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Expara accelerator program

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Expara accelerator program

  1. 1. July 2016 Expara Accelerator Program Discussion slides
  2. 2. 2 6XXXX About the lecturer  Wharton MBA  JP Morgan – Vice President IB Technology, GM Internet Marketing  Parallax Capital Mgmt – Co-founder and MD Private Equity  Extream Ventures – Co-founder and MD S$20 million seed fund  Expara – Founder and MD IDM Ventures Incubator, advisory, training  NUS – Adjunct Associate Professor, Business School, Entrepreneurship  Sasin – Visiting Professor, Venture Capital
  3. 3. 3 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  4. 4. 4 6XXXX Go big or go home  Introduction to scalable entrepreneurship  Understanding risk and return  Let’s fail
  5. 5. 5 6XXXX What is an entrepreneur?  A person who organizes, operates, and assumes the risk for a business venture.  From Old French, from entreprendre, to undertake.  Enterprise: An undertaking, especially one of some scope, complication, and risk.  Enterprising: Willingness to undertake new ventures; initiative: "Through want of enterprise and faith men are where they are, buying and selling, and spending their lives like serfs" (Henry David Thoreau).
  6. 6. 6 6XXXX What is a scalable business?  Small business: limited scope, complication and risk. Slow growth.  Scalable business: significant scope, complication, and risk. Rapid growth.
  7. 7. 7 6XXXX Present to investor to raise money How to build a scalable business? Identify idea and write business plan The new venture creation process Form a start-up company team
  8. 8. 8 6XXXX What are the qualities that make a successful entrepreneur?  Intelligent  Creative problem-solving skills  Self-starting  Committed  Motivated  Risk taking
  9. 9. 9 6XXXX Is entrepreneurship important to the country?  The development of a thriving entrepreneurial sector is not just an economic "nice-to-have." In the knowledge- and innovation-driven globalized economy of the 21st century it is a competitive necessity.  In one year alone, the small number of venture-backed companies in the US generated $736 billion in revenues, created 4.3 million new jobs, accounting for 3.3% of total jobs in the US and 7.4% of GDP.  The more than 4,000 companies started by MIT grads employ more than 1.1 MM people and generate more than $232 B in revenue p.a.  Innovative entrepreneurs drive long-term economic growth – creative destruction
  10. 10. 10 6XXXX Why is entrepreneurship important to you?  What type of life do you want to have? – An average life or an extraordinary life?  What do you want to do with your life? – Create something of value from nothing or just make money?  Do you want to: – Make a difference? – Change the world in some way? – Leave something of value after you are gone?
  11. 11. 11 6XXXX As an entrepreneur, you can:  Have an extraordinary life  Create something of value from nothing  Become rich  Do something meaningful  Make a difference  Change the world in a positive way  Leave something of value behind after you are gone
  12. 12. 12 6XXXX Obstacles to entrepreneurship  Lack of entrepreneurial skills  Attitudes toward risk  Cultural attitudes toward failure  Entrepreneurial success is difficult
  13. 13. 13 6XXXX This could be you - iTwin  BMA5108 – “Cable-less cable” remote access device based on A-Star technology  Selected for TechCrunch 50 2009 in Silicon Valley  Spin-off company launched in 2010  Raised S$2 MM Series A funding in July 2010
  14. 14. 14 6XXXX This could be you - Sparefoot  2007 – Chuck Gordon takes TR3002  2008 –Co-founds Ikatoo – Winner, IDM Prize S@S and i.JAM recipient  2008 – Returns to US and resumes work on Sparefoot  2010 – Sparefoot raises US$3 MM VC
  15. 15. 15 6XXXX This could be you: Pirate 3D
  16. 16. 16 6XXXX This could be you: Asia’s Top 25 Entrepreneurs
  17. 17. 17 6XXXX This could be you: Facebook  Feb 2004: Mark Zuckerberg, 19, launches The Facebook from his Harvard dorm room, with ~10K investment. Half of Harvard signs up in the first month  June 2004: Facebook receives $500K funding from Peter Thiel  Mid 2005: Accel partners invests $12.7MM and Greylock $27.5MM  Oct 2007: Microsoft buys 1.6% of Facebook for $246MM  Nov 2007: Li Ka-shing invests $60MM  2009-10: Elevation partners invests $210MM at valuation $12 - 23B  2011: Goldman Sachs buys shares in the secondary market at an implied valuation of $50B  2012: Goes IPO at valuation ~$100B (now $67B) “The youngest billionaire on earth” - Forbes
  18. 18. 18 6XXXX This could be you: Instagram  2010 - Kevin Systrom and Mike Krieger focus their multi-featured HTML5 check- in project Burbn on mobile photography  Mar 2010 – Close $500K seed funding round from Baseline Ventures and Andreessen Horowitz; est. val. $5 MM  Oct 2010 – Product launches on Apple App Store  Feb 2012 – Raise $7MM Series A funding; valuation $25 MM  Apr 2012 – Raise $50 MM at $500 MM valuation; sold to Facebook, val $1 B 0 5 10 15 20 25 30 35 Millions of Users
  19. 19. 19 6XXXX This could be you: Google  1995: Sergey Brin and Larry Page, two Stanford University graduate students develop the technology that will become the Google search engine.  1998: Sergey and Larry raise $1 million in funding from family, friends, and angel investors to start Google in a friend's Menlo Park, Calif. garage with four employees.  1999: Google raises $25MM from VCs and angel investors  2004: Google goes IPO at a valuation of US$23.1 billion. Sells 7% to public for $1.67 billion. Market cap Jan 2007 US$149 billion.
  20. 20. 20 6XXXX This could be you: YouTube  Feb 2005: Chad Hurley, Steve Chen, and Jawed Karim found YouTube, Inc.  Nov 2005: YouTube receives funding from Sequoia Capital  Dec 2005: YouTube service is officially launched  Nov 2006: Google acquires YouTube for US$1.65 billion, 20 months after the company was founded
  21. 21. 21 6XXXX Founded by undergrads: Dell and Microsoft  Michael Dell, who founded Dell in 1984 with $1,000 when he was 19 years old. The company now employs approximately 41,800 people worldwide and reported revenues of $38.2 billion for the past four quarters.  Bill Gates, who founded Microsoft in 1975 while still an undergraduate at Harvard. Microsoft had revenues of US$32.19 billion for the fiscal year ending June 2003, and employs more than 54,000 people in 85 countries and regions.
