How to Write a Business Plan 2012 Calit2 Auditorium Katan Associates ©2012. All Rights Reserved....

How to Write a Business Plan 2012Calit2 Auditorium

Katan Associates

©2012. All Rights Reserved. Katan Associates.

22

Disclaimer

• MY OPINION

33

Our Services

• Strategic Consulting– Market assessment and competitive analysis– Product and corporate positioning – Technical due diligence – Corporate planning– Start up and spin out of technologies– In licensing technologies to facilitate strategy or company

formation

• Partnering / Non-Dilutive Financing

• Mergers and Acquisitions

• Government and Industry Advisory

44

Our Team – Associates and PartnersNorth AmericaMarvin CollinEric WilkinsonTony BrazzaleMark Rosenfeld, PhD

BrazilFundaçäo BiominasEduardo Soares

EuropePeter Kalinka, PhDJean-Luc Centaeleghe, PhD

ChinaJack ZhenTranworld Capital Group

JapanTsutomu MoriBiocomm2

Taiwan

Hun Chi Lin, PhDITRI

IndiaHun Chi Lin, PhDITRI

IsraelAlf Fischbein, MD

AustraliaAndy Gearing, PhDBiocomm2

55

Representative Clients

6

Seth Yakatan

• In excess of 20 years experience as a corporate finance professional

• In excess of 4 years on a direct investment basis as a venture capitalist

• In excess of 6 years as a merchant banker; part of a group with over $5 billion under management at Union Bank of California, N.A.

• Founded Katan eight years ago, completed:– Sale of assets of 10 biotechnology companies; transaction value >

$220.0 million– Advised on numerous successfully completed, early-stage, partnering

assignments, with value generated for clients in excess of $650.0 million – For the past seven years, Mr. Yakatan has served as a faculty member

for the BIO Annual Meeting Executive Workshop Series• Mr. Yakatan holds a BS in History and Public Affairs from the

University of Denver and a MBA from the University of California, Irvine, Graduate School of Management.

7

Seth Yakatan Track Record page #1

Arranged financing for Private Equity Firm ’s acquisition of this assetManaged Transaction00 -01UBOC Equity Sponsor TransactionKorea Times

Arranged financing for Private Equity Firm ’s acquisition of this assetManaged Transaction00 -01UBOC Equity Sponsor TransactionCygnus Business Media

Divested Tower Communication Portfolio for $225.0 millionCo-Led Transaction99 -00Sell Side M&AClassic Cable, Inc.

Arranged financing for Private Equity Firm ’s acquisition of this assetManaged Transaction99- 00UBOC Equity Sponsor TransactionR&R Media, Inc.

Acquired by VoiceStream in 2001 for $300.0 million, 13.3x return 1100% IRRSourced, VP99 -00UBOC Private Equity InvestmentSol PCS

Acquired by Charter Communications in 2000Sourced, VP98 - 99UBOC Sub-Debt InvestmentHelicon Cable

Acquired by Rock-Tenn Co. in 2002Sourced, VP98 - 99UBOC Private Equity InvestmentHeritage Marketing Group

Acquired by Pitney Bowes in 2004Assistant VP98 - 99UBOC Private Equity InvestmentAncora Management

Largest Private Hispanic Media Firm in USANegotiated, Advised Company on terms97 -98UBOC Sub-Debt InvestmentLBI Holdings II

Operates as SunCom; $1.1 billion market capAssistant VP96 - 97UBOC Private Equity InvestmentTriton PCS

Acquired by RCC, Inc, in 2001for $1.2 billionAssistant VP96 -97UBOC Private Equity InvestmentTriton Cellular

Acquired by PEMEX in 1996Associate93 - 95Sureste Ventures InvestmentANEW, Inc

IPO in 1994Analyst91 - 93Venture Growth Funds InvestmentBioCryst Pharmaceuticals, Inc.

Acquired by Cardiotronic Systems in 1994Analyst 91 - 93Ventana Growth Funds InvestmentR2 Medical Systems, Inc.

Company Description Vintage Role Status

8


Arranged $35. 0 million financingManaged Transaction05 -06Debt FacilityXL Tech Group

Assist in new company formation processAdvisor04 -Company formationPremiere US Institution

Assisted CEO in broad restructuring of companyAdvisor04 -07RestructuringNventa Pharmaceuticals

On goingExternal BOD04 -Business Development CompanyDCI USA

Acquired by Assay Designs in 2005M&A Advisor04 -05Katan M&A AdvisoryStressgen Reagents

On-goingNegotiated, Advised Company on terms03 -04Pharmaceutical PartnershipDermaTrends

Created 4 portfolio companiesAdvisor02 -03Regional Venture Capital FundBiocomm

Terminated post Sanofi MergerAdvisor02 - 03$40.0 million partnership with AventisMTI, Inc.

