Includes:
"Building Your Financials" with Glenn McCrae, Early Growth Financial Services
"Value Propositions" with Noah Lichtenstein, Cowboy Ventures
"Market Sizing & Competitive Landscape" with Steph Palmeri, SoftTech VC
"Go-To-Market & Competitive Landscape" with Niko Bonatsos, General Catalyst Partners
Fundraising Series (Part One): Building Your Story
1. day and
The Fundraising Series (Part One) –
“Building Your Story”“Building Your Story”
April 8, 2014
Featuring:
• Niko Bonatsos, General Catalyst Partners
• Noah Lichtenstein, Cowboy Ventures
• Glenn McCrae, Early Growth Financial Services
• Stephanie Palmeri, SoftTech VC
2. Agenda
8:00 am – 8:05 am
Chad Lynch - Introduction
8:05 am – 8:40 am
Glenn McCrae – Creating Your 3-Year Financial Plan with Q&A
8:45 am – 9:15 am
Noah Lichtenstein – Constructing Your Value Proposition with Q&ANoah Lichtenstein – Constructing Your Value Proposition with Q&A
9:20 am – 9:55 am
Stephanie Palmeri – Understanding Your Competitive Landscape / Market Sizing / Q&A
10:00 am – 10:35 am
Niko Bonatsos – Go-To-Market Strategy / Q&A
3. Building Your Financials:
Creating Your 3-Year Financial Plan
1
Creating Your 3-Year Financial Plan
Glenn McCrae
Partner and Chief Strategy Officer
Early Growth Financial Services
4. About Early Growth Financial Services
• Outsourced financial services firm that provides small to mid-
sized companies with an integrated financial solutionsized companies with an integrated financial solution
• 4 platforms of services and support: transactional accounting,
CFO, tax, and valuation
• Services include: AP/AR, financial forecasts, cash management,
financial statements, monthly close, 409a valuations, corporate
taxes, investor relations, fundraising support
• 300+ successfully funded clients nationwide
• #5 Silicon Valley Business Journal Fastest Growing Private
Company Award 2013
2
5. Building Your Story with Numbers
“The point of financial projections is to
tell a story with numbers—a story about
opportunity, resource requirements,
market forces, growth, milestone
achievements, and profits.achievements, and profits.
Your job is to create a numerical
framework that complements and
reinforces the vision you’ve painted with
words.” – Guy Kawasaki
www.earlygrowthfinancialservices.com 3
6. Presentation Overview
The essentials of startup financial management
• What are investors looking for in your
finances?
• What is a financial model?
• Setting financial goals and objectives
• Milestone funding• Milestone funding
• Bottom-up financial projections
• Spend
• Budgeting
• Top-down projections
• Cost assumptions
• Reforecasting
www.earlygrowthfinancialservices.com
4
7. Why a 3-Year Financial Model?
A comprehensive financial pictures serves as the road-map
for your business
• Helps you understand your cash burn
• Forces you to evaluate key
performance drivers
• Validates your assumptions
Puts challenges into perspective• Puts challenges into perspective
• Iterative process continuously
improves your assumptions
• Insight into your business model
• Clarifies decision-making process
(short-term and long-term)
• Gives you leverage of accurate
baseline valuation
www.earlygrowthfinancialservices.com
5
8. What Goes Into a 3-Year Financial Model?
Essential components to your model
Major
objectives
MilestonesTimeline
www.earlygrowthfinancialservices.com
3
Key
assumptions
Trending
analysis
Key variables
9. Identify Major Objectives for Your
Company
Assess where you are and what you want to achieve
Venture funding and
negative cash burn
Positive cash burn and
no venture funding
www.earlygrowthfinancialservices.com
What do you want to accomplish
with next raise?
What are the goals you want to achieve
during this time period?
10. Process for Creating Your Financial Model
How to approach the process and get buy-in
1. Go to stakeholders and members of
executive team – what do they need to
achieve objectives (revenue, product,
market, strategic, etc.)?
2. What is needed from a2. What is needed from a
programmatic perspective?