  22. 22. 22 6XXXX SEA exit markets at an inflection point Exit activity in SEA, especially in Singapore, has exploded • Increased investment in startups since 2007 is beginning to yield results • Number of exits increased from 5 or less pre-2011 to 60 in last three years • Singapore alone has had 40 exits since 2007 • Value of exits increased from 51 MM in 2010 to 1.2 B in 2014
  23. 23. 23 6XXXX Some recent exits Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
  24. 24. 24 6XXXX Go big or go home  Introduction to scalable entrepreneurship  Understanding risk and return  Let’s fail
  25. 25. 25 6XXXX What is the relationship between risk and return?  Risk and return are highly correlated  You cannot increase return without taking more risk Return Risk Potential outcomes
  26. 26. 26 6XXXX Go big or go home  Introduction to scalable entrepreneurship  Understanding risk and return  Let’s fail
  27. 27. 27 6XXXX Let’s fail: the importance of failure for innovation
  28. 28. 28 6XXXX 3 key elements for success  Do something you love to do – something meaningful  Create opportunities – don’t wait for them  Don’t give up – stay the course
  29. 29. 29 6XXXX What about luck?  Luck by definition is random  In the long run, luck should even out for most  Luck plays an important role in initial conditions but after that much less than you imagine  Don’t wait to get lucky; make your own luck  Chance favors the prepared mind
  30. 30. 30 6XXXX Evolving cultural attitudes toward failure Failure is bad; avoid at all costs Traditional
  31. 31. 31 6XXXX Evolving cultural attitudes toward failure Failure is bad; avoid at all costs Failure is acceptable; leads to learning Traditional Current
  32. 32. 32 6XXXX Evolving cultural attitudes toward failure Failure is bad; avoid at all costs Failure is acceptable; leads to learning Failure is desirable; necessary for innovation Traditional Current Future
  33. 33. 33 6XXXX Why is failure desirable?  Willingness to fail – allows risk-taking and innovation  Risk and return – high risk ventures means they are likely to fail  Innovation – key to scalable ventures – innovators will fail
  34. 34. 34 6XXXX Rate of tech change is increasing exponentially 1 10 100 1,000 10,000 100,000 1,000,000 10,000,000 100,000,00 0 First Humanoids Language Agriculture Abacus Calculating machine Telegraph Stock Ticker Light Bulb Recording sound Television General purpose computer Stored program computer Integrated circuit Mini computer Microprocessor Personal computer IBM PC Pentium World Wide Web Deep Blue defeats Kasparov
  35. 35. 35 6XXXX The rate of innovation is increasing
  36. 36. 36 6XXXX Ever-shorter product cycles = more innovation  Phonograph - invented in 1877 by Thomas Edison  33 rpm/45 rpm discs - 1948 (71 years)  Cassette tapes - 1966 (18 years)  Compact disc - 1982 (16 years)  MP3 files - 1991 (9 years)  MP4 files - 1998 (7 years)
  37. 37. 37 6XXXX Sometimes failure itself is innovation  Post-It notes - failed glue  Scotchgard - spilled on shoes  Combat - failed additive for cattle feed
  38. 38. 38 6XXXX The essence of risk is failure
  39. 39. 39 6XXXX Failure is necessary to achieve success
  40. 40. 40 6XXXX Why are people afraid to risk failure?  Fear of the unknown - “Why take a chance?”  Fear of looking stupid - “What will they think?”  Judging too quickly - “That will never work”  Attachment to the old - “We have always done it this way”  Attachment to past successes - “This approach got us here”
  41. 41. 41 6XXXX Do not let fear stop you  Why are you afraid to try?  The outcome must be important to you; otherwise no fear  This makes you afraid to fail  If you do not try, then you have already failed  “You miss 100% of the shots you do not take” - Wayne Gretzky  Fear causes you to fail at the things that are most important to you
  42. 42. 42 6XXXX Why fear?  Fear is good when it helps us stay alive  It is rational to be risk-averse in life-and-death situations  Most investment decisions are not life-and-death situations
  43. 43. 43 6XXXX Conquering your fear  Everyone is afraid  It is OK to be afraid  Don’t try to eliminate your fear  Work through your fear
  44. 44. 44 6XXXX If you don’t fail, you are not trying hard enough  Most learning and progress are achieved through failure  The top scientists in the world fail more than average scientists  Everyone who is now highly successful took significant risk to get there  We don't regret the things that we do and fail at; we regret the things that we fail to do.  A life lived in fear is a life half lived
  45. 45. 45 6XXXX Success from failure – Apple and Steve Jobs
  46. 46. 46 6XXXX Product failures – from Apple III to Apple Newton  1980 - Apple III - 75k units sold  1983 – Apple Lisa - 40K units sold in 1984 vs. 80K forecast  1986 – Pixar Image Computer - < 300 units sold  1990 – NeXT workstation – 50K units sold  1993 – Newton – 100MM spent on development – 80K units sold  Apple clones, NeXT software
  47. 47. 47 6XXXX Market failure - Apple stock price – 1988 to 1998
  48. 48. 48 6XXXX Competitive failure – Apple vs. Microsoft  1980 – Apple’s share of PC market 15%  1996 – 4%  2005 – 2.2%  2011 – Microsoft Windows still has 92% share of operating system market
  49. 49. 49 6XXXX Steve Jobs career timeline Success - 1977 • Apple II Failure – 1980 • Apple III Failure – 1983 • Lisa Success – 1984 • Macintosh Failure – 1985 • Ousted from Apple Failure – 1988 • Pixar Image Computer Failure – 1990 • NeXT Workstation Failure – 1993 • NeXT discontinues HW Success – 1995 • Toy Story; Pixar IPO Success – 1996 • Apple buys NeXT Success – 1997 • Return to Apple Success – 1998 • Apple profitable Success 2001 • IPod Success 2007 • Iphone Success 2010 • iPad
  50. 50. 50 6XXXX Success from failure  Pixar animated films – 1995 (Toy Story) – 26 Oscars, 7 Golden Globes, 3 Grammies – Films have earned > $6.3 billion worldwide  iPod - 2001 – 300 MM units sold – 90% market share  iPhone – 2007 – > 75 MM units sold – 50% of profits from global mobile phone sales  iPad – > 15 MM units sold, more than all other tablets combined – 83% market share
  51. 51. 51 6XXXX Apple stock price 2004 – 2015 +7,910%
  52. 52. 52 6XXXX What makes Silicon Valley different?  A different attitude toward failure  Many Silicon Valley VCs will only invest in entrepreneurs who have already failed  “I got my education on the mean streets of Silicon Valley, where I got to see how huge mistakes are made. Knowing what doesn’t work is perhaps more valuable than knowing what should work. Failure is just tuition. If you are in a failing start-up, take notes.” - successful start-up founder
  53. 53. 53 6XXXX Only do things that are difficult to do  Everything that is worth doing is difficult  If it is easy, it is probably not worth doing  Therefore, you should never hesitate to do something difficult  Start-up entrepreneur is one of the most difficult jobs in the world  The more difficult it is to do, the greater the return when you succeed (risk/return correlation)  Returns to successful start-up entrepreneurs are the highest in the world
  54. 54. 54 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  55. 55. 55 6XXXX Investment: why and how  Why entrepreneurs raise money  Why investors invest in startups  How to raise venture funding
  56. 56. 56 6XXXX Why should companies raise investment?  Lifestyle or scalable?  Paycheck or payout?  A big piece of a small pie?  A small piece of a big pie? Founder Investors Investors Founder
  57. 57. 57 6XXXX How to fund growth?  Internally generated  Debt  Hybrid  Equity
  58. 58. 58 6XXXX Cost, control, growth and risk Internal Debt Equity Source of funds Cost Lose Control Growth $ Risk Impact of funding Low Somewhat High
  59. 59. 59 6XXXX Financial leverage and firm value
  60. 60. 60 6XXXX Companies founded with venture capital www.nvca.org
  61. 61. 61 6XXXX Industries created by venture capital www.nvca.org
  62. 62. 62 6XXXX Investment: why and how  Why entrepreneurs raise money  Why investors invest in startups  How to raise venture funding