On-goingAdvisor01 - 02$203.0 million partnership with RocheStressgen, Inc.

Acquired by Milipore for 4.1x revenuesManaged Transaction01- 02Katan Sell-Side MandateCPG, Inc.

Acquired by Harvard Bioscience, Inc.Sourced, Managed Transaction 01- 02Katan Sell-Side MandateInovio, Inc.

Company Description Vintage Role Status

9


• Last year a few of my clients were after me for stock picks

• I fooled around, ran a few numbers and the picks I had for 2011 were up 36.6% from March 2011 to January 20, 2012

• http://biotechmusings.blogspot.com/2012/02/biotech-2012-stock-picks.html

10

Agenda• Risk & Milestones• How I Do It• Business Plan 101• Specific Criteria• A Few More Tips• Q&A

What Makes Katan Unique?


1212

Simply a parabola...opening UP

13

CloseClose

LOIsLOIs

CDAsCDAsKatanKatan

Month 1 Month 12

13

1414

Most of Our Companies/ProjectsAre Considered Development Stage

• All of the therapeutic partnerships we have completed are Phase IIb or earlier

– Majority have been at IND or pre IND stage

• We have gained an international reputation amongst Universities, Research Institutions, Government Agencies, and Government Policy Makers for being able to find commercialization and development partners for projects

• Several of the companies that we have formed have been the result of a pro-active search for specific technology or specific intellectual property

1515

We Have Strong Deal Flow

• For the past nine years we have logged an average of 485 distinct transaction opportunities from across the globe

– Many of these are from non-G8 countries– Many of these come from the Outreach 5 countries

• We do little to no outbound marketing to attract this deal flow as 90% of our business is referral-based

• Experience and knowledge to determine commercial opportunities related to early stage technology

1616

Our Network is Global

• Our model has been to partner with a local service provider or company on a joint venture basis, this allows for:

– Unique knowledge of the local culture and customs– Access to local, state and federal governments– Access to local, state and federal agencies and institutions– Access to local, state and federal universities– Access to native funding networks and investors– Access to native service providers– A regional physical presence and local office

Risk & Milestones

18

Milestones ???

19

Risk

Commercialization

Time

Value

”EarlyHype”

”Dissapointmentsand disillusion”

”Debugging”

Most new technologies go through a long maturity-this can take up to 20 years development cycle before they reach commercialization

Risk

20

Milestones of Development

Taken from “Between Invention and Innovation An Analysis of Funding for Early-Stage Technology Development” Prepared for NIST Economic Assessment Office November 2002, page 33

Proof of Concept

Early-Stage Technology

DevelopmentBasic Research Product

DevelopmentProduction /

Marketing

IP CreationInvention:Functional

Business Validation

New Firm or Program

Viable Business

NSF, NIHCorporate ResearchSBIR Phase I

AngelsCorporationsTechnology LabsSBIR Phase II VC

EquityDebtCapital Markets

21

An Example…

Copyright © 2007. All Rights Reserved. Confidential Property of GenXL LLC.

Milestone 1 Timeline

Selection of First Drug/Implant Selection for PK StudiesSelection of First Drug/Implant Selection for PK Studies

Insero Short-Term Milestones Q1 Q2 Q3 Q4 Q1 Q2 Q3 TotalUse of Funds 2009 2009 2009 2009 2010 2010 2010

Milestone 1Selection of First Drug/Implant Candidate for PK

Indapamide Feasibility Study 100,001 99,999 200,000Enalapril Feasibility Study 99,999 100,001 200,000

Finalize license from Indevus 250,000 250,000Selection of 1st Drug/Implant Candiadte

200,000 200,000 250,000 650,000

Insero G&A Burn 52,000 46,000 52,000 0 0 0 0 150,000

Total 252,000 246,000 302,000 0 0 0 0 800,000

Cash-Post Series AInvestment of $1,750,000 1,498,000 1,252,000 950,000



Preparation of IND for First Drug/Implant CombinationPreparation of IND for First Drug/Implant Combination


Milestone 2Preparation of IND for 1st Drug/Impant Combination

Retain regulatory consultant 6,000 9,000 9,000 9,000 33,000

Meet with Ethics Advisors 12,500 37,500 50,000

Optimization Studies 37,500 37,500 75,000

PK Study 39,267 117,800 78,533 235,600

Statistical Analysis 50,000 50,000

Complete Pre-IND Meeting with FDA/TGA 12,500 37,500 50,000Preparation of IND for 1st Drug/Implant

