business plan rodermann eaf romania

Alain Rodermann

[email protected]

Copyright Alain Rodermann 1

MSEE Supelec 88 + MBA IEP Paris 97

Operations (Bouygues and Alcatel)

Venture Capital (Innovacom, Sofinnova,

Arenatis) since 1997

Alain RodermannAlain Rodermann

Arenatis) since 1997

Founder and Managing Director Arenatis

[email protected]


Secondary Direct Venture Capital

Co-foundation Pre-Business-Angels Capital

Coaching Coaching

Fundraising Assistance


1. A business Plan ? What for ?

2. Understanding VC

3. Elevator Pitch and Executive Summary

4. Slide show

Agenda Agenda

4. Slide show

5. Financial Plan and Business Plan

6. Equity Deals


What for ?


Do VCs read business plans ?Do VCs read business plans ?


To help you plan

-> and execute

To help you clarify your ideas

-> convince your partners

A Business Plan. What for ? A Business Plan. What for ?

-> convince your partners

To help you know how much money you need

-> raise money

8Copyright Alain Rodermann

Startup Inception ProcessStartup Inception Process

Financial

Plan

Market

StudiesIdea

Business

Model

Company creation

Copyright Alain Rodermann

Elevator

Pitch

Exec

Summary

Slide

Show

Business

Plan

Investor

Pack

9

Term

sheetLegal Doc

Money in

the Bank

How to loose your time with a VC ?How to loose your time with a VC ?


1946 Boston

Georges Doriot

DEC

VC VC The beginningThe beginning

$ 70k

sold $355m

Multiple 500x

IRR (internal rate of return) =101% per annum


Where does money come from ?Where does money come from ?

Individuals

Pension

funds

Corpora-

tions

Funds of

Funds

Found-

ationsTax

VC

funds

Startups

Subsidies


Global VC MarketGlobal VC Market


20 % of the US Gross Domestic Product is generated by companies that received venture capital

European VC Backed fundraising European VC Backed fundraising S1 2011S1 2011

sector Nb deals % deal flow amount % capital

TOTAL 447 -28% 2200M

Consumer Web 72 +13% 522M +200%

Health Care 92 628M

Software 122 -35% 384M -40%

country Nb deals % deal flow amount % capital

UK 119 -29% 766M -4%

France 114 -16% 315M -18%

Spain 25 +32% 139M +200%

Germany 54 -41% 240M -27%


What is the American Way of VC ?What is the American Way of VC ?

20 companies in a fund

$1b companies candidates

2-4 blockbusters (x 10-50)

IPOs (big)

Trade sales (fast)

4-6 write-offs (x 0)

3-4 deals a year/ partner


What is the VC compensation scheme ?What is the VC compensation scheme ?

Management fees over 10 years (2%)

Carried Interest - Carry

In exchange of a cash investment (0,5-2%)

Hurdle rate (6-8%/year) Hurdle rate (6-8%/year)

20% on capital gain

Ex 100M (20M fees + 80M invested)

7% over ten years = 2x

carry if proceeds > 200M (2,5x on

companies)Copyright Alain Rodermann 17

Is VC dependant on Stock Markets ?Is VC dependant on Stock Markets ?

IPO IPO

Early stage

Late stage

VC disillusion

investment window missed


Who does what in a VC team ?Who does what in a VC team ?


What is a standard partner time sheet ?What is a standard partner time sheet ?

1/3 : Read, Call and Type with Thumbs

1/3 : Travel / Eat and Drink / Seduce and

Convince / Negotiate

1/3 : Board meetings 1/3 : Board meetings

2/3 Headaches

1/3 Good time


Elevator pitchElevator pitch

1 minute to convince and get a business card

Use numbers

Train Train

Show Excitement

Adapt to the situation


What would have been the Elevator Pitch in

1977 ?

What would be the elevator pitch in 2011

after the death of Steve Jobs ?

Apple Apple Business CaseBusiness Case

after the death of Steve Jobs ?


Founded in 1976 by Steve Jobs , Steve

Wosniak and Ronald Wayne

1st round - total money raised $ 8,6M

Apple II, Visicalc, Macintosh (84), Macbook,

Apple Apple

Apple II, Visicalc, Macintosh (84), Macbook,

imac, ibook, ipod, iphone, ipad, itunes

IPO in 1980

Steve Jobs death 10 2011

Market cap 10 2011 : $380b


1 page (2 pages accepted)

Details of the elevator pitch

or summary of the business plan ?

Executive SummaryExecutive Summary

or summary of the business plan ?

