Entrepreneurship

1. Entrepreneurship Views from the Gutters and Back Alleys October, 2008

2. Three Things You Need to Know • It’s much harder than you can imagine • You need to know where you’re going • You can’t do it alone E&I Club

3. Why Start-up Companies are Difficult • You have: • no product, • no customers, • no revenue, • … just an idea (and it’s off the mark anyway). • Expect to take about two years to get it right “Ever feel you’re on the verge of an incredible breakthrough?” E&I Club

4. Conflicting Interests • Companies are created by, run by and serve people • Companies have personalities (culture) that must be nurtured • Stakeholders • Founder Entrepreneurs - Chasing the Dream • Investors - Looking for Financial Return • Customers - Want Solutions to Problems • Employees - Want Challenges • Partners - Looking for Competitive Advantage E&I Club

5. Some Key Definitions • Risk • 1661 - Italian - rischiare: “run into danger” • Strategy • 1688 - French - stratégie: “office or command of a general” • Tactics • 1638 - mod Latin - tactica: “an action carefully planned to achieve a specific end” • The start-up company has a lot of risk it needs to understand and manage by developing a clear strategy that leads to concise tactics to reach, at a minimum, break even operations. E&I Club

6. Strategy & Typical Start-up Scenario • Conventional Wisdom: • Start-ups are "too busy” doing stuff • Don’t have time to methodically think through & analyze the market development and product positioning processes • “Strategy and vision” is often someone’s dream of the future • Consequences: • Faulty assumptions leads to company sufferings & high risk • “Vision du jour" creates stress and skepticism in company • Unaligned key constituencies (management, employees, investors, customers, Board members) • Haphazard customer targeting and selling processes • Incomplete product feature sets E&I Club

7. Strategic Planning • Key strategic questions to get right: • What are you going to sell? • Who are your target customers • How can you beat or avoid the competition? • Key tactical questions to answer: • How do we get there? • How much is it going to cost? • When do we arrive? • Who is responsible? E&I Club

8. Get the Right Business Strategy “Technology Looking for a Home” Technology driven Insufficient customer contact Weak value proposition Weak business model Weak top line growth capability “Real Business with Profits” Sufficient customer contact Deep domain expertise Clear value proposition Focused resources Strong operations capability Clear business model “Boring” but lucrative story Method Execution Perception Reality (Strategy) “Looking for the Pot of Gold at the end of the Rainbow” Chasing Fads No domain expertise No value proposition Confused staff No top line growth capability “The Great Story” Market driven, but Lots of Hype Unable to deliver on time and on budget Good value proposition Weak operations expertise Initial top line growth, but unsustainable Myth E&I Club

9. Uncover / understand scientific principles High risk Trial & error Need not apparent Research phase Gov’t supported Discovery vs Innovation vs Business Discovery 2 (MP3 music) Business (iPod) Innovation (Mobile music library) Discovery 1 (Embedded systems) Discovery 3 (Ultra small storage) 25-30 years 2-3 years • Change the way a customer gets value and satisfaction from resources • Improves on existing methods or habits • Engineering phase • Private equity funding • Find and serve customers • Business strategy • Manufacturing • Marketing and sales • Customer service • Revenue • Public equity markets E&I Club

10. Channel Requirements End Customer Needs Industry Contacts Sales Agents Planning Operating Marketing Sales Spark (Vision) Market Entry Strategy Sales Prog Definition Sales Funnel Definition Sales & BD Strategy Phase 1: Incubation (Mission) Revenue Generation Product Definition Market Definition Target Mkt Prospecting Sales Prog Management Phase 2: Foundation (Goals) Opportunity Phase 3: Execution (Objectives) Product Management Prod / Srvc Architecture Financing Strategy Financial Systems Expense Containment Product Roadmap Business Metrics Investment Presentations Financial Packaging (Actions) Product / Service Finance Angel Funding VC Funding X-Over Funds Gov’t Programs Technology Forums Technical Managers Industry Trade Consortia Foundation Building Model E&I Club

11. Building Your Team • Focus on immediate to progressive needs: • 1-2 years (product dev’t, financing, sales) • Recognize and plan to the inevitability of the cycle • Augment the strength of the CEO • Create crisp roles & responsibilities • Factor in the following considerations: • Alternative people, not just easy choices • Previous start up experience • Team skills and ability to work across multiple functions • Previous work history and success track record • Appetite for long hours, risk, flexibility, change • Contract work before hiring • Don’t tolerate the “prima donna” syndrome E&I Club

12. Three Things You Need to Internalize • Be prepared for the long haul • Strategy + tactics = managed risk • Build your team well – adapt quickly E&I Club

13. Decision Criteria for Investors * “Angel Investing” Osnabrugge & Robinson E&I Club

14. Marketing Your Deal • Four things to market your deal: • an "elevator pitch", • a 4-page business summary, • a 12 -15 page PowerPoint presentation, and • a 30 - 40 page business plan. March, 2008 Telfer School - MISA E&I Club 14

15. Hook First Meeting Entrepreneur Market Enthusiasm Line Next Meetings Team Product Comp Position Sinker Final Stretch Due Diligence Technology Competition Comfort Growth Pitch Elevator Pitch Powerpoint Exec Summary Support Business Plan Market Info Depth Support / Ops / Research Documentation “My hook’s stuck!” Work To Do Casting About for an Investor E&I Club