  63. 63. 63 6XXXX Why invest in venture capital? As of 31-Dec 2014 The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,569 U.S. venture capital funds (1,002 early stage, 175 late & expansion stage, 386 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. 1Pooled end-to-end return, net of fees, expenses, and carried interest. Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc. *Capital change only Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03
  64. 64. 64 6XXXX Impact of VC on a diversified portfolio Private Equity and Strategic Asset Allocation. 2007 Ibbotson Associates
  65. 65. 65 6XXXX Early-stage tops long-term performance
  66. 66. 66 6XXXX How does early-stage out-perform? 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry Gross value multiples at all stages of investment
  67. 67. 67 6XXXX 65% of the portfolio will deliver less than 1x Gross value multiples for losers 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
  68. 68. 68 6XXXX Early-stage winners will have more home-runs Gross value multiples for winners 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
  69. 69. 69 6XXXX Early-stage has 450% more 50x and 800% more 100x than later rounds Gross value multiples for home runs 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
  70. 70. 70 6XXXX How does a venture capital fund work? Fund Investors VC 8 $ 10 mm 2 $ 10 mm $ 58 mm 25% 75% Fund size 10,000,000$ Life of the fund 7 Management fee 2.5% Investable 8,250,000$ Investment size 1,031,250$ Companies 8 Fail 4 50% Break even 2 25% Exit 2 25% Investor's required ROI 35% Fund multiple return 5.76 Fund size at exit 57,600,000$ Carry @ 20% 9,520,000 Distribution 48,080,000$ Fund return multiple 4.81 Fund ROI 35% Required return per exit 28 times Equity per company F/D 15% Required value of equity at exit 28,800,000$ Required co value at exit 192,000,000$
  71. 71. 71 6XXXX GVMs for all first-round investments 10 years after investment. Data from Sand Hill Road Econometrics. Companies received first financing before 1 January 1999. First non-seed round investment. Returns are gross - before fees and carry
  72. 72. 72 6XXXX How do VCs make money?  Trade sale – sell to another company  IPO – sell to the public through listing on an exchange
  73. 73. 73 6XXXX Trade sale or IPO? www.nvca.org
  74. 74. 74 6XXXX Investment: why and how  Why entrepreneurs raise money  Why investors invest in startups  How to raise venture funding
  75. 75. 75 6XXXX The investor’s decision tree Innovative? Yes Value proposition? Yes Fast-growing market? Yes Exit No No No
  76. 76. 76 6XXXX Product or service: which scales better?  Product-based start-ups – Value proposition is delivered via product  Service-based start-ups – Value proposition is delivered via people
  77. 77. 77 6XXXX Getting to gatekeepers  It’s not what you know; it’s who you know  Network, network, network  Strong ties and loose ties
  78. 78. 78 6XXXX Connecting to my network  My company websites: www.expara.com  My blog: www.douglasabrams.com  E-mail: dka@expara.com; lanie@expara.com  Facebook: bizadk@nus.edu.sg  Linked-In: dka@parallaxcapital.com  Twitter: twitter.com/douglaskabrams
  79. 79. 79 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  80. 80. 80 6XXXX Key elements for success  Develop an innovative product – Innovation  Solve a problem for customers – Value proposition  Identify your customers – Market identification and analysis  Reach your customers – Marketing strategy  Compete when others enter - Sustainable competitive advantage  Make money – Business model and financial plan  Team – A team or B team
  81. 81. 81 6XXXX Problem Solution Key Metrics Cost drivers Revenue model Innovation and value proposition Sustainable competitive advantage Channels Customer segments Market size Customer archetype High concept Existing solutions Top 1-3 customer problems How are these problems solved today? Your solutions to customer problems Key numbers that tell if you are succeeding What is innovative about your solution? Why are you better than existing solutions? One sentence that says it all How will you create barriers to entry for followers? How will you get your product to customers? Who are your target customers? How big is your market and how fast is it growing? Characteristics of your key customers How do you generate revenue? What are your key cost drivers? Expara Business Model Canvas
  82. 82. 82 6XXXX Writing a model business plan 1. Executive summary 2. Value proposition and innovation 3. Market identification and analysis 4. Marketing and sales strategy 5. Sustainable competitive advantage Overview, innovation, market 6. Company products and services 7. Team 8. Expansion plan 9. Operational plan 10. Finances – Revenue and cash flow, valuation, funding required, equity offered, ROI Execution and financials
  83. 83. 83 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  84. 84. 84 6XXXX Innovation and value proposition  Sources of innovation – Trend-driven: forces, trends and mega-trends – Technological, macro, social, demographic, political  Types of innovation – Technology, product, process, positioning, paradigm, operational, cost, customer experience, management, business model, industry, attribute-driven (Blue Ocean)  Degrees of innovation – Incremental, disruptive
  85. 85. 85 6XXXX Types of innovation  Trend-driven: forces, trends and mega-trends – Technological, macro, social, demographic, political  Business model: changing market and industry structures & needs – Market inefficiencies  Attribute-driven – Blue Ocean strategy
  86. 86. 86 6XXXX Generating innovations  Alternative approaches to existing innovations – Second mover advantage  Personal experience, hobbies and pastimes, personal passions, annoyances  De-commoditize a commodity – Starbucks  Drive an innovation down-market – Spinbrush  Import geographically isolated innovations, cross regional, discipline or industry – Red Bull, Starbucks  Identify small companies with niche products with broader market appeal potential – Gyration and Nintendo
  87. 87. 87 6XXXX Value propositions • What value do we deliver to customers? • Which one of our customer’s problems are we helping to solve? • What bundles of products and services are we offering to each Customer Segment? • Which customer needs are we satisfying? Key questions • Newness • Performance • Customization • Getting the job done • Design • Brand/status • Price • Cost reduction • Risk reduction • Accessibility • Convenience/usability Types of values
  88. 88. 88 6XXXX Value proposition – how much does it hurt?  Painkiller  Vitamin  Candy
  89. 89. 89 6XXXX Value proposition – degrees of recognition  Latent problem – they have a problem but don’t know it  Passive problem – they know they have a problem but not looking for a solution yet  Active or urgent problem – they know they have a problem, are actively looking for a solution but no serious work done yet to solve  A vision – they have an idea for solving the problem and a home- grown solution but are prepared to pay for a better solution
  90. 90. 90 6XXXX Business model innovation: Diamond Rio vs iPod
  91. 91. 91 6XXXX Disruptive business model or disruptive tech  Diamond is the first mover in portable MP3 in 1998  Apple enters in 2003 and captures 90% of the market  Business model innovation – hardware + software + service
  92. 92. 92 6XXXX Disruptive models from Gillette to Google  Gillette – razor and blade  Southwest Airlines – budget airlines  Dell Computer – mass customization  Charles Schwab – on-line broker  Amazon – ecommerce  eBay – peer to peer marketplace  Google – search-based advertising
  93. 93. 93 6XXXX Innovation and value proposition 1. What is your product and what is innovative about it? 2. What is the painful problem you are solving for customers? 3. What are the shortfalls of the current solutions? 4. How do you solve this problem and can you quantify your benefit? 5. How does your innovation enable you to accomplish this?