Milestone 2 Cash 43,500 98,267 176,800 175,033 493,600

Insero G&A Burn 0 59,500 57,000 57,000 57,000 230,500

Total 43,500 157,767 233,800 232,033 57,000 724,100

Cash-Post Series AInvestment of $1,750,000 906,500 748,733 514,933 282,900 225,900



IND Filing for First Drug/Implant CombinationIND Filing for First Drug/Implant Combination


Milestone 3IND Filing

IND Submission 75,000 75,000IND Granted

Milestone 3 Cash 0 0 0 0 0 0 75,000 75,000

Cash-Post Series AInvestment of $1,750,000 150,900

22

An Example…



Selection of First Drug/Implant Selection for PK StudiesSelection of First Drug/Implant Selection for PK Studies


Milestone 1Selection of First Drug/Implant Candidate for PK

Indapamide Feasibility Study 100,001 99,999 200,000

Enalapril Feasibility Study 99,999 100,001 200,000

Finalize license from Indevus 250,000 250,000Selection of 1st Drug/Implant Candiadte

200,000 200,000 250,000 650,000

Insero G&A Burn 52,000 46,000 52,000 0 0 0 0 150,000

Total 252,000 246,000 302,000 0 0 0 0 800,000

Cash-Post Series AInvestment of $1,750,000 1,498,000 1,252,000 950,000

23

An Example…



Preparation of IND for First Drug/Implant CombinationPreparation of IND for First Drug/Implant Combination


Milestone 2Preparation of IND for 1st Drug/Impant Combination

Retain regulatory consultant 6,000 9,000 9,000 9,000 33,000

Meet with Ethics Advisors 12,500 37,500 50,000

Optimization Studies 37,500 37,500 75,000 PK Study 39,267 117,800 78,533 235,600

Statistical Analysis 50,000 50,000

Complete Pre-IND Meeting with FDA/TGA 12,500 37,500 50,000Preparation of IND for 1st Drug/Implant

Milestone 2 Cash 43,500 98,267 176,800 175,033 493,600

Insero G&A Burn 0 59,500 57,000 57,000 57,000 230,500

Total 43,500 157,767 233,800 232,033 57,000 724,100

Cash-Post Series AInvestment of $1,750,000 906,500 748,733 514,933 282,900 225,900

24

An Example…



IND Filing for First Drug/Implant CombinationIND Filing for First Drug/Implant Combination


Milestone 3IND Filing

IND Submission 75,000 75,000IND Granted

Milestone 3 Cash 0 0 0 0 0 0 75,000 75,000

Cash-Post Series AInvestment of $1,750,000 150,900

25

Why are Milestones Important?

• Achievement of them de-risks projects

• Lower risk, higher value

26

Are you ready to start today ?• What do you have?• Why is it novel?• What is the market?• At what stage of development is it?• Can one technology support the formation of an entire company?• Who can help ?• Where do I get $$$$$$$ ?

27

DP’s Issues

• Inability to tell the story properly

• Failure to meet or respect the time frame

• Failure to explain the value proposition

• Failure to disclose issues up-front

• Lack of knowledge of the competitive landscape

28

It IS a Tough Road

• There is a high failure rate in new ventures– Approximately 20% are successful in obtaining more

than 1 round of capital

• VC’s strive for failure rates of 80% on investments– 5 in 10 investments fail – 3 in 10 investments breakeven

– 2 in 10 investments succeed • A 2010 report by PriceWaterhouseCoopers

indicates that only 10% to 15% of venture capital funds produce profit-generating firms

29

Would You Have Invested?

How Do I Do It?


31

Our Criteria – K. I. S. S.

• Do we believe that the people involved can get the job done?

• Does the product/technology/company have a sustainable competitive advantage?

• Do we share similar expectations of value and outcomes?

• Can we add value to the company/process given our involvement?

32

4 Easy Steps• Elevator Pitch • Presentation• Executive Summary• Plan

– Executive Summary– Products or Services– Market Need (Marketing ??)– Market Potential– Competitive Advantage– Management– Financial Overview

33

The Elevator Pitch• Do we know what this is ???• An elevator pitch (or elevator speech) is a brief

overview of an idea for a product, service, or project. • The pitch is so called because it can be delivered in the

time span of an elevator ride (say, thirty seconds or 100-150 words).

• Part Mission Statement• Part Positioning Statement

34

Presentation

• Use as a high level outline for the business plan– Executive Summary– Products or Services– Market Need– Market Potential– Competitive Advantage– Management– Financial Overview

35

Executive Summary

• Most important piece of the Plan• Begin with the Elevator Pitch • Talk about product / service• Highlight Market• Promote Management• Use of Proceeds• Ask for the $$$• What is the value ?

