the investor pitch - entrepreneurship 101 (2013/2014)

Peter Evans Entrepreneur-In-Residence, MaRS Founder & CEO, ExpertFile

@techmarketer Entrepreneurship 101 May 7th - 2014 @expertfile

The Investor Pitch

The Beginning of a $10 Billion Story

Other People’s Money Fundamentally Changes Everything

The Investment Paradox

Getting to !

NO!

Investor!Entrepreneurs!

Getting to !

YES!

Venus & Mars

Successful!Track

Record

Compatible!Match of

Size/Stage/ Geography

Strategic!Relevant Portfolio

Friendly!No directly competitive investments

Capacity!Has funds to invest

The Right!Investor!

Entrepreneurs want… Investors want...

Platform!Significant "

Technological"Advantage

Market!Sizable and "Addressable

IP &!Bus. Model !

Entry Barriers

Traction!Early "

Customers"

Team!Skills & "

Track Record

The Right!Investment!

<Insert Your Logo Here>

How you see your venture

How investors see your venture

It’s a Hits Business*

30 Qualified Referrals

Get closer review 15-20 Company gets investment 1

* Ron Conway SV Angel 1/3

Success Rate

1/3 1/3 Fail 4-5X

Return Even

Return

What a week looks like

Getting to Yes: 3 Levels of Engagement

Emotional! Rational! Financial!

Signs an investor is just not that into you

“I still don’t know what you do”

“Isn’t your product just a nice to have?”

“Is your market really enough?”

“I still don’t understand how you

make money”

“Are you underestimating

your cost to acquire customers?”

“Couldn’t your competitors copy

you?”

“Do you have the right players on

your team?”

Components of the Investor Pitch

Real Problem

#1

Compelling Investment

#4

Unique Advantage

#3

AttractiveMarket

#2

Real Problem

(2 min)

#1 Attractive Market

(3 min)

#2 Unique

Advantage

(3 min)

#3 Compelling Investment

(2 min)

#4

(3 min)

#1 Real

Problem

(2 min)

#4 Compelling Investment

(4 min)

#2 Attractive Market

(3 min)

#3 Unique

Advantage Start

Pacing Your Investor Pitch Sample timeline: 12 minutes

End

* Note: Elapsed times are guidelines only

Answering the “So What?”

Real!Problem!

1

Focusing a Problem that Matters

Creating Impact

•  Core Value Proposition: Use a single sentence

•  Unique Benefit: Focus on one single aspect of what you do (aka…”the big idea”)

•  Metaphors: Try to create a cognitive connection to something people understand

•  Emotion: Create a visceral response (why are things still done this way?) Be provocative….Nice to have’s aren’t investable

The Company & It’s Solution – Elevator Style

Real Problem

Introduction

Key Message: We’re fixing the insanity of the status quo

Start Min 3

Start

•  Current State: Show the insanity of how customers address the issue today

•  Historical Evolution: What’s changed in the customer’s mindset

•  Personas: Describe the main players in your market you address

•  Pictures: Every picture tells a story

Real Problem

Introduction

Problem

Defining the Problem Paint a picture of who has this pain

Key Message: We’re solving real pain…not “nice to haves”

Min 3

•  Product: What is it? "(screen shots, product photos)

•  Functionality: The Who + Do

•  Benefits: High level value

•  Category: Where do you play?

•  Stage: What is the readiness of the solution?

Real Problem

Introduction

Problem

Solution

Your Solution to the Rescue Describe WHAT you do and HOW you do it

Key Message: Our solution is novel and easy to understand

Start Min 3

•  Founded (Year) •  Employees (FT/PT) Offices •  Advisors •  Product Release(s) •  Beta Users/Unique Views/ Registrations •  Paying Customers •  Partners (Technology/Channel) •  Certifications/Industry Awards •  Media Coverage •  Patents

Real Problem

Introduction

Problem

Solution

Traction

What’s Been Achieved to Date? Show your ability to succeed: On lots of sweat…little $

Key Message: We’ve got meaningful traction

Start Min 3

Confidential PG 26

©NIMTech Inc. 2009

Metabolized by

Patient

Lost to the Atmosphere

Environmental Impact Average Annual Climate Change Footprint for 1 Hospital

2000

= 400

>1,600 Tonnes of eCO2 Vented per hospital/year

Automobiles

250 ml Bottles Anesthetic Agents

on the Road/yr.