3. Compile information and discuss
with CEO (maybe executive team):
total amount requested relative to
milestone
4. Dialogue about wants and tradeoffs
5. Use dialogue to create bottom-up
forecasting budget
www.earlygrowthfinancialservices.com
8
12. Spend for Bottom-Up Projections
Consider relevant operational costs
• Customer/Cost details
• Human resource costs
• Consultant and professional services• Consultant and professional services
• Research and development
• Office and admin
• Sales and marketing
• Capital spending
www.earlygrowthfinancialservices.com
10
13. Budgeting
Use your budget to plan your actions
• Budgeting created on accrual basis: budgeting
versus actual results
• Difference between cash and accrual is
around capital expenditures
• Report budget by department and major cost
drivers (expense categories and revenue
www.earlygrowthfinancialservices.com
11
drivers (expense categories and revenue
categories)
• Plan actions: how quickly will this impact
revenue and what will you be able to achieve
based on spending
• Identify key variables
• Identify key revenue assumptions
• Run different scenarios
14. Budgeting Exercise
Start from a milestone perspective
• If company has been around for
a while, look at historical costs
• What do you need to
accomplish before you run outaccomplish before you run out
of money, or in a specific time
period
• Ask budget owners what they
need to accomplish goals
• Tradeoffs
• Trending analysis
• Trending initiative
www.earlygrowthfinancialservices.com
12
16. Reforecasting
Your financial plan is always evolving
• Don’t do a 5-year plan, at
most 3-year
• Update your budget on a
quarterly basis (at least)quarterly basis (at least)
• For investors budget on a
quarterly basis for first year
and then annually
• What’s realistic in terms of
timeline and reforecasting
on monthly or quarterly
basis?
www.earlygrowthfinancialservices.com
14
17. Thank You and Q&A
Glenn McCrae
415.320.5753
www.earlygrowthfinancialservices.com
15
gmccrae@earlygrowthfinancialservices.com
www.earlygrowthfinancialservices.com
Follow us @EarlyGrowthFS
19. At a Glance: Cowboy Ventures
• Founded in late 2012, $40m seed stage fund
• 2 partners, 6 ninjas, focus on community
• Our mission: to back the most beloved new
consumer + enterprise companies at seed stage –
companies re-imagining “Life 2.0”
Confiden'al
-‐
Cowboy
Ventures
2014
2
20. The “Re-Imagination of Everything”
Life 2.0, via Web/Mobile
New Content &
Commerce
Mobile-first
Consumer
New Connected
Devices
Consumerization
of Enterprise
16 investments to date*
New Gaming
*does not include some of our Stealth and “non-anchor” investments
Cowboy Ventures Current Portfolio
Confiden'al
-‐
Cowboy
Ventures
2014
3
21. Brief Bio: Noah Lichtenstein
• Partner, Cowboy Ventures (2013-present)
• Founding Team, HomeRun (2009-2012)
– Acquired by Rearden Commerce (Sept. 2011)
– Raised from Foundation, First Round, Founder
Collective, Angels
• Business Development, Climate Corp
(2008-2010)
– Acquired by Monsanto (MON) for ~$1bn (Oct. 2013)
– Raised from Index, NEA, Khosla, GV, First Round, etc.
• Other:
– Board of Directors, United Way
– Advisor, Life360
– Stanford University (B.A. 2004)
Confiden'al
-‐
Cowboy
Ventures
2014
@Noah_L
noah@cowboy.vc
4
22. What We’ll Cover Today
1. Company Value Proposition
2. Investor Value Proposition
Confiden'al
-‐
Cowboy
Ventures
2014
5
23. What We’ll Cover Today
1. Company Value Proposition
2. Investor Value Proposition
Confiden'al
-‐
Cowboy
Ventures
2014
6
24. Company Value Prop – What is it?
Purpose of the Value Proposition:
To help inform the customer so that he or she can
make a choice.
Confiden'al
-‐
Cowboy
Ventures
2014
7
25. Value Proposition is…
A positioning statement that explains WHAT benefit
you provide for WHO and HOW you do it uniquely
well.
--Michael Skok, North Bridge Venture Partners
Value Proposition is not…
A mission statement or company vision
Confiden'al
-‐
Cowboy
Ventures
2014
Company Value Prop – What is it?
