Pitching the Plan: The Deck June 18, 2013
Jan 21, 2015
Pitching the Plan: The Deck June 18, 2013
Jeremy Halpern Biography
› Nu#er, McClennen & Fish, LLP -‐ Partner; Director of Biz Dev, Emerging Companies Team
• Top 10 Boston law firm • Represent clients in technology, hardware, soJware, mobile, medical devices, health IT,
biotechnology, cleantech CPG, consumer electronics, sports & entertainment • Provide support and outreach to the entrepreneurial community
› Boards and OrganizaOons
› MassVentures – Director & Investment Commi#ee Member
• The Venture Arm of the Commonwealth-‐-‐ catalyzing innovaOon in Massachuse#s by providing seed and early stage venture funding to high growth technology startups.
› The Capital Network – Director; Past Chairman
• Providing educaOon, resources and community to high growth entrepreneurs and angel investors as they navigate the early stage capital process
› Entrepreneurial Experience -‐ Entertainment and Digital Consumer Products
› UC Berkeley, B.A. (Go Bears!); UCLA School of Law, J.D.
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Christopher Mirabile Biography
• Co-‐Managing Director of LaunchPad Venture Group
• Named XConomy's "Top Angel Investors in New England" for 2012
• Adjunct lecturer in the MBA program at Babson College
• Entrepreneur-‐in-‐Residence at Babson's Olin School of Business.
• Previous: • CFO -‐ IONA Technologies PLC • Corporate and securiOes lawyer -‐ Testa Hurwitz & Thibeault • Management consultant with Price Waterhouse's Strategic ConsulOng Group
• Christopher earned his J.D. from Boston College Law School and his B.A., with honors, from Colgate University
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Gail Hoffman Biography
• Managing Director – Golden Seeds
• Previous • Corporate Finance Department of Dean Wi#er Reynolds
• Boston Ventures Management Inc., a private equity firm focused on the communicaOons and entertainment industries.
• Received an MBA with High DisOncOon from The University of Pennsylvania’s Wharton School
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Nutter’s Emerging Companies Group
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As a full service firm with a dedicated team of lawyers in the Emerging Companies Group, Nu=er supports ventures across the innova>on economy:
• Biomedical Devices • Biotechnology • PharmaceuOcals • Life sciences • SoJware • Hardware • InformaOon Technology
• Cleantech • Mobile • Consumer Products • AnalyOcs • New Media • RoboOcsa
We provide entrepreneurs will the full spectrum of support that they need to build their businesses and realize their visions:
• EnOty FormaOon • Founders Agreements • Financing Strategy and Key IntroducOons • Angel & Venture Capital • Debt Financing • Private Equity • IniOal Public Offerings • Private Placements • Strategic Partnering • Mergers & AcquisiOons
• Employment support • Equity CompensaOon • Tax Strategy • LiOgaOon • Licensing • DistribuOon • Manufacturing • Supply Agreements • Electronic Commerce • Patent and Trademark Strategy & ProsecuOon
Cover Slide Introduction
• 1 Minute Elevator Pitch
– Get their a#enOon! • Introduce company without distracOng from spoken introducOon
• Sets the tempo • Content:
– Logo – Tag Line – should explain business and begin to differenOate – Contact informaOon
‒ Name of the investor/group to whom presentaOon is delivered
‒ Possibly a non-‐distracOng picture
• Be enthusiasOc – people buy from people not PowerPoint 6
Company Value Proposition (*Zoom out) • Argued to be most important slide in presentaOon – a 1 slide summary
– Important enough to repeat 3 Omes
– Bookend the deck – begin and end presentaOon
• Content objecOve – why should investors invest
– 5-‐7 bullets outlining strengths and direcOon of presentaOon • Core technology • Product candidates • Market opportunity
• Key partnerships • Management strengths
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The Problem a/k/a the Opportunity
• What is the unsolved problem or need?
• Who has this problem? Define your Core Customer and their a#ributes
• How serious is it? Do you have Metrics?
– Magnitude : How significant is it? Can you quanOfy it? – Frequency: How oJen is pain experienced (life insurance vs. coffee) – CriOcality: Will the pain disrupt the business (e.g., IT outage).
