Professional Documents
Culture Documents
Presented as part of Climbing the Stairway to Heaven on 2/15/05 for the Venture Association of New Jersey
MISSION STATEMENT
-What the company does, what business you are in -What industry you are in -Customers and markets -What the company aspires to become -Maximum of 2-4 sentences
ELEVATOR PITCH
-Networking is one of an entrepreneurs most important activities -Typically a one minute description of the BUSINESS OPPORTUNITY in LAYMANS terms -No more than 15 seconds on the technology and product -Entrepreneurs should also have a 10-15 second networking pitch, which can be elaborated on if the listener is interested
ELEVATOR PITCH
ADDRESS EACH POINT BELOW WITH 1 OR 2 SENTENCES AND THEN COMBINE AND SELECT YOUR BEST 10-14: -What the company does/what business you are in -Who you do it to- customers and markets -What the company aspires to become -What unmet need/customer problem do you solve? -Brief product/service description, 2 sentences max, non-technical terms -Why this is important/why customers will care/customer benefits -Why should investors care/what is compelling? -One or two exceptional milestones that demonstrate momentum is building. -What you are presently looking for (i.e. financing, guidance, team members) -Why you will be successful
BUSINESS PLAN
-The -FINAL EXAM test of the adequacy of your research -One of the most important steps in preparing to launch a new business -Describes what a business does, where it is going, how it is going to get there, and the resources it is going to require -It will only be as good as the depth and the quality of your research -Generally a prerequisite for formal debt and equity investors
3 PURPOSES
-Extraction: Extracts, translates and expands upon an idea for a company from the entrepreneurs head turning it into a written outline and roadmap for how to run a business -Most effective exercise you will go through -Communication: Communicates business to prospective advisors, management team members, investors, strategic partners and employees -Sales document -Management: Effective management tool -Serves as a benchmark -Dynamic, living document
EXECUTIVE SUMMARY
-Most important component of plan -Should convey the essence of your business IN LAYMANS LANGUAGE and summarize the most important information contained in each section of the plan -Starts with the mission statement, what business are you in? -Essentially an expansion of your elevator pitch -Identifies how much money you are looking to raise, your planned use of the funds, earnings projections and an exit strategy -Typically read first by investors and bankers, screening tool -Should arouse curiosity and be compelling -You want to demonstrate through a few significant milestones that a momentum is building -Should be completed last and run no more than 2 to 3 pages in length
A GOOD EXECUTIVE SUMMARY AND BUSINESS PLAN ARE LIKE THE FOUNDATION OF A BUILDING
-Build readers understanding of business opportunity block by block -Each block must be clear and succinct -Must build upon and fit with one before it -Must flow smoothly and be easy to read -Readability, must be user friendly
COMPANY DESCRIPTION
-Company founding (who, what, when, why?) -Structure -Compelling information about origins of company -Current status -Anticipated pathway to market entry and profitability -Introduction to complex technologies and their significance
MILESTONES
-Significant achievements to date -You want to be able to demonstrate that a momentum is building -The number and significance of them determines their placement in the plan
MARKET ANALYSIS
-Investors expect entrepreneurs to know their markets at least as well as anyone else and to demonstrate that understanding in the Market, Competitive Analysis and Marketing and Sales Plan sections of the plan -They like CEOs who know their prospective customers and who can sell -Tend to be worst written sections of plan
MARKET
-Identify, describe and quantify your market opportunity -Bigger is better, but begin by targeting niches -Discuss targeted markets including size, growth and other trends, as well as how they are likely to be impacted by economic trends -Explain rationale for targeting niches and identify unmet needs -Demonstrate understanding of dynamics of how market works including the buying and selling process and who makes decisions -Identify and discuss barriers to entry -Profile your typical customer and best prospects
PRODUCT/TECHNOLOGY/SERVICE
-Describe
your product thoroughly in laymans terms -Define acronyms and scientific terms -What benefits will it deliver to customers? -What are its unique features? -Focus on what makes this a compelling business opportunity, not on how the technology works -Include more robust technical discussion as warranted as an attachment -Discuss your intellectual property position -New product pipeline
COMPETITIVE MATRIX
-Matrixes allow the presentation of lots of information in a useable format -X Axis-Critical evaluation criteria -Y Axis-Key competitors or groups
COMPETITIVE MATRIX
Criteria 1 Price Competitor 1 Competitor 2 Competitor 3 You Inc. $ 28,000 $ 37,000 $ 31,000 $ 33,000 Criteria 2 Speed 8 units/hr 10 units/hr 10 units/hr 12 units/hr Criteria 3 Useful life 7 years 10 years 8 years 10 years
MARKET VALIDATION
-Sales -Beta testing -Business Partnerships -Testimonies from prospective customers and industry leaders
the long term development of your company, its products and your exit strategy -Identify risks both inherent in your venture and the broader business environment and demonstrate that you have a plan to address potential problems -Universal truths of entrepreneurship
FINANCIAL ANALYSIS
-Introduce and discuss companys revenue model including all revenue streams included in the financial projections and their scheduled start -Discuss companys current financial status? -Capital requirements- both short and long term -Use of funds -Sources of funding (R&D grants, bank loans, equity, other) -Source of repayment -Projected net income and cash flow for the first 3 years -Not worth the paper theyre written on -Explanation of assumptions underlying projections -Bottom up versus top down financial projections -Break-even point -Discuss financial ratios- are they in line with industry norms?