  94. 94. 94 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  95. 95. 95 6XXXX Market and competitive analysis  Identifying favorable markets  Analyzing markets
  96. 96. 96 6XXXX Choose an industry favorable to start-ups  Increasing returns business: up-front costs are high relative to marginal costs  Network externalities  Complementary technologies are important to use  Producer learning is strong, switching costs are high
  97. 97. 97 6XXXX Look for fast-growing, segmented markets  The cost gap between new and established firms is smaller in larger markets  In fast-growing markets, new firms can serve new customers rather than customers of existing firms  Segmented market provide niches for new firms to enter and reduce retaliation by existing firms
  98. 98. 98 6XXXX Market timing – entering at the inflection point Measure of performance Measure of effort invested The technology adoption S curve
  99. 99. 99 6XXXX Industry life cycles and structures  Choose a young industry – more demand and less competition  Enter before a dominant design has been adopted  Labor intensive rather than capital intensive  Advertising and branding less important  Less concentrated industries – smaller competitors
  100. 100. 100 6XXXX Market and competitive analysis  Identifying favorable markets  Analyzing markets
  101. 101. 101 6XXXX Market identification and analysis 1. What is your market type? 2. How big is your market and how fast is it growing? – Top-down approach – Bottom-up approach 3. What are trends in your market are favourable for you? – Technological, social, demographic, regulatory 4. Who are your direct and indirect competitors?
  102. 102. 102 6XXXX Types of markets  Existing markets  Re-segmented markets/niche market  New market  Clone market
  103. 103. 103 6XXXX Top-down market sizing Total addressable market Target market Target segment Market share
  104. 104. 104 6XXXX Bottom-up market sizing
  105. 105. 105 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  106. 106. 106 6XXXX Customer discovery workshop
  107. 107. 107 6XXXX The customer discovery process Phase 1 State Hypothesis Draw Business model canvas Phase 2 Test the problem Phase 4 Verify or pivot Phase 3 Test the solution Customer validation
  108. 108. 108 6XXXX Phase 1: Business model hypothesis  Market size hypothesis  Value proposition hypothesis – Product vision – Product features and benefits – Minimum viable product  Value proposition 1: low fidelity MVP – Do customers care about the problem? – Write a user story
  109. 109. 109 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  110. 110. 110 6XXXX What are the elements of marketing strategy?  Differentiation – how is your product different from competition – Product - superior customer value – better, faster closer – Cost leadership  Positioning – market selection + differentiation – Image for the product that embodies its values  Marketing Execution – the 4 Ps – Product, pricing, place, promotion
  111. 111. 111 6XXXX Marketing strategy 1. How is your product differentiated from your competitors’ product? Use a comparison matrix to illustrate. 2. What is your position in the market? Use a positioning map or Blue Ocean Strategy canvas to illustrate 3. What are your price, place, product, promotion and initial sales plans 4. What is your tagline?
  112. 112. 112 6XXXX Comparison matrix Competitor 1 Competitor 2 Competitor 3 Competitor 4 Your company Benefit 1      Benefit 2      Benefit 3      Benefit 4      Benefit 5      Benefit 6     
  113. 113. 113 6XXXX Positioning map Portability Value Competitor 2 Your company Competitor 1 Competitor 3 Competitor 4
  114. 114. 114 6XXXX Value innovation – reduce costs & increase value Costs Buyer value Value innovation www.blueoceanstrategy.com
  115. 115. 115 6XXXX Four factors model www.blueoceanstrategy.com
  116. 116. 116 6XXXX Blue Ocean strategy canvas www.blueoceanstrategy.com
  117. 117. 117 6XXXX iPod strategy map
  118. 118. 118 6XXXX Develop a tagline  Clear, strong, authentic  Describes your unique offering to customers  Provides focus and differentiation
  119. 119. 119 6XXXX Elements of the 4 Ps  Product – Name, functionality, styling, quality, safety, packaging, repairs and support, warranty, accessories and service  Price – Pricing strategy, MSRP, volume discounts and wholesale pricing, cash and early payment discounts, seasonal pricing, bundling, flexibility  Place – Distribution channels, market coverage, specific channel members, inventory management, logistics  Promotion – Push/pull, advertising, selling and sales force, sales promotions, PR and publicity, budget. – How will you make your first sale?
  120. 120. 120 6XXXX Competitors will enter  How to compete with followers?  How to compete with existing companies?  Sustainability of technological lead – Competitors cannot duplicate the technology – Firm can innovate as fast or faster than competitors  First-mover disadvantages  Last-mover advantage
  121. 121. 121 6XXXX Competitive advantage – barriers to entry  Proprietary intellectual property  Network effects or externalities  Customer lock-in/switching costs
  122. 122. 122 6XXXX First mover advantage?