• Cancer Drug vs. Aspirin vs. Vitamin? • How have the alternaOve offerings failed to meet the need? • Analysis of why has the problem not been solved unOl now?
• Remember!
– Customers buy if they experience need, not if society does.
– Business customer buy to make money or solve problems.
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Product/Service Solution
• Describe your product or service? • What does it do and how does it work?
• Do not get too detailed? Assume technical ma#ers will be validated later.
• Use pictures or diagrams where possible.
• Demo / screen shots, etc. if necessary.
• How does it fit within the customer’s environment?
• What proof of concept have you achieved? Prototype? Beta?
• What proof do you have of its effecOveness?
• Use accurate words to describe phase of development:
• “it does” vs. “it will” vs. “it may” 9
LifeSci Only: Regulatory Progress and Path
• Are you IND or 510k? Any addiOonal details? • Costs and Oming and paOent populaOon of trials needed to obtain approval?
• Phase 1, Phase 2 (2b), Phase III
• Strategy? • Team or consultants with experience in obtaining approval?
• Roadblocks or risks? • RelaOonship of path to exit Oming
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Solution Value Proposition and Competitive Advantage (*Zoom In)
• How is your soluOon be#er, faster or cheaper than the exisOng soluOons for your customer? **Remember Different ≠ Be#er** – Saves costs -‐ – Drives revenue or customer acquisiOon – Allows customer to offer its customers a superior value proposiOon – Decreases risks – Leverages customer’s exisOng customers or soluOons – Provides enjoyment, recreaOon, educaOon, Ome saving… (consumer
product) • How much be#er, faster, cheaper? Can you quanOfy the value proposiOon
to the customer? – Can you validate that your soluOon is be#er? Do you have data to
indicate that such items are meaningful to the customer? – Can you quanOfy a Return on Investment (ROI) for your customer.
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• Who is compeOng with you?
• Barriers to entry for you? For others? Ones that you are creaOng?
Competitive Landscape
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• Blocking IP • Startup Cost to compeOOon
• Change Cost to customers
• Geography • Contract exclusivity or change penalOes • Market dominaOng companies (“800lb Gorillas”)
• CompeOOve Advantage revisited -‐ Why will you be able to win (not “cooler”)
• Points soluOon vs. total soluOons • Current major compeOtors and why you will beat them
• Avoiding the “no-‐compeOOon trap”
• Explaining their trends of growth or contracOon • On a matrix – show advantages and areas where you don’t compete
• Pick metrics your customers care about not just those you “win” at!
• Avoid upper right quadrant graphs
Comparative Advantage & Focus
Criteria 1 Criteria 2 Criteria 3 Criteria 4
You
CompeOtor 1
CompeOtor 2
CompeOtor 3
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• Choose criteria important to your customers and to end users / paOents
• Show focus: being best in class in only certain things • Show where you are not compeOng
• How and when will you make money?
• Who is going to pay (i.e, what is the “Revenue Model”)? Who are YOUR customers?
• Manufacturing and commercializaOon strategies
• Timing and frequency of buying decision and payments
• Average $/purchase? Likely to increase or decrease? • Cost of Customer AcquisiOon (CCA/CAC) vs. LifeOme Value of Customer (LTV/LVC)
• Fixed vs. variable costs • Revenue Model – and consequences to volume, price, margin etc. of each:
• Direct / Indirect Sales • Razor and Blade • Professional Services • SAAS • Licensing • Government Contractor
Strategy: Business and Revenue Model
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• How you get your customers and costs
• How you actually deliver soluOon to customers (trucks, distributors or click?)
• Go-‐to-‐Market and General MarkeOng strategies
• How you incenOvize and compensate sales (if applicable)
• Explain geography and expansion strategy (scaling or growth issues)
• Discuss criOcal distribuOon partners, opOons and roadblocks • Core business vs. non-‐core business
• potenOal licensing or spin-‐off opportunity • Conversion metrics (idenOficaOon > lead > sales process > conversion)
Sales and Distribution Model
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LifeSci Only: Cost vs Revenue / Role of Reimbursement
• You cannot “help the system save money” – if your soluOon is cheaper than the compeOOon, understanding
the moOvaOon of the payor vs the provider (to whom cost may equal revenue)
• Will you need reimbursement? – Status of code designaOon? Strategy?
