Transcript Advanced Venture Business

Class 11

Elevator Pitches
NBC1 2008, (c) 2008 Jay A. Smith
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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
NBC1 2008, (c) 2008 Jay A. Smith
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Start Pitching
30 sec (soft stop)
 45 sec (hard stop)
 1 summary sentence – “hook”

 Who
/ produces What / for Whom
 Company/ Product / Customer Market
No PC or powerpoint
 2 questions from class/instructor

NBC1 2008, (c) 2008 Jay A. Smith
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Class 12
Business Models & Business Strategy
 Valuation and investors
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NBC1 2008, (c) 2008 Jay A. Smith
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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?
“Value Chain”
Inbound Logistics > Operations > Outbound Logistics > Marketing/Sales > Service
Toyota
NBC1 2008, (c) 2008 Jay A. Smith
Uniqlo
Amazon
McDonalds
Amex
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Business Model “Profit Engine”
Revenue Sources (how do we get paid?)
 Key Expenses
 Size (volume, scale/growth)

Profit
=
Year
(
Sales - Product Costs
Profitn=
NBC1 2008, (c) 2008 Jay A. Smith
Units
x
Unit
(Margin n
Year
)
Overhead
Year
x Volumen) - Overhead n
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Business Model
+ Business Strategy

Strategy: Development, protection, adjustment
of business model over time
Profit
(
Sales - Product Costs
=
Year
Units
x
Unit
Year
)
Overhead
Year
Year 1, Year 2, Year 3,…


Plan for executing on Key Success Factors
Goal: Sustainable Competitive Advantage
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Key Success Factors

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Key skills, functions, actions needed to maintain
and strengthen business model and strategy
Subscriptions/Memberships
 Get
 Get
many members (acquisition effectiveness)
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
NBC1 2008, (c) 2008 Jay A. Smith
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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
Value =

f(
Cash
Σ Profit
Flow n
)+
α
(not a strict formula)
Valuation depends on both company and
market for investment in stocks
 Public
stocks are priced in an open market
 Private company stock transactions are usually
negotiated between company and “lead”
venture capital investor
NBC1 2008, (c) 2008 Jay A. Smith
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Many Factors Affect Valuation

Opportunity-Related



Company-Related







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Is this a good business opportunity?
How big a business can this be, when?
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?
NBC1 2008, (c) 2008 Jay A. Smith
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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.
$6 million
$2 million


$8,000,000 “post-money” valuation
$6,000,000 “pre-money” valuation
(pre-money = post-money – investment amount: $8 - $2 = $6 mil.)
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Simple Valuation Calculation
SUPERSOFT CORP.
Now
YEAR 1 YEAR 2
Sales
10,000,000
Net Income
Price/Earnings Comps:
Future Value
Required Rate of Return
Number of Years
Current Value to VC
YEAR 3
1,000,000
15 x
15,000,000
15,000,000
30%
3
future value
/ (1+rate)
15,000,000 / (1-.30)
years
6,827,492
3
VC Ownership
Investment
Ownership Required
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2,000,000
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?
Earnings Before Interest, Taxes,
Depreciation & Amortization
PEG= Price/Earning Growth Ratio =
yoy: year over year
NBC1 2008, (c) 2008 Jay A. Smith
Forward P/E
Projected Growth Rate
ttm: trailing twelve months
Source: Yahoo! Finance 7/7/08
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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

Schedule
 7/15
Initial presentation/workshop (English)
 7/22 Final Presentations (English or E&J)

See Springboard Enterprises
 By

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

NBC1 2008, (c) 2008 Jay A. Smith
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Making a Successful Venture
Business
Idea
Entrepreneur
Team
Capital
Yen/ $
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Business
Model &
Strategy
R&D,
Production,
Operations
Sales &
Marketing
Strategic
Partners,
Suppliers,
Distributors Early
Users,
Supporters
Customer
Markets
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Basic Business Plan Questions

What is the opportunity?



What is the business strategy?



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Does it fit?
Is it sustainable?
What is the business model?


What is happening? Why?
How big can it be? When?
How do they make money?
Sales/Profit Years 1-3
How much funding is needed?
NBC1 2008, (c) 2008 Jay A. Smith
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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
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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?
NBC1 2008, (c) 2008 Jay A. Smith
MARGIN
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Workshop Checklist
1.
Company Name
1.
2.
2.
3.
1.
2.
3.
4.
5.
6.
7.
4.
5.
Risks
NBC1 2008, (c) 2008 Jay A. Smith
7.
__________________
__________________
__________________
__________________
1.
2.
Price, other driving factors (memberships, etc.)
Breakeven, How much money do you need, when?
__________________
__________________
__________________
__________________
__________________
1.
2.
3.
6.
__________________
__________________
__________________
1.
2.
3.
Competitive Advantages (defensible, sustainable)
Key Success Factors (what is important to do well)
Operations (How you do it, supply, scale)
Financials (3 year forecast)
1.
2.
3.
__________________
__________________
__________________
1.
2.
Market, segment, size (Who, how many?)
Place/Channel
Promotion
Business Model & Revenue Sources
Business Strategy and Implementation
1.
2.
3.
2.
Problem Being Solved
Product/Service Solution (why it’s a great idea)
Target Customer
__________________
1.
2.
Your Name and Title
Mission statement “catch phrase”
Business Idea
1.
2.
1.
__________________
__________________
__________________
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Helpful Links
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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
NBC1 2008, (c) 2008 Jay A. Smith
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Picture Perfect Inc.

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
Location/contact information
Good, simple business summary
Industry analysis

Market Size & Growth
 Competition


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History/Progress
Team
Products
Marketing
Finance


Forecast
Finance needed
 How much raised and from whom

What’s missing?
NBC1 2008, (c) 2008 Jay A. Smith
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