Download - Essentials of a Great Investor Pitch - Entrepreneurship 101

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© 2012 Peter Evans, MaRS Discovery District!

Presented By:!

Peter Evans !Entrepreneur-In-Residence, MaRS !

Founder & CEO, Speakerfile !

@techmarketer!

May 2, 2012!

@speakerfile!

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Other People’s Money Fundamentally Changes Everything!

Vision | Talent | Money

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The Investment Paradox!Entrepreneurs & Investors Take Different Approaches!

Getting to!!

NO!

Investor!Entrepreneurs !

Getting to!!

YES!

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Finding the Right Match!Matching the Venture to the Investor!

Successful!Track !

Record!

Compatible!Match of !

Size/Stage/!Geography!

Strategic!Relevant!Portfolio!

Friendly!No directly!competitive!investments!

Capacity!Has funds !to invest!

The Right!Investor!

Entrepreneurs want…! Investors want...!

Platform!Significant "

Technological"Advantage!

Market!Sizable and "Addressable!

IP &!Bus. Model !

Entry Barriers!

Traction!Early "

Customers"!

Team!Skills & "

Track Record!

The Right!Investment!

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Getting to Yes: 3 Levels of Engagement!

Emotional! Rational! Financial !

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Engaging Investors on All 3 Levels!

!  Storify!Create a well paced, logical narrative….think storyboard!

!  Disnify!Use visuals - frameworks, graphics and images…But only where they make sense…you are not keynoting a TED talk!

!  Personify!Relate to the team’s personal experiences…investors are in the people business. !

!  Simplify!Avoid too much detail, overused buzzwords and jargon…getting a term sheet after first meeting is not the goal !

!  Verify!Can you finish this sentence? “As evidenced by…” Show a sense of discipline in measuring the right things from market research to key metrics for the business!

!Some tips for scoring on emotional, rational financial elements !!

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Components of the Investor Pitch!

Real!Problem!

#1!

AttractiveMarket!

#2!

Unique!Advantage!

#3!

Compelling Investment!

#4!

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Start!

Pacing the Pitch !Selling your story in 12 minutes!

End!

Real!Problem!

(3 min)!

#1!AttractiveMarket!

(4 min)!

#2!Unique!

Advantage!

(3 min)!

#3!Compelling Investment!

(2 min)!

#4!Real!

Problem!

(3 min)!

#1!Attractive Market!

(4 min)!

#2!Unique!

Advantage!

(3 min)!

#3!

!"#$%&'"()*+,&-"./&,"*0&"123-&)34&,"$4)5"""

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Answering the “So What?”!

Real !Problem!

1!

Focusing a Problem that Matters!

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Creating Impact!

!  Core Value Proposition: Use a single sentence:!

!  Unique Benefit: Focus on one single aspect of what you do (aka…”the big idea”)!

!  Metaphors: Provide a cognitive connection (the movie pitch) i.e. ”we’re the x of the y business.” !

!  Emotion: Create a visceral response (why are things still done this way?) Be provocative….Nice to have’s aren’t investable!

The Company & It’s Solution – Elevator Style!

Real Problem!

Introduction"

Key Message: We’re fixing the insanity of the status quo!

Start! Min 3!

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Start!

!  Current State: Show the insanity of how customers address the issue today!

!  Historical Evolution: What’s changed in the customer’s mindset !

!  Personas: Describe the main players in your market you address!

!  Pictures: Every picture tells a story!

Real Problem!

Introduction"

Problem"

Defining the Problem!Paint a picture of who has this pain!

Key Message: We’re solving real pain…not “nice to haves”!

Min 3!

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!  Product: What is it? "(screen shots, product photos)!

!  Functionality: The Who + Do!

!  Benefits: High level value!

!  Category: Where do you play?!

!  Stage: What is the readiness of the solution? !

!

Real Problem!

Introduction"

Problem"

Solution"

Your Solution to the Rescue !Describe WHAT you do and HOW you do it!

