Fundraising Series (Part One): Building Your Story

day and
The Fundraising Series (Part One) –
“Building Your Story”“Building Your Story”
April 8, 2014
Featuring:
• Niko Bonatsos, General Catalyst Partners
• Noah Lichtenstein, Cowboy Ventures
• Glenn McCrae, Early Growth Financial Services
• Stephanie Palmeri, SoftTech VC

Agenda
8:00 am – 8:05 am
Chad Lynch - Introduction
8:05 am – 8:40 am
Glenn McCrae – Creating Your 3-Year Financial Plan with Q&A
8:45 am – 9:15 am
Noah Lichtenstein – Constructing Your Value Proposition with Q&ANoah Lichtenstein – Constructing Your Value Proposition with Q&A
9:20 am – 9:55 am
Stephanie Palmeri – Understanding Your Competitive Landscape / Market Sizing / Q&A
10:00 am – 10:35 am
Niko Bonatsos – Go-To-Market Strategy / Q&A

Building Your Financials:
Creating Your 3-Year Financial Plan
1
Creating Your 3-Year Financial Plan
Glenn McCrae
Partner and Chief Strategy Officer
Early Growth Financial Services

About Early Growth Financial Services
• Outsourced financial services firm that provides small to mid-
sized companies with an integrated financial solutionsized companies with an integrated financial solution
• 4 platforms of services and support: transactional accounting,
CFO, tax, and valuation
• Services include: AP/AR, financial forecasts, cash management,
financial statements, monthly close, 409a valuations, corporate
taxes, investor relations, fundraising support
• 300+ successfully funded clients nationwide
• #5 Silicon Valley Business Journal Fastest Growing Private
Company Award 2013
2

Building Your Story with Numbers
“The point of financial projections is to
tell a story with numbers—a story about
opportunity, resource requirements,
market forces, growth, milestone
achievements, and profits.achievements, and profits.
Your job is to create a numerical
framework that complements and
reinforces the vision you’ve painted with
words.” – Guy Kawasaki
www.earlygrowthfinancialservices.com 3

Presentation Overview
The essentials of startup financial management
• What are investors looking for in your
finances?
• What is a financial model?
• Setting financial goals and objectives
• Milestone funding• Milestone funding
• Bottom-up financial projections
• Spend
• Budgeting
• Top-down projections
• Cost assumptions
• Reforecasting
www.earlygrowthfinancialservices.com
4

Why a 3-Year Financial Model?
A comprehensive financial pictures serves as the road-map
for your business
• Helps you understand your cash burn
• Forces you to evaluate key
performance drivers
• Validates your assumptions
Puts challenges into perspective• Puts challenges into perspective
• Iterative process continuously
improves your assumptions
• Insight into your business model
• Clarifies decision-making process
(short-term and long-term)
• Gives you leverage of accurate
baseline valuation
5

What Goes Into a 3-Year Financial Model?
Essential components to your model
Major
objectives
MilestonesTimeline
3
Key
assumptions
Trending
analysis
Key variables

Identify Major Objectives for Your
Company
Assess where you are and what you want to achieve
Venture funding and
negative cash burn
Positive cash burn and
no venture funding
What do you want to accomplish
with next raise?
What are the goals you want to achieve
during this time period?

Process for Creating Your Financial Model
How to approach the process and get buy-in
1. Go to stakeholders and members of
executive team – what do they need to
achieve objectives (revenue, product,
market, strategic, etc.)?
2. What is needed from a2. What is needed from a
programmatic perspective?
3. Compile information and discuss
with CEO (maybe executive team):
total amount requested relative to
milestone
4. Dialogue about wants and tradeoffs
5. Use dialogue to create bottom-up
forecasting budget
8

Bottom-Up Financial Projection
Forecast for realistic revenue potential
9

Spend for Bottom-Up Projections
Consider relevant operational costs
• Customer/Cost details
• Human resource costs
• Consultant and professional services• Consultant and professional services
• Research and development
• Office and admin
• Sales and marketing
• Capital spending
10

