Presentation I gave at Takomo 25.9.2012 about business model design from investors perspective. First a few slides about Butterfly Ventures, then couple that related to VCs business model to models they're expecting, then a few key points we look at and finally a case example of use of business model canvas and a few tips.

1. Designing business models
Investors perspective

2. Who we are, and what we do
BUTTERFLY VENTURES

3. The Team
Partners Board of Directors
Matti Kanninen Jukka Mäkinen
managing partner Chairman of the Board
Juho Risku
partner, co-founder Jari Pasanen
Member of the Board
Antti Kosunen
partner, co-founder,
and Board member

4. Investing from pre‐seed to follow‐up
Unqualified Qualified pre‐seed/seed Qualified expansion Financed – Exit
Accelerating
”TechStars”
Scouting Go fast forward Operationalization Follow
or fail fast
Scope of main interest
StartUp
Proof of
Idea Basics Preparation Scale‐up
concept
15‐90 k€ 200‐400 k€ 1‐2 M€ xx M€
Financing
First time Follow up
Investment Exit
Investment
Σ < 500 k€ Σ < 2.5 M€

5. What early stage investors look for
in a target company?

6. Positive black swans.

7. Scale of opportunity.

8. The business model is the key while
reaching there.

9. All the investors are not the same.

10. Two models for venture financing
EXIT VS. CASH FLOW

11. Exit driven model
Cash from stock sale
Expectations
Exit 10 * Valuation
Investor
• Money
• Expertise
Investor
• Money
• Expertise
Cash flow
Company Valuation

12. Exit driven startup
• Has a very large market potential
– Most of the potential not realized in a form of
positive cash flow at the exit
• Is easily scalable, usually globally
– Smart customer acquisition logic built into
business model is a plus
• Has strong IPRs or a business model that
accumulates value over time
– Customer retention can be clearly articulated

13. Cash flow driven model
Product launch End of life
1‐x% cash flow
Company
• IPRs (value)
Product x
• Money
• Expertise
Investor x% cash flow = 10 * money invested

14. Cash flow driven product
• Requires less capital over life cycle, can accept
more market behavior related risk
• Has well defined, easy to understand product and
clear simple business model
• Has short time to market
– Straight forward development, no technology related
risk
• Generates large positive cash flow fast
– Has short sales cycle
– Are usually consumer market products

15. How to choose the right model
Exit driven model Cash flow driven model
• The grand vision is large • Company is based on idea
enough to fill the purpose of multiple products
of the company alone • IPRs are mostly creative
• IPRs are patents or content based and different
accumulated during longer in each product
period of use (information) • Founders like to keep the
• Founders ready to sell the options open for future
company or IPO is a realistic • Successful product can be
option used as a future reference

16. Venture capital is expensive.

17. What we’re looking for from a business model perspective
THE RIGHT KIND OF STARTUP

18. Customer acquisition.

19. Customer retention.

20. Tool to design business models
BUSINESS MODEL CANVAS

21. * Source: Business Models Generation ‐ http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf

22. Tribevine: The predictive Google
analytics of real world products.

32. * Source: Business Models Inc. ‐ http://businessmodelsinc.wordpress.com/2009/08/11/sellaband‐
business‐model‐visualized/

33. It’s a iterative process.

34. Design customer‐centric*
Organization‐centric Customer‐centric
1. What can we sell to customers? 1. What does our customer need
2. How can we reach customers to get done and how can we
help? What are their aspirations
most efficiently? and how can we live up to
3. What relationships do we need them?
to establish with customers? 2. How do our customers prefer to
4. How can we make money from be addressed, how do we fit into
our customers? their routines?
3. What relationship do our
customers expect us to establish
with them?
4. For what value are customers
truly willing to pay for?
* Source: Alexander Osterwalder & Al. (2010). Business Model Generation

35. Any questions?

36. Resources
Books Links
• Business Model Generation: A Handbook for Visionaries, • Butterfly Ventures in the web: http://butterfly.vc/,
Game Changers, and Challengers (ISBN: 978‐ http://www.facebook.com/ButterflyVentures,
0470876411) http://www.linkedin.com/company/butterfly‐ventures,
• The Lean Startup: How Today's Entrepreneurs Use https://twitter.com/Butterfly_VC
Continuous Innovation to Create Radically Successful • Tribevine: http://www.tribevine.com
Businesses (ISBN: 978‐0307887894)’ • How to build a startup – free course by Steve Blank:
• The Startup Owner's Manual: The Step‐By‐Step Guide http://www.udacity.com/overview/Course/ep245/Cours
for Building a Great Company (ISBN: 978‐098499930) eRev/1
• The Art of the Start: The Time‐Tested, Battle‐Hardened • Business model generation – tools:
Guide for Anyone Starting Anything (ISBN: 978‐ http://www.businessmodelgeneration.com/
1591840565)’ • Business model canvas poster:
• Running Lean: Iterate from Plan A to a Plan That Works http://www.businessmodelgeneration.com/downloads/
(ISBN: 978‐1449305178) business_model_canvas_poster.pdf
• Showcase your startup, practical tips: https://angel.co/
• Staretup Compass, tool to analyze your starup KPIs:
https://www.startupcompass.co/