Marketing to Investors 2~17~16 - GW New Venture …€¢ • • • • • •

MarketingYourBusinesstoInvestors

CanYouManageMoney?

StevenRogers,[email protected]

2/14/16 1CopyrightRedstones LLC

AlwaysRemember

• Thisismyperspectiveoffindingmoneybasedonmyexperience

• Therearenorulesandlotsofexceptions• Seekotheropinions• Thereisnosecretpathtosuccess– Hardwork– Consumesallyourresources– Verylowchanceofsuccess– Followeverypieceofstring

• Expecttheunexpected


PrepareABusinessPlan• AbusinessplanisadocumentthatexplainstoSOMEONE thereasonWHY yourbusinessshouldexist

• ThinkcarefullyabouttheWHY first– Makemoney?– Solveworldhunger?

• ThenidentifytheSOMEONE andwhatyouwantfromthem– Anequityinvestment(AngelsandVCs)– Aphilanthropicinvestment(foundations)

2/14/16 CopyrightRedstones LLC 3

TheSOMEONEincludesYOU

WhatDoesTheSOMEONEWantToKnow?

• Thisisnotaboutyourbettermousetrap• Thisisnotagrantoraloan• ThisisaboutthecompellingWHY• Thisisaboutyourteamsabilitytorunabusiness• Canyoutakeinput?• Canyoupivot?• Thisisaboutyourassumptions• Theywillassessyourbusinessability• Otherswillassessyourinnovation


InvestorsPriorities• TheTeam– Businessexperience– Domainexperience

• Theidea– Theircomfortzone

• Anewandgrowingmarketthatwillbebig– TheirROI

• Barriers toentry– Protectingtheirinvestment

• Potentialexit– TheirROI

2/14/16 5CopyrightRedstones LLCCantheteamdeliverthebusinessmodel?

KeyTeamAbilities• CEO– Anexperiencedleader– Responsibleforvisionandstrategy– Chieffundraiser

• COO– Managesresources(cash,people,commitments)– Dailytacticaldecisions(many)

• Founders– Createdtheoriginalidea– Theyarethesourceofthepassion

2/14/16 6

Veryraretofindalltheseattributesinoneperson

CopyrightRedstones LLC

QuoteFromGrotech“AtGrotech,weseekoutcompaniesthathavethepotentialtomakeamassiveimpact,"saidFredrick."ThefoundersofWhiteOpsarewellknownfortheconsiderablepositiveeffectthey'vehad-- andcontinuetohave-- onthesecurityindustry.Inaveryshorttime,they'vedevelopedthe'Go-To'solutionforadindustryplayerstocombatfraud,whilebecominganauthoritativevoiceandanintegralresourceforsettingdirectionintheadvertising industryasawhole.Thiscombinationofinfluenceandinnovationenablesthecompanytofundamentallychangethegameinonlinefraud.”


Pro-FormaIncomeStatement• ItisthecoreofyourBusinessPlan• Capturesyourbusinessmodel• Whatareyougoingtodowiththeirmoney?• Yourviewofthefuture• Assumptions• Embodiesyourstrategy• Revealsyourteam’sthinkingandabilities

Itisastrategic lookatthefuturenotafinancialstatement


Yourpro-forma incomestatementshouldanswertheequityinvestor’squestion………

“Whatwillyoudowithmymoneyandhowwillitmakemerich?”

Orthedonor’squestion…......“Willthissocialventurebefinancially

sustainable?”

Ifitdoesn’t, itisabigredflag2/14/16 CopyrightRedstones LLC 9

TheSOMEONEHasExpectations

HowToBuildaPro-Forma• Startwiththeproduct/servicedevelopmenttimeline

• Whenwillbetaproductbeready?• Release1featuresandprice(minimumviableproduct)

• Release2featuresandprice,etc.• Numberofdevelopersandexpense• Whentobeginmarketingproduct?• Whentoaddsalesresources• Howmuchsalesexpensetocreaterevenues?

Itmustalllinktogether2/14/16 10CopyrightRedstones LLC

Pro-FormaIncomeStatement

• Thisisaforecast• Itillustratesyourplans• Itisbasedonyourbestassumptions• Itisatestofconsistency• Itisnotmeanttomeetaccountingrules


Pro-FormaPlusCash

AdditionallinesconveyimportantinformationaboutCASH2/14/16 12CopyrightRedstones LLC

Sales• Mostimportantline,nosales,nobusiness• Salesofproductsand/orservices,donorrevenue• Licenseincome,royalties• Grants,investmentsetc.arenotsales• Notopdownnumbers(e.g.%marketsharegoals)• Explainbottomupassumptions– Whowillbuyitandwhy?– What/whoareyoucompetingwith?– Howwillyougetfirstsale?

• Betacustomers,referenceaccounts– Howwillyougrowannually?

• Howdidyousetyourprice?AreSalesConsistentWithProduct/FeatureAvailabilityandPrice?



