Presentation Guidelines How to present your company as an investment opportunity Making the few points that count.

TECH COAST ANGELS

Presentation Guidelines

How to present your company

as an investment opportunity

Making the few points that count

TECH COAST ANGELS

© Tech Coast Angels 2005 2

Tech Coast Angel’s Six-Step Process

1. Submit Application – Register and complete Business Plan Summary form on TCA website

2. Pre-Screening Assessment – Meet with small team of TCA members; present business plan. TCA members provide same-day assessment: accepted for formal screening, or not

3. Formal Screening – Present to 20-30 TCA members at meetings in LA, OC, SD– Entrepreneur’s objective – Generate enough interest to advance to due-diligence… at

least one person willing to “lead” and at least 20 other “interested” angels– Investors’ objective – Identify promising opportunities: strong management team with a

clear, compelling and credible business plan– We recommend no more than 15 slides

4. Due-Diligence – Starts after successful formal screening; ends with funding5. Dinner Presentations – Present “tuned” business plan to TCA membership.

Firm up funding interest6. Funding – Close on equity placement

Submit Application

Pre-Screening Assessment

Formal Screening

Dinner Presentations

Funding

Due-Diligence ProcessFocus of this

document

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1. Cover Page - Business Positioning statement2. What do you do? – describe succinctly3. What pain do you relieve? - and the value proposition to the customers4. Who will buy your products / services? – describe the market5. Who does it at your company? - list the team + credentials + previous

endeavors6. How better than others do you do it? - your company vs. the competition.

How will you sustain your advantage?7. How do you sell it? - direct, channel, etc.8. What is your time-table and what have you already done? What will each

step cost? - Milestones9. How will you grow the company beyond launch? Financial Projections +

skills10.How much money do you need? - prior investments, this round, future

rounds11.What is the value proposition for the investors?- the X factor, the

planned "exit“12.What are the risks?13.Optional: when is the due-diligence meeting and when do you plan to

close the round?

The Essence of the Presentation

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1. Cover… Business Positioning

The cover slide should position the company so TCA members have a framework for listening…• Company name (and graphics, if appropriate)• One-sentence “what we do” statement (positioning or elevator pitch)• Presenter’s name(s)• For example:

PICtage

A service for professional photographers that increases sales and cuts costs through online:

Proofing and viewing

Print-order fulfillment

Presenter: Jason Kiefer, CEO

Payment Protection Systems

Devices dealers install in cars to assure that poor credit risks pay their loans on time:

• Reminds customer payment is due, controls ignition when delinquent

• Cuts dealer’s collection / repossession costs by 80% or more

Presenters:

• Mike Simon – President, CEO

• Ashley Herndon-VP Sales and Marketing

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Summarize briefly what your company does, emphasizing the unique qualities of your product line, but without much comparison to the competition just yet.

Explain where your product fits within the whole solution to the customers’ needs.

Identify whether or not your customers will see your products as being the main component of the solution or just a portion of it.

Typical TCA Questions..

2. What do you do?

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Briefly describe “the pain” which exists in the market. Give a couple of examples, and relate to what “unfair advantage” you have for relieving this pain.

Important points to cover:1.How do you know that there is real “pain”?2.Further explain your understanding of the needs

in the market. Dwell on this point!3.What is / will be the ROI of the customers? How

fast will they recoup their investment? (the “value proposition”)

4.How will you protect your product from becoming a commodity?