Key Message: Our solution is novel and easy to understand!

Start! Min 3!

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!  Founded (Year)!

!  Employees (FT/PT) Offices!

!  Product Release(s)!

!  Beta Users/Unique Views/ Registrations!

!  Paying Customers!

!  Partners (Technology/Channel)!

!  Certifications/Industry Awards!

!  Media Coverage!

!  Patents!

Real Problem!

Introduction"

Problem"

Solution"

Traction"

What’s Been Achieved to Date? !Show your ability to succeed: On lots of sweat…little $!

Key Message: Our team is committed and can execute!

Start! Min 3!

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Changing the Way Dentists Detect & Treat Tooth Decay

Investor Presentation: Quantum Dental Technologies

October 20th, 2010 MaRS Angel Breakfast

Lisa Crossley, CEO

Case Study: Quantum Dental!

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Gold standard detection methods (visual & x-ray) fundamentally unchanged for decades.

Existing Tooth Decay Diagnostics

Tooth Decay Detected


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by Quantum Dental Technologies

Canary interactive software and printed patient reports

The Canary Console


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Company Overview

What we do !  Quantum Dental Technologies has developed a new platform which uses a low-

powered laser to detect tooth decay earlier and more accurately than conventional technologies, allowing dentists to treat & heal the teeth instead of “drill, fill & bill”.

Milestones !  Product - Dental Clinic model designed, first commercial units manufactured !  Customers - Over 50 pre-orders secured !  IP - Strong patent portfolio !  Clinical - First Health-Canada approved clinical trial completed, second trial in

progress, providing independent validation of safety & efficacy !  Partnerships – Relationships with key global distributors and major multinational

strategic partners

Financing !  $3.3M raised to date, seeking an additional $2.5M to reach breakeven !  Funds: Sales/marketing to support launch; large-scale mfg; final reg. approvals


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Market Problem

! Need to increase revenues, leverage office staff to reduce costs

! Need to attract new patients

! Need new diagnostic tools that provide more accurate detection of tooth decay

! Discomfort during x-rays

! X-ray exposure ! Painful and costly

restorations ! Weakened tooth

structure

! High false positives / false negatives

! Can’t detect early tooth decay

! Can’t detect decay on all tooth surfaces

!  Interference from orthodontics

Dentists’ Concerns Limitations of Current Detection Methods

Patients’ Concerns


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Value Proposition

Value to the Dentist ! Attract new patients: with state of the art

technology and a minimally invasive approach

! More patient visits: more frequent visits for patients enrolled in remineralization programs

! Reduce costs: scans can be performed by other staff (hygienists, assistants)

! Affordable: flexible leasing options provide immediate profitability

Value to Patients & Insurers ! Reduce costly & painful restorations


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What it is – Canary Console

! Show product with call outs

Handpiece

Laser & Intra-oral Camera

Eye Shield

Console

CA Patent # 2314691 US Patent # 6584341


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What it is - Screenshot Odontogram

Menu Options

Canary Number

Camera Image


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Healthy Tooth

Early Enamel Decay

Advanced Enamel Decay

Demineralization

The Life Cycle of Tooth Decay

Remineralization

Remineralization Therapies The Canary System Scan X-Ray, Drill Fill & BIll


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Attractive Market!

2!

Opportunity Awaits!Lots of Room in the Market to Scale a Business!

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!  Size: What’s being spent today on problem? Build from ground up. Can the market support multiple players?!

!  Addressability: What’s the reasonable market you can serve? !

!  Trends: Focus on Formative Forces (PESTLEC) –Is the problem getting worse or growing over time?!

!  Charts: Keep it visual and engaging!

!  Segments: Going Niche or broad?!

!  Global: Identify other markets!

!  Proof: Use 3rd Party reports!

!  Thought Leadership: Are you using primary research to gain insight?!

Market Size"

Attractive Market!