  123. 123. 123 6XXXX Creating last-mover advantage  Reputation  Preempting positioning  Switching costs/Lock-in/Network effects  Unique channel access  Move down learning curve  Favorable access to inputs  Definition of standards  Institutional barriers – IP protection First Mover Advantages  Pioneering costs  Demand uncertainty  Changes in buyer needs  Specificity of investments to early generations  Technological discontinuities  Low-cost imitation Disadvantages
  124. 124. 124 6XXXX Strategies to create last-mover advantage  IP strategy – patents, copyrights, trademarks, trade secrets  Create barriers to entry – Network effects and externalities – Lock-in effects
  125. 125. 125 6XXXX Established company strengths and weaknesses  Learning curve  Reputation effect  Cash flow  Economies of scale  Complementary assets Advantages  Difficult to innovate  They need to satisfy existing customers, partners and supply chain  Existing organizational structure is appropriate to current tasks  Risk aversion Weaknesses
  126. 126. 126 6XXXX Opportunities that favor new firms  Existing firms frozen in the headlights  Disruptive technologies and business models  Uncertainty: existing firms’ advantages in market research are neutralized; risk propensity  Technologies: Discrete versus systemic technologies, based on human capital, general purpose rather than specific  Bad customers: Enter market that is unattractive to existing competitors due to established cost structure
  127. 127. 127 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  128. 128. 128 6XXXX Customer segments • For whom are we creating value? • Who are our most important customers? Key questions • Mass market • Niche market • Segmented • Diversified • Multi-sided platform or market Types of customer segments
  129. 129. 129 6XXXX Customer segments: who/problem  Customer problem – Latent – Passive – Active or urgent – Vision  Customer types – End user – Influencer – Recommender – Economic buyer – Decision maker  Customer archetype  A day in the life of a customer  Organizational/influence maps  Consumer/web influence map
  130. 130. 130 6XXXX Customer archetype
  131. 131. 131 6XXXX Customer relationships • What type of relationships does each of our customer segments expect us to establish and maintain with them? • Which ones have we established? • How are they integrated with the rest of our business model? • How costly are they? Key questions • Personal assistance • Dedicated Personal Assistance • Self-Service • Automated Services • Communities • Co-creation Examples
  132. 132. 132 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  133. 133. 133 6XXXX Do you love to sell?
  134. 134. 134 6XXXX Sales and distribution  Great sales and distribution vs great product  Best sales is hidden  Products don’t sell themselves
  135. 135. 135 6XXXX Metrics for effective distribution  CLV: total net profit earned over the course of relationship with customer  CAC: cost to acquire a new customer  CLV>CAC
  136. 136. 136 6XXXX Sales channels
  137. 137. 137 6XXXX Complex sales  Seven figure deals  CEO must sell  50-100% YoY growth over 10 years  Enterprise sales must start small
  138. 138. 138 6XXXX Personal sales  10K-100K  Sales team can sell  Need to establish a process so sales team can move to mass
  139. 139. 139 6XXXX Sales dead-zone  Product needs a personal sales effort  Resources are not available or too expensive  Underserved SME markets
  140. 140. 140 6XXXX Marketing and advertising  Work for products with mass appeal but not viral – FMCG  Can work for start-ups but  Only when CLV-CAC make all other channels uneconomical
  141. 141. 141 6XXXX Viral marketing  Core functionality encourages users to invite their friends  Move first to dominate most important segment of market with viral potential  Get the most valuable users first  Paypal – initial focus on 20K Ebay PowerSellers
  142. 142. 142 6XXXX Power law of distribution  Select one - one distribution channel will be more powerful than all others combined  Most businesses get zero distribution channels to work  Poor sales rather than bad product is most common cause of failure  Sell your company to the media  Everyone sells
  143. 143. 143 6XXXX Channels • Through which channels do our customer segments want to be reached? • How are we reaching them now? • How are our channels integrated? • Which ones work best? • Which ones are most cost-efficient? • How are we integrating them with customer routines? Key questions • Awareness: How do we raise awareness about our company’s products and services? • Evaluation: How do we help customers evaluate our organization’s Value Proposition? • Purchase: How do we allow customers to purchase specific products and services? • Delivery: How do we deliver a Value Proposition to customers? • After sales: How do we provide post- purchase customer support? Channel phases
  144. 144. 144 6XXXX Channel hypothesis – physical products  Does your product fit the channel?  Physical channel choices – Direct sales – Independent sales rep firms – SI/VAR – Distributors/resellers – Dealers/Retailers – Mass merchandisers – OEMs  Which channel should I use?
  145. 145. 145 6XXXX Channel hypothesis – web/mobile  Pick one distribution channel – use tests to choose  Web/mobile channel choices – Dedicated e-commerce – your website – Two-step e-distribution - Amazon – Aggregators - Lendingtree – Platform app store – Apple – Social commerce - Facebook – Flash sales - Groupon – Free-to-paid channel  Multi-sided markets need unique channel plans
  146. 146. 146 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  147. 147. 147 6XXXX Customer relationships hypothesis
  148. 148. 148 6XXXX Get customers strategy  Who is your audience and where are they?  What content will they like?  Make sure your content works in location  Participate in their communities  Create content that people want to link to
  149. 149. 149 6XXXX Get customers tactics  Earned or free – Public relations – Viral marketing – SEO – Social networking  Paid – Pay-per-click advertising – Online or traditional media advertising – Affiliate marketing – Online lead generation; permission-based emailing
  150. 150. 150 6XXXX Keep customers  Interact, retain  Customization  User groups  Blogs  Online help  Product tips/bulletins  Outreach, affiliates
  151. 151. 151 6XXXX Grow customers  Get current customers to spend more – Cross-sell – Up-sell – Next selling – Unbundling  Get customers to send more customers – Encourage likes – Discounts or free trials to share – Enable email to friends to create mailing lists – Contests or incentives for viral activities – Highlight social networking action buttons – Encourage bloggers to write about the product
  152. 152. 152 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  153. 153. 153 6XXXX Revenue models • For what value are our customers really willing to pay? • For what do they currently pay? • How are they currently paying? • How would they prefer to pay? • How much does each Revenue Stream contribute to overall revenues? Key questions • Asset sale • Usage fee • Subscription Fees • Lending/Renting/ Leasing • Licensing • Brokerage fees • Advertising Types • List price • Product feature dependent • Customer segment • dependent • Volume dependent Fixed pricing • Negotiation (bargaining) • Yield Management • Real-time-Market Dynamic pricing
