Class 11

1
Class 11

• Elevator Pitches

2
Individual Elevator Pitch 7/8 (?)30-45 second
pitch (every person)

• Pitch Content (ENGLISH)
• Opportunity/problem being solved
• Target market/customer
• Product/service to be created
• Value being created
• Why it is better than competition
• Business model (how firm will make money)
• Anything else unique that will capture
  attention/interest
• Pitch Goal Get enough interest for a meeting
• Choose the most interesting parts
• Business idea to use for rest of the class

3
Start Pitching

• 30 sec (soft stop)
• 45 sec (hard stop)
• 1 summary sentence hook
• Who / produces What / for Whom
• Company/ Product / Customer Market
• No PC or powerpoint
• 2 questions from class/instructor

4
Class 12

• Business Models Business Strategy
• Valuation and investors

5
Business Model Questions

• How do we make money?
• We sell stuff to
• How do we help customers?
• How do we add value?

Value Chain
6
Business Model Profit Engine

• Revenue Sources (how do we get paid?)
• Key Expenses
• Size (volume, scale/growth)

)
(
Profit Sales - Product Costs Units
Overhead
x - Year
Unit Year Year
Profit (Margin x
Volume ) - Overhead
7
Business Model Business Strategy

• Strategy Development, protection, adjustment of
  business model over time
• Plan for executing on Key Success Factors
• Goal Sustainable Competitive Advantage

)
(
Profit Sales - Product Costs Units
Overhead
x - Year
Unit Year Year
Year 1, Year 2, Year 3,
8
Key Success Factors

• Key skills, functions, actions needed to maintain
  and strengthen business model and strategy
• Subscriptions/Memberships
• Get many members (acquisition effectiveness)
• Get members at low cost (acquisition efficiency)
• Keep members from leaving (retention rate)
• Increase spending per member (share of wallet)
• Transaction-based
• Command above average pricing (value
  effectiveness)
• Lower product costs (production efficiency)
• Lower fixed overhead costs

9
Member/customer retention strategies

• Adding value/benefits to membership
• Automatic renewal
• Increase switching costs
• Exit fees (early departure, cancellation)
• Pain (email address changes)
• Proprietary systems (MS Windows)
• Loyalty cards (point cards, mileage cards)
• Makes transaction based customers more like
  members
• Membership referrals

10
Valuation

• Valuation price of the whole company
• Valuation depends on both company and market for
  investment in stocks
• Public stocks are priced in an open market
• Private company stock transactions are usually
  negotiated between company and lead venture
  capital investor

Value f (S Profit n) a
(not a strict formula)
11
Many Factors Affect Valuation

• Opportunity-Related
• Is this a good business opportunity?
• How big a business can this be, when?
• Company-Related
• Is it a good business strategy?
• Is this a good team? Right skills, prior
  success?
• Is there a sustainable competitive advantage?
• What are the business strengths/weaknesses,
• How risky? Biggest risks, challenges?
• What else is needed to make this work?
• How badly does the company need financing?
• Capital Market-Related
• What are prices for companies that are similar?
• How much VC competition is there for the
  investment?
• How are the public stock markets doing?

12
Valuation

• Valuation of company price for the whole
  company
• Market Value current stock price x total shares
• Enterprise Value Market Value Cash Debt
• Example 1 30.00/share x 5,000,000 total
  shares 150,000,000
• Determined by what investor pays to own piece of
  company
• Valuation 2,000,000 / 0.25 8,000,000
• Example 2 VC buys 25 of company for 2 mil.
• 8,000,000 post-money valuation
• 6,000,000 pre-money valuation
• (pre-money post-money investment amount 8
  - 2 6 mil.)

6 million
2 million
13
Simple Valuation Calculation
14
Is eBay a better business than Amazon?
15
Is eBay a better business than Amazon?
Earnings Before Interest, Taxes, Depreciation
Amortization
yoy year over year ttm trailing twelve
months
Source Yahoo! Finance 7/7/08
16
Computer Industry Comps
17
Homework

• Prepare Business Investor Presentation
• Company Name (can change)
• Initial Business Idea
• Think Big! Sales gt 3?? in year 3
• Schedule
• 7/15 Initial presentation/workshop (English)
• 7/22 Final Presentations (English or EJ)
• See Springboard Enterprises
• By 7/29 Final Report (English)
• Read Picture Perfect 2 page business summary

18
Presentation Goal Convince Investor to Invest

• Early stage investor into seed-stage business
• 1-2 Minute Summary of Key Points
• Important, Interesting Points Early
• Sample/Demonstration/Prototype is helpful
• Creating a COMPANY, not just a product
• Strategies of business FIT each other

19
Making a Successful Venture Business
Strategic Partners, Early Users, Supporters
Customer Markets
Business Model Strategy
Sales Marketing
RD, Production,Operations
Suppliers, Distributors
Capital Yen/
Idea
Entrepreneur
Team
20
Basic Business Plan Questions

• What is the opportunity?
• What is happening? Why?
• How big can it be? When?
• What is the business strategy?
• Does it fit?
• Is it sustainable?
• What is the business model?
• How do they make money?
• Sales/Profit Years 1-3
• How much funding is needed?

21
More Strategic Questions

• What are the key factors for success?
• No. 1 merit
• Number 1 risk
• Confidence of it working
• When will you know if it is working? Why?
• Are these the right people?
• What is missing?

22
Sample Marketing Questions

• Who is target customer?
• How many possible customers are there?
• How does customer buy?
• Is the purchase compelling to customer?
• How will you reach the customer?
• How much does it cost to get a customer?
• What does it cost to support a customer?
• How easy is it to retain a customer?
• What is the pricing?
• What is the cost of goods?

MARGIN
23
Workshop Checklist

1. __________________
2. __________________
3. __________________
4. __________________
5. __________________
6. __________________
7. __________________
8. __________________
9. __________________
10. __________________
11. __________________
12. __________________
13. __________________
14. __________________
15. __________________
16. __________________
17. __________________
18. __________________
19. __________________

1. Company Name
2. Your Name and Title
3. Mission statement catch phrase
4. Business Idea
5. Problem Being Solved
6. Product/Service Solution (why its a great idea)
7. Target Customer
8. Market, segment, size (Who, how many?)
9. Place/Channel
10. Promotion
11. Business Model Revenue Sources
12. Business Strategy and Implementation
13. Competitive Advantages (defensible, sustainable)
14. Key Success Factors (what is important to do
    well)
15. Operations (How you do it, supply, scale)
16. Financials (3 year forecast)
17. Price, other driving factors (memberships, etc.)
18. Breakeven, How much money do you need, when?
19. Risks

24
Helpful Links

• www.springboardenterprises.com
• www.garage.com
• www.guykawasaki.com
• www.entrepreneur.com
• www.inc.com
• www.startupjournal.com
• http//nvc.nikkeibp.co.jp/ Nikkei Venture
• www.dreamgate.gr.jp

25
Picture Perfect Inc.

• Location/contact information
• Good, simple business summary
• Industry analysis
• Market Size Growth
• Competition
• History/Progress
• Team
• Products
• Marketing
• Finance
• Forecast
• Finance needed
• How much raised and from whom
• Whats missing?