NBC1 2008, (c) 2008 Jay A. Smith1

Class 11

Elevator Pitches

NBC1 2008, (c) 2008 Jay A. Smith2

Individual Elevator Pitch 7/8 ( 火 )30-45 second “pitch” (every person) Pitch Content (ENGLISH):

Opportunity/problem being solved Target market/customer Product/service to be created

Value being created Why it is better than competition

Business model (how firm will make money) Anything else unique that will capture attention/interest

Pitch Goal: Get enough interest for a meeting Choose the most interesting parts Business idea to use for rest of the class

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Start Pitching

30 sec (soft stop) 45 sec (hard stop) 1 summary sentence – “hook”

Who / produces What / for WhomCompany/ Product / Customer Market

No PC or powerpoint 2 questions from class/instructor

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Class 12

Business Models & Business Strategy Valuation and investors

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Business Model Questions

How do we make money?We sell stuff to…

How do we help customers?

How do we add value?

Inbound Logistics > Operations > Outbound Logistics > Marketing/Sales > Service

Uniqlo AmazonToyota McDonalds Amex

“Value Chain”

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Business Model 　“ Profit Engine” Revenue Sources (how do we get paid?)

Key Expenses Size (volume, scale/growth)

Profit Sales - Product Costs Units Overhead = x - Year Unit Year Year

)(Profit = (Margin x Volume ) - Overheadn nnn

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Business Model + Business Strategy Strategy: Development, protection, adjustment of

business model over time

Plan for executing on Key Success Factors Goal: Sustainable Competitive Advantage

Profit Sales - Product Costs Units Overhead = x - Year Unit Year Year)(

Year 1, Year 2, Year 3,…

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Key Success Factors

Key skills, functions, actions needed to maintain and strengthen business model and strategy

Subscriptions/Memberships Get many members (acquisition effectiveness) Get members at low cost (acquisition efficiency) Keep members from leaving (retention rate) Increase spending per member (share of wallet)

Transaction-based Command above average pricing (value effectiveness) Lower product costs (production efficiency) Lower fixed overhead costs

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Member/customer retention strategies

Adding value/benefits to membership Automatic renewal Increase switching costs

Exit fees (early departure, cancellation) Pain (email address changes) Proprietary systems (MS Windows)

Loyalty cards (point cards, mileage cards) Makes transaction based customers more like members

Membership referrals

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Valuation

Valuation = “price” of the whole company

Valuation depends on both company and market for investment in stocksPublic stocks are priced in an open marketPrivate company stock transactions are usually

negotiated between company and “lead” venture capital investor

Value = f (Σ Profit n) + α (not a strict formula)CashFlow

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Many Factors Affect Valuation Opportunity-Related

Is this a good business opportunity? How big a business can this be, when?

Company-Related Is it a good business strategy? Is this a good team? Right skills, prior success? Is there a sustainable competitive advantage? What are the business strengths/weaknesses, How risky? Biggest risks, challenges? What else is needed to make this work? How badly does the company need financing?

Capital Market-Related What are prices for companies that are similar? How much VC competition is there for the investment? How are the public stock markets doing?

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Valuation Valuation of company = price for the whole company

Market Value = current stock price x total shares Enterprise Value = Market Value – Cash + Debt Example 1: $30.00/share x 5,000,000 total shares = $150,000,000

Determined by what investor pays to own piece of company Valuation = $2,000,000 / 0.25 = $8,000,000 Example 2: VC buys 25% of company for $2 mil.

$8,000,000 “post-money” valuation $6,000,000 “pre-money” valuation

(pre-money = post-money – investment amount: $8 - $2 = $6 mil.)

$2 million

$6 million

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Simple Valuation Calculation

SUPERSOFT CORP. Now YEAR 1 YEAR 2 YEAR 3

Sales 10,000,000

Net Income 1,000,000

Price/Earnings Comps: 15 x 15,000,000

Future Value 15,000,000

Required Rate of Return 30%

Number of Years 3

Current Value to VC future value / (1+rate) years 6,827,492

15,000,000 / (1-.30) 3

VC Ownership

Investment 2,000,000

Ownership Required 29% 4,394,000

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Is eBay a better business than Amazon?

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Is eBay a better business than Amazon?

Source: Yahoo! Finance 7/7/08

PEG= Price/Earning Growth Ratio = Forward P/E

Projected Growth Rate

Earnings Before Interest, Taxes,Depreciation & Amortization

yoy: year over year ttm: trailing twelve months

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Computer Industry “Comps”

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Homework Prepare Business Investor Presentation

Company Name (can change) Initial Business Idea Think Big! Sales > ３億円 in year 3

Schedule7/15 Initial presentation/workshop (English)7/22 Final Presentations (English or E&J)

See Springboard EnterprisesBy 7/29 Final Report (English)

Read “Picture Perfect” 2 page business summary

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Presentation Goal: Convince Investor to Invest Early stage investor into “seed-stage”

business 1-2 Minute Summary of Key Points Important, Interesting Points Early

Sample/Demonstration/Prototype is helpful Creating a COMPANY, not just a product Strategies of business FIT each other

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Making a Successful Venture Business

Idea Entrepreneur Team

CustomerMarkets

StrategicPartners,EarlyUsers,Supporters

Capital Yen/ $

BusinessModel &Strategy

Sales & Marketing

R&D, Production,Operations

Suppliers, Distributors

NBC1 2008, (c) 2008 Jay A. Smith20

Basic Business Plan Questions

What is the opportunity? What is happening? Why? How big can it be? When?

What is the business strategy? Does it fit? Is it sustainable?

What is the business model? How do they make money?

Sales/Profit Years 1-3 How much funding is needed?

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More Strategic Questions

What are the key factors for success? No. 1 merit Number 1 risk Confidence of it working When will you know if it is working? Why? Are these the right people? What is missing?

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Sample Marketing Questions

Who is target customer? How many possible customers are there? How does customer buy? Is the purchase compelling to customer? How will you reach the customer? How much does it cost to get a customer? What does it cost to support a customer? How easy is it to retain a customer?

What is the pricing? What is the cost of goods?

MARGIN

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Workshop Checklist1. Company Name

1. Your Name and Title2. Mission statement “catch phrase”

2. Business Idea1. Problem Being Solved2. Product/Service Solution (why it’s a great idea)

3. Target Customer 1. Market, segment, size (Who, how many?)2. Place/Channel3. Promotion

4. Business Model & Revenue Sources5. Business Strategy and Implementation

1. Competitive Advantages (defensible, sustainable)2. Key Success Factors (what is important to do well)3. Operations (How you do it, supply, scale)

6. Financials (3 year forecast)1. Price, other driving factors (memberships, etc.)2. Breakeven, How much money do you need, when?

7. Risks

1. __________________1. __________________2. __________________

2. __________________1. __________________2. __________________

3. __________________ 1. __________________2. __________________3. __________________

4. __________________5. __________________

1. __________________2. __________________3. __________________

6. __________________1. __________________2. __________________

7. __________________

NBC1 2008, (c) 2008 Jay A. Smith24

Helpful Links

www.springboardenterprises.com www.garage.com www.guykawasaki.com www.entrepreneur.com www.inc.com www.startupjournal.com http://nvc.nikkeibp.co.jp/ Nikkei Venture www.dreamgate.gr.jp

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Picture Perfect Inc. Location/contact information Good, simple business summary Industry analysis

Market Size & Growth Competition

History/Progress Team Products Marketing Finance

Forecast Finance needed How much raised and from whom

What’s missing?