• Comparables for reimbursement pricing?
• If deployed onto paOents, the long term savings to payor?
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• Industry size = the total revenue generated in a segment of the economy.
• These are what are tracked by Forrester, Gartner, Thomson etc.
• Only useful for trend analysis, not for evaluaOng investability. • Example: “The internet adverOsing industry is an $X billion industry”
• Addressable Market = the total amount of revenue that your company could generate if it acquired every potenOal customer (the “Addressable PopulaOon”).
• Willing and able buyers that you can reach
• Ini>al Target Market: subset of the addressable market for whom the value proposiOon is truly compelling and obvious at product introducOon.
• Annual Sales: that subset of the addressable market or the iniOal target market who buy or who are likely to buy each year.
• Explain how the market is changing and why.
• Customers, pricing, compeOOon, new technology, etc.
• $500m TAM vs. $50m TAM – know your investors!
The Addressable Market
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• Intellectual Property: Patents, Trademarks, Copyrights, Trade Secret
• Difference between provisional, applicaOons and granted patents
• Patent strategy
• IP that covers advantage vs. extraneous claims/assets
• How unique is your soluOon?
• Trade Secret and development lead; Ease of replicaOon
• Cost/Ability of customer to replace your SoluOon
• Key relaOonships
• Contractual protecOon
• FDA Approvals
• SancOoned monopolies (e.g., cable systems)
Defensibility
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Management Team and Advisors
• Top execuOves, Board of Directors, Board of Advisors & SAB • Startup, domain, customers or key opinion experience
• Prior success • Balance • Cohesiveness • Don’t put their whole resume on the slide
• Only show acOves • Current staffing gaps and strategy for filling
• OrientaOon towards success not control (“Rich” not “Monarch”)
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Current Status: Achievements and Upcoming Milestones
• Demonstrate current progress and achievement of milestones
• Development partnerships
• DistribuOon partnerships • Customer acquisiOon progress (conversion rates) • PublicaOons • Financing • Team Developments
• Upcoming milestones and Challenges
• Gant-‐style Charts • How you will overcome the challenges/weakness (ex. key hire)
• OJen integrated with use of proceeds slide
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• IdenOfy exisOng/Oming of prior preferred stock deals
• Cash and monthly cash burn
• How much of burn is variable vs. fixed
• Lowest you can the Burn without killing the company
• Time and investment dollars to reach cash flow posiOve
• Timing and quanOty of future rounds
• Current round size and Oming
• Use of proceeds -‐ what will it be used for? What will it buy?
• OpOmal deal structure
• Pre Money ValuaOon
• Dangers of including suggested valuaOons • Dangers of not knowing the appropriate valuaOons
Funding, Cash and Use of Proceeds
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• Technology / Product – Will the soluOon work? Can you build it?
• Business Model – Can you sell the soluOon at margin?
• Supply – Can you acquire and manage criOcal vendors
• Customer AdopOon Risk – Will the Dogs eat the Dog Food?
• Market Dynamics – Do customers have cash and the will to spend?
• DistribuOon Risk -‐ Can you acquire and run criOcal distribuOon and sales points? • CompeOOon Risk – Is there an opportunity in the marketplace? Will an 800lb gorilla eat your lunch?
• Financial risks –Will you have sufficient or available capital now and in the future?
• Legal risks –Freedom to operate ? Do you have the ability to defend your IP?
• Regulatory risks – Are there barriers beyond your ability to influence? • Team risks – Is our product or customer knowledge distributed and accessible?
• Exit Risk – Are there willing buyers (or a public market) for your company?
Risks and Plans
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• Length to liquidity • IPO vs. M&A vs. Licensing (vs. other)
• PotenOal Acquirers • Acquirer characterisOcs and raOonale for acquisiOon
• How frothy is the current/expected market now and at maturity
• Recent exits for similarly situated companies
• ValuaOons (if available) • Counterpoint: Building a company vs. building an exit
Exit Strategy and Options
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Summary Slide / Investment RaOonale
• End with a summary of what you have just said.