  154. 154. 154 6XXXX Key revenue model issues  Subscription/membership  Volume or unit-based sales  Advertising-based  Licensing & syndication  Transaction fee  Pay-per-use  Referrals  Affiliate/revenue sharing  Selling data  Back-end offers Revenue models  Single stream  Multiple streams  Interdependent  Loss leader Revenue streams  Value pricing  Competitive  Volume  Portfolio  Razor/blade  Subscription  Leasing  Product based Pricing models
  155. 155. 155 6XXXX Other revenue model issues  Total cost of ownership (TCO)  Return on investment (ROI)  Multi-sided markets have multiple revenue models  Distribution channel affects revenue streams  Consider lifetime value
  156. 156. 156 6XXXX Revenue diagram – Grateful Dead From Note on Business Model Analysis for the Entrepreneur – HBS Publishing
  157. 157. 157 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  158. 158. 158 6XXXX Cost structure • What are the most important costs inherent in our business model? • Which Key Resources are most expensive? • Which Key Activities are most expensive? Key questions • Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) • Value Driven (focused on value creation, premium value proposition) Is your business more • Fixed Costs (salaries, rents, utilities) • Variable costs • Economies of scale • Economies of scope Sample characteristics
  159. 159. 159 6XXXX Cost drivers  Payroll-centered (Direct)  Payroll-centered (Support)  Inventory  Space/Rent  Marketing/advertising Cost structures  Fixed  Semi-variable  Variable  Non-recurring Types of cost drivers
  160. 160. 160 6XXXX Costs diagram – 7-11 Japan From Note on Business Model Analysis for the Entrepreneur – HBS Publishing
  161. 161. 161 6XXXX Complete business model diagram
  162. 162. 162 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  163. 163. 163 6XXXX Customer acquisition and activation workshop
  164. 164. 164 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  165. 165. 165 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  166. 166. 166 6XXXX Key roles in a start-up company team Position Skills 1 CEO (Chief Executive Officer) Leadership, vision, presentation 2 CFO (Chief Finance Officer) Financial 3 COO (Chief Operating Officer) Operations and HR 4 CTO (Chief Technology Officer) Technical/product background 5 CMO (Chief Marketing Officer) Sales and marketing
  167. 167. 167 6XXXX Beyond the management team  Board of advisors  Strategic partners  Suppliers
  168. 168. 168 6XXXX Key partnerships • Who are our key partners? • Who are our key suppliers? • Which key resources are we acquiring from partners? • Which key activities do partners perform Key questions • Optimization and economy • Reduction of risk and uncertainty • Acquisition of particular resources and activities Motivations for partnership
  169. 169. 169 6XXXX Partners hypothesis  Strategic alliances  Cooperation with competitors  Joint business development efforts  Key supplier relationships  Traffic partners (web/mobile)  Other partners – app stores, payment providers
  170. 170. 170 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  171. 171. 171 6XXXX IP Strategy  Patents  Copyrights  Trade Marks  Registered Designs  Trade secrets
  172. 172. 172 6XXXX Patents  Technical inventions  Novelty, inventiveness & industrial application  Registration system – national & PCT systems  Novelty & infringement searches  20 years, if continuously renewed  Exclusive monopoly  Business methods & computer programs, algorithms, ideas
  173. 173. 173 6XXXX Copyrights  Exists on creation, no registration procedures  Searches are therefore not available  Expression not ideas – words, music, art, film, sound, broadcast, cable, publishing, live performance  Life or author/ creator+ 50 years; or 50 years  Copy, publish, perform, broadcast, cable, adapt  Software, databases, GUI, multimedia  International protection e.g.., Berne, TRIPs
  174. 174. 174 6XXXX Trade Marks  Registration system – national, CTM & Madrid treaties  Capable of distinguishing & earlier marks  Substantive examination  Searches? – national or CTM  10 years, renewable indefinitely  Right to use in the course of trade  Domain names, marketing, web partnerships
  175. 175. 175 6XXXX Design registration  National registration system  Novelty and mass-produced articles  Formal examination only  15 years / 25 years protection, if continuously renewed  Exclusive monopoly  Computer icons  Register or almost no protection, not even copyright
  176. 176. 176 6XXXX Trade Secrets  Formula (e.g. Coca Cola formula)  Pattern, Plan, Customer Lists, etc  Process, R&D Data  Device, Apparatus, Machinery etc
  177. 177. 177 6XXXX Advantage of Trade Secrets  No fees  No time limits  Information not available to competitor for improvements  No blocking patents  Freedom to operate  Proprietary position
  178. 178. 178 6XXXX Forms of organization  Sole proprietorship  Partnership  Limited Liability Partnership  Companies – Private Limited companies – Public companies – Listed public companies
  179. 179. 179 6XXXX Key agreements  Shareholder agreement  Employment agreement  Director’s responsibilities  Investment agreement
  180. 180. 180 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  181. 181. 181 6XXXX Who are the players?  Entrepreneurs – Lifestyle entrepreneurs - limited scope, complication and risk. Slow growth. – High-growth entrepreneurs (scalable business) Significant scope, complication, and risk. Rapid growth.  Venture investors – Venture capitalists (VCs) – Seed investors/incubators – Angel investors – Corporate VCs and investors – Banks, government
  182. 182. 182 6XXXX What roles do they play?  Identify opportunities  Provide funding  Oversee finances  Assist with growth  Generate returns for themselves or their investors Venture investors  Create opportunities  Raise funding  Manage finances  Increase value  Generate returns for investors Entrepreneurs
  183. 183. 183 6XXXX VCs invest at multiple stages Founder’s Capital Seed/ Angel Series A, B, C Mezzanine Pre-Exit Exit VC hurdle rates 60-100% 40-60% 20% OM F,F&F Incubators corporations government Customers, suppliers, strategic partners VCs, Banks for VC loans R&D Establishment GTM/Rollout Accelerated Expansion Maturity Enablement growth
  184. 184. 184 6XXXX How much funding is required?  What are sources of funds – debt, equity, retained earnings  How much money do you need to raise and how much equity will the investor receive?  You should generally be raising around $0.6MM to $1.5MM at this stage.  Remember that if you are raising less than $1MM, you will likely be seeking investment from Angel investors rather than from VCs.
  185. 185. 185 6XXXX Equity offered – how much do you need?  What percentage does the company want to sell? – Often too much or too little – This is the wrong question  Set performance and fund-raising milestones – How much money do you need to achieve the next milestone? – Divide defensible firm value by funds needed to determine percentage to sell  Equity offered in the seed stage should usually be in the range of 15-30%
  186. 186. 186 6XXXX Use the funds to fuel company growth  How are you going to use the money you are raising?  Show a detailed breakdown  Minimize investment in fixed assets  No big salaries for founders
  187. 187. 187 6XXXX Exit strategy and ROI  How will your investors make money and how much will they make?  The most likely exit strategies are IPOs (sell to the public) and trade sale (sell to another company), with trade sale the first choice in most cases.  For VCs, ROI should be at least 10 times and preferably 30-100 times over 5 years.