Gold standard detection methods (visual & x-ray) fundamentally unchanged for decades.

Existing Tooth Decay Diagnostics

Tooth Decay Detected

by  Quantum  Dental  Technologies  

Canary interactive software and printed patient reports

The Canary Console

Company Overview

What we do •  Quantum Dental Technologies has developed a new platform which uses a low-

powered laser to detect tooth decay earlier and more accurately than conventional technologies, allowing dentists to treat & heal the teeth instead of “drill, fill & bill”.

Milestones •  Product - Dental Clinic model designed, first commercial units manufactured •  Customers - Over 50 pre-orders secured •  IP - Strong patent portfolio •  Clinical - First Health-Canada approved clinical trial completed, second trial in

progress, providing independent validation of safety & efficacy •  Partnerships - Strong relationships with key global distributors and major multinational

strategic partners

Financing •  $##M raised to date, seeking an additional $##M to reach breakeven

Healthy Tooth

Early Enamel Decay

Advanced Enamel Decay

Demineralization

The Life Cycle of Tooth Decay

Remineralization

Remineralization Therapies The Canary System Scan X-Ray, Drill Fill & BIll

Market Visibility!

Real-Time Engagement!

Analytics & Control!

Website Integration "

(API/Widgets)

Search Engine Optimization

ExpertFile.com Directory

Sharable "Public Profile

Inquiry Workflow

Email & "System Alerts

3rd Party Agent Access

Publishing Controls

Lead Generation Reporting

Content"Asset Tracking

Lead Generation

Dynamic Publishing!

Intuitive Expert Profiles Corporate Profile"Rich-Media Plug-Ins

Mobile Compatible Advertising-Free No Registration Required to View

A Unique Platform for Expert Content Software built for management, marketing & measurement

Start End

Real Problem

(3 min)

#1 AttractiveMarket

(3-4 min)

#2 Unique

Advantage

(3 min)

#3 Compelling Investment

(2 min)

#4 Unique

Advantage

(3 min)

#3

Attractive Market!

2

Opportunity Awaits Lots of Room in the Market to Scale the Business

•  Size: What’s being spent today on problem? Build from ground up. Can the market support multiple players?

•  Addressability: What’s the reasonable market you can serve?

•  Segments: Going Niche or broad? •  Global: Identify other markets •  Proof: Use 3rd party analyst reports

•  Thought Leadership: Are you using primary research to gain insight?

•  Charts: Keep it visual and engaging

Market Size

Attractive Market

Sizeable Market Opportunity It’s very big …and you can get to it

Key Message: We have unique insight into the market

Min 3-4

Min 7-8

•  Status: Closed vs. Prospects and "Paid vs. Free Trial

•  Categorize: Key segments etc.

•  Contextualize: Why they bought

•  Personas: Describe customer characteristics

•  Logos: Categorize …Avoid “logo soup”

•  Evangelists: Customer quotes to validate market pain and size

Customers

Attractive Market

Market Size

Early Customers/Prospects Nothing really matters till somebody buys something

Key Message: We have buyers who must have our solution

Min 3-4

Min 7-8

•  Key Metrics: Pricing, Avg. Deal Size, Registrations/Subs., Monthly Recurring Revenue (MRR), Churn, LTV etc. Note: Customer Acquisition Cost (CAC) is the most overlooked metric

•  Channels: What are the downstream costs to sell and service the customer (is this built in?)

•  Competitive Scenarios: Is your model sustainable if competitors start stealing share? Have you factored in potential of downward price pressure over time?

Revenue Model

Attractive Market

Customers

Market Size

Making Money Where does the growth and profit come from?

Min 3-4

Min 7-8

Key Message: We’ve validated our revenue model and and we can scale the business.

• Visibility: Critical to success…what’s your unique story? •  Lead Generation Programs: What marketing approaches

will you use (stay high level – categorize)

• Sales Model: Direct vs. Channel (Do you have partners? Have you built a wave for channels to ride?)

• Systems: Do you have an infrastructure to scale (CRM/Inbound Mktg. Platforms etc.)

•  Testing: Do you have capability to test value prop./offers? • Stages: Do you have the ability to pivot from launch to

growth to maturity?

Marketing & Sales

Attractive Market

Revenue Model

Customers

Market Size

Acquiring Customers What’s your go-to-market strategy?