Sizeable Market Opportunity!It’s Very Big …And you Can Get To It!

Key Message: We have unique insight into the market!

Min 3! Min 7!

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!  Status: Closed vs. Prospects and "Paid vs. Free Trial !

!  Categorize: Key segments etc.!

!  Contextualize: Why they bought!

!  Personas: Describe customer characteristics!

!  Logos: Categorize …Avoid “logo soup”!

!  Evangelists: Customer quotes to validate market pain and size !

!

Customers"

Attractive Market!

Market Size"

Early Customers/Prospects!Nothing really matters till somebody buys/downloads something!

Key Message: We have buyers who must have our solution !

Min 3! Min 7!

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!  Key Metrics: Pricing, Avg. Deal Size, Registrations/Subs., Churn, LTV etc. Note: Cost to Acquire is perhaps the most overlooked and important metric!

!  Channels: What are the downstream costs to sell and service the customer (is this built in?)!

!  Competition: Is your model sustainable if competitors start stealing share? Have you factored in potential of downward price pressure over time? !

Revenue Model"

Attractive Market!

Customers"

Market Size"

Making Money!Where does the growth and profit come from?!

Key Message: We’ve validated our revenue model and can !demonstrate how it will allow us to scale the business !

Min 3! Min 7!

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!  Visibility: Critical to success.. "what’s your unique story?!

!  Lead Generation Programs: What marketing approaches will you use (stay high level – categorize)!

!  Sales Model: Direct vs. Channel (Do you have partners? Have you built a wave for channels to ride?) !

!  Systems: Do you have an infrastructure to scale (CRM/Inbound Mktg. Platforms etc.)!

!  Testing: Do you have capability to test value prop./offers?!

!  Stages: Do you have the ability to pivot from launch to growth to maturity?!Marketing & Sales"

Attractive Market!

Revenue Model"

Customers"

Market Size"

Acquiring Customers!The most visible proof there’s a market for your solution !

Key Message: We have programs, systems and talent to !drive visibility, lead gen. and close deals!

Min 3! Min 7!

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Case Study: Wave Accounting!

November 9th, 2010!MaRS Angel Breakfast"

Changing the business of small business accounting.

Kirk Simpson, President & CEO

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Confidential – Wave Accounting Inc., 2010

The Market Opportunity

1.  The explosion in SaaS •  primary driver is accessibility anywhere •  collaboration •  auto-backup

2.  Paper to digital •  lose the shoebox by bringing in digital

copies of the transaction

3.  Wireless •  turn downtime into productive time •  increase automation

4.  Collaborative Consumption •  show me what my peers are spending so I

can make better decisions

2

Strong desire to be organized, lack competency in this area but looking for control.

Free Agent Nation

28.5 million in North America!

Wave is at the forefront of some powerful trends:

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Recent Successes

!  1.8 million users in 2 years – 4.2 million after 4 years

!  Sold for $170 million (17 times rev or $140 per user) to Intuit in 2009

!  2 million + users !  Monthly fee for use

3

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Revenue Model

4

Targeted Offers & Research

!  Wave will embed targeted offers within the app based on users’ data (never against personally identifiable information) – Telus now a customer

!  Selling aggregated research about what’s happening in this key market

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Revenue Model

Premium Products

Additional modules available for a fee (built by Wave or through 3rd party integrations)

!  Payroll (in discussions with several U.S. and Canadian providers)

!  CRM

!  Receipt entry (shoeboxed)

!  Email learning

5

Tax Returns Web-based tax preparation (for a fee)

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Go to Market Strategy

!  Integration Stickiness Auto-syncing banking data every night

!  Communication: Informative, insightful weekly emails

!  Offers: Value-added, contextual, time sensitive offers

!  Collaboration tools with internal and external advisors (i.e., accountant)

!  Focus on customer service

!  PR – already featured in the Financial Post and Profit Magazine. U.S. PR through Hoffman.