Write it from the beginning to the end.

Useful to get a first meeting with an investor


1. Vision & Mission

2. Problem & Solution

3. Business Model

4. Market and Competition

Executive SummaryExecutive Summary


5. Team

6. Key financial figures (Revenues, Margin, Net

income

7. Deal proposal


ExecSummLynkware2011.pdf

reaDIYmate-essai1000.doc

ExamplesExamples


Which opportunity have you discovered?

Which problem are you having a solution to?

How did you get the idea?

Problem and SolutionProblem and Solution

Why was it you who had this idea?

Why wasnt it discovered earlier ?


Which market are your targeting

Positioning map

MarketMarket

Total available market

Number of potential customers or clients

Size of TAM : product price x nb clients


Competitive Landscape

Comptetitive advantage

Disruptive Technology : 10X rule

First entrant

CompetitionCompetition

First entrant

Monopoly


models the functioning of the company. It

allows the formalization of:

The production plan

The go to market strategy

Business ModelBusiness Model

The go to market strategy

The Revenue model

having implicitly mentioned:

the clients of the company (segmentation)

the positioning of the company in the value chain


Alexander Alexander OsterwalderOsterwalder approachapproach


Somebody should pay (not me!)

What do the client pay for ?

Product vs Service

Cession of a right of use, Royalty

Revenue ModelRevenue Model

"Free" cession of a product, sale of consumables.

Rent, Leasing

Advertising and affiliation

Gross margin

Cost of acquisition

Working Capital Requirements35Copyright Alain Rodermann

What is the value of stakeholders ?

Pay cash

Help find other clients

Consume (others will pay)

SegmentationSegmentation

Consume (others will pay)

Give time or produce for free

Get paid


Direct sale

Indirect sale

Qualification / Prospecting / Sale

Prescription

Go to market StrategyGo to market Strategy

Prescription

OEM

Communication (RP)

Advertising, Mailing, etc.

Virality

Etc.


The The PowerpointPowerpoint PresentationPresentation


Mid PitchMid Pitch


Pitch 2.0Pitch 2.0

Magic

Vision

Passion

10 20 30

Pitch

Informative

Before

Kawazaki

Memorable


2 versions (min-#-font)

10 20 30

20 45 30

The nicer the better

The slide showThe slide show

The nicer the better

Include pictures and illustrations

Use graphic designers services if necessary


1. Vision & Mission


3. Business Model

ContentContent


5. Team

6. Key figures (Revenues, Margin, Net income,

Cash position curve)

7. Deal proposal


LynkwarePres2011.pdf

Prsentation welovewords.pdf

ExamplesExamples


The goal is to let the VC think that

Your company is fantastic

You are the one

Be professional

TheThe showshow

Be professional

Dont read your slides

Show enthousiasm


Version 4Version 4


Content

Income Statement

Balance Sheet

Statement of Cash Flow

Financial PlanFinancial Plan

Statement of Cash Flow

Staff assumptions linked with revenues

Bottom up construction

Assumptions highlighted

Monthly built with annual summaries


Dont underestimate salaries and staff size

Net income higher than 25% is suspect

Include international business if any

How many scenariosHow many scenarios

Can you make more than 10M in sales ?

Cash scenario drives financial strategy


Barely read before first meeting

2 options

Powerpoint

Word

Business planBusiness plan

Word

Prose (subject verb complement)

No bullet point, no slide copy

Standard sketch

To be written by the CEO


Business planBusiness plan

1. Executive summary

2. Vision & Mission


4. Business Model

5. Market, Competition and IP

6. Team and organisation

7. Financial figures

8. Deal proposal


A must have for winners

Size matters

Always ready and up to date

Investor packInvestor pack

market studies, clients, marketing docs

IP, legal


Why VCs dont sign NDAs ?Why VCs dont sign NDAs ?


VC criteriaVC criteria

The ideal companyThe ideal company

RevenuesRevenues

Strong and complete management teamStrong and complete management team

Big and growing marketBig and growing market Big and growing marketBig and growing market

Strong IPStrong IP

Good competitive positionGood competitive position

Low cash requirementsLow cash requirements

Low preLow pre--money, low postmoney, low post--moneymoney


VC criteriaVC criteria

The ideal companyThe ideal company

RevenuesRevenues

Strong and complete management teamStrong and complete management team

Big and growing marketBig and growing market Big and growing marketBig and growing market

Strong IPStrong IP

Good competitive positionGood competitive position

Low cash requirementsLow cash requirements

Low preLow pre--money, low postmoney, low post--moneymoney

Doesnt existDoesnt exist


Time to market 1/4 (10Time to market 1/4 (10--2000)2000)

Source Gartner


Time to market 2/4 (10Time to market 2/4 (10--2001)2001)

Source Gartner


Product life cyclesProduct life cycles


Time to market 3/4 (7Time to market 3/4 (7--2003)2003)Technology Hype Cycle

Source Gartner


Time to market 3/4 (7Time to market 3/4 (7--2007)2007)Emerging technologies Hype Cycle

Source GartnerCopyright Alain Rodermann 61

Why most VCs are visionary sheep ?Why most VCs are visionary sheep ?


