1. HIGH GROWTH BUSINESS FORMATION:THE ORIGINS OF A SUCCESSFUL COMPANY Aaron Holiday

2. GET THE FULL EXPERIENCE: LEARN WHAT YOU WANT, WHEN YOU WANT Unlimited access to all upcoming live streams On-demand streaming classes taught by top practitioners A growing video library, updated weekly Get access for only $25 USD/month. No riskyou can cancel at any time!START 14-DAY FREE TRIAL 3. HIGH GROWTH BUSINESS FORMATIONHIGH GROWTH BUSINESS DEVELOPMENT LIFE CYCLE: 6 STAGES 4. AGENDA Idea Generation Ownership Legal Entity Business Model Revenue Streams 5. HIGH GROWTH BUSINESS FORMATIONIDEAS ARE WORTHLESS, BUT STRONG TEAMS WILL BUILD BIG BUSINESSES IDEAS There are NO unique ideas Ideas are NOT defensible Ideas are binary and staticVSTEAMS There is only ONE team Teams take action Teams learn and pivotAfter identifying a promising business idea, SHARE that idea with others and form a powerful team around the idea to prove the value hypothesisIDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 6. HIGH GROWTH BUSINESS FORMATIONKEY QUESTIONS TO ASK WHEN ACCESSING HIGH GROWTH BUSINESS OPPORTUNITY: Do I have the right team and access to the right people? Is there a market dislocation or a real paradigm shift in:Regulatory environments Complexity or access to needed technology Business Models Consumer Behavior Natural Orders Traditional Operations How big is the market? (Top Down, Bottom Up, number of people and number of entitites) What is required for short-run and long-run success? IDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 7. HIGH GROWTH BUSINESS FORMATIONITS NOT YOURS, A BUSINESS IS OWNED BY MANY INDIVIDUALS AND ENTITIES COMPANY FORMATIONPOST QUALIFIED EQUITY FINANCINGBusiness Owners Co-founders Early employees and management Family, friends, and angel investors AdvisorsIDEA GENERATIONOWNERSHIPBusiness Owners Co-founders Early employees and management Family, friends, and angel investors Advisors Venture Capitalists and Seed Investors Debt holders (non equity)LEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 8. HIGH GROWTH BUSINESS FORMATIONITS NOT YOURS, A BUSINESS IS OWNED BY MANY INDIVIDUALS AND ENTITIES COMPANY FORMATIONPOST QUALIFIED EQUITY FINANCINGHypotheticalHypotheticalIDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 9. HIGH GROWTH BUSINESS FORMATIONDECIDING WHEN TO DIVIDE THE BUSINESS AND HOW TO ALLOCATE OWNERSHIP Allocate equity ownership sooner rather than later 1. Decide key business drivers and allocate a weight for each drivers 2. Assign founders and investors percentages based on performance and expectations 3. Use weighted average calculation to determine fair ownershipIDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 10. HIGH GROWTH BUSINESS FORMATIONDECIDING WHEN TO DIVIDE THE BUSINESS AND HOW TO ALLOCATE OWNERSHIP INITIAL EQUITY ALLOCATION BASED ON KEY BUSINESS DRIVERS Total AllocationSeed InvestorsOption Pool20%50%50%0%0%Pre-existing IP or Technical Expertise20%30%70%0%0%Intellectual Capital & Business Development18%45%55%0%0%Sacrifice & time commitment15%60%40%0%0%Startup funding15%16.67%16.67%66.67%0%Option Pool12%0%0%0%100%100%OWNERSHIPCo-founder #2Direction, Vision, and LeadershipIDEA GENERATIONCo-founder #135.60%42.40%10%12%LEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 11. HIGH GROWTH BUSINESS FORMATION CAP TABLECo-FoundersContributionShare AllocationShare ClassOwnershipDate: 1/1/2011Co-founder 1424,000Common Stock42.40%Company FormationCo-founder 2356,000Common Stock35.60%Team member 1Common Stock0%Team member 2Common Stock0%120,000Options12%$100,000100,000Warrants10%$100,0001,000,000LEGAL ENTITYBUSINESS MODELInvestment: $100,000 Total Shares: 1,000,000Management TeamEmployee Ownership Option Pool Seed Investors Angel 1 Angel 2 Angel 3 Early Stage Investors VC #1 (Seed Investors) VC #2 VC #3 VC #4TotalIDEA GENERATIONOWNERSHIP100%REVENUELANDSCAPE 12. HIGH GROWTH BUSINESS FORMATIONHIGH GROWTH VENTURE BACKABLE STARTUPS SHOULD CONSIDER C OR S CORPS C CorporationSHAREHOLDERS & LIABILITYS Corporation No restrictions on ownership and supports multipleclasses of stock (creating voting rights) Owners are NOT personally responsible for