• Leave them with the key message points you are trying to convey.
• Be prepared for quesOons
• Appendices
• All of the informaOon that may backstop your conclusions
• Case studies • Customer tesOmonials
• More detailed technical or product informaOon
• More detailed market or customer informaOon
• Demo videos
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• P&L – Historical + 3-‐5yrs; OJen with cash, customers and headcount
• Segment revenue by type of revenue
• Fixed vs. Variable cost structure • Revenue and Margin RaOos
• Think about cash flow Oming issues – see revenue model (e.g., direct/reimbursement)
• Bo#om-‐Up vs. Top-‐Down projecOons
• AssumpOon tab in the Excel build
• What does “conservaOve” mean: Use of High / Medium / Low
• Perfect vs. FuncOonal – Running your business vs. Building a model
• AnOcipaOng investor cutback • Risks of projecOons being Oed to equity and compensaOon
• ValuaOon Issues
Financials and Projections
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FINANCIALS AND PROJECTIONS – DEEP DIVE
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Building ProjecOons: Yeah, but…
• Business plans with financial projecOons are necessary…
– Bo#oms-‐up vs. Top-‐down – HINT: You're trying to talk yourself out of this!
• Financial projecOons are a key porOon of the due diligence most investors perform
• I’ve heard that I don’t really have to build a business plan with financial projecOons because no one actually reads it…
Investors are more interested in the assump1ons made when building financial projec1ons, not the exact bo;om line
FOR YOU
More on Scenario Planning…
Worst-‐case scenarios should answer “What happens if there is no outside capital?” – if the answer isn't 'grow slower', is this a pipe dream?
Best-‐case scenarios should answer “What does this business look like if everything goes right?” – if the answer isn’t a huge financial win for your investor, is this a pipe
dream?
Most-‐likely scenarios should answer “What does this business look like following comparable companies’ growth paths?” – if the answer isn’t able to be funded with the current “ask”, is this a
pipe dream?
Goldilocks got it right: examine all op1ons!
ProjecOons: Start with Revenue
Take a “Bo#oms Up” approach
• Ex: We have tracked X unique visitors to our website and with an industry averages 2% conversion rate, sales will be Y.
• Ex: Survey revealed customers are willing to pay $X for an app with Y features.
• Ex: Q4 sales were $X. With a customer acquisiOon cost of $Y, we expect a 20% growth rate as a result of markeOng efforts
Econ 101: revenue = price * volume. Knowing which element is driving your company’s revenue is a key metric.
Building ProjecOons: How it works
• Have an assump>ons page and reference cells for your Income Statement (don’t hard code anything)
• A separate assumpOons page allows flexibility – change them for different growth scenarios
• AssumpOons are the backbone of your projecOons, so you should know them COLD
Excel is your friend, but be careful with cell references – it’s easy to make a mistake!
ProjecOons: Add in expenses
This also has a “Bo#oms-‐up” approach
• Include details of all categories – Ex. Headcount is a step-‐funcOon (hard to find .25 person) – Ex. Income taxes, no; Sales tax, use tax, payroll tax… yes!
• SG&A – MarkeOng
– Development – Overhead
ProjecOons: Cash Flow
• Map out cash inflows and ou�lows to determine funding needs – do this by month!
• Revenue collecOon – Oming impacts cash projecOons. Collect in 30 days? 60 days?
• DepreciaOon = noncash expense (include?) • Don’t forget to include CapEx in cash flow (tooth fairy doesn’t exist)
ProjecOons: Some Final Checks "The GOAL” is to make money – Social jusOce, triple net bo#om line, etc, come AFTER
profitability • "You can't give away what you don't have" (unless you're the Feds)
– You'll need space one day that isn't free – It is illegal to hire someone and not pay them
– Equity + cash = total compensaOon • As equity values increase, cash compensaOon should increase as the less expensive long-‐run pay opOon (this means you are WINNING!)
– Research financial statements to get an idea of expenses you may have missed
– Research how much things cost – don’t guess!
Pitching projecOons: What’s the “ask”?