36

Business Plan• Executive Summary• Products or Services• Market Need• Market Potential• Competitive Advantage• Management• Financial Overview

B-Plan 101


38

What is a Business Plan ??• A business plan is any plan that works for a business to

look ahead, allocate resources, focus on key points, and prepare for problems and opportunities

• Plans don't sell new business ideas to investors. People do. Investors invest in people, not ideas. The plan, though necessary, is only a way to present information

39

Purpose• Business planning is about results • You need to make the contents of your plan match your

purpose • Don't accept a standard outline just because it's there

40

Key Factors

• Simplicity• Believability• Focus• Management• Milestones

41

Key Mistakes• Management• Competition• Idea / Technology inflation • Belief in the market• Valuation or Lack of Valuation• Answering questions• Lack of milestones

42

ABRAHAM LINCOLN

• 1831 Failed in Business• 1832 Lost bid for Illinois State Legislature• 1834 Failed in Business• 1835 Fiancé died• 1836 Suffered a nervous breakdown• 1843 Ran for Congress and Lost• 1848 Tried again for Congress and Lost• 1855 Ran for US Senate and Lost• 1856 Tried for Vice President and Lost• 1859 Lost bid for Senate again • 1860 Became 16th President of the US

Specific Criteria


44

Business PlanKatan’s Concepts• Executive Summary• Products or Services• Market Need• Market Potential• Competitive Advantage• Management• Financial Overview• Development pathway• IP• Technology overview• BOD• AB

Competition Requirements• Executive Summary• Products or Services• Market Need• Market Potential• Competitive Advantage• Management• Financials

45

Some things to consider…• Does the plan explore an opportunity that is realistic?• Is the business model well thought out and have the potential to be effective?• Are there past benchmarks set that the plan can be measured against?• Is a significant initial investment required?• What is the length of the implementation process?• Does the business have the necessary tools to become a market leader?• Has a clear target customer been established?• Does the management team have the skills to succeed?• What are the projections for the venture to achieve profitability?• Is the plan concise and well written?• What will allow this business plan to have sustained success?

46

Executive Summary• What problem are you solving? • What is your business proposition for solving the problem? • Who are your customers? • Who are your competitors? • How viable is your business? • How do you make money? • Executive Summary is clear & effective as a stand-alone

document

47

Products or Services – What ?

• What is the product or service? • What are its attributes? • Advantages and potential drawbacks? • Why/how is your product/service more compelling than

existing ones or the competition? What is the stage of development?

• Do you have a proprietary position or intellectual property protection planned or in place?)

48

Market Need – Why ?• What specific conditions in the market have created the

problem you are solving?• How will your product/service take advantage of the

opportunity? • Who are your customers and what are their attributes? • Clearly define your potential customers and why they

will pay for your product or service

49

Market Potential – Why ??• What are the characteristics of the market for your product

or service? • How will you reach the market? • How big is the market opportunity: number of potential

customers & annual sales? • Can you narrow the market to a manageable segment? • How will you dominate the market? e.g. through pricing,

quality, geography, etc? • Is there a market niche where you will have competitive

advantage?

50

Competitive Advantage – How ?• Competitive Matrix: Who are your competitors? • Their strengths & weaknesses? • Your strengths & weaknesses? • How will you close the gap? • How easily can competition close gap?

51

Management – Who ?• Who are key team members and their respective roles?• What are their relevant experiences and

accomplishments?• What other areas of expertise are you lacking?• When will you need additional team members?

52

Financials• Income Statement• Balance Sheet• Funds Required & Uses• Key Assumptions• Financial Model

A Few More Tips….


54

I’m NOT That Smart…

55

REALLY I’m NOT…

56

Even Better Let Them Do the Work

57

Clayton Christensen: Disruptive Technologies

• The term disruptive technology was coined by Clayton M. Christensen and described in his 1997 book The Innovator's Dilemma.

Disruptive Technologies Displaced

steam engines and internal-combustion engines horses and humans (for powering machines)

Hydraulic excavators Cable-operated excavators

mini steel mills vertically integrated Steel mills

minicomputers mainframes

Container ships and containerization "Break cargo" ships and stevedores

desktop publishing traditional publishing

digital photography originally, instant photography, now increasingly all chemical photography

personal computers minicomputers, workstations

58

Clayton Christensen: Disruptive Technologies

• Main Principals– 1. Companies listen to their customers, and strive to bring to the market

the products their customers ask for.– 2. Small Markets Don’t Solve the Growth Needs of Large Companies. – 3. Markets that don’t exist can’t be analyzed: Get close to your customers,

learn their needs.– 4. Technology Supply May Not Equal Market demand.