3. What “pain” do you relieve?

Typical TCA Questions…

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4. Market…The Customers

•Define the characteristics of the companies or consumers that need a solution

•Quantify – number of prospects that have the need•Explain how the market is growing and why

Identify the important 2 – 3 segments of the market; for each…•Estimated market size (customers & potential

sales)•What distinguishes the key segments from the

broad market and from each other•How urgently customers need or want the solutionTypical TCA Questions…

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5. Management Qualifications…Background, Startup Experience

Focus on the management team, in particular:• CEO – Prior entrepreneurial experience in similar

businesses• CTO – Proven know-how in your core technologies• CMO – Proven knowledge of the target markets; strong

relationships with channel partners &/or key industrial customers

• CFO – Prior IPO or acquisition experience• Identify who is full-time and who is part-time or on the

sidelines awaiting funding…• Identify BOD and BOA members, highlighting any

strategic members’ value-addedTypical TCA Questions… (problems with the link)

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6. Competitive Position…Competitors & Barriers

Address three barriers to adoption:

• Big Dogs – What are huge, well-known companies that have existing products and well-established relationships with your target customers doing? How will they react to your initiatives?

• Inertia – What will it take to get customers to change what they are using / doing today?

• Innovators – What companies might leapfrog your solution with equal or better solutions?

Explain how you propose to win against the best of these

In particular, describe your strongest barriers to competition… i.e.: if you are successful, how do you plan to block better-known or better-funded competitors from moving in and taking over.


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7. Marketing / Sales / Support

Briefly explain the expected selling cycle.Describe how you propose to reach your targeted customers – focusing on the initial segments

• Marketing – To raise customers’ awareness of your product and stimulate their interest in buying

• Sales – To give buyers (buying decision-makers) a convenient way to find out the details and place an order

• Support – To help customers understand your product before buying, during installation and in use

If you rely on indirect channels, explain:

• Your approach to reaching them• Whose responsibility it is to raise awareness and generate demand among

end-customers• Who provides pre-and post-sales support

Describe special sales incentive programs (if any)


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8. Milestones - Past and Future,Business And Financial

Provide a milestone chart similar to the one below, and describe the use of the funds:

1. Company formed

2. $250K seed round

3. Product prototype

4. Field tests

5. $2M angel round

6. 1st production ship

7. Positive cashflow

8. $7M VC round

9. $75M annualized revenue

10.IPO/Acquisition

2002 2003 2004 2005


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9. Growth Beyond Launch

Describe the 3-5 year goals of the businessIdentify the several most important steps needed to reach that goalSpecifically say what you need to do to achieve positive cash-flow and how long it will take to get thereIdentify specific steps to IPO or acquisition readinessPlace the key steps and milestones on a Gantt chart

Explain the development status… how much work remains before the product / service achieves full functionality• Show your intended schedule for major product development on

a time-line (Gantt chart) covering the next 18 – 24 months• Identify major development risks or challenges• Provide estimated levels of effort &/or costs for each product• Summarize future products’ fit with market needs


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9a. Financial Projections

Provide a P&L similar to this one:

Be prepared to explain “dramatic” numbers, such as:• “Instant” market penetration & dispersion• “Hockey stick” growth• Unprecedented margins• Long periods of negative cashflow

(“goodness” is positive cashflow in 6 – 12 months)

Last 12 Mo. This Year Mo. 13-24 Mo. 25-36 Mo. 37-48New CustomersUnits Shipped

RevenuesGross ProfitGross Margin %SG&AEBITDACashflowCum. Cashflow

Financial Projections ($000s)

Typical Questions…

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10. Funding Sought…Amount , Valuations, Use

Provide a capitalization table similar to this:

Identify the major uses of funds for each round prior to IPO or acquisition… this round, prior rounds and next round(s)Describe the size and composition of your current “burn-rate”The Tech Coast Angels’ “sweet spot” for investing is a pre-money valuation of $1.5M - $3.0M. Expect tough questioning in proportion to any valuation higher than this range

Pre-Money Post-Money Round 1 Round 2 Round 3

Valuation Raise Valuation Total Founders Investors Investors Investors IPO

Round 1 1,191,892$ 700,000$ 1,891,892$ 100% 63% 37%

1,191,892$ 700,000$

Round 2 4,000,000$ 2,500,000$ 6,500,000$ 100% 39% 23% 38%

2,520,000$ 1,480,000$ 2,500,000$

Round 3 12,000,000$ 7,000,000$ 19,000,000$ 100% 24% 14% 24% 37%4,652,308$ 2,732,308$ 4,615,385$ 7,000,000$

