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Presentation Guidelines

TECH COAST ANGELS

How to present your company as an investment opportunity


Making the few points that count

Tech Coast Angels Six-Step Process


Submit Application
TECH COAST ANGELS

Pre-Screening Assessment

Formal Screening

Dinner Presentations

Funding

Focus of this document

Due-Diligence Process

1. Submit Application Register and complete Business Plan Summary form on TCA website 2. Pre-Screening Assessment Meet with small team of TCA members; present business plan. TCA members provide same-day assessment: accepted for formal screening, or not 3. Formal Screening Present to 20-30 TCA members at meetings in LA, OC, SD
Entrepreneurs objective Generate enough interest to advance to due-diligence at least one person willing to lead and at least 20 other interested angels Investors objective Identify promising opportunities: strong management team with a clear, compelling and credible business plan We recommend no more than 15 slides

4. Due-Diligence Starts after successful formal screening; ends with funding 5. Dinner Presentations Present tuned business plan to TCA membership. Firm up funding interest 6. Funding Close on equity placement
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The Essence of the Presentation


1. 2. 3. 4. 5.
TECH COAST ANGELS Positioning statement Cover Page Business What do you do? describe succinctly What pain do you relieve? - and the value proposition to the customers Who will buy your products / services? describe the market Who does it at your company? - list the team + credentials + previous endeavors 6. How better than others do you do it? - your company vs. the competition. How will you sustain your advantage? 7. How do you sell it? - direct, channel, etc. 8. What is your time-table and what have you already done? What will each step cost? - Milestones 9. How will you grow the company beyond launch? Financial Projections + skills 10. How much money do you need? - prior investments, this round, future rounds 11. What is the value proposition for the investors?- the X factor, the planned "exit 12. What are the risks? 13. Optional: when is the due-diligence meeting and when do you plan to close the round?

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1. Cover Business Positioning


The cover slide should position the company so TCA members have a TECH COAST ANGELS framework for listening
Company name (and graphics, if appropriate) One-sentence what we do statement (positioning or elevator pitch) Presenters name(s) For example:
PICtage Payment Protection Systems

A service for professional photographers that increases sales and cuts costs through online:
Proofing and viewing Print-order fulfillment

Devices dealers install in cars to assure that poor credit risks pay their loans on time:
Reminds customer payment is due, controls ignition when delinquent Cuts dealers collection / repossession costs by 80% or more

Presenter: Jason Kiefer, CEO

Presenters:
Mike Simon President, CEO Ashley Herndon-VP Sales and Marketing
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2. What do you do?


TECH COAST ANGELS what your company does, emphasizing Summarize briefly the unique qualities of your product line, but without much comparison to the competition just yet.

Explain where your product fits within the whole solution to the customers needs. Identify whether or not your customers will see your products as being the main component of the solution or just a portion of it.

Typical TCA Questions..


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3. What pain do you relieve?


Briefly describe the pain which exists in the market. Give a couple of examples, and relate to what unfair advantage you have for relieving this pain. Important points to cover: 1. How do you know that there is real pain? 2. Further explain your understanding of the needs in the market. Dwell on this point! 3. What is / will be the ROI of the customers? How fast will they recoup their investment? (the value proposition) 4. How will you protect your product from becoming a commodity?
TECH COAST ANGELS

Typical TCA Questions

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4. MarketThe Customers
TECH COAST ANGELS

Define the characteristics of the companies or consumers that need a solution Quantify number of prospects that have the need Explain how the market is growing and why Identify the important 2 3 segments of the market; for each Estimated market size (customers & potential sales) What distinguishes the key segments from the broad market and from each other How urgently customers need or want the solution
Typical TCA Questions
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5. Management Qualifications Background, Startup Experience


TECH COAST ANGELS

Focus on the management team, in particular:


CEO Prior entrepreneurial experience in similar businesses CTO Proven know-how in your core technologies CMO Proven knowledge of the target markets; strong relationships with channel partners &/or key industrial customers CFO Prior IPO or acquisition experience Identify who is full-time and who is part-time or on the sidelines awaiting funding Identify BOD and BOA members, highlighting any strategic members value-added

Typical TCA Questions (problems with the link)


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6. Competitive Position Competitors & Barriers


Address three barriers to adoption: TECH COAST ANGELS

Big Dogs What are huge, well-known companies that have existing products and well-established relationships with your target customers doing? How will they react to your initiatives? Inertia What will it take to get customers to change what they are using / doing today? Innovators What companies might leapfrog your solution with equal or better solutions?

