Transcript Eric Engineer - Essentials of a Business Plan

the essentials of a
business plan
Eric Engineer
Sevin Rosen Funds
[email protected]
what are investors looking for?
Special
Team
Large
Opportunity
Clear
Advantage
Market
Traction
• Founders w/ unique vision and passion
• Startup / industry experience
• Ability to recruit others: employees, angels, advisors
• How big? $20M, $100M, $1B? Depends on size of investor
• Big today or tomorrow? Market timing matters!
• IPO potential and/or large number of potential acquirers
• Unique value proposition and market positioning
• Advantage that improves over time [virtuous-cycle]
• Evidence of product/market fit
• Data points supporting business model assumptions
your fundraising toolbox
Executive Summary
1-2 page doc
Slide Deck
10 slides + detailed appendix
Product Demo
Live or video
Financial Model
Simple spreadsheet w/ clear assumptions
CONCISE
&
CONSISTENT
get it down to less than 15 slides
Slide 0
Slide 7
Slide 1
Slide 8
Slide 2
Slide 9
Title + intros + back story
10,000 foot view
problem definition
Slide 3
how you uniquely
solve the problem
Slide 4
product demo / case study
Slide 5
market analysis + sizing
Slide 6
competition +
sustainable advantage
market traction + GTM plan
team bios
unit economics +
financial projections
Slide 10
company status +
funding needs/uses
Slide 11
exit potential
Slide 12
summary + next steps
Appendix
lots of back-up slides
0: title + intros + back story
Build credibility and rapport in the first five minutes
by providing context and finding common ground:
– Do homework on the investor (past investments, common
contacts, past employers, familiarity with space)
– Start with a reminder on how you met or why/how you
were introduced
– Provide quick bios of your founding team;
focus on experiences that are relevant to your startup
– The “founding story” is often a good segue into the slide
presentation
1: the 10,000 foot view
• “Tweet” pitch: summary of your summary
• Problem you solve and for whom
• Market positioning / advantage / opportunity
• Top 1-2 accomplishments to date
• Initial strategy as part of a long-term vision
• How much you are raising
2: the problem definition
• What problem do you solve? And for whom?
• How do you know it’s a real problem?
• How are customers handling problem today?
• Do you speak your customer’s language?
• Is there adoption friction?
– Aware of the problem?
– Urgency? Feeling pain? Medicine or Vitamin?
– Willingness to pay? Existing or new budget?
3: how you uniquely solve the problem
• How does your offering solve the problem?
• Offering = product + go-to-market strategy
• What’s your secret sauce?
• How much better/unique/different?
• What evidence do you have?
4: product demo / case study
• Demo is NOT a features and functions walk through
• Illustrate the customer problem and your unique
solution to that problem
o Build your demo around a “case study”
o Provide context before starting
o Focus on 1-2 core “use cases” that create value and differentiate
your product
• PRACTICE, PRACTICE, PRACTICE
• Consider a video if you are not good at demos
5: market analysis + sizing
• Big picture description of market dynamics
o Why now? Why a startup?
o Graphics are useful
• Define and segment your market
o Identify low-hanging fruit
o Short-term vs. long-term
• Market size estimates
o
o
o
o
SAM vs. TAM
Bottoms-up vs. tops-down
Consider changes over time
“sanity check”
6: competition + sustainable advantage
• No competition = no market
• “doing nothing” / “good enough” substitutes
• What is the basis of competition?
• How does your advantage grow over time?
o
o
o
o
o
o
Economies of scale
Network effects
Data scale
Brand
Distribution
Virtuous cycles
• Patents are nice to have but not enough
7: market traction + GTM plan
• Evidence of “product/market fit”
o B2B: adopters, customers, partners, press/analyst
o B2C: users, virality, engagement, monetization
• Go-to-market plan
o Product Definition + Positioning
o Marketing + Distribution + Sales Plan
o Business Model + Pricing
8: team bios
• Why are you the best team to capture this big
opportunity?
• Focus on relevant experiences
• Don’t exaggerate or be too verbose
• Be open and honest about your gaps and
weaknesses; have a plan to address them
• Avoid title inflation; think of the future
• Recruit advisors to build credibility
9: unit economics + financial projections
• Demonstrate unit economics of business model
– Pricing, acquisition costs, churn, lifetime value
– Data points supporting your assumptions
• 3-5 year financial forecast
– bookings, revenues, gross margin, key operating expenses, cash needs
• Overlay with key stages, milestones, metrics
– # customers, product releases, new channels, cash-flow break even,
financing rounds, etc
• Nobody will believe your numbers!
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Mechanics and key assumptions are what matters
Clearly identify key assumptions and why you feel confident in them
What drive revenues, margin, and expenses?
Is it consistent w/ market sizing and GTM plan
If you’re taking a SWAG be up-front about it and explain how you will
learn more over time
10: company status + funding needs/uses
• Think of financing as a series of experiments
where you learn more at each stage  reduces
risk + increases value of your company
• Each stage should have clear value-creating
milestones
• How are you going to use the funding in this
stage? In future stages?
• How much money do you need to get to cashflow breakeven?
• Do you have enough buffer if things don’t go
according to plan?
11: exit potential
• Where is sustainable value being created?
•
•
•
•
•
Customer base / traffic / engagement
Partner / distribution network
Data / content / “real estate”
Unique technology / capability
Revenues / EBITDA
• Who are the likely acquirers and why?
• Are there analogs from the past?
12: summary + next steps
• Similar to “10,000 foot view” slide but more focus
on momentum, potential, & fundraising schedule
• Do not leave meeting without defining some clear
“next steps” :
– Setting up next meeting (i.e. visit to your offices to meet other team
members, meeting with other members of the firm, more in-depth product
demo, meet after key milestone completed, etc)
– Sending due diligence materials
– If “too early”, then define what investor would need to see to consider
investing in the future
– Understand the VC firm’s “process” and make sure you’re talking to the
right person in the firm
• Add investor to “status update” emails to “friends
of the company” (no more than one per quarter)
Appendix
• Don’t be afraid to include several more slides with
lots of detail
• Group and label Appendix slides based on topic
areas (product, market, financials, etc)
• Use these slides to answer questions that come up
during/after the presentation
• Create a second version without appendix (or with
subset of appendix) for “emailing” and “printing”
CONCISE
&
CONSISTENT
Q&A