IPO 45,000,000$ 15,000,000$ 60,000,000$ 100% 18% 11% 18% 28% 25%

11,018,623$ 6,471,255$ 10,931,174$ 16,578,947$ 15,000,000$


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11. Liquidity – When and How Much

If an IPO is in the cards…• Cite recent examples of successful comparable offerings, their

offering valuation and their current market cap• Explain why you believe the opportunity will remain when your

company is “ready”

If you anticipate being acquired…• Identify the two or three most likely buyers• Explain why they would be interested• If possible, describe recent acquisitions of comparable

companies and the deal value• Describe any relationships you already have with potential

acquirers, investment banks or VCs that might facilitate your liquidity plans

The Value Proposition for the Investors• Calculate, taking into account additional future investments,

what the X factor is going to be for the current round of investments


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12. The Risks

Investors need to know what keeps you up at night (other than changing diapers…):-Quality issues?-Adoption rate?-Costs?-Cash-flows?-Manufacturing problems?-Personnel training and retention?-The competition?-Etc.

Be open and straight forward. Investors are looking for “win-win” situations.

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Appendix A - Typical TCA questions:“Market: the Need of the Customers”

Common TCA Member Questions…What specific problem or need do customers have?Why is the problem important? For whom? That is, who, specifically is the customer?How do we know the market exists? What independent evidence can

you cite, such as independent market research?How large is the specific (narrowly defined) market for your product? What growth is expected in this market?Are the market size estimates realistic?

For industrial product companies…• What 2-3 industries comprise the most important prospects in Year-1? In Year-

3?• What are the job titles of the buyers (decision-makers) in these prospects?

For consumer product companies…• What are the demographics of the 2-3 most important customer segments in

Year-1? Year-3?

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Appendix A - Typical TCA questions:Solution…Your Product or Service

Common TCA Member Questions…• What, specifically, are the company’s products?• What do the products do? • Why would the customer buy these products? • What makes the products unique or special? • In general, how are they better than other products or alternative

methods of solving the problem? • How much better are they than other solutions? • Can we demonstrate that they are cost effective? • What, if any, proprietary technologies are used to make them? Any

proprietary process?• Are there patents? If so, what, specifically, do they protect? • Why will they be of value to the company?• What special issues relate to manufacturing the product(s)? Any

special materials or processes? • What special equipment or facilities are required? • What investment is required to set up manufacturing? For what

capacity? • How do you know you can manufacture the product at a cost that will

yield acceptable gross margins?

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Appendix A - Typical TCA questions:Competitive Position…Competitors & Barriers

Common TCA Member Questions…• How else can the customer solve the problem your products solve? • What are the alternatives? • How does your product compare to each? • Why is it better? • In what ways is it worse? • Who are the vendors of these other solutions? • How do they compete with each other? • Where will you fit into the industry? • Why will you be able to compete effectively against them for the next

ten years? • Why are you confident that no new entrant will come along with a

better solution and blow you away? • Why do you think you can dominate your market niche?

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Appendix A - Typical TCA questions:How will you sell it?

Common TCA Member Questions…

• What channels of distribution will you use to deliver your products to your customers?

• How will these channels be established? By whom? When?

• What expertise does your company have to execute the marketing / sales program?

• How are you going to stand out among all the established competitors?

• How can you boil down the advantages of your sophisticated technology so prospects will understand it, quickly and easily?

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Appendix A - Typical TCA questions:Business Strategy…Growth Beyond Launch


• How has it been funded to date? • What kind of gross margins will the company have? • What level of operating profit can the business generate? • Do you have (or plan) any corporate partnerships in place? • What are the significant risks your business faces?• What needs to be done to finish your first product(s)? What’s your

next act?• Do you rely on outside contractors? How much do you license from

others?• What expertise do you have at developing this kind of product?• What development challenges are most important or difficult to

overcome? How do you intend to do so?