Explain how you propose to win against the best of these In particular, describe your strongest barriers to competition i.e.: if you are successful, how do you plan to block better-known or better-funded competitors from moving in and taking over. Typical TCA Questions
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7. Marketing / Sales / Support


Briefly explain the expected TECH COAST ANGELS selling cycle. Describe how you propose to reach your targeted customers focusing on the initial segments
Marketing To raise customers awareness of your product and stimulate their interest in buying Sales To give buyers (buying decision-makers) a convenient way to find out the details and place an order Support To help customers understand your product before buying, during installation and in use

If you rely on indirect channels, explain:


Your approach to reaching them Whose responsibility it is to raise awareness and generate demand among endcustomers Who provides pre-and post-sales support

Describe special sales incentive programs (if any)

Typical TCA Questions


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8. Milestones - Past and Future, Business And Financial


Provide a milestone TECH COAST ANGELS chart similar to the one below, and describe the use of the funds:
1. Company formed 2. $250K seed round 3. Product prototype 4. Field tests
2002 2003 2004 2005

5. $2M angel round


6. 1st production ship 7. Positive cashflow 8. $7M VC round 9. $75M annualized revenue 10.IPO/Acquisition

Typical TCA Questions


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9. Growth Beyond Launch


TECH COAST ANGELS

Describe the 3-5 year goals of the business Identify the several most important steps needed to reach that goal Specifically say what you need to do to achieve positive cash-flow and how long it will take to get there Identify specific steps to IPO or acquisition readiness Place the key steps and milestones on a Gantt chart Explain the development status how much work remains before the product / service achieves full functionality Show your intended schedule for major product development on a timeline (Gantt chart) covering the next 18 24 months Identify major development risks or challenges Provide estimated levels of effort &/or costs for each product Summarize future products fit with market needs

Typical TCA Questions


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9a. Financial Projections


TECH COAST similar ANGELS Provide a P&L to this one:

Financial Projections ($000s)


Last 12 Mo. This Year Mo. 13-24 Mo. 25-36 Mo. 37-48 New Customers Units Shipped Revenues Gross Profit Gross Margin % SG&A EBITDA Cashflow Cum. Cashflow

Be prepared to explain dramatic numbers, such as:


Instant market penetration & dispersion Hockey stick growth Typical Questions Unprecedented margins Long periods of negative cashflow (goodness is positive cashflow in 6 12 months)
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10. Funding Sought Amount , Valuations, Use


TECH COAST ANGELS Provide a capitalization table similar to this:
Pre-Money Valuation Round 1 $ 1,191,892 $ Post-Money Valuation Round 1 Investors 37% 700,000 23% 1,480,000 $ 14% 2,732,308 $ 38% 2,500,000 24% 4,615,385 $ 37% 7,000,000 28% 16,578,947 $ 25% 15,000,000 Round 2 Investors Round 3 Investors

Raise

Total

Founders 63% 1,191,892 $ 39% 2,520,000 $ 24% 4,652,308 $

IPO

700,000 $ 1,891,892 100% $

Round 2 $

4,000,000 $

2,500,000 $ 6,500,000 100% $

Round 3 $

12,000,000 $

7,000,000 $ 19,000,000 100% $

IPO

45,000,000 $

15,000,000 $ 60,000,000 100%

18% $ 11,018,623 $

11% 18% 6,471,255 $ 10,931,174 $

Identify the major uses of funds for each round prior to IPO or acquisition this round, Typical Questions prior rounds and next round(s) Describe the size and composition of your current burn-rate The Tech Coast Angels sweet spot for investing is a pre-money valuation of $1.5M - $3.0M. Expect tough questioning in proportion to any valuation higher than this range Tech Coast Angels 2005

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11. Liquidity When and How Much


TECH ANGELS If an IPO isCOAST in the cards

Cite recent examples of successful comparable offerings, their offering valuation and their current market cap Explain why you believe the opportunity will remain when your company is ready

If you anticipate being acquired


Identify the two or three most likely buyers Explain why they would be interested If possible, describe recent acquisitions of comparable companies and the deal value Describe any relationships you already have with potential acquirers, investment banks or VCs that might facilitate your liquidity plans

The Value Proposition for the Investors


Calculate, taking into account additional future investments, what the X factor is going to be for the current round of investments

Typical Questions

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12. The Risks


Investors need to know what keeps you up at night TECH COAST ANGELS (other than changing diapers): -Quality issues? -Adoption rate? -Costs? -Cash-flows? -Manufacturing problems? -Personnel training and retention? -The competition? -Etc. Be open and straight forward. Investors are looking for win-win situations.
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Appendix A - Typical TCA questions: Market: the Need of the Customers


Common TCA Member Questions TECH COAST ANGELS What specific problem or need do customers have? Why is the problem important? For whom? That is, who, specifically is the customer? How do we know the market exists? What independent evidence can you cite, such as independent market research? How large is the specific (narrowly defined) market for your product? What growth is expected in this market? Are the market size estimates realistic? For industrial product companies
What 2-3 industries comprise the most important prospects in Year-1? In Year-3? What are the job titles of the buyers (decision-makers) in these prospects?

