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W HITE & L EE LLP Soup to Nuts 2001 A Brave New World January 20, 2001. Bruce W. Lichorowic. Soup to Nuts 2001 PACKAGING THE COMPANY AND PREPARING FOR FUNDING What can you expect?. Bruce W. Lichorowic. Background…BWL. Focus Solutions for troubled companies Issues - PowerPoint PPT Presentation
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1Bruce Lichorowic
WWHITEHITE && L LEEEE LLPLLP
Soup to Nuts 2001 Soup to Nuts 2001
A Brave New World A Brave New World
January 20, 2001January 20, 2001
Bruce W. LichorowicBruce W. Lichorowic
2Bruce Lichorowic
Soup to Nuts 2001 Soup to Nuts 2001
PACKAGING THE COMPANY AND PACKAGING THE COMPANY AND
PREPARING FOR FUNDING PREPARING FOR FUNDING
What can you expect?What can you expect?
Bruce W. LichorowicBruce W. Lichorowic
Background…BWLBackground…BWL Focus Focus
Solutions for troubled companiesSolutions for troubled companies IssuesIssues
Funding, operational, marketingFunding, operational, marketing PartnersPartners
VC’s, Angels, Board, EntrepreneurVC’s, Angels, Board, Entrepreneur 20+ years 20+ years
TurnaroundsTurnarounds
4Bruce Lichorowic
Funding EnvironmentFunding Environment ““So what’s going on?”So what’s going on?”
210 Start-Ups…shut down210 Start-Ups…shut down** $1.5B in venture capital$1.5B in venture capital 60% in Q4, ’0160% in Q4, ’01
Dot com lay-offs…~15,000Dot com lay-offs…~15,000 Investors are Investors are nervousnervous
* Reuters, 1/17/01* Reuters, 1/17/01
5Bruce Lichorowic
Smart $ Became Dumb $…Smart $ Became Dumb $… Before Mega-fundsBefore Mega-funds
VC’s had time to work with their VC’s had time to work with their companiescompanies
Be active board membersBe active board members Make strategic introductionsMake strategic introductions Contribute to the successContribute to the success
6Bruce Lichorowic
Smart $ Became Dumb $…Smart $ Became Dumb $… After Mega-FundsAfter Mega-Funds
VC Partner must invest more $VC Partner must invest more $ Carry more DealsCarry more Deals Sit on more BoardsSit on more Boards Spend less time with their CompaniesSpend less time with their Companies
7Bruce Lichorowic
We Live in Interesting TimesWe Live in Interesting Times““If your looking for $”If your looking for $”
VC’s ActivityVC’s Activity 1 year ago…. 4-5 financings a week1 year ago…. 4-5 financings a week Today… ~4-5 financings a monthToday… ~4-5 financings a month Taking Care…Current PortfolioTaking Care…Current Portfolio
Funds being returned…LLP’s Funds being returned…LLP’s Institutional Investors…On HoldInstitutional Investors…On Hold Possibility of economic recession Possibility of economic recession Reminders of early 80’sReminders of early 80’s
8Bruce Lichorowic
What does this all mean?What does this all mean? “ “B2B”B2B”
Back 2 BasicsBack 2 Basics Strong…“addressable” marketStrong…“addressable” market Strong Technology…”secret sauce” Strong Technology…”secret sauce” Strong Team…no OJT Strong Team…no OJT Business model…that makes senseBusiness model…that makes sense
Strong business propositon!Strong business propositon! Rethink QuicklyRethink Quickly
Don’t throw everything out!Don’t throw everything out!