Key Message: We know how to drive visibility, lead gen.and close deals

Min 3-4

Min 7-8

Opportunity Example: B2B Healthcare

$1.1 Billion is spent globally every year by Healthcare sectors on inhalation anesthetic Demand is growing annually by 15%!"54,000 operating rooms in NA""3 dominant players own a monopoly position in the market, with no forthcoming alternatives"

Go to Market Strategy

  Integration Stickiness Auto-syncing banking data every night

  Communication: Informative, insightful weekly emails

  Offers: Value-added, contextual, time sensitive offers

  Collaboration tools with internal and external advisors (i.e., accountant)

  Focus on customer service

  PR – already featured in the Financial Post and Profit Magazine. U.S. PR through Hoffman.

  Social media and blog to drive SEO

  Partnerships, i.e. banks, accounting firms

  Vertical Communities: Custom chart of accounts for 40+ industries

  Advertising: Google Adwords, Facebook Ads, LinkedIn DirectAds

Retaining Capturing

Start End

Real Problem

(3 min)

#1 AttractiveMarket

(3-4 min)

#2 Unique

Advantage

(3-4 min)

#3 Compelling Investment

(2 min)

#4

You are in the Best Position to Win

Unique!Advantage!

#3 Many of the essential pieces are in place

Every company will eventually be run by an idiot

I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.

Warren Buffet

“

”

•  Role: What value will they add to your solution Research/Development/Sales/Support etc.

•  Reputation: Do you you have the right players in the market you are serving?

•  Category Fit: Do they have sufficient market power?

•  Executive Sponsorship: Do you have buy in from key people inside the channel?

•  Incentives: Is the partner aligned financially to support you?

•  Longer Term: Is there competitive threat or potential M&A?

Partners

Partners Show how you can punch above your weight

Key Message: Important market players get our vision and want to work with us

Min 6 Min 10 Unique Advantage

•  Technology: Validate how you are different? How much market lead do you have? What degree of leverage and scale do they create?

•  Process: Are there unique process elements of how your technology works?

•  Licenses: Are there 3rd party components of your solution that are licensed? Do you have an exclusive right to the technology?

•  Patents: What is the focus of the patent and what stage are you at? (provisional filing, patent granted) – Not a bad idea to mention any name brand attorneys you work with.

Partners

Competition Technology/IP

Competition: Technology/IP Leadership Creating barriers to entry

Min 6 Min 10 Unique Advantage

Key Message: We’ve nailed a problem that is hard to solve. It will be hard for competitors to catch up

•  Company Background: List experience in terms of key companies each team member worked for. List “pedigrees” (notable exits).

•  Planned Hires: Speak briefly to what primary role they will play in the venture

•  Achievement: Focus on a key aspect of their experience that uniquely qualifies them for the venture

•  New Hires: Where applicable, speak to any key people you may be hiring to build out the team

Partners

Technology/IP

Team & Advisors

Unique Advantage

Team & Advisors The capabilities to execute on the plan

Min 6 Min 10

Key Message: We have assembled the right mix of talent with the “know how” and “know who.”

Multimedia integration

Lead Gen. Workflow & Alerts

Professional Services

Detailed Expert Profiles

Competition

SEO Optimized

Searchable Expert Directory

3rd Party Agent/ PR Agency Admin.

Analytics Dashboard

On-Domain Content (API to Client Website)

Advertising Free

Competitor 1 Competitor 2

48  

Achieving the $10 Billion Story

Peter Evans!CEO"

Robert Carter!Product Management"

Dan Stanhope!Software Development"

Lance Laking* (Ottawa)"TRM, BTI Systems, MaRS, IAF"Capital Angel Network"

Board*/Advisors!

David Meerman Scott (Boston)"Bestselling Author/Speaker – Advisor to Hubspot & Eloqua"

"Product management, strategy, business development Riverdale Partners, MaRS, Platespin, !FloNetwork/Doubleclick, Sympatico.ca, Bell Canada

MBA (Queens University) """

"Marketing research, product marketing, marketing & sales systems integration roles."

Riverdale Partners, MaRS, Platespin, !FloNetwork/Doubleclick, Sympatico.ca, Goldfarb Consultants!

MSc. Market Research (University of Guelph)

"""

"

Management!

"Agile software dev, UX & architecture/design of high traffic sites."

TorStar Digital, Platespin/NovellBSc., Computer Science (Brock University)!

