The Content to be Pitched to a VC Firm


Now you have decided that the business sector you are entering and identified the business model that will generate those wonderful returns hoped by the firms, as discussed in an earlier blog Now you need to create the presentation materials for the potential investors. My earlier blogs hint that the content is essentially the business course entitled “Strategy.” The SEC filings, specifically the S-1 registrations, clearly reveal, upon reading them carefully,  the critical content for every S-1 is the strategy of the company, except it will not include forward-looking projections. A start-up must outline the same kind of strategic content similar to a S-1 registration but adds the financial projections.  Strategy is used by every company, public or private. In fact, every large company employs senior staffing whose roles are to identify business opportunities while naming the responsibility — business development —  that seeks to enter into new market sectors in which the company will grow profitably.

Strategy is all about how you intend to attack a market and how you will maneuver to seize that market and outmaneuver your potential adversaries. It is a well-written, thought out outline that tells the story of the overall process of achieving the final objectives. From the beginning to end, you start to identify the market all the way to show the potential numbers that relate to the bottom line — the Return on Investment (ROI).

I am always amazed how many start-ups fail to put every ingredient to formulate that content.  One only has to look at S-1’s, which anyone can find on-line, with other SEC regulatory filings at SEC.gov website. I do use the same website to look at potential competitors. These elements for strategic planning are so fundamental that missing any component raises a red flag to any smart money audience for lack of diligence or effort.

First, look at the Situational Analysis — the Past, Present and Future.  This process includes the 1) company environment – SWOT (here you discuss your management team, the barrier to entry like IP, capitalization); 2) the task environment — suppliers, distribution channels and the customer profiles;  3) description of the competitive environment — addressed in an earlier blog — that identifies potential and actual competitors, what has been done in the past and present, marketing approaches used by them, and future market analysis; 4) public environment – laws and regulations, PR, communities; and 5) macro-economic environment-demographics, population, cultural trends, technological changes, political trends.   The aforementioned needs to be carefully researched and distilled later for the Executive Summary.

Second, the plan must set the Marketing Objectives —  are you looking at a niche in the market or will you be seizing a substantial market share? Whichever route taken, you have to quantify now the size of that market derived from the situational analysis, and declare concisely and precisely the quantity to be sold and to whom, and achieve certain profits or sales within a 3-5 year model. Do remember that your earlier research should reveal how achievable are those numbers. And, make sure that the growth of those sales achieve the ROI expected by VC firms.  Those projections should be fairly accurate.  And remember another rule, under-promise but over-deliver those numbers.

Third, look at alternative strategies to achieve the same objectives, if the first elected strategy begins to pan out. This discussion demonstrates that the business plan  has been thought out carefully, but foresees other options.

Fourth, the strategy must be quantified into an action program that breaks it down from month-to-month, showing both sales and costs.  Here one sets the budget, looking at every possible costs.  These are inserted as both milestones and financial numbers.

Here you have to be realistic with your numbers. You try to control things like legal costs so that the product development becomes the priority — another discussion I made in an earlier blog.  Make sure that your sales projections are not inflated, but realistic.  If you had done the situational analysis correctly, those numbers should be known already.  Through this section you begin to show the ROI of the plan and hint as to the valuation of the company based on your plan and projections.

Finally, you describe the controls — how often will you check the sales?  Also, one thing that investors get vexed by, not
knowing your daily “burn rate” to the exact dollar amount.    Failure to do know that dollar figure clearly demonstrates to any investor you are not watching your money. Investors hate excuses, prefer to know your exact financial condition.

From this discussion, one can write a decent business plan. I always prefer to do the homework and, when one has the complete plan, then one can put together an Executive Summary, a PowerPoint, and a Teaser document.  I hear people saying that they put together a summary without investing the time to draft the entire plan, but I feel that shortcut is a major mistake.  During the due diligence and one’s presentation, questions will probably address aspects of the plan not indicated in the presentations, but revealed in the business plan.  And, since one has one chance to present, it pays to be prepared with the knowledge garnered through the work in putting together the entire business plan.  Expect that the audience peppering you with questions has done the homework in your industry.

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About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP, jrzarco2001@yahoo.com, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy. http://www.docstoc.com/video/89135472/make-your-business-an-international-presence; http://www.youtube.com/watch?v=fx5gijf3yoc For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
This entry was posted in Capital and Management, Entrepreneurship, Management and Capital, ROI, Strategy, Valuation. Bookmark the permalink.

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