  188. 188. 188 6XXXX How do VCs make money?  Trade sale – sell to another company  IPO – sell to the public through listing on an exchange
  189. 189. 189 6XXXX Trade sale or IPO? www.nvca.org
  190. 190. 190 6XXXX Exit markets at an inflection point Exit activity in SEA, especially in Singapore, exploded in 2013 • Increased investment in startups since 2007 is beginning to yield results • Number of exits increased from 6 in 2010 to 20 in 2013 • Singapore alone has had 30 exits since 2007, 13 in 2013 • Value of exits increased from 51 MM in 2010 to 400 MM in 2013
  191. 191. 191 6XXXX Recent exits in SEA Company Country Acquiror Price Year ZopIM Singapore Zendesk US$29.8MM 2014 Non-Stop Games Singapore King US$ 100MM 2014 sgCarMart Singapore SPH S$60 MM 2013 DS3 Singapore Gemalto S$50 MM est. 2013 Asian Food Channel Singapore Scripps Networks Undisclosed 2013 Reebonz Singapore MediaCorp and Existing investors S$250MM 2013 Yfind Singapore Ruckus Wireless Undisclosed 2013 Techsailor Singapore TO THE NEW Undisclosed 2013 travelmob Singapore HomeAway Undisclosed 2013 Catcha Digital Media Singapore Opt Inc Undisclosed 2013 GridBlaze Singapore Undisclosed Silicon Valley Startup Undisclosed 2013 Viki Singapore Rakuten US$200MM 2013 SGE Singapore Tech In Asia Undisclosed 2013 ThoughtBuzz India To The New Undisclosed 2013 AyoPay Indonesia MOL AccessPortal Undisclosed 2013 Tongue in Chic Malaysia PopDigital Undisclosed 2013 Ocision Malaysia Star Publication US$ 4.36MM 2013 Glamybox Vietnam VanityTrove Undisclosed 2013 PaymentLink Singapore Wirecard US$41.2MM 2013 Dealguru Singapore iBuy S$34.28 MM 2013 Buy Together Hong Kong iBuy S$21 MM 2013 Dealmates Malaysia iBuy S$10 MM 2013 PropertyGuru.com Singapore ImmobilienScout24 S$60 MM 2012 HungryGoWhere Singapore Singtel S$12 MM 2012 AdMax Network Singapore Komli Media Undisclosed 2012 TheMobileGamer Singapore Singtel US$1.5 MM 2012
  192. 192. 192 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  193. 193. 193 6XXXX In the financial section of the business plan  Business model  Financial projections  Valuation  Funding required and equity offered  Use of Proceeds  Exit Strategy and ROI
  194. 194. 194 6XXXX Business model – how will you make money?  Revenue sources  Cost drivers
  195. 195. 195 6XXXX Complete business model diagram
  196. 196. 196 6XXXX Create financial projections  3-5 years of projected balance sheet, income statement and cash flow statements.  Project from bottom up and top down  Sales growth and market share are key  Project cash requirements using a detailed budget Yr 1 Yr 2 Yr 3 Yr 4 Gross Revenues Operating Expenses EBITDA Metric: Ex: Units sold/leased Scalability necessary for VC investment - $50MM in annual rev
  197. 197. 197 6XXXX Pro-forma financial statements
  198. 198. 198 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  199. 199. 199 6XXXX Company valuation methods  Price to earnings (p/e)  Dividend yield  Multiple of book value  Comparables  Discounted Cash Flow (DCF)  VC method
  200. 200. 200 6XXXX Valuation – how much is your business worth?  How much is your business worth, based on comparables and a DCF valuation of your projected cash flows at an 80% discount rate?  Make sure that you can explain how you arrived at this valuation.  For seed stage companies, this should generally be in the range of $2-4 MM.  Pre-money valuation - worth of the business before VC investment  Post-money valuation – after VC investment
  201. 201. 201 6XXXX VC method of valuation  Variation on NPV/IRR method  Founders expect to sell company for $25 MM in 4 years  Need to raise $3MM; investors require 50% return (discount rate)  Post-money valuation = $4.9 MM ($25MM/(1.54)  Pre-money valuation = $1.9MM ($4.9MM-$3MM)  Equity required = $3MM/$4.9MM = 60.75%
  202. 202. 202 6XXXX How much equity does the investor receive?  Pre-money valuation – Amount invested by VC ÷ (Agreed pre-money value of business + Amount invested by VC) – $3MM pre + 1 MM VC = 25% VC equity  Post-money valuation – Amount invested by VC ÷ post-money valuation – $4MM post = 25% VC equity
  203. 203. 203 6XXXX Pro-forma DCF valuation model
  204. 204. 204 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  205. 205. 205 6XXXX Key elements of the deal  Board of directors  Protective provisions  Drag-along agreement  Conversion Control  Price-per-share  Valuation  Amount of financing  Liquidation preference  Vesting  Options pool  Anti-dilution  Pay-to-play Economics
  206. 206. 206 6XXXX Calculate investor’s ROI including dilution
  207. 207. 207 6XXXX Cap table
  208. 208. 208 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  209. 209. 209 6XXXX VC vs. entrepreneur - interests  Solve sorting problem  Minimize agency costs/problems  Maximize financial returns  Maintain option to abandon  Be able to force entrepreneur to exit and distribute proceeds  Maintain reputation VC  Get outside capital  Maximize financial gains from equity stake  Retain control, minimize constraints on behavior and decision making  Build successful firm  Build reputation  Get outside expertise and contacts Entrepreneur From Venture Capital Negotiations: VC versus Entrepreneur – HBS Publishing
  210. 210. 210 6XXXX VC versus entrepreneur  Entrepreneur compensation increases when value of VC's stake increases  Vesting of entrepreneur's stake  Key-person agreements  Ability to fire managers Ways to align incentives  Due diligence  Repeated relationships  Monitoring/information rights Ways to reduce information asymmetries From Venture Capital Negotiations: VC versus Entrepreneur – HBS Publishing
  211. 211. 211 6XXXX VC versus entrepreneur  Equity stake senior to that of entrepreneur  Option to abandon through staging of investments across financing rounds  Forcing exit through decision-making control  Convertible debt  Puts rights and anti-dilution provisions Ways for VC to protect downside  Seat on board of directors  Covenants in agreement limiting entrepreneur's ability to use capital in undesirable ways  Involvement in operations  Super-majority rights Ways for VC to control decision making From Venture Capital Negotiations: VC versus Entrepreneur – HBS Publishing
  212. 212. 212 6XXXX Entrepreneur versus investor  Maximize financial returns  Maintain option to abandon  Be able to force entrepreneur to exit and distribute proceeds  Maintain reputation VC  Get outside capital  Maximize financial gains from equity stake  Retain control, minimize constraints on behavior and decision making  Build successful firm  Build reputation  Get outside expertise and contacts Entrepreneur
  213. 213. 213 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  214. 214. 214 6XXXX VC-Start-up negotiation workshop
  215. 215. 215 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  216. 216. 216 6XXXX Communicating with investors  Business plan  Executive summary  Investor presentation  Formal and informal presentations
  217. 217. 217 6XXXX Use meaningful titles  The title of each slide should communicate the key message for that slide.  For example, if you have a slide that shows projected sales, do not make the title "Projected Sales."  Instead, make the title something like, "Projected Sales in 2003 are $3 Million."
  218. 218. 218 6XXXX Less is more  Your message needs to be clear and concise  Clean visual design – avoid chart junk and “design-itis”  On presentation slides, less is more – slides, bullet points, text  If you can't explain your message simply, you need to re-formulate your message.