9Bruce Lichorowic
Preparing for Funding…TodayPreparing for Funding…Today1.1. Market…Market…
1.1. Identified the Problem your Fixing IDIdentified the Problem your Fixing ID2.2. TechnologyTechnology
Does it work?Does it work?3.3. TeamTeam
Right PeopleRight People4.4. Business ModelBusiness Model
Holds Water…Holds Water…
10Bruce Lichorowic
Early StagesEarly Stages FinancingFinancing Need to Identify your StageNeed to Identify your Stage
1.1. Seed Seed 2.2. Series ASeries A3.3. Series BSeries B4.4. Series CSeries C
11Bruce Lichorowic
Seed RoundSeed Round0-6 months0-6 months
Market/MarketingMarket/Marketing Markets Identified, Web SiteMarkets Identified, Web Site
TechnologyTechnology WhitepaperWhitepaper
Team Team FoundersFounders
Business Model/PlanBusiness Model/Plan One pager Executive SummaryOne pager Executive Summary
FundraisingFundraising Founder/AngelsFounder/Angels
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Rethink… TechnologyRethink… Technology
““Secret Sauce”… Core TechnologySecret Sauce”… Core Technology Underlying technology behind the productsUnderlying technology behind the products Meet customers needs and applicationsMeet customers needs and applications
00 1100 1100 1100 1100
11
00 1100 111111
11Internet
Personalization Technique
Dynamic segmentation
of on-line users
Adaptive response to on-line users
Cooperative Multi-Agent
Search
13Bruce Lichorowic
Series ASeries A6-18 months6-18 months
Market/MarketingMarket/Marketing Analyst ApprovalAnalyst Approval
VP Marketing, Core Message, PR LaunchVP Marketing, Core Message, PR Launch TechnologyTechnology
VP Engineering, Proof of Concept, AlphaVP Engineering, Proof of Concept, Alpha Team Team
Development, MarketingDevelopment, Marketing Business Model/PlanBusiness Model/Plan
Basic Executive Plan Basic Executive Plan VP Business Development VP Business Development
FundraisingFundraising Lead VC with Existing AngelsLead VC with Existing Angels
14Bruce Lichorowic
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY
Rethink… Rethink… Cash Required BreakevenCash Required Breakeven
TOTAL TOTAL CASH CASH
REQUIREDREQUIRED
BREAKEVENBREAKEVEN
15Bruce Lichorowic
Series BSeries B12-24 months12-24 months
Market/MarketingMarket/Marketing Customer Approval Customer Approval
TechnologyTechnology Beta or FCSBeta or FCS
Team Team CEO, VP Sales, Marketing ProfessionalsCEO, VP Sales, Marketing Professionals
Business Model/PlanBusiness Model/Plan Detail Plan Detail Plan
Strategic Partnerships Strategic Partnerships FundraisingFundraising
Syndicate of Investors, Lead VCSyndicate of Investors, Lead VC
16Bruce Lichorowic
Rethink… Product RoadmapRethink… Product Roadmap
PRO
1.0
Product #1Product #1
Product #2Product #2
Product #3Product #3
Q2 2001Q2 2001 Q3 2001 Q4 2001Q3 2001 Q4 2001 1H2002 1H2002 2H 2002 2H 2002
1.0 2.0
1.0
1.0 2.0
PRO
2.0
PRO
1.0
PRO
2.0
17Bruce Lichorowic
Series CSeries C18-24 months18-24 months
Market/MarketingMarket/Marketing Key Message…”why are customers buying?”Key Message…”why are customers buying?”