8
26. Value Prop – Examples
Uber provides on-demand personal transportation
through a simple mobile application that enables users*
to request, ride, and pay for transportation at the push
of a single button. Unlike with taxis, Uber passengers
get reliable pickups, clear pricing, and convenient
cashless transactions.
*Because Uber is a marketplace, there is a distinct value proposition for Drivers
Confiden'al
-‐
Cowboy
Ventures
2014
9
27. Value Prop – Examples
Dropbox enables users to store and access their
photos, docs, and videos anywhere and share them
easily. Unlike local storage solutions, it does this by
storing digital copies of these files in the Cloud, and
automatically synchronizing them across a user’s
multiple devices.
Confiden'al
-‐
Cowboy
Ventures
2014
10
28. Company Value Prop – The What
The What
• What is the specific problem you are solving?
• Do consumers view this as a problem?
• How big is the problem?
Confiden'al
-‐
Cowboy
Ventures
2014
11
29. Company Value Prop – The Who
The Who
• Who will benefit from your product or service?
• Why do they care?
• How many are there?
Confiden'al
-‐
Cowboy
Ventures
2014
12
30. Company Value Prop – The How
The How
• What is your unique solution to the problem
• What are other existing solutions to the problem?
• Why is this better than existing alternatives?
Confiden'al
-‐
Cowboy
Ventures
2014
13
31. Quick Recap: Company Value Prop
Confiden'al
-‐
Cowboy
Ventures
2014
The Company Value Proposition is…
The What, Who and How of your company that helps
inform the customer so that he or she can make a
choice.
14
32. 1. Company Value Proposition
2. Investor Value Proposition
Confiden'al
-‐
Cowboy
Ventures
2014
15
What We’ll Cover Today
33. Investors: A bit of Background
• What keeps investors up at night?
• Needles in a (growing) haystack
• It’s not personal
• There is no right investor; there is only the right
investor for you
Confiden'al
-‐
Cowboy
Ventures
2014
16
34. What do Investors Care About?
The Four Things Investors Care Most About:
• Team
• Market
• Plan
• Traction (or some proof you can rock it)
Confiden'al
-‐
Cowboy
Ventures
2014
17
35. What do Investors Care About?
The Team
• Team make-up
• Relevant skills + background
• Unfair advantage
• The intangibles
Confiden'al
-‐
Cowboy
Ventures
2014
18
36. What do Investors Care About?
The Market
• Think big – market size >$1bn
• Addressable vs. total market size
• Growing market
• Comparable exits + strong multipliers
Confiden'al
-‐
Cowboy
Ventures
2014
19
37. What do Investors Care About?
The Plan
• Product roadmap
• Metrics and milestones
• Financials / projections
• Hiring plan
Confiden'al
-‐
Cowboy
Ventures
2014
20
38. What do Investors Care About?
Traction (or some proof you can rock it)
• Traction
• Other “proof”
Confiden'al
-‐
Cowboy
Ventures
2014
21
39. Meeting with Investors
What to do and expect…
• Before
• During
• After
Confiden'al
-‐
Cowboy
Ventures
2014
22
40. Meeting with Investors
Before
• Do your homework
• Reaching investors
• Arranging a time
Confiden'al
-‐
Cowboy
Ventures
2014
23
41. Meeting with Investors
During
• The goal of the first meeting à get a second meeting
• Start strong
• Show > tell
• Know and mention potential competitors
• Concrete next steps
Confiden'al
-‐
Cowboy
Ventures
2014
24
42. Meeting with Investors
After
• Send a follow-up note thanking them and
summarizing any next steps or action items
• The investor’s process
Confiden'al
-‐
Cowboy
Ventures
2014
25
43. Other Thoughts
• Is VC right for you?
