IS YOUR BUSINESS INVESTOR READY?

Thinking Like an Entrepreneur Is Not Enough

Presented At:The iCAN-Global

Entrepreneurs Breakfast Forum

June 17, 2014

By:Stephen Young

Mentor Business Groupwww.mentorbiz.com

www.amgcapitaladvisors.comwww.investorscollaborative.com

OVERVIEWMY BACKGROUND:• Industrial Technology: marine / energy / aviation• Corporate Law / Multinational Operations / Intrapreneur• Startups and Investing / Consulting and Capital Raising

BIG THEMES• Preliminary Questions for Entrepreneurs – Your Asset Inventory• Preparation , Planning and Pitching -- Getting investors to write checks • Delivering on Promises – Execution is Everything

SEPARATE STEPS• Process Guidelines and Suggestions

PERSPECTIVES• Thinking like an Investor

PRELIMINARY QUESTIONS: PERSONAL AND CONCEPTUAL • What are your personal goals? • What is your business concept?• Are you a technology in search of a market?• Have you created a team?• Can you fulfil the CEO Role?• Are You Coachable?• Who do you need as partners / advisors?• Will execution of your idea accomplish your goals?• Are you willing to do what it takes to be successful?

PRELIMINARY QUESTIONS: MARKET & BUSINESS PLANNING

• Do you understand your target market/industry/customers and competitors?

• Can you deliver on your forecasted product / service performance?

• Will your prospective customers want to buy?• Do you have a way to find new customers?• How will you reach and close them?• What is your “go to market” strategy?• Do you know who your competition is? (sometimes its “continue what they’re doing now”) • What is your “distinctive advantage” over your competition?

PRELIMINARY QUESTIONS: MEETING PERSONAL, BUSINESS AND INVESTOR OBJECTIVES

• Is this an Investable or a Lifestyle Business?• Are you Being Paid as a worker and owner?• Are you Measuring your success (or lack thereof)?• What are you getting out of your business right now?• What are your Investors Expecting to get?• Is there a Big Payday in your and your investors’ future? • Do you have an Exit Plan? Is it reasonable?• Can you Execute on your plans in the near and long term?

PREPARATION: PROCESS OVEVIEW

• Evaluating Yourself and the Concept• Finding Partners / Seeking Advisors• Thinking Like Customers• Understanding Investors • Researching the Industry / Market / Competition• Analyzing Disparate Data and Details• Developing The Plan • Testing the Concept (“Lean Launch” to Prove Traction) • Preparing and Making the Presentation• Assembling the Due Diligence• Structuring the Offer• Negotiating the Deal• Executing on Everything

PREPARING, PRESENTING & EVALUATING THE PLAN

10 Point Program (Guideline and Scorecard):• Problem / Market Opportunity (Validation)• Solution / Magic of Solution• Business Model• Competition / Competitive Advantage• Go to Market and Sales Strategies• Financials and Metrics• Management Team• Risks and Mitigation • Status & Next Steps• Investment Opportunity

FINDING INVESTORS AND ADVISORSFINANCING SOURCES• Personal Assets / Banks / non-traditional lenders• Friends, Family (and Fools)• Angels (who are really not) (individuals and Groups)• Incubators / Economic Development Programs (target industries)• VC’s and Private Equity (larger financial targets)• Public/Private Institutions/Universities (grants and tech support)• Strategic Partners (from associated industries)• Crowds (JOBS Act / New SEC Rules under review)

CONSULTANTS and ADVISORS• Accountants and lawyers• Broker dealers and investment bankers• Strategic advisors / business coaches• Retired / hired / retained / incentivized Consultants• Advisory Boards and Boards of Directors • Strategic Partners / Universities / Govt Agencies (DOC / DOD / DOE / EDC)

INVESTMENT TYPESTYPICAL FORMS• Debt: amount, interest, payment terms, security• Convertible Debt: loan converts to equity at next round• Equity: percentage interest ownership (warrants & options)

BASIC STRUCTURES:• Limited Liability Companies (LLC’s) (Membership Interests)• “C” Corporations (shares of stock) (or warrants / options) SEC / REGULATORY ISSUES:• Public v Private (registration / disclosure) • Intrastate or multi-state (Blue Sky reviews)• Special exemptions (Reg D and section 4(2)) (Accredited Investors)

TYPICAL INVESTOR FOCUS ISSUESBUSINESS AND TEAM:• Metrics / Understanding of Everything on the 10 point scorecard • Best / Worst / Probable case analysis (launch, sales, financials)• Due Diligence Package that Supports claims and assesses Risk INVESTMENT STRUCTURE • Valuation: Discounts, Dilution, Next Round / Down Rounds• Cash Flow: Break Even, Sustainability, Distributions, Payback, ROI, IRR• Documents: Rights, Protections, Security

EXECUTION, EXIT AND CONTINGENCIES• Best Plans and the 2X Rule (Cost and time) and ½ Rule (sales and revs)• Board Impact and Mentoring Advice• Are we all doing what it takes to be successful? (making tough decisions on plans, programs, people, cash)

MAKING THE PRESENTATION

MULTIPLE VENUES:• Elevators, Conferences and Cocktail Conversations• Executive Summaries• Power Point Presentations• Business Plan Write-ups• Private Placement Memo

CONSIDER AUDIENCE BACKGROUND / MOTIVATIONS:• Generally: “What’s in it for me?”• Specifically: What ROI is achievable / in what timeframe?

BRIEF AND DEBRIEF:• Utilize 10 Point Pitch Format and Investor Scorecard • Ask Better Questions: Known / Unknowns Problem

PERSPECTIVES: VIEW DEPENDS ON WHERE YOU SIT

Entrepreneur Touts Investor Thinks

Plan / forecast Actual Results / TractionHockey Stick Growth Executable Sales PlanCutting Edge Invention Bleeding Edge CostsGiant Killing Idea Crushed by Existing Giants Focused Experts Academics with BlindersNew Ideas & Energy Detailed ExecutionPromised Milestones Underdelivered ResultsNeeded Resources Overspending SGASky is the Limit What are you Smoking?Rewards Risks

MOVING FORWARDSEE YOUR BUSINESS THROUGH AN INVESTORS EYES • Seek Investors/Stakeholders interests/concerns/hot points

PATIENCE• Remain open to new learning – investors are smart (and want to show you) • Valuation is important, but focus on delivering value

PERSISTENCE:• Repetition breeds retention and persistence fosters success

CONTINUE TO QUESTION AND ANSWER• Understanding and overcoming objections builds character

USEFUL REFERENCES:• Lots of Books on Biz Plans, Presentations, Entrepreneurship• HVCFI/iCAN-Global & other incubator programs• Kaufmann Foundation, National VC Association, Angel Groups, other websites

Free Investor Pitch ScorecardEmail SSY@MentorBiz.com

IS YOUR BUSINESS INVESTOR READY?

Thinking Like an Entrepreneur Is Not Enough

Presented At:The iCAN-Global

Entrepreneurs Breakfast ForumJune 17, 2014

By:Stephen Young

Mentor Business Groupwww.mentorbiz.com

www.amgcapitaladvisors.comwww.investorscollaborative.com