TechnologyTechnology FCS with milestone releasesFCS with milestone releases
Team Team CFO, Audit FirmCFO, Audit Firm
Business Model/PlanBusiness Model/Plan Polished Presentation, Focus Plan, Reference Sites Polished Presentation, Focus Plan, Reference Sites
FundraisingFundraising Syndicate Investors with VC Lead or Syndicate Investors with VC Lead or Mezzanine if IPO is imminentMezzanine if IPO is imminent
18Bruce Lichorowic
Rethink… Revenue SourcesRethink… Revenue Sources LicensesLicenses HostingHosting Professional Professional
ServicesServices
93%
7%
Licenses & Hosting Professional Services
19Bruce Lichorowic
19%
41%5%
19%
16%
Contractors & Professional Services Employees & Employee BenefitsRecruiting Fees All other expensesCapital Equipment
Rethink… Annual Cash RequiredRethink… Annual Cash Required
20Bruce Lichorowic
DESCRIPTION JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV
BEGINNING CASH BALANCE: * $468.6 $520.1 270.8$ 545.9$ $111.9 $932.6 $4,932.8 $7,260.5 $6,118.4 $4,970.7 $3,767.3
CASH FROM INVESTMENTS OR LOANS:• Series B Preferred Financing $250.0 — $503.9 — — — — — — — —• Series B2 Preferred Financing — — — — 1,500.0 5,000.0 3,500.0 — — — —• Credit and/or Lease Line for Capital — — — — — — — 130.0 125.0 112.5 101.5 • Interest Income & Other 1.1 0.8 8.6 3.6 0.7 0.1 1.2 6.2 9.1 7.6 6.2
CASH FROM INVESTMENTS OR LOANS: $251.1 $0.8 $512.5 $3.6 $1,500.7 $5,000.1 $3,501.2 $136.2 $134.1 $120.1 $107.7
CASH FROM REVENUE: 30 days from date of shipment — — — — — — $14.2 $1.6 $15.7 $1.7 $60.2 60 days from date of shipment — — — — — — 32.4 4.0 0.4 4.5 0.5 90 days from date of shipment — — — — — — — 16.2 2.0 0.2 2.2
CASH FROM REVENUE: — — — — — — $46.6 $21.8 $18.2 $6.5 $63.0
TOTAL CASH GENERATED: $251.1 $0.8 $512.5 $3.6 $1,500.7 $5,000.1 $3,547.7 $158.0 $152.3 $126.6 $170.7
CASH REQUIRED FOR OPERATIONS:• Salaries for Employees $54.8 $52.5 $82.4 $185.5 $158.3 $220.0 $371.3 $427.5 $452.5 $495.8 $495.8 • Insurance, Payroll Taxes, Employee Benefits 10.0 6.2 7.3 20.2 15.5 41.6 70.2 80.8 85.5 93.7 93.7 • Commissions 4.2 2.5 2.5 3.7 5.5 5.1 0.6 5.6 0.6 21.5 24.9 • Recruiting & Other Personnel Expenses 7.2 5.9 — 30.0 65.0 55.0 60.0 60.0 52.5 52.5 52.5 • Contractors/Temporary Personnel/Legal/Audit 80.4 119.7 50.8 93.1 260.0 214.1 185.0 190.0 190.0 205.0 205.0 • Cost of Sales/Other Materials/Office Supplies 10.3 1.1 — 0.3 2.0 29.3 31.5 31.5 31.5 29.3 31.5 • Computer Hardware/Software Expenses — — 1.2 — 10.0 38.0 42.8 42.8 52.3 42.8 42.8 • Air Travel/Automobile/Entertainment/Hotel 14.9 5.8 7.8 2.1 25.0 34.0 29.8 34.0 34.0 39.1 39.1 • Advertising/Promotions 12.2 30.6 13.1 28.0 34.0 61.0 86.0 96.0 71.0 36.0 36.0 • Equipment Rental & Maintenance Agreements 2.5 — — — — 23.0 21.0 21.0 24.0 22.0 22.0 • Facilities/Utilities/Communications Costs 0.8 22.4 0.7 6.6 12.5 12.5 26.5 26.5 26.5 26.5 26.5 • Other Expenses — 1.5 0.8 5.9 17.2 16.5 20.5 18.8 18.7 25.2 37.2
CASH REQUIRED FOR OPERATIONS: $197.3 $248.2 $166.6 $375.4 $605.0 $750.0 $945.0 $1,034.5 $1,039.1 $1,089.4 $1,107.0
CASH REQUIRED FOR CAPITAL AND OTHER• Prepayment required for lease of a facility — — — — — — — — — — —• Capital Purchases $2.3 $1.9 $70.8 $62.2 $75.0 $250.0 $275.0 $260.0 $250.0 $225.0 $203.0 • Credit and/or Lease Line for Capital Payment — — — — — — — $3.6 $7.1 $10.2 $13.0 • Interest Expense — — — — — — — $2.0 $3.8 $5.5 $7.0 • Taxes payable — — — — — — — — — — —