CostofSales

• Coststomanufacture, deliver,installetc.– s/wproductcanincludeservercosts(delivery),outsourcedbilling,licensingetc.

• Canincludewarrantyprovisions• Costofgoodsnotsoldbutobsolete/scrapped• Doyouunderstandyourcosts

Caution:Youwillhavetoincurthecostswellaheadofbeingpaidfortheproduct



GrossMargin• $sales– $costofsales=$margin• ($margin/$sales) x100=%margin• Keymetric, theproductmarginfundsyouroperatingexpenses

• Marginschangeovertime– Competitiondrivespricedown– Premiumfeaturescanraiseprice– Costscandropduetovolume– Costscanriseifyouhaveproductreliabilityissues



Selling,GeneralandAdmin(SG&A)

• SalariesandbenefitsofallbutR&Dteam• Tradeshows,advertising,marketingcollateral• Rent• Lap-tops, desk-tops• Phone,internet• Legalcosts• Bankcharges• Etc.

Isyourspendingonsalesandmarketing

consistentwithrevenuegrowth?



ResearchandDevelopment(R&D)

• SalariesandbenefitsofR&Dteam• Includenon-capitalized labtools/eqpt• Includecontractwork

IsyourR&Dspendconsistentwiththenewfeaturesrequiredtostayaheadofcompetition

andsellatacompetitiveprice?



OperatingEarnings

• $Grossmargin- $SG&A- $R&D=OperatingEarnings• OperatingMargin%isakeymetric– OperatingMargin%=(Op’g Earnings/sales)x100

• Typicalerrors– Hugemargins– Insufficientspendingtostayaheadofmarketandcompetition

– Rapidrevenuegrowth,despitebeing“conservative”– Betterearningsthananylargecorporation



RealityCheckApple Pfizer Facebook GM

Sales $171B $51.6B $7.9B $155BGrossMargin 37.6% 81.4% 76.2% 11.6%SG&A 6.3% 27.9% 22.6% 7.9%R&D 2.6% 13% 18% 0%Op’g Margin 28.7% 27.3% 35.6% 3.2%

• Isyourpro-formaconsistentwithsimilarbusinesses?• Compareindustry• Directsalesvs.distributorsalesvs.licensingetc.

2/14/16 25

Source:YahooFinance2012


CapitalSpending• Forthepurposesofthisexercisecapitalspendingismoneyspentonbuying,notrenting,assetsneededtoproducetheproduct.

• Couldbeanyequipmentormachinery thatwillbedepreciatedovertime.

• Couldalsobebuildings,vehiclesetc.ifnecessary

Caution:Capitalequipmentneedstobepurchased,delivered,installedandcommissionedbeforeyoucanmakeanything



CashOnHand

• Youwillalwaysneedsomecashonhand– Payroll– Rawmaterials

• Suppliersdon’tgivestart-upscredit• IfOperatingEarnings+CapitalSpendisnegativeyouneedinvestmentmoney.

• Totalinvestmentrequiredbeforethebusinessisselfsupportingisanimportantmetricforyourinvestors.



InvestmentRequired• Lookslike$6Minvestment required– Forthepurposesofthisexercisethereisnosuchthingasnegativecash

• Domonthlyanalysis tomakesure• Atleast$2Mneededforfirstyear• Askfor18monthsto2yearsrunway• Trytworaisesof$3Meach– Couldgofor$6Mintwotranches

• Aslowerstartmightattract angelseedmoney



Pro-FormaResultIfyouhaveputalltheinitialeffortintoawellthoughtoutpro-forma thenwritingabusinessplanofanysizeoraPowerPointofanylengthwillbeeasy.

FollowthebusinessplantemplateNOTthepro-formasequence.


HaveyousatisfiedtheWHY?HaveyoudemonstratedtoSOMEONEyoucan

managecash?

Summary• Youarecompetingwithothersforthefunds• Alldealsaredifferent,therearenorules• Expecttheunexpected• Getadvicefromanyonethathasbeenthroughthis,ignorehearsay

• Network,network,network• Theprocesscanbelongandverystressful• Takeinputaftereveryencounterandadjust

2/14/16 33

WhatwillyoudowithmymoneyandhowwillitsatisfytheWHY?


FindingSOMEONE

• Youcanimproveyourchancesbybeingtherightpersonintherightplaceattherighttime.

• Areyoutherightperson?• Areyoueverinaplacetobediscovered?• Howmuchtimedoyoumakeavailabletobediscovered?


WheretoLook• www.crunchbase.com• http://thomsonreuters.com/pratts-guide/• www.pitchbook.com• www.mattermark.com• www.cbinsights.com• www.massinvestor.com• www.potomactechwire.com• http://citybizlist.com• www.mava.org• https://dc.tie.org• www.meetup.com/TechBreakfast/• http://tedco.md


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Marketing to Investors 2~17~16 - GW New Venture …€¢ • • • • • •