!  Social media and blog to drive SEO

!  Partnerships, i.e. Freshbooks, banks, accounting firms

!  Vertical Communities: Custom chart of accounts for 40+ industries

!  Advertising: Google Adwords, Facebook Ads, LinkedIn DirectAds

6

November

16 LAUNCH

CAPTURE RETAIN

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You are in the Best Position to Win!

Unique!Advantage !

#3!

Many of the essential pieces are in place !

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!  Role: What value will they add to your solution Research/Development/Sales/Support etc.!

!  Reputation: Do you you have the right players in the market you are serving? !

!  Category Fit: Do they have sufficient market power?!

!  Executive Sponsorship: Do you have buy in from key people inside the channel? !

!  Incentives: Is the partner aligned financially to support you?!

!  Longer Term: Is there competitive threat or potential M&A?!

Partners"

Partners!Show how you can punch above your weight !

Key Message: Important market players buy into our !vision and want to work with us!

Min 8! Min 10!Unique Advantage!

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!  Technology: Validate how you are different? How much market lead do you have? What degree of leverage and scale do they create?!

!  Process: Are there unique process elements of how your technology works?!

!  Licenses: Are there 3rd party components of your solution that are licensed? Do you have an exclusive right to the technology? !

!  Patents: What is the focus of the patent and what stage are you at? (provisional filing, patent granted) – Not a bad idea to mention any name brand attorneys you work with.!

!

Partners"

Technology/IP"

Technology/IP!Creating barriers to entry!

Min 8! Min 10!Unique Advantage!

Key Message: We’ve nailed a problem that is hard to solve. !It will be hard for competitors to catch up!

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!  Company Background: List experience in terms of key companies each team member worked for. List “pedigrees” (notable exits).!

!  Planned Hires: Speak briefly to what primary role they will play in the venture!

!  Achievement: Focus on a key aspect of their experience that uniquely qualifies them for the venture!

!  New Hires: Where applicable, speak to any key people you may be hiring to build out the team!

Partners"

Technology/IP"

Team & Advisors"

Unique Advantage!

Team & Advisors!The capabilities to execute on the plan!

Min 8! Min 10!

Key Message: We have assembled the right mix of people who understand our target customers and the dynamics of the marketplace. We have “know how” and “know who.”!

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Case Study: Verold!

Automating 3D!

Jad Yaghi!Co-Founder and [email protected]!

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Competitors!

Manual Tools ! Other Scanners!

Any Size Object!

Full Automation!

Automated!

Simple to Use!

Rapid Asset Creation!

Ready to Animate !

No Special Hardware!

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Case Study: Verold!

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Case Study: Verold!

IP Portfolio!

•  R&D conducted top German University (Computer Graphics Lab!

•  Concepts, high level methods by our CTO, Matthew Sloly!

•  Key Patents:!

Licensed IP!

Automatic retargeting of 3D meshes!

Animation content transfer!

Automated Rigging!

3D City reconstruction from images!

IP Developed by Verold!

Work-flow for automated creation of animation-ready 3D models!

Multi-user real-time 3D model reconstruction!

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Chris Cole (Co-founder of Mathematica, ActiveWorlds, consultant Disney Imagineering) ! !!Robert Quance (entrepreneur in Residence, MaRS)!Georgy Oganov (Chief strategist at Gaz-Prom, former Russian ambassador)!

Team/Advisors!

Name! Position! Background!

Matthew Sloly! Co-Founder & CTO!

•  Internationally recognized digital artist with work in the collection of the National Gallery of Canada!

• Co-Invented majority of the IP being commercialized!

Jad Yaghi! Co-Founder & CEO!

•  Serial entrepreneur with over eight years management experience in startup environments!

•  Previously Strategy Consultant with Monitor!

Oliver Schiffers! CMO! •  Founded two online and VR companies 1996 and 1998!•  10 years experience, Senior Consultant and Head of

Marketing Strategy in ICT, Sapient!

