How to Fund a Technology Business

Making SaaS Businesses Work™.biz
Dave Key

.biz Making SaaS Businesses Work™cloudstrategies.biz
.biz

.biz
Easy to do
Likely Commoditized
∂ Find Harder Problem
∂ Add sizzle
∂ Or sell the IP
MarketValue
Difficulty to Replicate
Technology in Search of a
Problem
∂ Expand Capabilities
∂ Partner to Create
Value
∂ or Sell the IP
Its All There
∂ Get Funding
∂ Go To Market
∂ Move Quickly
Incomplete
Ho-Hum Value
∂ Shelve It
∂ Reexamine Next Year
∂ or Sell the IP
Keep Your Day Job

.biz
‫טּ‬ Unique and Protectable IP
‫טּ‬ Early Mover Advantage
‫טּ‬ Large Time Requirement to Replicate
‫טּ‬ Strong Market Position
‫טּ‬ Strong Team with Unique Skills

.biz
‫טּ‬ A Track Record of Success
Both the CEO and the Management Team
‫טּ‬ Friends with Money
Super Angels each Investing $250K+
‫טּ‬ A Superstar CTO
Well Known in Technology Field
or a World Class University Reputation

.biz
‫טּ‬ How Important is the Problem Solved?
‫טּ‬ How Good are the Alternative Solutions?
‫טּ‬ How Passionate are the Customers?
‫טּ‬ How Willing are Customers to Pay?
“The only thing that matters is
finding product-market fit before
you run out of cash”
Marc Andreessen

.biz
‫טּ‬ Time to Replicate Market Position
‫טּ‬ Time to Replicate Technology
‫טּ‬ Unique Team Skills
‫טּ‬ Fast Moving
‫טּ‬ No Concerns about Cannibalization
‫טּ‬ Slay the incumbent's cash cow
‫טּ‬ Manically Focused on a Single Problem
‫טּ‬ Unless you aren’t focused!

.biz
‫טּ‬ Limited Cash/High Cost of Capital
‫טּ‬ Limited Resources
‫טּ‬ Hard to get Mind Share
‫טּ‬ No Viral Network Effect Initially
‫טּ‬ Lack of Access to Key Prospects
‫טּ‬ Investors can add value here

.biz
Management Appropriate for the Stage
Advisors with Experience & Credentials
Complete Market Research
Complete Business and Financial Model
Blogosphere/Media Awareness
Industry Analysts Accolades
Enthusiastic Customers
Strong Growth

.biz
“I understand my market
and its needs, and my
competitors”
“I have an
idea” Angels,
Super Angels
Sweat equity, friends & family, existing business or consulting revenue
“I’ve have my core
team”
“I have experienced
advisors”“I can
demonstrate its
Value”
Liquidity
Event
IPO,
Acquisition
“I have product
delivery”
VCs and Strategic
Investors
“I have
revenue
traction”
“This venture is
growing very rapidly”

.biz
Positive
Cash
Flow
Earnings
Revenue
Beta
Minimum Viable Product
Prototype
Concept

.biz
*businessmodelgeneration.com

.biz
‫טּ‬ The Model Quantizes Your Business
‫טּ‬ All Key Elements Addressed
‫טּ‬ Revenue Sources, Use of Funds, Gross Margins of the
Business
‫טּ‬ Cash Burn/Runway are Shown
‫טּ‬ Sensitivity to KPI Variations Shown
‫טּ‬ Gives You Credibility
It will change, but your model shows you understand the
guts of how the business could be run

.biz
‫טּ‬ 100% of Startups “Pivot”
‫טּ‬ The “Coherency” of the Plan Shows You
Understand How the Business Could Work
‫טּ‬ Does each piece tie together logically and completely?
‫טּ‬ Investors want to See You Can Adapt
* (but that’s ok)

.biz
Investment Stage Investor Type Typical Amount Raised
Idea/Prototype Ideation Principals’ Credit Cards $25K - $100K
Product through Beta Friends and Family $50K - 200K
First Revenue Angel/Super Angel $100K - $750K
Early Traction – “A” Round Venture Capital $1M - $3M
Market Development Venture Capital $3M - $10M
Seek investors appropriate for your company stage

.biz
‫טּ‬ Typical Time to Close – 4 to 8 months
‫טּ‬ Often Follow-on from Angel Financing
‫טּ‬ Find VCs whose Focus Matches Yours
‫טּ‬ Find the Partner who Knows Your Space
‫טּ‬ Get Referred by a Respected Associate
‫טּ‬ 2 to 4 Page Business Summary is Best Intro
‫טּ‬ Follow-up with the more Detailed Plan and
Financial Model
‫טּ‬ Work to get Multiple Advocates in the Firm