Budgeting
Use your budget to plan your actions
• Budgeting created on accrual basis: budgeting
versus actual results
• Difference between cash and accrual is
around capital expenditures
• Report budget by department and major cost
drivers (expense categories and revenue
11
drivers (expense categories and revenue
categories)
• Plan actions: how quickly will this impact
revenue and what will you be able to achieve
based on spending
• Identify key variables
• Identify key revenue assumptions
• Run different scenarios

Budgeting Exercise
Start from a milestone perspective
• If company has been around for
a while, look at historical costs
• What do you need to
accomplish before you run outaccomplish before you run out
of money, or in a specific time
period
• Ask budget owners what they
need to accomplish goals
• Tradeoffs
• Trending analysis
• Trending initiative
12

Top-Down Projection?
Not particularly useful, but necessary for investors to show
market potential
13

Reforecasting
Your financial plan is always evolving
• Don’t do a 5-year plan, at
most 3-year
• Update your budget on a
quarterly basis (at least)quarterly basis (at least)
• For investors budget on a
quarterly basis for first year
and then annually
• What’s realistic in terms of
timeline and reforecasting
on monthly or quarterly
basis?
14

Thank You and Q&A
Glenn McCrae
415.320.5753
15
gmccrae@earlygrowthfinancialservices.com
Follow us @EarlyGrowthFS

Value Proposition
Noah Lichtenstein
Partner, Cowboy Ventures
April 8, 2014

At a Glance: Cowboy Ventures
•  Founded in late 2012, $40m seed stage fund
•  2 partners, 6 ninjas, focus on community
•  Our mission: to back the most beloved new
consumer + enterprise companies at seed stage –
companies re-imagining “Life 2.0”
Conﬁden'al
-‐
Cowboy
Ventures
2014
2

The “Re-Imagination of Everything”
Life 2.0, via Web/Mobile
New Content &
Commerce
Mobile-first
Consumer
New Connected
Devices
Consumerization
of Enterprise
16 investments to date*
New Gaming
*does not include some of our Stealth and “non-anchor” investments
Cowboy Ventures Current Portfolio
Conﬁden'al
-‐
Cowboy
Ventures
2014
3

Brief Bio: Noah Lichtenstein
•  Partner, Cowboy Ventures (2013-present)
•  Founding Team, HomeRun (2009-2012)
–  Acquired by Rearden Commerce (Sept. 2011)
–  Raised from Foundation, First Round, Founder
Collective, Angels
•  Business Development, Climate Corp
(2008-2010)
–  Acquired by Monsanto (MON) for ~$1bn (Oct. 2013)
–  Raised from Index, NEA, Khosla, GV, First Round, etc.
•  Other:
–  Board of Directors, United Way
–  Advisor, Life360
–  Stanford University (B.A. 2004)
Conﬁden'al
-‐
Cowboy
Ventures
2014

@Noah_L

noah@cowboy.vc

4

What We’ll Cover Today
1.  Company Value Proposition
2.  Investor Value Proposition
Conﬁden'al
-‐
Cowboy
Ventures
2014
5

Conﬁden'al
-‐
Cowboy
Ventures
2014
6

Company Value Prop – What is it?
Purpose of the Value Proposition:
To help inform the customer so that he or she can
make a choice.
Conﬁden'al
-‐
Cowboy
Ventures
2014
7

Value Proposition is…
A positioning statement that explains WHAT benefit
you provide for WHO and HOW you do it uniquely
well.
--Michael Skok, North Bridge Venture Partners
Value Proposition is not…
A mission statement or company vision
Conﬁden'al
-‐
Cowboy
Ventures
2014

Company Value Prop – What is it?
8

Value Prop – Examples
Uber provides on-demand personal transportation
through a simple mobile application that enables users*
to request, ride, and pay for transportation at the push
of a single button. Unlike with taxis, Uber passengers
get reliable pickups, clear pricing, and convenient
cashless transactions.
*Because Uber is a marketplace, there is a distinct value proposition for Drivers
Conﬁden'al
-‐
Cowboy
Ventures
2014
9

Value Prop – Examples
Dropbox enables users to store and access their
photos, docs, and videos anywhere and share them
easily. Unlike local storage solutions, it does this by
storing digital copies of these files in the Cloud, and
automatically synchronizing them across a user’s
multiple devices.
Conﬁden'al
-‐
Cowboy
Ventures
2014
10