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Appendix A - Typical TCA questions:Financial Projections


• What kind of revenues can the business produce, on an annual basis, over the next five years?

• Profits? • What investment is required to carry the company to the next major level

of valuation? • When do you expect the next rounds to take place?• What specific tasks need to be accomplished to do that? • How long will it take? (Try to identify a “next level” that can be achieved in

less than 18 months.) • What investment will be required beyond that? • To the extent possible, explain key assumptions behind your forecast. And

make sure the forecast relates in a logical way to the market forecasts you described previously.

• How will the investor get his money back? Through an IPO? Acquisition? When?

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Appendix A - Typical TCA questions:Funding Sought…Amount , Valuations, Use


• How much hard-money (cash) have the founders put in?• How much cash have Directors and Advisory Board members

invested?• What equity is available to recruit key executives?• How did you arrive at your pre-money valuation for this round?• What comparables are you using for your proposed IPO/exit round?

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Appendix A - Typical TCA questions:Management Qualifications…Background, Startup Experience


• What is your background and previous experience?• Where did the idea for the company come from? • How did you get involved with the company?• Who is presently involved in managing the company? • What are their credentials? • Why will they be able to build a successful company? • If not all management spots are filled, what is the plan for filling

them? • What kind of people are we seeking? To fill what roles? • If you do not expect to be the CEO that builds the business to $10 or

20 million, what kind of person would you bring in? When? • Who is on your board of directors? • How does the board function?

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Appendix A - Typical TCA questions:Milestones…Business And Financial


• What is your track record at hitting schedules on similar efforts?• Are you fully-staffed for the work indicated in the schedule?• How are you going to get your partners to meet your schedule?• What makes you think you can achieve this schedule when “X”

failed?• What contingencies have you built into the schedule? The budget?

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Appendix A - Typical TCA questions:Exit Strategy…Liquidity – When and How


• Why won’t one of your established competitors step in and leapfrog you?

• How long do you think you can maintain your lead, thus preserving your company’s value?

• Why would this be an exciting business opportunity for an acquirer? • Why would it an exciting IPO opportunity? • What are the three most serious risks the company faces?

* NOTE: If you aren’t sure how to value the company in the future, use 1 x annual sales in Year-2 and 15 or 20 x net profits in Year-3 as reasonable estimates.

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Old slide – discard?:Solution…Your Product or Service

Clearly explain your product(s)… what it is that customers will be buying.Explain where your product fits within the whole solution to the customer’s need, as customers see it. For example:

• Services, technologies or platforms (“enablers”) required to make your product effective

• System, behavior or procedure conversions required to realize the key benefits

Identify your product’s value-added (what portion of the whole solution you provide)… and whether customers will see your product as being the main component of the solutionDescribe the benefits delivered, justifying the cost of the whole solution vs. the expected benefits.

See Appendix - Slide 24

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Appendix B

An Approach To UnderstandingThe Intersection Between

Dispersion, Value-Added and Benefits Delivered

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Characteristics...• Practical, pragmatic• Need proof• Conservative… adopt technology as a tool

Questions...• Who and where are they? How many are there• Why will they buy your product?

Customers’ “Needs” – Pre-Chasm and Post-Chasm

Characteristics...• Technology, per se, interests them• Visionaries• Gatekeepers, endorsers

Questions...• Who and where are they? How many are

there?• Why will they buy your product?

Innovators Early Adopters

Early Majority Late Majority Laggards

Th

e

Ch

asm

Your first sales Your vehicle to liquidity

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How TCA Assesses Market Opportunity

Value Added• From the end-customer’s

viewpoint, how much of the “Whole Solution” does YOUR product deliver?

• What else must the customer buy or do to realize the expected benefits?

• What alliances will you need to complete the solution?