.biz
http://youtu.be/zngK13FMgXM
*Well a Parody…

.biz
Elevator
Pitch
Business
Summary
Investor
Pitch(es)
Business
Plan
Term
Sheet
Due
Diligence
Deal
Documents
Closing
Get to know investors before formally pitching to them…

.biz
‫טּ‬ Your Company must be Differentiated
‫טּ‬ Totally Understand Your Business
‫טּ‬ The ability to answer hard questions is essential
‫טּ‬ Its OK to have a few Missing Pieces
‫טּ‬ As long as you know what’s missing
‫טּ‬ Don’t Sour Investors with a Mediocre Pitch
‫טּ‬ You won’t get a second chance

.biz
‫טּ‬ Who are You?
‫טּ‬ What is the Product or Service?
‫טּ‬ What is Value Proposition?
‫טּ‬ Why Should I Care?
‫טּ‬ What is Your Market?
‫טּ‬ Who are Your Customers?
‫טּ‬ Differentiate – What is Unique!
All in less than 60 seconds

.biz
‫טּ‬ Plan on 15 to 30 Minutes plus Questions
‫טּ‬ Determine your actual time allocation before the meeting
‫טּ‬ Interaction is More Important than Your Pitch
‫טּ‬ If you are losing your audience, deviate from your pitch
‫טּ‬ You’ll Give the Pitch to the other Partners Later
‫טּ‬ (if you make the cut..)

.biz
‫טּ‬ Presentation Excellence are “Table Stakes”
‫טּ‬ Passion is Indispensable
‫טּ‬ Include the Team (3 to 4 total)
‫טּ‬ Encourage Interactivity
‫טּ‬ Show you are “Coachable”
‫טּ‬ Make every presentation your best
‫טּ‬ Be Capable of Answering Any Question

.biz
‫טּ‬ The Problem
‫טּ‬ Your Solution
‫טּ‬ Business Model
‫טּ‬ Underlying Magic/Technology
‫טּ‬ Marketing and Sales
‫טּ‬ Competition
‫טּ‬ Team
‫טּ‬ Projections and Milestones
‫טּ‬ Status and Timeline *
‫טּ‬ Summary and Call-to-Action
* blog.guykawasaki.com/2005/12/the_102030_rule.html

.biz
‫טּ‬ Value of the Business
‫טּ‬ Your Market and Competition
‫טּ‬ Fit for Their Firm
‫טּ‬ Your Management Team
‫טּ‬ The Passion
‫טּ‬ Your Ability to Think-on-Your-Feet
‫טּ‬ The Mutual Chemistry
‫טּ‬ Risk
Their Decision is if to Move to the Next Step

.biz
‫טּ‬ Help the Investor Meet their Goals
‫טּ‬ Show why You should be in the “Funded 1%”
‫טּ‬ Make them Excited about You and Your Team
‫טּ‬ Show You can Answer all their Questions
‫טּ‬ Give them a Sense of Urgency to Proceed
‫טּ‬ Disclose Major Issues (showing your trustworthiness)
‫טּ‬ Secure the Next Meeting

.biz
‫טּ‬ The Lead Investor Selling the Deal Internally
‫טּ‬ The Term Sheet & Negotiation
‫טּ‬ The Due Diligence Process (next slide)
‫טּ‬ Creating and Finalizing Deal Documents
‫טּ‬ Two to six weeks despite what they say
‫טּ‬ You’ll pay all legal costs
‫טּ‬ The Close

.biz
‫טּ‬ Founders Experience and Background Checks
‫טּ‬ Market Opportunity/Size Validation
‫טּ‬ Competitive Analysis – Current and Future
‫טּ‬ Barriers to Entry Assessment
‫טּ‬ Intellectual Property Assessment
‫טּ‬ Both advantages and risks
‫טּ‬ Customers and Industry Analyst Opinions
‫טּ‬ Financial Model and Cash Burn Credibility

.biz
 Develop Idea
 Scope Total Addressable Market
 Develop Market Positioning
 Raise “Friends and Family” Cash
 Build Team
 Create legal entities
 Get cap table right!
 Build Minimal Viable Product
 Get Advisors
Prototype on Real Users
Get Customer Traction
Develop Elevator Pitch
Create Business Plan
Research Ideal Investors
Build Business Model
Create Pitch Deck
Prepare for Due Diligence
Raise investor capital

.biz
Dave Key
cloudstrategies.biz
cloudstrateiges.biz/blog
dave@cloudstrategies.biz
+1 949/887-4401

How to Fund a Technology Business

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (19)

Similaire à How to Fund a Technology Business

Similaire à How to Fund a Technology Business (20)

Dernier

Dernier (20)

How to Fund a Technology Business