"

"""

Team

Paul Philp (San Francisco)"Amity, Marketwire, Platespin"

John Vukovic (Toronto)"FloNetwork, Ernst & Young"

Randall Howard* (Waterloo)"VERDEXUS, MKS (Founder)"GTAN Angel Group"

Mark Greenfield (Buffalo)"State University of New York"

Skillsets Matter

Start End

Real Problem

(2 min)

#1 AttractiveMarket

(3 min)

#2 Unique

Advantage

(3 min)

#3 Compelling Investment

(2 min)

#4

There is Upside for Investors

Compelling!Investment!

#4 Presenting the Offer for Investment

Rule No. 1: Never lose money; Rule No. 2: Don't forget rule No. 1

Warren Buffet

“

”

Key Message: Our venture clearly offers a superior return for our investors.

•  Key Numbers: Revenues, Expenses, EBITDA, Customers, Headcount

•  Burn Rate: What is the net cash out month

•  Assumptions: Be prepared to defend them

•  Scenarios: Be able to speak to impact of various scenarios (i.e. Cost of Acquisition is x% higher than forecast or lack of conversion from free to premium)

Financials

Compelling Investment

How You Will Make Money Key Metrics that Explain the Bottom Line for Investors

Min 10 End

Key Message: We have clear exit opportunities

•  Partners: Are there any important players who are showing interest in working with you? What problem do you help solve for them?

–  Intellectual Property

–  Talent

–  Customer Base

•  Acquisitions: Are there companies that have shown interest in your market space or technology?

•  Comparables: Do your homework on past transactions that have happened in your market and note the prices paid to acquire companies.

Financials

Compelling Investment

Path to Liquidity Potential Exits for the Company

Min 10 End

•  Investment Structure/Terms: Type of Instrument (Convertible Debt, Equity) and what are the terms of the deal

•  Amount: What’s been raised and what is left in the round? Use of Proceeds: What milestones will you achieve (with the investors money)

•  Runway: What amount of time does the current money buy (can you hit breakeven or is a new round required?)

•  Pipeline: Be prepared to speak to who is committed so far and who are you approaching. You must show momentum – “herd dynamics.”

•  Valuation: Be careful about “premature” discussions regarding pre-money value – don’t price from the podium!

Compelling Investment

Financials

Offer Details

The Ask Value & Deal Structure/Terms & Use of Funds

Min 10 End

Key Message: Our deal structure &terms are favourable.

Financial Projections

2011 2012 2013 2014 2015

Number of Licenses # # # # #

Revenue $______ $______ $_______ $_______ $_______

Expenses $______ $______ $_______ $_______ $_______

Gross Margin % % % % %

EBITDA $_______ $_______ $_______ $_______ $_______

Total Head Count #

#

# # #

•  Investment to Date: $_______"–  $______ support from government programs/grants (if applicable) "–  $______ cash investment from founders and angels"

•  Current Raise: $________ "

•  Use of Funds See Examples of Activities Below!–  Build Marketing programs"–  Hire US sales team"–  Commercial launch of V1.0 product "–  Secure final regulatory approvals"–  Finalize Patents"–  Initiate large scale manufacturing "

•  Further Fundraising? !–  Planned ___ Round Financing in ____ of _____ "–  Expect to achieve __________with the proceeds of this raise "

"

Financing & Use of Funds

A Recap: The 4 Components of the Pitch

Real Problem

#1

Compelling Investment

#4

Unique Advantage

#3

AttractiveMarket

#2

In the End…The Investment is in You A dozen attributes smart investors look for 1. Honesty…….........................Gives straight answers to investor questions 2. Vision….................................Demonstrates customer insight/thought leadership 3. Resourcefulness…………… Can make an investor’s dollar go far 4. Logic …………….……………Makes wise, pragmatic decisions quickly 5. Drive…………………………..Genuine passion for early stage & ability to excite 6. Humility……………………….Coachable and seeks help to address weak spots 7. Leadership……………………Has the ability to attract and lead a winning team 8. Critical Thinking……………..Challenges assumptions and spots the false +’s

12. Agility……………...................Decisive…Cuts losses & pivots at the right time

9. Commitment……………........Not just involved - sweat &/or capital invested 10. Patience……………...............Tolerance to the ambiguity of innovation 11. Credibility…………….............Well researched. Uses data to back assumptions

“You don’t need every investor to believe you can succeed…You just need one.” Ben Horowitz Andreessen Horowitz

Peter Evans | CEO, ExpertFile !Entrepreneur-In-Residence, MaRS!

@techmarketer http://ca.linkedin.com/in/peterevansprofile