businessdebts and liabilities Restricted to 100 shareholders and single class of stock Shareholders must be US citizens Owners are NOT personally responsible for businessdebts and liabilities Taxed at the entity level C Corporations pay taxes on corporate incomeTAXATION Pass through taxation Profits/losses are reported on the owners personal tax Double Taxation: Corporate income is taxed first at thebusiness level and again at the individual level if distributed to owners in the form of dividendsreturns and any tax due is paid by the owners at the individual tax levelC Corporations and S Corporations Share Many Similarities Limited liability protection Structure: shareholders and board of directors Separate legal entities created by state filingSIMILARITIES Corporate formalities: bylaws, issuing stock, filing annual Filing documents Articles of Incorporationreports, shareholders and directors meetings, etc.Form a C Corp if the business plans to raise capital and issue different classes of stockIDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 13. HIGH GROWTH BUSINESS FORMATIONBUILD A HIGH GROWTH BUSINESS, NOT A FEATURE OR A PRODUCT People/ TeamLegalProducts/ ServicesFinancesIntellectual Property (IP)Value HypothesisGrowth StrategyActivitiesCostsRevenue StreamsYour Business Barriers to Enter; Gate to Revenue; Access to Customers; Access to CapitalCustomersDistributionTechnology (APIs, Cloud)SuppliersMarking ChannelsPartnershipsInvestors (Angels, VCs)Debt MarketComplementsShare Business Economy & EcosystemThreats Threats are not only competition, but anything that takes away resources from the shared business economy and ecosystem IDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 14. HIGH GROWTH BUSINESS FORMATIONREVENUE IS A FUNCTION OF CUSTOMERS, PRODUCT/SERVICES, AND YOUR BUSINESSS VALUE PROPOSITION People/ TeamLegalProducts/ ServicesFinancesIntellectual Property (IP)Value HypothesisGrowth StrategyActivitiesCostsRevenue StreamsYour BusinessCustomersDistributionTechnology (APIs, Cloud)SuppliersMarking ChannelsPartnershipsInvestors (Angels, VCs)Debt MarketComplements Identify which customers are willing to pay for your products/services and understand your value proposition to determine pricing power Build detailed financial models to project your revenues based on data youve collected and realistic projections using trends and comparabledata The detailed analysiss are for your business; you will not prepare detailed analysis for investors, rather you will share the analysis that is being used to govern your business IDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 15. HIGH GROWTH BUSINESS FORMATIONUNDERSTANDING THE INTRICACIES AND METRICS OF YOUR SELECTED REVENUE STREAMS Important questions to ask: Whos paying # of paying customers? Where are the customers?IDEA GENERATIONOWNERSHIP Why are they paying? Wheres the evidence? Whats the churn? Whats the LTV? How do you acquire them? Whats the alternatives?LEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 16. HIGH GROWTH BUSINESS FORMATIONTHERE ARE SEVERAL CONSIDERATIONS FOR REVENUE STREAMS, CHOOSE THE OPTIONS THAT MEET YOUR CUSTOMERS BUYING POWER AND BUSINESS GOALS Subscription Revenue Affiliate Models Virtual Goods Transaction Revenue Service Sales Licensing Commerce Sales Advertising Revenue Payments Processing Premium Revenue Share Revenue Big Data/AnalysisIDEA GENERATIONOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 17. HIGH GROWTH BUSINESS FORMATIONUNDERSTANDING THE INTRICACIES AND METRICS OF YOUR SELECTED REVENUE STREAMS Subscription RevenueSubscription fees Periods Per user fees Transaction RevenueTransaction feePricing Volume Inventory Affiliate ModelsCPA CPC Premium RevenueConversion Advertising RevenueImpressions CPM, CTR, etc. Service Sales Share RevenueFee types Virtual GoodsFrequency % Split Payment Processing LicensingTransaction feeFeesIDEA GENERATION Product SalesCurrency type Exchange rate Big Data AnalysisAnalysis feeOWNERSHIPLEGAL ENTITYBUSINESS MODELREVENUELANDSCAPE 18. HIGH GROWTH BUSINESS FORMATIONAARON HOLIDAY Blog: www.aholidayiii.com Twitter: @aholidayiii Email: aaron.holidayiii@gmail.com