Benefits Delivered• Business market…

How much can your product increase revenues or lower costs?

• Consumer market…How much happier, healthier or richer will it make the customer?

Valu

e

Ad

ded

100%

0%

Benefits Delivered

Candy

Vitamin

Painkiller

Cure

Plug & playHo-hum benefit•Re-target•Refresh•Add sizzleor…•Sell the IP

Plug & playMajor benefit•Get funding•Build the business

•Go to market

IncompleteHo-hum benefit•Shelve it•Reexamine next year

or…•Sell the IP

IncompleteMajor benefit•Add features•Refocus•Partner upOverall: Are there

enough potential customers to make a business thrive?

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Whole-Solution Value-Added vs. Perceived Customer Benefits

R&D

Proprietary Technology

Proprietary Process

Manufacturing Capability

Market Presence

Distribution

Sales

Installation Service

Support Service

Other…

Marketing Know-How

What percent of the“Whole Solution” does YOUR solution provide?

What are the principal benefits and how urgently do customers need them?

Lower Costs

New Revenue Source

Higher Margins

Increased Customer Retention

Larger Market

Other

Better Health

Lower Costs

Great Prestige

Fun To Use

Saves Time

Other

Typical Business Benefits

Typical Consumer Benefits

Valu

e

Ad

de

d

100%

0%

Benefits Delivered

Candy Vita

min Painkill

er Cure

Plug & playHo-hum benefit

Plug & playMajor benefit

IncompleteHo-hum benefit

IncompleteMajor benefit

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More about Value-Added

R&D?• Product technologies• Customer processes, needs,

technologiesProprietary Technology?• Protected or exclusively licensed• That plays a core role in delivering

the solution’s major benefit(s)• How does it do that?• How might a competitor duplicate

benefits without infringing? Proprietary Process?• Protected or exclusively licensed• That plays a core role in delivering

the solution’s major benefit(s)• How does it do that?• How might a competitor duplicate

benefits without infringing? Manufacturing Capability?• Able to meet ramp-up schedule• Adequate quality and cost

Market Presence?• Brand awareness and value• Product positioning

Marketing Know-How?• Relevant to target customers• For similar products or services

Distribution?• Access to preferred POSs• Relationships with market-makers

Sales?• Access to initial customers• Salesforce that knows and gets face-time with

targeted customers• Salesforce mind-share

Installation Service?• Ability to make sure customers get product up

and runningSupport Service?

• Ability to answer questions• Ability to keep customers satisfied

What pieces of the value-added stream do you own, control, perform?

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“Embedded Value”

The combination of “value-added” and “benefits delivered” roughly translates to “embedded value”• The more you contribute to delivering the

whole solution, the more potential your company has to become embedded in your customers’ business or life

• The more valuable your solution is to your customers, the more likely they are to continue

to use you (or seek to acquire you)

Examples of the concept:• Microsoft: with MS-DOS, Windows and IE built-

in, they are embedded in PC products• Amazon: becoming more-fully-integrated

“store” with more lines to be a “one-stop” shop for e-customers

• Yahoo: tough to see where they are more than an easily-substituted site

• E-Bay: moving to become standard channel for remaindered (unsold) goods


• How important is your product, really, to the customer?

• Is your product just a tool that could be replaced with another tool without affecting the customers’ suppliers or customers?

• Will your product become embedded in what your customers deliver to their customers?

• How easy would life be for your customers if they were to uninstall your product?

Valu

e

Ad

de

d

100%

0%

Benefits Delivered

Candy Vita

min Painkill

er Cure

Plug & playHo-hum benefit

Plug & playMajor benefit

IncompleteHo-hum benefit

IncompleteMajor benefit

Exte

nt O

f

Embe

dded

Val

ue

Presentation Guidelines How to present your company as an investment opportunity Making the few points that count.

Documents

tech coast angels

cover business

cover slide

credible business plan

formal screening present

presentation slide

tca website

tca membership