planning & communicating your business concept

NORTHWATER CAPITAL MANAGEMENT INC.

Planning & Communicatingyour Business Concept

Andrew HarrisonMarch 2006

2NORTHWATER CAPITAL MANAGEMENT INC.

Presentation Overview

Tools of the Trade

Myths and Truths

Overview of the Tools

– The Elevator Pitch

– The ‘One-Pager’

– Executive Summary

– White Paper

– PowerPoint Presentation

– The Business Plan

Outlines and Content

Advice


Tools of the Trade


Tools of the Trade

The ‘Elevator Pitch’ – 30 second outline of business concept

The ‘One-Pager’ – 1 page overview of your business

Executive Summary – 3-5 page overview of your business

White Paper – Layman’s summary of your technology, product(s), the uniqueness and the value

PowerPoint Presentation – ~15 slide outline of your business plan

Business Plan – Detailed description of your business plan: product plan, go-to-market strategy, detailed management team profiles and financials.


Why do we need these tools?

These tools are generally used to:

– Solicit investment – by communicating to investors why your idea is good, how you will execute and what return they can expect

– Communicate to customers – why they should do business with you

– Communicate to partners – why they should do business with you

– Communicate to employees or potential hires – what is the mission and plan is and what role they will play

– Lay out a vision and plan for building the business

These tools are used for communication and planning


Communication vs. Business Planning

The primary purpose of these documents is to communicate the value of your business idea – EXCEPT THE BUSINESS PLAN

Be conscious of the huge difference between communicating your business concept and building your business plan

A business plan is an internal planning document seldom shown to anyone outside the company

The other documents are external communication documents used to sell the value of your business idea to outside parties

Business plans are an internal execution toolsThe other documents are external communications tools


Keys to Communication

Know your audience:

– Institutional (Financial) investor, Strategic investor, Angel investor, Strategic partner, Customer, etc.

Speak to your audience in language that they understand:

– Institutional investor – do not speak ‘techie’, tie everything back to money

– Strategic investor – may be more technical; will be interested in your idea’s as they impact their business

– Strategic Partner – mix of technical and business; understand how a relationship will be mutually profitable to both parties

– Angel Investors - access their background; understand their interests

– Customer – understand their needs

Give your audience the information they are looking for:

– Do not assume they want to see the depth of your scientific knowledge

– Speak to them with their interests in mind, not your interests in mind


Myths and Truths


Myths and Truths

Myths:

– That you only have 30 seconds to get a VC’s attention

If you get develop your communication tools right, you will have longer than that

– That a VC will ask you for all of these documents

– That you should start by building your business plan

Truths:

– What you can provide depends on how far along you are in developing your business concept

The vision you are communicating must be grounded in reality

– You should be strategic about what you provide and when you provide it

– That your documentation should radiate professionalism – grammar, spelling, diction, illustration, layout, etc.


Overview of The Tools


The Elevator Pitch

What:

– A 30 second overview of your business concept

– To a certain extent, an internet bubble invention – at least in terms of raising money

– Strangely enough - 60% of the worlds venture capital is in the bay area in low-rise office buildings without elevators

Why:

– To quickly communicate your business concept in a chance meeting or phone call

When:

– In a cold call to an investor, customer, potential partner, etc.

– Good for networking at trade shows, networking events, etc.

Dos and Don’ts:

– Do not spend forever practicing and refining this – should come naturally; may sound plastic

– Figure out a few key messages you would like to get across to use as a loose script

– Distribute key messages to outward facing employees – standardize message


The ‘One-Pager’

What:

– A concise one-page summary of your business concept and management team

Why:

– A ‘teaser’ document meant to generate a request for more information

– To offer a very general non-confidential overview of your business

When:

– When blasting out to many potential investors – select interested VCs from large list

– When you don’t want to offer any confidential details – chance encounter, potential competitor,etc

Dos and Don’ts:

– I’m not a big fan – Part of ‘shotgun’ approach to fundraising, not my preferred method

– Often just enough detail to say no

– Often adds an additional and debatably unnecessary stage to a process - VCs might sit on the one-pager for a few weeks

– If you are going to build one, make it fairly non-contentious and allude to missing information


The Executive Summary

What:

– A concise 3-5 page summary of your technology, product, sales plan, revenue path and financial requirements

– Significantly more detailed but succinctly expressed, coherent and highly readable

Why:

– Again, a ‘teaser’ document meant to generate a request for more information or a meeting

– VCs will want to get their head around the concepts quickly – short attention span

– Primer for a more detailed explanation of your product plan and business strategy