Alexander Oganov ! Business Development!

•  Angel InvestorSuccessfully invested in 32 early stage companies!

Nils Martins! 3D Engine Developer!

•  Virtual Reality Center, Aachen!•  4 years geometry processing and game engine

development!

Dr. Leif Kobbelt! Chief Computer Scientist!

• Computer scientist at RWTH Aachen!• Geometry Processing!

Advisory Board!

Case Study: Verold!

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There is Upside for Investors!

Compelling!Investment!

#4!

Presenting the Offer for Investment!

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!

!  Key Numbers: Revenues, Expenses, EBITDA, Customers, Headcount !

!  Burn Rate: What is the net cash out month!

!  Assumptions: Be prepared to defend them !

!  Scenarios: Be able to speak to impact of various scenarios (i.e. Cost of Acquisition is x% higher than forecast or lack of conversion from free to premium)!

Financials"


How You Will Make Money!Key Metrics that Explain the Bottom Line for Investors!

Min 10! End!

Key Message: Our venture clearly offers a superior return for our investors.!

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!  Investment Structure/Terms: Type of Instrument (Convertible Debt, Equity) and what are the terms of the deal !

!  Amount: What’s been raised and what is left in the round? Use of Proceeds: What milestones will you achieve (with the investors money)!

!  Runway: What amount of time does the current money buy (can you hit breakeven or is a new round required?) !

!  Pipeline: Be prepared to speak to who is committed so far and who are you approaching. You must show momentum – “herd dynamics.”!

!  Valuation: Be careful about “premature” discussions regarding pre-money value – don’t price from the podium! !


Financials"

Offer Details"

The Ask!Value & Deal Structure/Terms & Use of Funds!

Min 10! End!

Key Message: Our structure and terms should meet your investment criteria!

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Financial Projections!

2011 2012 2013 2014 2015

Number of Licenses # # # # #

Revenue $______ $______ $_______ $_______ $_______

Expenses $______ $______ $_______ $_______ $_______

Gross Margin % % % % %

EBITDA $_______ $_______ $_______ $_______ $_______

Total Head Count #

#

# # #

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!  Investment to Date: $_______!–  $______ support from government programs/grants (if applicable) !–  $______ cash investment from founders and angels!

!  Current Raise: $________ !

!  Use of Funds (See Examples Below)!–  Build Marketing programs!–  Hire US and European sales team!–  Commercial launch of V1.0 product in North America and Europe!–  Secure final regulatory approvals!–  Finalize Patents!–  Initiate large scale manufacturing!

!  Further Fundraising (Speak to Runway – See Example Below)!–  Planned A Round Financing (Jan. 2013) … or….!–  Expect to achieve cashflow positive with the proceeds of this raise !!

Financing & Use of Funds!

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A Recap: The 4 Components of the Pitch!

Real!Problem!

#1!

AttractiveMarket!

#2!

Unique!Advantage!

#3!


#4!

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In the End…The Investment is in You!11 signals smart investors look for!!

1. Honesty…….........................Gives straight answers to investor questions!

2. Credibility…..........................Demonstrates customer insight/thought leadership!

3. Resourcefulness……………!Can make an investor’s dollar go far!

4. Logic …………….……………Makes wise, pragmatic decisions quickly!

5. Drive…………………………..Genuine passion for early stage & ability to excite!

6. Humility……………………….Coachable and seeks help to address weak spots!

7. Leadership……………………Has the ability to attract and lead a winning team!

8. Critical Thinking……………..Challenges assumptions and spots the false +’s!

11. Agility……………...................Decisive…Cuts losses & pivots at the right time !

9. Commitment……………........Not just involved - sweat &/or capital invested!

10. Patience……………...............Tolerance to the ambiguity of innovation !

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Peter Evans, Entrepreneur-In-Residence, MaRS !

@techmarketer! http://ca.linkedin.com/in/peterevansprofile!