Building a Business Model

Dave Angelow April 2014

About Me

• Investor, Mentor, Professor

• Marketing, Operations, Business Modeling

• Contact Info – dangelow@gmail.com – Cell 512.633.1500

Agenda

• Business Model Journey

• Start with the end in mind – the “Pitch Deck”

• Steps to get to a pitch and a business

• Use of Lean Canvas to start the journey

Steps to build a business

1

3

2

4

Iterative approach • Utilize “lean”

techniques

• Start with a hypothesis ….

• Validate problem, solution, pricing with minimum investment

• Start-ups focus on finding a business model (Companies focus on scale and optimization)

Slide Content Comments

Title Include your organization’s name, your name and title, and contact information. The audience can read the slide—cut to the chase and summarize what you do (e.g., we sell

software, we protect the environment).

Problem Describe the pain that you’re alleviating. The goal is to get everyone nodding and buying in. Provide context for the problem you’re solving; don’t assume everyone understands the

market/business

Solution Explain how you alleviate this pain and the meaning that you make. Ensure that the audience clearly understands what you

sell and your value proposition.

Provide just the gist of how you fix the pain.

Not an in-depth technical explanation.

Business Model

Explain how you make money—who pays you, your channels of distribution and your gross margins. Describe the sources of revenue, the product/service and channels that generate income. Describe

major drivers of costs and the margins you’re targeting

Underlying Magic

Describe the technology, secret sauce or magic behind your product or service. Aim for less text and more diagrams, schematics and flowcharts on this slide.

Marketing and Sales

Explain how you will reach your customer and your marketing leverage points. Convince the audience that you have an effective go-to-market strategy that will not break the

bank.

Competition Provide a complete view of the competitive landscape. Most every business has competition – The “Do nothing” alternative

is competition

Never dismiss your competition. Everyone—customers, investors and employees—wants to hear

why you’re good, not why the competition is bad.

Management Team

Describe the key players on your management team, board of directors and board of advisors, as well as your major

investors.

Investors are often as interested in the team as the solution itself – “We bet on the Jockey”

Financial Projections and Key Metrics

Provide a three-year forecast containing not only dollars but also key metrics, such as number of customers and conversion

rate.

Details are not required for the pitch, roll-up revenue and costs are good. However detailed

bottom-up models need to be in place for due-diligence review.

Timeline and Funding Needs

Define the major milestones you expect to accomplish, and the timeline for achieving the milestones. Tie the milestones to

use of funds needed to meet the timeline

Build excitement by describing the milestones and how meeting these drives the business. Tell how

funds will be used (why are you asking for $$$)

http://www.marsdd.com/articles/investor-engagement-elements-of-a-pitch-deck/

Building content for a “Pitch Deck”

Tonight’s Focus Customer, Problem, Solution

Lean Canvas

• Focus on customer needs (by segment)

• Start with defining the problem solved

Over achievement

Suggested sequence for completing the full canvas

Techniques for defining the problem you solve

• 5 Whys – Decompose the problem by asking “why”

• What is the job the customer is hiring you to do?

– People pay to have problems solved, the question is what problem do you solve?

– How do you make life better than “status quo” ?

• Fishbone Diagrams (a bit esoteric)

Thinking like a Customer What’s in their head…….

Looking ahead we’ll extend the canvas to create financial models

Revenue streams from

problems solved

Costs incurred in delivering

solutions

Next Steps

• Start working the lean canvas

• Homework for the coming month – Share, test, refine, validate with customers and

prospects – Iterate (pivot) based on feedback

• Start thinking about major categories of costs

and revenues

Slide Content Comments Title Include your organization’s name, your name and title, and contact

information. The audience can read the slide—cut to the chase and summarize what you do (e.g., we sell software, we protect the environment).

Problem Describe the pain that you’re alleviating. The goal is to get everyone nodding and buying in.

Provide context for the problem you’re solving; don’t assume everyone understands the market/business

Solution Explain how you alleviate this pain and the meaning that you make. Ensure that the audience clearly understands what you sell and your value proposition.

Provide just the gist of how you fix the pain. Not an in-depth technical explanation.

Business Model Explain how you make money—who pays you, your channels of distribution and your gross margins.

Describe the sources of revenue, the product/service and channels that generate income. Describe major drivers of costs and the margins you’re targeting

Underlying Magic

Describe the technology, secret sauce or magic behind your product or service.

Aim for less text and more diagrams, schematics and flowcharts on this slide.

Marketing and Sales

Explain how you will reach your customer and your marketing leverage points.

Convince the audience that you have an effective go-to-market strategy that will not break the bank.

Competition Provide a complete view of the competitive landscape. Most every business has competition – The “Do nothing” alternative is competition

Never dismiss your competition. Everyone—customers, investors and employees—wants to hear why you’re good, not why the competition is bad.

Management Team

Describe the key players on your management team, board of directors and board of advisors, as well as your major investors.

Investors are often as interested in the team as the solution itself – “We bet on the Jockey”

Financial Projections and Key Metrics

Provide a three-year forecast containing not only dollars but also key metrics, such as number of customers and conversion rate.

Details are not required for the pitch, roll-up revenue and costs are good. However detailed bottom-up models need to be in place for due-diligence review.

Timeline and Funding Needs

Define the major milestones you expect to accomplish, and the timeline for achieving the milestones. Tie the milestones to use of funds needed to meet the timeline

Build excitement by describing the milestones and how meeting these drives the business. Tell how funds will be used (why are you asking for $$$)

http://www.marsdd.com/articles/investor-engagement-elements-of-a-pitch-deck/

Resources • http://customerdevlabs.com/2012/06/05/how-assumptions-made-

an-ass-out-of-my-startup/ • http://leanstack.com/LeanCanvas.pdf • http://practicetrumpstheory.com/2012/02/why-lean-canvas/ • http://practicetrumpstheory.com/2010/08/businessmodelcanvas/ • https://www.youtube.com/watch?v=7o8uYdUaFR4

• http://bubblecow.co.uk/images/running_lean_7.pdf

– Complete Running Lean Book