1. Our projections are conservative.

2. (Big name research firm) says our market will be $50 billion in 2015.

3. (Big name company) is going to sign our purchase order next week.

Guy Kawasaki : Guy Kawasaki :

10 Lies VCs know you are telling10 Lies VCs know you are telling

order next week.

4. Key employees are set to join us as soon as we get funded.

5. No one else is doing what were doing.

6. No one else can do what we are doing.

7. Hurry, because several other VC firms are interested.

8. Oracle is too big/dumb/slow to be a threat to us.

9. We have a proven management team.

10. All we have to do is get 1 percent of the market.63Copyright Alain Rodermann

Early stage financingEarly stage financing

Love money

1-50k

Business Angels

10-300k

Venture Capital Venture Capital

500k-5M+


A Love Story ?

Process Decoding

Elevator pitch : Whaou Effect

Exec Sum : compatibility with investment strategy

1st meeting : team

Convince a VCConvince a VC

1st meeting : team

2nd meeting : plan and risk analysis

3rd+ meeting : show stoppers

Experts can help


100 Exec sum sent

20 first meetings

5 second meetings

VC meeting ProcessVC meeting Process

20 calls

15 Exec sum sent

15 first meetings

3 third meetings

1 term sheet

Copyright Alain Rodermann

15 first meetings

10 second meetings

5 third meetings

3 term sheets

66

Taking Equity stakesTaking Equity stakes

Inception : nominal value

Series A,B,C,D shares

Capital increase with premium value

Stock Option Pool Stock Option Pool

Liquidation preference

Full and Weighted average ratchett

Wash out


68

10

12

14

16

in

out

in - out

PhasingPhasing

Break-even

-4

-2

0

2

4

6

1 2 3 4 5 6 7 8 9

in - out

cash position

0,1 0,7 2+

Break-even


Should you accept more money than Should you accept more money than

you need ?you need ?


ValuationValuation

Net present value

Market Value

Premoney + investment = Post money

Postmoney + Options (as if exercised) = Postmoney Fully

diluted

R)(1FV

R)(1CiNPV

n

1

0i

++

+=

n

diluted

Investors view

IRR=R with NPV=0, (Co= -X M),

(Excel : XIRR)


Preferred Stock EffectPreferred Stock Effect

R)(1FV

R)(1CiNPV

n

1

0i

++

+=

n

VCs% $ % $ % vote% vote1st round 2nd round

% $Exit

Foundersand employees


ExampleExample

Inception: 1000

1000 share at 1 nominal value

Capital increase at 3/share (with full ratchet rights), for

2000 shares

premoney = 3000=> post money = premoney+ 2000x3 = 9000

Issuing of 10% in a stock option pool

300 options => 3300x3 post money fully diluted

Capital increase at 1/share (ratchet applied)

4000 additional free shares. (as if all the shares were paid at

1/share : 6000/1 6000/3 = 4000)


SOHARD

Goal :

understanding and mastering cap tables

Business Case SOHARD.docx

Business Case Business Case

Business Case SOHARD.docx


answers1 money raised 59 320 057,00 2 Charles

1 50,0%2 47,2%3 28,3%4 28,3%5 7,9%6 11,2%7 10,8%8 10,8%9 6,7%

AnswersAnswers

10 0,0%

Capital Gain IRR3 TC 4 162 893,27 16,37%4 BOB - 204 000,00 -49,43%5 PEDRO 1 881 654,60 192%6 CHARLES 3 004 499,33 55%7 MARCEL 343 955,16 infinite


Questions ?

Alain Rodermann

+33 6 86 58 58 24

[email protected]

www.arenatis.com

linkedin.com/in/rodermann

@alroder


business plan rodermann eaf romania

Documents

vc dependant

vc team

fundraising european

venture capitaleuropean

vc compensation scheme

american way of vc

business plans

partnersa business plan