When:

– When you have a ‘warm’ intro or an invitation to contact someone

– Integral first interaction with an investor

– Rides the line between confidential and non-confidential – some degree of trust

Dos and Don’ts:

– This is a critical communications tool – imperative that it is strong and well written

– Has to have the right emphasis given the maturity of the business concept - Tech, Sales, Revs


The Whitepaper

What:

– A fairly concise layman’s summary of your technology, product(s), the uniqueness and the value

Why:

– Not all (or few) investors will be scientists, engineers or experts in your area of innovation

– You have to go easy on the technical details in the communications documents

– This is the place to fully display your technical knowledge and product vision

When:

– After investors are curious or have bought into the big picture business vision

– Great to give to customers and partners to help them communicate internally

– General education of analysts, customers, potential partners, etc.

Dos and Don’ts:

– Stay high level - Don’t go so deep as to give away all of your secrets

– Keep it as short as possible and fully explain all acronyms


The PowerPoint Deck

What:– A ~15 slide outline of the key aspects of your business plan

Why: – Provide an overview of the business plan in point form

– Allows people to absorb a lot of key information in a short period of time

– Easy to adjust and adapt to a new audience

When: – Usually the second piece of information a VC will receive after the exec summary

– VC’s love these because they can flip through them very fast

– Medium to highly proprietary – requires a greater degree of trust

Dos and Don’ts: – Critical document in the fundraising process –present a sound story; make it look good

– Practice speaking to it, preferably in front of friendly people who will ask lots of questions

– Use graphics as much as possible – max absorbance of information

– Tune emphasis given the maturity of the business concept


The Business Plan

What:

– A rigorously prepared and executable description of how you will build your business

Why:

– This is your roadmap for how you are going to build your business

– Describes roles and responsibilities for building various aspects of the business

– Outlines revenue targets, financial details and investment requirements

When:

– When you have assembled enough solid information to write it

– Highly proprietary – requires a high degree of trust to give it out; later stages of diligence

– Wait for the VC to ask for it

Dos and Don’ts:

– Often made a condition of financing or a board requirement – can provide after the fact

– Re-write with every major change in strategic tack – living document

– Avoid the temptation to turn this into a sales tool – preserve its integrity as an executable


Outlines and Contents


Executive Summary ~ 3-5 pages

Company Description – 1 paragraph

Basic Need and Company Solution – 1 paragraph

Technology and Product(s) – 1 paragraph; diagram

Value Proposition – couple of bullets

Market Size and Growth – diagram

Sales Plan – 1 paragraph

Competitive Advantages – couple of bullets

Management – detailed bullets

Revenue Growth and Margins – diagrams

Financing Requirements – 1 paragraph


PowerPoint Deck ~ 15 slides

Company Overview, Management and Vision – 2-3 slides

Need and Existing Solutions – 1-2 slides

Technology, Products and Product Rollout – 2-3 slides

Market Opportunity – 1 Slide (Graphical)

Competitive Overview – 1 Slide – (Largely Graphical)

Sales Strategy and Channels - 2-3 slides

Partnerships and/or Partnerships strategy – 1 slide

Financials and Path to Liquidity – 2-3 Slides (Largely Graphical)


The Business Plan ~ 30 pages

Executive Summary

Company and Opportunity Summary

Product and Technology

Market Size and Growth

Sales and Marketing Plan

Competitive Overview

Operations Plan

Management Team

Financials and Investment Requirements


Advice


Advice…

Do not start by building your business plan

– You will not have the information you need

– You will examine issues out of priority

– You will expose lack of understanding

Do not offer to supply a business plan off the bat

Start dumping your ideas into the Powerpoint Deck

Use the Powerpoint Deck as receptacle for all ideas and information that comes to light – easy to manipulate, organize and adapt

Build your executive summary and eventually your business plan based on your Powerpoint deck

Give investors your exec summary and offer to walk them through the Powerpoint slides in person or on the phone


More advice …

The main idea of all of this is to entice investors to take a deeper look

– Leave the details for diligence (except in the business plan)

Do not assume that your audience is technically literate or savvy

– Investors predominantly come from a financial background

Do not overload the documentation

– Try to get across a few key messages instead of telling the whole story

– Your audience will only absorb the key messages

– Do not make your information detail rich / noisy – Use graphics as much as possible

Templates exist for all of these documents

– Don’t re-invent the wheel

– Surf the web or go to www.primaxis.com


Questions / Discussions


Planning & Communicatingyour Business Concept

Andrew HarrisonVice President

[email protected]