59

Valuation

„Trying to assess basic research by its practicality is like trying to judge Mozart by how much money the Salzburg Festival brings in each year.“

Konrad Lorenz

60

“Of the 300-odd public companies in the biotechnology business,8 have meaningful earnings fromselling products. The rest trade onthe strength (or weakness)of their ideas. ”

M. Gianturco in Forbes

Valuation

61

Definitions

Taken from “Understanding Valuation: a venture Investor’s perspective”Callow, etal, Boston Millenia Partners White Paper

Pre Money Valuation = notional amount of equity value prior to any equity investments

Pre Money Valuation + Invested Capital = Post Money Valuation

Price per share = Pre Money Valuation / Pre-Money Shares

$5 million pre-money

+ $5 million =

$10 million post money &50% ownership

62

Series A Valuations - Revealed

• Series A valuations are usually based on percentages - as in, how much of the company does the venture capital fund want to own

• Most established venture funds have an established strategy of owning a particular percentage of a company after a Series A investment

• A typical, good fund will look to own 20% to 33% of a company after the initial investment

• During a normal two-VC, syndicated Series A investment the startup sells around half the company to the VC

• Raising $4 million? Pre-money of $4 million• Raising $6 million? Pre-money of $6 million

63

Summary

Type of valuation

What it gives you

Why people use it

Equity multipl

es(PE)

Enterprise

multiples

(Sales,EBIT,

EBITDA)

Tech. value

Leveraged

value

Common equity

value only

Easy to calculate

and understand

Firm value which can

be split into equity value

after deducting net debt

Avoids distortions

due to accounting

policies (D&A etc)

Value of products or

platform over and

above cash

Easy to calculate

and understand

How much debt a

company can support

To estimate how much a

financial buyer can

pay

However, life science companies are often loss making and not forecast to be profitable

over a 2-4 year time horizon

DCF

Fundamental value of a

company based on

cash flows

Dependent on business

plan not distorted by

market sentiment

How much a company

can be acquired for and possible routes of finance

Assesses impact on

shareholders

64

Enterprise value (US$ m) 70 80 90 100 110 120 130 140 150

Trading multiples

FV/sales 04

FV/EBIT 04

DCF (Implied FV/EBIT 04 multiple)

Precedent transactions

FV/sales 04

FV/EBIT 04

Implied multiples

US$ m Implied multiples

FV/sales 2004E 71.2 1.0x 1.1x 1.3x 1.4x 1.5x 1.7x 1.8x 2.0x 2.1x

2005E 73.7 0.9x 1.1x 1.2x 1.4x 1.5x 1.6x 1.8x 1.9x 2.0x

FV/EBIT 2004E 7.3 9.6x 11.0x 12.3x 13.7x 15.1x 16.4x 17.8x 19.2x 20.5x

2005E 10.1 6.9x 7.9x 8.9x 9.9x 10.9x 11.9x 12.9x 13.9x 14.9x

FV/EBIT 2004E 9.0 7.8x 8.9x 10.0x 11.1x 12.2x 13.3x 14.4x 15.6x 16.7x+restr. costs

1.0x 1.4x

1.2x

13.0x 10.0x

1.6x

11.0x

19.4x 13.5x

14.0x

Valuation overviewValuation overview

Valuation range

This leads to a core valuation range

Valuation – football field example

65

DataFinancing Company Stage Data Risk /

UncertaintyValue in Millions

Seed Incorporation / early Development

Soft / Value Proposition

Extremely High $1+

Series A (First Inst Round)

Development Validation / Time to Market

Very High $3+

Series B Shipping product Prelim Revenue High $7.5+

Series C Shipping product Predict Revenue Moderate $10+

Mezz /Later Shipping product / Profitable

Hard Data, EBITDA, Net Income

Low $20 to $50+

Taken from “Understanding Valuation: a venture Investor’s perspective”Callow, etal, Boston Millenia Partners White Paper

66

The Exit• It there one ?• How realistic is it ?• What happens if there is none ?• Is that okay ?

67

Key Lessons for Success

• Products must have large and near-term markets• Compatible corporate team• Level of funding sufficient to meet goals• Observant – follow market – don’t discard anything• Confidence in common sense• Be prepared for competition – new product pipeline• Need luck and smart friends

Q&A


Date post:	20-Jan-2016
Category:	Documents
Upload:	david-nichols
View:	222 times
Download:	0 times

How to Write a Business Plan 2012 Calit2 Auditorium Katan Associates ©2012. All Rights Reserved....

Documents