• Every investor meeting is an opportunity to get
better
Confiden'al
-‐
Cowboy
Ventures
2014
26
44. Common Mistakes
• Settling for a cold intro
• Asking an investor to sign an NDA
• Thinking too small / not selling the dream
• Discussing exits in an early stage pitch
• Focusing too much on valuation in the early stage
• Not knowing the VC’s investment thesis
• Making the investor do all the work
• Game-playing
• Huge spikes in revenue from year to year
Confiden'al
-‐
Cowboy
Ventures
2014
27
45. Some Things I Love
• Be data driven
– If you have data already, speak to what it is telling you
– If you don’t have data, speak to what data is important and
what metrics you will be tracking
• CAC, WoW growth, churn, DAUs/MAUs, etc.
• Run tests
– Run a limited test to see if data will help you prove a
hypothesis or help demonstrate product-market fit
• Product roadmap
– A well thought-out roadmap for building and executing on
product development
Confiden'al
-‐
Cowboy
Ventures
2014
28
46. Closing Thoughts
• A strong company value proposition is a pre-
requisite for seeking investment
• Team, Market, Plan, and Traction (or some
proof you can rock it) are the four most
important things to investors when evaluating
an opportunity
Confiden'al
-‐
Cowboy
Ventures
2014
29
48. MARKET SIZING
& COMPETITIVE LANDSCAPE& COMPETITIVE LANDSCAPE
Steph Palmeri, SoftTech VC / @stephpalmeri
TOTAL ACCESS Fundraising Series, Part I
April 8, 2014
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49. Our Three Asses Rule
This
Presentation’s
Focus
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51. Big-Ass Market
* “Big enough” stress test
– Greater than $1B market opportunity
– Company, not feature
– How does your startup get to $100M in revenue?
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– How does your startup get to $100M in revenue?
• 10% of $1B market v. 50% of $200M (unrealistic!)
* By raising capital, you commit to match return
expectations
53. Market Analysis 101
* Problem definition:
– What are the underlying needs you solve?
* Identify your customers
– What do they look like?
– How are you helping them?
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– How are you helping them?
– Are your users also your buyers? (who pays?!)
* Addressable Market = # Customers * LTV
– What is the relevant market?
– Your expected share? (be reasonable, its not 100%!!)
– Growth / overall market potential?
54. Top Down Market Sizing
1. Industry, analysts estimates,
market data, etc.
2. Broken down to appropriate
sub-segment by:
1. Product Category
Addressable Market
≠ Total Market Size
Total Apparel
Market (US)
Total Kid’s Apparel
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1. Product Category
2. Geography
3. Vertical
4. Sales Channel
5. Customer
6. Etc…..
Total Address Market (topdown)
Your revenue if you
captured 100% of your
addressable market.
Total Kid’s Apparel
Market (US)
Total Online Kid’s
Apparel Market (US)
55. Bottom Up Approach
Identify & multiply the following:
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# of potential customers x est. revenue per user per year
Total Addressable Market(bottom up)
57. Market Sizing Tips
* Existing: Known customer + understood need
– Know entities make it ‘easier’, for you and investors
– Understand market nuances, don’t be careless
* New markets: New customer + new use case
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* New markets: New customer + new use case
– Emerging macro trends
– Adoption rate assumptions
– Timing matters
creativity + basic algebra + educated guesses
= bullshit but shows us how you think about your space
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59. Market Attractiveness
Size matters…
(but don’t overlook)
* Competition
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* Competition
* Monetization potential
* Market Growth
* Market Share
* Timing
61. You’ll probably have a slide that
looks something like this…
Feature list YOU! Giant
Incumbent
Fledging
Competition
Not even in
your market
Feature
everyone has
Feature that
✓✓ ✓✓ ✓✓ ✓✓
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Feature that
some of the
competition has
Unnecessary
feature your
competition cut
Feature you
think you have
Feature you
wish you had
✓✓
✓✓
✓✓
✓✓ ✓✓
✓✓
✓✓
62. … or this...
Fast
Your Logo
Here!
Others
Others
Others
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Slow
Traditional Modern
Others
Others
Others
Others
Others
Others
63. … or more recently this...