For consumer product companies


What are the demographics of the 2-3 most important customer segments in Year-1? Year-3?

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Appendix A - Typical TCA questions: SolutionYour Product or Service


Common TCA Member Questions TECH COAST ANGELS What, specifically, are the companys products? What do the products do? Why would the customer buy these products? What makes the products unique or special? In general, how are they better than other products or alternative methods of solving the problem? How much better are they than other solutions? Can we demonstrate that they are cost effective? What, if any, proprietary technologies are used to make them? Any proprietary process? Are there patents? If so, what, specifically, do they protect? Why will they be of value to the company? What special issues relate to manufacturing the product(s)? Any special materials or processes? What special equipment or facilities are required? What investment is required to set up manufacturing? For what capacity? How do you know you can manufacture the product at a cost that will yield acceptable gross margins?
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Appendix A - Typical TCA questions: Competitive PositionCompetitors & Barriers


Common TCA Questions TECHMember COAST ANGELS How else can the customer solve the problem your products solve? What are the alternatives? How does your product compare to each? Why is it better? In what ways is it worse? Who are the vendors of these other solutions? How do they compete with each other? Where will you fit into the industry? Why will you be able to compete effectively against them for the next ten years? Why are you confident that no new entrant will come along with a better solution and blow you away? Why do you think you can dominate your market niche?

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Appendix A - Typical TCA questions: How will you sell it?


TECH COAST ANGELS

Common TCA Member Questions

What channels of distribution will you use to deliver your products to your customers? How will these channels be established? By whom? When? What expertise does your company have to execute the marketing / sales program? How are you going to stand out among all the established competitors? How can you boil down the advantages of your sophisticated technology so prospects will understand it, quickly and easily?
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Appendix A - Typical TCA questions:


Business StrategyGrowth Beyond Launch
TECH COAST ANGELS

Common TCA Member Questions How has it been funded to date? What kind of gross margins will the company have? What level of operating profit can the business generate? Do you have (or plan) any corporate partnerships in place? What are the significant risks your business faces? What needs to be done to finish your first product(s)? Whats your next act? Do you rely on outside contractors? How much do you license from others? What expertise do you have at developing this kind of product? What development challenges are most important or difficult to overcome? How do you intend to do so?

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Appendix A - Typical TCA questions: Financial Projections


TECH COAST ANGELS

Common TCA Member Questions What kind of revenues can the business produce, on an annual basis, over the next five years? Profits? What investment is required to carry the company to the next major level of valuation? When do you expect the next rounds to take place? What specific tasks need to be accomplished to do that? How long will it take? (Try to identify a next level that can be achieved in less than 18 months.) What investment will be required beyond that? To the extent possible, explain key assumptions behind your forecast. And make sure the forecast relates in a logical way to the market forecasts you described previously. How will the investor get his money back? Through an IPO? Acquisition? When? Tech Coast Angels 2005

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Appendix A - Typical TCA questions:


Funding SoughtAmount , Valuations, Use
TECH COAST ANGELS

Common TCA Member Questions How much hard-money (cash) have the founders put in? How much cash have Directors and Advisory Board members invested? What equity is available to recruit key executives? How did you arrive at your pre-money valuation for this round? What comparables are you using for your proposed IPO/exit round?

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Appendix A - Typical TCA questions: Management Qualifications Background, Startup Experience


TECH COAST ANGELS

Common TCA Member Questions What is your background and previous experience? Where did the idea for the company come from? How did you get involved with the company? Who is presently involved in managing the company? What are their credentials? Why will they be able to build a successful company? If not all management spots are filled, what is the plan for filling them? What kind of people are we seeking? To fill what roles? If you do not expect to be the CEO that builds the business to $10 or 20 million, what kind of person would you bring in? When? Who is on your board of directors? How does the board function?
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Appendix A - Typical TCA questions: MilestonesBusiness And Financial


TECH COAST ANGELS

Common TCA Member Questions What is your track record at hitting schedules on similar efforts? Are you fully-staffed for the work indicated in the schedule? How are you going to get your partners to meet your schedule? What makes you think you can achieve this schedule when X failed? What contingencies have you built into the schedule? The budget?

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Appendix A - Typical TCA questions:


Exit StrategyLiquidity When and How
TECH COAST ANGELS

Common TCA Member Questions Why wont one of your established competitors step in and leapfrog you? How long do you think you can maintain your lead, thus preserving your companys value? Why would this be an exciting business opportunity for an acquirer? Why would it an exciting IPO opportunity? What are the three most serious risks the company faces?

* NOTE: If you arent sure how to value the company in the future, use 1 x annual sales in Year-2 and 15 or 20 x net profits in Year-3 as reasonable estimates.