CASH REQUIRED FOR CAPITAL AND OTHER $2.3 $1.9 $70.8 $62.2 $75.0 $250.0 $275.0 $265.6 $260.9 $240.7 $223.0 TOTAL CASH REQUIRED: $199.6 $250.1 $237.4 $437.6 $680.0 $1,000.0 $1,220.0 $1,300.0 $1,300.0 $1,330.0 $1,330.0 NET CASH FLOW: Positive / (Negative) $51.5 ($249.3) $275.1 ($434.0) $820.7 $4,000.2 $2,327.8 ($1,142.1) ($1,147.7) ($1,203.4) ($1,159.4)
ACTUAL
Rethink… Cash DetailRethink… Cash Detail
21Bruce Lichorowic
Rethink… Marketing StrategyRethink… Marketing Strategy No Hat-TricksNo Hat-Tricks True sustainable pipelineTrue sustainable pipeline No big splashNo big splash Don’t announce before the Don’t announce before the
product is readyproduct is ready Build on yourself Build on yourself Marketing should grow with the Marketing should grow with the
companycompany Keep in BalanceKeep in Balance
Marketing vs EngineeringMarketing vs Engineering
22Bruce Lichorowic
Rethink…Channel StrategyRethink…Channel Strategy
• Seed AccountsSeed Accounts• Early AdoptersEarly Adopters• Major AccountsMajor Accounts
Channels Market Segments
Technology Technology IntegratorsIntegrators
Marketing PartnersMarketing Partners
Direct Sales
Indirect Sales IntegratorsIntegrators
Business Development
• Mid-MarketMid-Market• Vertical MarketsVertical Markets
23Bruce Lichorowic
President
Rethink…TeamRethink…Team Clear roles and responsibilitiesClear roles and responsibilities General management experienceGeneral management experience Morph… functional skillsMorph… functional skills
OperationsOperations Finance & Finance & AdministrationAdministrationSalesSales MarketingMarketing
PresidentPresident
Product/ServiceProduct/ServiceDevelopmentDevelopment
24Bruce Lichorowic
Top 10…Must HavesTop 10…Must Haves1.1.One Page Business BriefOne Page Business Brief2.2.Value Proposition…10 wordsValue Proposition…10 words3.3.Stay 6-9 months ahead…burn rateStay 6-9 months ahead…burn rate4.4.Hit your established milestonesHit your established milestones5.5.Get a reference customer site…ASAPGet a reference customer site…ASAP6.6.Calculate to the month…breakevenCalculate to the month…breakeven7.7.Accurately describe…use of fundsAccurately describe…use of funds8.8.Hire a respectable management teamHire a respectable management team9.9.Business Integrity*Business Integrity*10.10.Strategic Partnerships*Strategic Partnerships*
25Bruce Lichorowic
Top 10…Personal ChecklistTop 10…Personal Checklist1.1.Don’t fall in love with the product or Don’t fall in love with the product or the companythe company2.2.Funding is a full-time jobFunding is a full-time job3.3.Don’t assume VC’s are going to HelpDon’t assume VC’s are going to Help4.4.Constantly rethink your PlanConstantly rethink your Plan5.5.Watch out…quick fix consultantsWatch out…quick fix consultants6.6.Check your ego at the door Check your ego at the door 7.7.Plan on 3 near-death experiences Plan on 3 near-death experiences 8.8.Always tell yourself the truthAlways tell yourself the truth9.9.Know where the “Exits” are Know where the “Exits” are 10.10.Trust your instinctsTrust your instincts
26Bruce Lichorowic
Bruce W. LichorowicBruce W. LichorowicSpecialist for Distressed CompaniesSpecialist for Distressed Companies