Fin projecOons need to Oe to the amount of the raise – Fundraising takes Ome, so 12-‐18 months of cash per raise – IdenOfy milestones to be hit and cost of each one
– The sum of those milestone costs is the raise amount – The "cushion" in the raise is not X%, it's the cost difference in the most likely scenarios
The secret to life is “t” – “t” is the variable for “Ome” in mathemaOcal equaOons… and Ome in projecOons is everything
Pitching ProjecOons: Expert moves
• Know your audience – The earlier you are, the more interested in your assumpOons the investors are – so know you’ll be discussing them in detail. Painstaking detail.
• Be rich, not king – Does a new hire cut costs or increase revenue? This will drive the Oming of a new hire.
• Don’t forget that headcount is a step-‐funcOon • What is B/E expectaOon for a new hire?
– Good metric for HC is sales/employee – these numbers are benchmarked and available with some research.
Pitching ProjecOons: Rookie moves
– CTRL+C+P enOre excel model into a slide
– Using anything less than 18-‐point font – Li#ering clipart from 1995
– StaOng projecOons to the $.01 – Failing to summarize projecOons
– Using ANY of the following phrases: • “conservaOvely esOmated…” • “at only X% of the market…”
• “with no compeOOon…”
– Forge�ng to explain what the amount you raise achieves
– Assuming a short-‐term exit at a high mulOple
CLOSING THOUGHTS
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General Dos and Don’ts: “Presentation is a visual not a reference”
Do • Use one topic per slide
• Limit text on each slide
• Use pictures, graphs, video’s – Not all bullets
• Choose fonts and colors that are easy to read
• PowerPoint is the accessory to YOUR presentaOon
• Spell Check
Don’t • Use sounds with slide transiOons
• Overdo the ALL CAPS, bolded, italicized or underlined text
• Use too many different fonts
• Overuse special effects – focus on the content
• Have technical difficulOes – test before the meeOng
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• Know your material cold! Don’t wing it.
• DON’T READ your presentaOon.
• You should have answers to likely quesOons.
• Be clear when you don’t know an answer – then follow up.
• When possible, know the room. Arrive early, walk around the speaking area and pracOce using the microphone and any visual aids.
• Body language and appearance = 50% of the pitch
• PrioriOze and eliminate less criOcal points.
• Be flexible – be prepared to be interrupted.
• Understand the goal of your presentaOon. Is it to inspire, to educate, to connect, to get a#enOon, to get a second more personal meeOng?
Presentation Skills: Part I
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• Modulate your pace, pitch, volume, tone and enthusiasm – like when you are telling a story. This helps keep the audience focused.
• Use humor, personal stories and conversaOonal language where possible. Use easy to understand analogies.
• PracOce. PracOce. PracOce! GO SEE OTHER PRESENTATIONS!
• Slides should HELP the oral presentaOon, not BE the presentaOon.
• Bring a backup copy on a flash drive and via cloud
• Slides should be professional and consistent with your image.
• Spend more Ome building the business than the presentaOon
• Leave Ome for quesOons.
• RELAX, BREATHE and SLOW DOWN
Presentation Skills: Part II
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Interacting with Investors Basic Principles - Overview
• Research the investor in advance
• Pay a#enOon to what you say during the presentaOon banter
• Communicate
• Be likeable • State your value proposiOon up front
• Come prepared with sufficient data (including back up slides)
• Enjoy yourself and let it show
• Keep the presentaOon within allo#ed Ome
• Be realisOc about valuaOons in the market • Make due diligence easy
• Realize investors are thinking about exit strategy
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Interacting with Investors Cautionary Overview – Don't do the following
• Bash the compeOOon
• Hype
• Condescend or talk down
• Be arrogant • Be vague about your technology
• UnderesOmate the importance of the core science/development
• Deluge investors with facts
• Act desperate for funding (even if you are)
• Act like you don’t need money • Cite that “the company is undervalued” as a reason to invest
• Overprice your rounds so you can keep stepping up valuaOon
• Give investors a reason to turn you down
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Jeremy Halpern Partner Director of Business Development Emerging Companies Team Nu#er McClennen & Fish LLP
Pitching the Plan: The Deck
Christopher Mirabile Managing Director Launchpad Venture Group
Gail Hoffman Managing Director Golden Seeds