16. Building the Fairy Tale • Common approach: take numbers from big name research firms and discount them to create an illusion of a market • Doesn’t factor in difficulty in understanding the sales cycle: direct, channels, partners … • Better approach is to build a ‘bottoms up’ pro forma sales funnel • Segment customers … name names of early customers • Understand financial health of segments (CLECs??) • Understand buying cycle and how many units per sale • Allocate sales and support effort appropriately • Word of advice: Ignore everybody who doesn’t contribute to the top line! E&I Club

17. Pitch Outline E&I Club

18. The Elevator Pitch • Capsule comment summarizes essence of your deal • What it is, why it's different, why it's big • Why you're sharp • Verbal calling card. • Must be concise (in less than 25 words) • Identify a pain and solve the problem • Defensible business model, • Have a call to action • Remember your delivery • Demonstrate enthusiasm • Ensure that messaging is consistent across organization • Use similar phrasing, tell the same story. E&I Club

19. Management E&I Club

20. Market E&I Club

21. Business E&I Club

22. Market Research Gap Analysis Segmentation Strategy Vision Position Competition Funding Enough fuel to get the job done Contacts Syndication People World Class Team Core Competencies Experience Building a Survivable Business Improve Success Rate • Develop a clear customer value proposition • Develop a sustainable business model • Build the right team and board • Have a market entry strategy • Watch your competition • Understand and manage business risks • Spend money wisely E&I Club

23. We like early stage investing I like your company but my partners don’t If you find a lead, we will follow We invest along side (high profile VC) all the time Show us some traction and we will invest We don’t want to run your company - we are investing in your team We’ll help you craft your management team We can open doors for you at our client companies This is a vanilla term sheet I’m just a phone call away when you need me Top Ten Lies of VCs E&I Club

24. Our projections are conservative (Big Name Research Firm) says our market will be $50B five years from now (Big Company) will sign our contract next week Key employees will join us as soon as we get funded We have first mover advantage VCs are already interested (Big Company) is too slow to be a threat We have a proven management team Our patents make our business defensible All we have to do is 1% of the market Top Ten Lies of Entrepreneurs Guy Kawasaki, CEO Garage.com E&I Club

25. Backup E&I Club

26. 12 - 15 page PowerPoint presentation The 12 - 15 slide show again captures the essence of your opportunity ("why should I invest") in a presentation format. The Tech Coast angels recommend the following in the PowerPoint presentation: Eleven must-have slides Cover – business positioning statement – framework for listening. One sentence what we do. Market – the need and what customers have this need – what creates the demand for your solution Solution – product, core benefit Competitive position – who they are and your defenses Marketing/sales/support – channels and skills needed Business strategy – growing beyond launch Financial projections Funding sought Management Milestones Exit strategies March, 2008 Telfer School - MISA E&I Club 26

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29. The Business Plan Good plans are usually simple plans. Good ideas do not require 150 pages to tell the story. Most business plans are strong on technology and weak on marketing. There are many excellent online resources to assist you with the creation of your full business plan: http://www.businessplans.org/MootCorp.html - place for sample business plans.. The site includes 25 complete plans, all of which were entries in the 1999 Moot Corp business plan competition. http://www.sba.gov/starting/indexbusplans.html - Business plan tutorial by the SBA. http://www.cstgf.com/new/venture_financing_submitproposal.shtml#what - The Canadian Science and Technology Growth Fund has an excellent outline A good outline of a business plan for seed funding can be found (written by Keith Bates of Ventures West). http://java.sun.com/features/1999/03/seedmoney.tips.html March, 2008 Telfer School - MISA E&I Club 29

30. From BCE Capital: • The right business plan • We see a lot of business plans. The ones that impress us are those that show professionalism, simplicity, dedication and clarity. We want to know: • who you are and what you have accomplished • what you plan to do • why you plan to do it • how you plan to do it • who your customers are • who else is doing it and what other approaches there are • why you're special • what you hope to achieve in one year and three years • what you think the risks are March, 2008 Telfer School - MISA E&I Club 30

31. The Elevator Pitch Sample one sentence product description: CarDiagnostics has developed a patented hardware and software solution for your wireless device that plugs into your car lighter and identifies and advises you what, if anything in your car, needs repair. Another sample one sentence product description: Cardiagnostic develops a simple hardware and software solution for your wireless device that performs a diagnostic on your automobile then identifies mechanical problems and potential solutions. Sample thirty seconds: Consumers feel frustrated not understanding their vehicle – the mechanic seems to have the upper hand. The Cartest product by CarDiagnostic puts you back in the driver’s seat. We’ve developed a patented hardware and software solution for your wireless device that plugs into your car lighter and identifies and advises you what, if anything, needs repair. It takes 60 seconds, and saves you unnecessary mechanic’s bills. We’ve beta tested our solution with a major car manufacturer and we’re in negotiations with Canada’s largest car accessories distributor. We’re ready to go to the next level and would like an opportunity to discuss this exciting product with you. March, 2008 Telfer School - MISA E&I Club 31