Adjacent
Market Segment
Adjacent
Market Segment
Adjacent
Market Segment
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Your
Logo
Here
Adjacent
Market Segment
Adjacent
Market Segment
64. but regardless…
explain your startup in the context
of the environment in which you
operate including those who you
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operate including those who you
partner with and those who you
compete against and those
who keep you awake at night
proprietary &
confidential
blackbox.vc
65. overview
* Competitive Landscape
– Examine the macro business environment
– Review your competition (past, present, future)
– Benchmark yourself
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– Benchmark yourself
* Competitive analysis
– The classic SWOT analysis
* Competitive advantage
66. Classic completive analysis
* Examine the macro business environment
– Economic + political trends
– Cultural + social shifts
– Technological innovation
– Regulations + legislation
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– Regulations + legislation
* Know the industry ecosystem surrounding your startup
– Competitors (direct, indirect, potential entrants)
– Suppliers/Partners
– Substitutes
– Customers
67. Pop Quiz
Q: Is your industry one or more of the following:
a. Considered crowded?
b. Fairly complex?
c. Scary to investors?
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c. Scary to investors?
A: Consider making an
ecosystem slide
Show investors
how much you
know (and they
don’t) about your
space… OWN IT!
68. Competitive analysis
* Comparisons you might put in a competitive grid:
– Products / feature set
– Customers
– Market share
You Them
Feature #1
Feature #2
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– Distribution strategy
– Technology
– Pricing
– Resources are they well funded?
Feature #2
Feature #3
Wow, your startup
takes all the boxes
on your arbitrary
grid!
69. SWOT Analysis –
Your Competitive Position
Strengths: why you kick ass
- Team
- Technology
- Scalability
- Execution
- Customer acquisition & retention
Weaknesses: why you don’t kick ass
- Team
- Lack of Technology
- Scalability issues
- Inability to execute
- Unreliable product/service
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- Customer acquisition & retention
- Distribution
Opportunities: why you might kick ass
- Early mover
- Emerging segments
- New technology
- New distribution channel
- Changing tastes
- Etc.
- Unreliable product/service
- Poor distribution
Threats: why you might not kick ass
- Competitors w/ more $
- Emerging segments
- New technology
- New distribution channel
- Changing tastes
- Etc.
70. Competitive advantage
* Barriers to entry
* Create a long-term sustainable advantage
– Continuous learning & innovation
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– Continuous learning & innovation
– Excellence and speed in execution
* Don’t obsess about others
– A little competition is healthy
– Keep an eye on competition but don’t loose focus on
what’s really important … the customer
71. VC’s perspective
What VC’s MeanWhat VC’s Say
Who will you compete with
tomorrow?
When does Facebook plan to do
this?
How are you different from the 15
other dating services I this week?
Who do you compete with
today?
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tomorrow?
[Insert name here] just raised
$50M from these 10 firms, how
are you differentiated?
this?
Your competition has deep
pockets…will anyone be willing to fund
your next round?
72. How to reach Steph Palmeri:
w: www.softtechvc.com
b: www.stephpalmeri.com
t: @stephpalmeri
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75. You always face competition
◦ It gets worse over time.
◦ Copying is the best form of flattery.
Why will your company break out?
What is your real advantage? What is your real advantage?
◦ Is it a technology advantage?
◦ Unique insights about the market?
◦ Timing re: seizing regulatory changes?
◦ Unique growth model?
@bonatsos
88. Seek for FREE PR
◦ Techcrunch et al need to report on something
◦ Recruiting
◦ Fundraising
◦ Early Adopters
Facebook Mobile Ads, New channels (e.g. Snapchat) Facebook Mobile Ads, New channels (e.g. Snapchat)
◦ “Golden Time” -> Cheap
NEVER pay for users/customers early on
◦ Spend that $$ improving your product/dating life
@bonatsos
89. Invest in growth and strategic value
◦ Revenue and profit$ will follow in time (we hope)
◦ Leverage your strengths
Don’t focus on breaking even
◦ Diminish profits and slow growth◦ Diminish profits and slow growth
Set personal goals (be realistic)
◦ Funding requirements
◦ Exit expectations
◦ Time horizon
◦ Social life
@bonatsos
90. Iterate all the time
Every business is different
Great product is “table-stakes” today
Advisors & experts vs. customers & market
Startup = Growth (Paul Graham) Startup = Growth (Paul Graham)
@bonatsos