSETTING THE HOOK WITH INVESTORS First formal meeting PowerPoint presentation Investors still wont write checks Objective: Solidify interest Find potential lead investors Begin due diligence process Intense interactions with investors 14. When to Use Which PlanREELING INVESTORS IN Due diligence process (2-3 months) Validation of Business Plan DD Team validation Negotiate term sheet DD Team members agree to write checks Other investors will follow Be patient: Closing takes time 15. Business Plans Content 16. Business Plan ContentPRODUCT OR SERVICE What problem do you solve? What makes your product amust have to customers? What are the unique featuresof your product? What differentiates you from the competition? Why willcustomers insist on buying your product? What competitive advantage? What keep the competitionfrom copying your product, especially those with lots ofresources? 17. Business Plan ContentMANAGEMENT TEAM What skills and experiences do you bring to this business? Experience in the business sector Management and leadership Describe the rest of your team, including any waiting in thewings What are you doing to build a world-class team? Who are your advisors? Board of directors? 18. Business Plan ContentSALES AND MARKETINGWhat is the size of opportunity? Annual revenues of the addressable or target market Who are the key customers in this market?What customer relationships are established? Are customers using or at least testing your product?What sales channels will you utilize? How will you sell to these customers? Partners?What is your branding and pricing strategy? 19. Business Plan ContentCOMPETITIVE ANALYSIS Who is selling in this marketplace SWOT Analysis Your company and products versus thecompetition Strengths Weaknesses Opportunities Threats Why would customers buy from you? 20. Business Plan ContentOPERATIONS Where will product be manufactured? Partnering: Vendors, manufacturers Sales cycle and idiosyncrasies Product development pipeline Inventory management and issues Facilities and outsourcing 21. Business Plan ContentPROFORMA FINANCIALS (five year projections)Income statements build revenues from the bottom up (who will buy what and when)Cash flow projections how much cash will it take to achieve break-even? How fast can the company grow on cash from earnings?Balance sheet for five yearsFinancing requirements and sources to break-even for growth 22. Business Plan ContentGROWTH PLANSKey milestone how does investment increase valuation of the company?New products and management team additions necessary to exceed expectationsExit strategy for the company What large public companies would want to buy? Why? When? 23. Tips on Business Plans Find a template and good advisors Keep it balanced, dont focus only on product or technology Keep it concise. Put summaries in the body and extendeddata and spreadsheets in appendix Find and use outside market validation Size and growth of market Use editors, make it readable 24. Dont Make These Mistakes 25. 1. Taking dumb moneyfrom many investors! 26. 2. Pitching only product andtechnology. Investors want to seebusiness plans and the investmentopportunity 27. 3. Overestimating the market size 28. 4. Dont ball park revenues as apercentage of the total market. 29. 5. Dont press afirst mover advantage 30. Pitching InvestorsPowerPoint Presentation Content 31. The Art of the Start Guy Kawasaki Rule10:20:30 Rules for Pitching Investors 10 - Ten slides Give investors the info they need 20 - Twenty minutes Leave plenty of time for questions 30 - Minimum font sizeDo not clutter slides with excessivewords and data. Slides are an outlineof the presentation 32. From the Tech Coast Angels PPT Presentations ContentA Cover Slide: Company name, business one-liner and your contact information (doesntcount as one of the 10). 33. From the Tech Coast Angels PPT Presentations Content1. Market What problem does the product/service solves for customers a solution theyabsolutely cannot live without a must have? 34. From the Tech Coast AngelsPPT Presentations Content2. Solution Describe the product(s), thefeatures and benefits of the product. What isunique about your solution? 35. From the Tech Coast Angels PPT Presentations Content3. Competitive Position Who are thecompetitors, what are their strengths andweaknesses, and what are your advantages overeach competitor. Why would customerspurchase product from you? 36. From the Tech Coast AngelsPPT Presentations Content4. Marketing /Sales /Support How will you makecustomers aware of the product? What is yourvalue proposition to customers? How will youestablish a recognizable brand? Describe saleschannels. How will you provide product andtechnical support to your customers? How long isyour sales cycle? 37. From the Tech Coast AngelsPPT Presentations Content5. Business Strategy Most of us know how tofind the first customer for a product. But, it ismore difficult to describe how to grow thebusiness. What partnerships, teammembers, facilities and capital will be requiredto achieve the five-year plan? 38. From the Tech Coast Angels PPT Presentations Content6. Financial Projections It would be nice toprovide the usual spreadsheets: Incomestatements, balance sheets and cash flowprojections for the first five years of operations.However, in a 20 minute presentation, anabbreviated income statement showing revenueramp and anticipated earnings will probablysuffice. In some cases, cash flow statements orbalance sheets might be available in an appendix. 39. From the Tech Coast AngelsPPT Presentations Content7. Funding Sought How much money do youneed to achieve early milestones? How muchadditional funding will be necessary to achievepositive cash flow? From what sources to youexpect to raise these funds? And when? 40. From the Tech Coast Angels PPT Presentations Content8. Management What is the relevant backgroundand experience of the existing team? Describe thecharacteristics of additional team members thatwill be required to achieve positive cash flow.Describe your advisors and board of directors. 41. From the Tech Coast Angels PPT Presentations Content9. Milestones Investors want to know how thisround of funding will increase the value of thecompany. What accomplishments can thecompany achieve and how will that increase thevaluation of the company? 42. From the Tech Coast Angels PPT Presentations Content10. Exit Strategy In most cases, IPOs are nolonger a rational exit expectation for startupinvestors. Which large public companies might beinterested in buying this company and why? Whatdoes the company need to achieve to attractpotential acquirers? 43. Tips on PPT Presentations Get to meeting on time, dress neatly Follow 10:20:30 Rule Do not read slides or use notes, use slides as anoutline to make sure you cover all the material The audience wants to listen to you, not readyour slides Finish presentation on time or early, leave lots oftime for questions Practicepracticepractice a smooth delivery 44. MORE INFORMATIONwww.fiban.org/billpayne