EXHIBITS
-SUPPORTING DOCUMENTATION -Resumes -Market research information -Documentation of customer demand -Supplemental technical discussions -Product literature -FINANCIAL -Pro forma income statements -Pro forma cash flow -Pro forma balance sheets -Break-Even Analysis -Historical financial statements, if applicable
BOOTSTRAPPING
-Cleaning out your personal savings or retirement accounts
-Home equity loans and second mortgages -Credit cards -Friends & family plan/4 Fs -Research and development grants -Strategic alliances -Outsourcing activities requiring large up-front investments -Purchasing used equipment -Bartering your product/service for someone elses -Advances from professional service providers -Suppliers -Advance payments from customers DOWNSIDE- There is often a trade-off between time and money and the delay can sometimes be detrimental or fatal
Dept. of Agriculture Dept. of Commerce Dept. of Defense Dept. of Education Dept. of Energy Dept. of Health and Human Services (NIH) Dept. of Homeland Security Dept. of Transportation Environmental Protection Agency NASA Nat. Science Foundation
-SBIR/STTR provide up to $850,000 of financing over a period of approximately 3 years to develop a technology and reduce its technical risk. -If a company simultaneously works to reduce market and business risk it can become a prospect for equity financing.
STRATEGIC ALLIANCES
BUSINESS PARTNERSHIPS
-You partner with another company to gain access to resources that you need but dont have -For most young businesses this typically means partnering with a larger, more established business -More important than ever given current risk adverse venture capital environment -SPEED ENTRY TO MARKETPLACE AND REDUCE REQUIRED FINANCING -Loss of control -Several Types Financing Marketing and sales Manufacturing Licensing
FINANCING
-Large companies may invest in smaller entrepreneurial ventures to supplement or substitute for their own R&D -Less risky and more cost effective means of accessing cutting edge technology -Strategic partners most likely to understand and appreciate value -Potentially more favorable terms of investment
MANUFACTURING
-Identify regional manufacturer -Eliminates or defers costly equipment purchases -No manufacturing employees to recruit, hire and train; no payroll Downside: Less control
LICENSING
-Transfer of rights to commercialize a technology, or an
application of a technology to another company in return for financial consideration -Typically some combination of up front cash, consulting contract, milestone payments and longer term royalty payments -There is typically a tradeoff -Particularly useful for first application of a platform technology or the first technology of a company with multiple technologies -Use cash and validation generated from the license to commercialize other applications and build a company Downside: Lower rate of return, loss of control, time lag before royalty payments flow
MUST BE PREPARED
-Entrepreneurs often approach prospective partners too early -A good idea wont be enough, strategic partners will want to see many of the same milestone achievements that equity investors look for -Typically will want to see at least a prototype and often some testing and market validation
RUTGERS RESOURCES
-NJSBDC DIRECTOR OF E-BUSINESS Reviews and evaluations of small business web sites Nat Bender 973-353-1924 -RUTGERS INTERFUNCTIONAL TEAM CONSULTING PROGRAM 2 semester business development projects Teams of 5-7 second year MBA students Business plans, market research, marketing plans January, May and September start dates Paul Belliveau- 973-353-1126
LESSONS LEARNED
-Market entry takes more time and costs more than planned -The better and more comprehensive your planning, the better your chances for success, minimize your surprises -Reader should know after the first sentence what the company does. -A great technology may not be good enough, Thou shalt know thy markets and customers and their needs -Laymans terms, Dont make reader work hard to understand the technology and the business opportunity -Differentiate yourself from your competitors in a way that provides the perception of value to your prospective customers, and that you can sustain over time
LESSONS LEARNED
-First business hire or advisor should usually be a marketing and sales professional who knows your markets -Demonstrate that momentum is building and validate market demand before approaching venture capitalists -Venture capitalists will expect you to understand your markets and customers at least as well as anyone -Management, management, management -Develop a bootstrapping strategy which you can fall back on -Develop your venture as far as you can before quitting day job -Network -If the reader is not EXCITED by the end of the executive summary, you have lost them