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Old slide discard?: SolutionYour Product or Service


TECH COAST ANGELS

Clearly explain your product(s) what it is that customers will be buying. Explain where your product fits within the whole solution to the customers need, as customers see it. For example:
Services, technologies or platforms (enablers) required to make your product effective System, behavior or procedure conversions required to realize the key benefits

Identify your products value-added (what portion of the whole solution you provide) and whether customers will see your product as being the main component of the solution Describe the benefits delivered, justifying the cost of the whole solution vs. the expected benefits.

See Appendix - Slide 24


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Appendix B
TECH COAST ANGELS

An Approach To Understanding The Intersection Between Dispersion, Value-Added and Benefits Delivered

Customers Needs Pre-Chasm and Post-Chasm


TECH COAST ANGELS

Innovators

Early Adopters

The Chasm

Early Majority

Late Majority

Laggards

Your first sales Characteristics...


Technology, per se, interests them Visionaries Gatekeepers, endorsers Who and where are they? How many are there? Why will they buy your product?

Your vehicle to liquidity Characteristics...


Practical, pragmatic Need proof Conservative adopt technology as a tool Who and where are they? How many are there Why will they buy your product?
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Questions...

Questions...

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How TCA Assesses Market Opportunity


Value Added TECH COAST ANGELS
From the end-customers viewpoint, how much of the Whole Solution does YOUR product deliver? What else must the customer buy or do to realize the expected benefits? What alliances will you need to complete the solution?

100 %

Plug & play Ho-hum benefit


Re-target Refresh Add sizzle or Sell the IP

Plug & play Major benefit


Get funding Build the business Go to market

Benefits Delivered
Business market How much can your product increase revenues or lower costs? Consumer market How much happier, healthier or richer will it make the customer?

Value Added

Incomplete Ho-hum benefit


Shelve it Reexamine next year or Sell the IP

Incomplete Major benefit


Add features Refocus Partner up

Overall: Are there enough potential customers to make a business thrive?

0% Benefits Delivered
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Whole-Solution Value-Added vs. Perceived Customer Benefits


100%

TECH COAST ANGELS

Support Service Installation Service Sales Distribution Marketing Know-How Market Presence Manufacturing Capability Proprietary Process Proprietary Technology R&D

Value Added 0%

Other

Plug & play Plug & play Ho-hum Major benefit benefit

Incomplete Incomplete Ho-hum Major benefit benefit

Benefits Delivered

What are the principal benefits and how urgently do customers need them?
Lower Costs New Revenue Source Higher Margins Increased Customer Retention Larger Market Other

Typical Business Benefits


Better Health Lower Costs Great Prestige Fun To Use Saves Time

What percent of the Whole Solution does YOUR solution provide?

Other

Typical Consumer Benefits


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More about Value-Added


What pieces of the value-added stream do you own, control, perform?
R&D? Product technologies Customer processes, needs, technologies Proprietary Technology? Protected or exclusively licensed That plays a core role in delivering the solutions major benefit(s) How does it do that? How might a competitor duplicate benefits without infringing? Proprietary Process? Protected or exclusively licensed That plays a core role in delivering the solutions major benefit(s) How does it do that? How might a competitor duplicate benefits without infringing? Manufacturing Capability? Able to meet ramp-up schedule Adequate quality and cost
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Market Presence? Brand awareness and value Product positioning Marketing Know-How? Relevant to target customers For similar products or services Distribution? Access to preferred POSs Relationships with market-makers Sales? Access to initial customers Salesforce that knows and gets face-time with targeted customers Salesforce mind-share Installation Service? Ability to make sure customers get product up and running Support Service? Ability to answer questions Ability to keep customers satisfied
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Embedded Value
The combination of value-added and benefits TECH COAST ANGELS delivered roughly translates to embedded value
The more you contribute to delivering the whole solution, the more potential your company has to become embedded in your customers business or life The more valuable your solution is to your customers, the more likely they are to continue to use you (or seek to acquire you)
100%

Plug & play Plug & play Ho-hum Major benefit benefit
Value Added 0% Benefits Delivered

Incomplete Incomplete Ho-hum Major benefit benefit

Examples of the concept:


Microsoft: with MS-DOS, Windows and IE builtin, they are embedded in PC products Amazon: becoming more-fully-integrated store with more lines to be a one-stop shop for ecustomers Yahoo: tough to see where they are more than an easily-substituted site E-Bay: moving to become standard channel for remaindered (unsold) goods
Tech Coast Angels 2005

Common TCA Member Questions


How important is your product, really, to the customer? Is your product just a tool that could be replaced with another tool without affecting the customers suppliers or customers? Will your product become embedded in what your customers deliver to their customers? How easy would life be for your customers if they were to uninstall your product?
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