  219. 219. 219 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  220. 220. 220 6XXXX How long does it take to make a first impression?  First impressions are critical  You make yours in the first 7 seconds of your presentation  How long to feel someone is trust-worthy? 0.1 second  How can people decide so quickly? Appearance and body language.
  221. 221. 221 6XXXX You can’t judge a book by its cover, can you?  Appearance counts  Attractive people are viewed as more interesting, credible, trustworthy and persuasive  Good looking people get better jobs, tall men perceived as powerful
  222. 222. 222 6XXXX Which one is more likely to be the CEO?  In the U.S. population, about 14.5 percent of all men are six feet or over  Among CEOs of Fortune 500 companies, that number is 58 percent  3.9 percent of adult men are 6'2" or taller  Among CEOs, 30 percent were 6'2" or taller  An inch of height is worth $789 a year in salary From Blink – Malcolm Gladwell
  223. 223. 223 6XXXX You can’t judge a book by its cover: Part II
  224. 224. 224 6XXXX You can’t judge a book by its cover: Part III  You can’t judge a book by its cover; appearance doesn’t matter  Everyone judges books by their cover; appearance matters a lot  We can be seriously misled by this approach – Susan Boyle  So why does everyone judge a book by its cover?
  225. 225. 225 6XXXX All stereotypes are wrong, aren’t they?  Beauty is not in the eye of the beholder – standards of beauty are innate  One-week old babies look longer at attractive faces  Beauty is not only skin-deep  Bi-lateral symmetrical and composite appearance are correlated with genetic and developmental fitness  Tall and strong men were more successful in our ancestral environment
  226. 226. 226 6XXXX Presentation dos and don'ts  Rock back and forth - nervous  Fidget - nervous  Shake leg while sitting – bored, nervous  Too many um and uh  Voice too soft – shy; too loud – overbearing  Rubbing back of the neck – bored Don’t  Stand up straight, open body language – nothing crossed  Arms at side - relaxed and proper gesticulation – hands below chin and within shoulder ranger  Be aware of hands and feet  Face smiling and inviting  Silent pause – thoughtful and confident Do
  227. 227. 227 6XXXX Maintain proper eye contact  Too little eye contact – lying  Too much eye contact – stalker stare  Look directly at the audience for emphasis or conviction  Sweep and click to create connections  Handshake – strong and confident. Pump 2-3 times, then release. Don’t use two hands
  228. 228. 228 6XXXX Pitching to VCs
  229. 229. 229 6XXXX Getting past gatekeepers  Why are presentations important?  Understand gatekeepers’ incentives  Avoid raising red flags  Attention to detail  Get it right the first time
  230. 230. 230 6XXXX Why are presentations important? You’re fired!
  231. 231. 231 6XXXX What causes choking?  Top performance under pressure requires focus and relaxation  Too much focus on performance causes skill to break down  Forget about your bad shots; remember your good shots
  232. 232. 232 6XXXX Create takeaway messages  People remember the first or last things that you say, so start and end the presentation strong  Communicate your important points clearly, concisely and memorably.  People remember stories more easily than lists of facts, so if you can make any of your key points in story form, that can be helpful.
  233. 233. 233 6XXXX Do not read your slides  Do not just stand and read your presentation slides.  Makes your presentation redundant and therefore uninteresting, since the audience can just then read the slides.  Try to pick out one or two important points on each slide to discuss in more detail.
  234. 234. 234 6XXXX Practice and test  Analyze the details of your presentation, then master those details by practice, practice, practice.  Arrive early and if you are using any technology, test it  If you can not get in early, try to test the night before  It is OK to be nervous before you begin
  235. 235. 235 6XXXX Q&A is the most important part  Audience has a chance to ask you about what is on their mind.  Q&A is do or die time.  Prepare for Q&A by studying your material in-depth  Anticipate likely difficult questions and formulate answers  Note questions you are asked and if you did not have a good answer to a specific question, formulate one for next time.  Don’t disagree - agree
  236. 236. 236 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  237. 237. 237 6XXXX Presentation workshop
  238. 238. 238 6XXXX Expara Accelerator Program • Go big or go home • Investment: why and how • Business model canvas and plan Understanding the big picture • Innovation and value proposition • Market identification and analysis • Customer discovery workshop • Competitive analysis and strategy • Customer analysis and archetype • Channel strategy • Sales strategy • Revenue model • Cost model • Customer acquisition and activation workshop • Low fidelity MVP demo Key elements for success: product/market fit • Team, team and team • Legal and regulatory issues Key elements for success: business • The fundraising process • Financial plan and model • Valuation • Key deal terms and term sheets • Negotiating with investors • VC-startup negotiation workshop • Investor presentation materials • Presenting to investors • Investor presentation workshop • Demo Day Financing and fundraising
  239. 239. 239 6XXXX Demo day
  240. 240. 240 6XXXX Customer discovery process
  241. 241. 241 6XXXX The customer discovery process Phase 1 State Hypothesis Draw Business model canvas Phase 2 Test the problem Phase 4 Verify or pivot Phase 3 Test the solution Customer validation
  242. 242. 242 6XXXX Testing the problem • Do we really understand the customers problem? • Do enough people care about the problem for the business to scale? • Will they care enough to tell their friends? Key questions • Designing experiments for customer tests • Preparing for customer contacts and engagements • Testing customers understanding of the problem and assessing its importance to customers • Gaining understanding of customers • Capturing competitive and market knowledge Key steps
  243. 243. 243 6XXXX Design tests and pass/fail experiments
  244. 244. 244 6XXXX Prepare for customer contacts – physical  Start with 50 target customers  Develop a reference story  Start the appointment setting process
  245. 245. 245 6XXXX Build low-fidelity MVP – web/mobile  Makes sure the problem or need is an urgent one  Presents the problem  Asks for a response  Can use multiple MVPs
  246. 246. 246 6XXXX Test understanding of problem and assess its importance - physical  Develop a problem presentation  The problem meeting  Understand how they solve the problem today  Collect information on everything  Amalgamate and score customer data
  247. 247. 247 6XXXX Low fidelity MVP problem test – web/mobile  Push – push contacts need referral sources  Pull – pull strategies  Pay – pay for contacts  Drive traffic and start counting  Consider scalability  Use traffic measurement tools
  248. 248. 248 6XXXX Gain customer understanding  Participate in their culture  Get to know real customers  Internalize customer experience  Understand how they discover new ways to spend their time
  249. 249. 249 6XXXX Contact us  Douglas Abrams  Expara Pte. Ltd.  dka@expara.com  www.expara.com  65-6323-3084, 65-9780-5381 (hp)  Block 71 Ayer Rajah Crescent, #02-10/11 Singapore 139951

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