Company Value Prop – The What
The What
•  What is the specific problem you are solving?
•  Do consumers view this as a problem?
•  How big is the problem?
Conﬁden'al
-‐
Cowboy
Ventures
2014
11

Company Value Prop – The Who
The Who
•  Who will benefit from your product or service?
•  Why do they care?
•  How many are there?
Conﬁden'al
-‐
Cowboy
Ventures
2014
12

Company Value Prop – The How
The How
•  What is your unique solution to the problem
•  What are other existing solutions to the problem?
•  Why is this better than existing alternatives?
Conﬁden'al
-‐
Cowboy
Ventures
2014
13

Quick Recap: Company Value Prop
Conﬁden'al
-‐
Cowboy
Ventures
2014

The Company Value Proposition is…
The What, Who and How of your company that helps
inform the customer so that he or she can make a
choice.
14

Conﬁden'al
-‐
Cowboy
Ventures
2014
15


Investors: A bit of Background
•  What keeps investors up at night?
•  Needles in a (growing) haystack
•  It’s not personal
•  There is no right investor; there is only the right
investor for you
Conﬁden'al
-‐
Cowboy
Ventures
2014
16

What do Investors Care About?
The Four Things Investors Care Most About:
•  Team
•  Market
•  Plan
•  Traction (or some proof you can rock it)
Conﬁden'al
-‐
Cowboy
Ventures
2014
17

The Team
•  Team make-up
•  Relevant skills + background
•  Unfair advantage
•  The intangibles
Conﬁden'al
-‐
Cowboy
Ventures
2014
18

The Market
•  Think big – market size >$1bn
•  Addressable vs. total market size
•  Growing market
•  Comparable exits + strong multipliers
Conﬁden'al
-‐
Cowboy
Ventures
2014
19

The Plan
•  Product roadmap
•  Metrics and milestones
•  Financials / projections
•  Hiring plan
Conﬁden'al
-‐
Cowboy
Ventures
2014
20

Traction (or some proof you can rock it)
•  Traction
•  Other “proof”
Conﬁden'al
-‐
Cowboy
Ventures
2014
21

Meeting with Investors
What to do and expect…
•  Before
•  During
•  After
Conﬁden'al
-‐
Cowboy
Ventures
2014
22

Before
•  Do your homework
•  Reaching investors
•  Arranging a time
Conﬁden'al
-‐
Cowboy
Ventures
2014
23

During
•  The goal of the first meeting à get a second meeting
•  Start strong
•  Show > tell
•  Know and mention potential competitors
•  Concrete next steps
Conﬁden'al
-‐
Cowboy
Ventures
2014
24

After
•  Send a follow-up note thanking them and
summarizing any next steps or action items
•  The investor’s process
Conﬁden'al
-‐
Cowboy
Ventures
2014
25

Other Thoughts
•  Is VC right for you?
•  Every investor meeting is an opportunity to get
better
Conﬁden'al
-‐
Cowboy
Ventures
2014
26

Common Mistakes
•  Settling for a cold intro
•  Asking an investor to sign an NDA
•  Thinking too small / not selling the dream
•  Discussing exits in an early stage pitch
•  Focusing too much on valuation in the early stage
•  Not knowing the VC’s investment thesis
•  Making the investor do all the work
•  Game-playing
•  Huge spikes in revenue from year to year
Conﬁden'al
-‐
Cowboy
Ventures
2014
27

Some Things I Love
•  Be data driven
–  If you have data already, speak to what it is telling you
–  If you don’t have data, speak to what data is important and
what metrics you will be tracking
•  CAC, WoW growth, churn, DAUs/MAUs, etc.
•  Run tests
–  Run a limited test to see if data will help you prove a
hypothesis or help demonstrate product-market fit
•  Product roadmap
–  A well thought-out roadmap for building and executing on
product development
Conﬁden'al
-‐
Cowboy
Ventures
2014
28

Closing Thoughts
•  A strong company value proposition is a pre-
requisite for seeking investment
•  Team, Market, Plan, and Traction (or some
proof you can rock it) are the four most
important things to investors when evaluating
an opportunity
Conﬁden'al
-‐
Cowboy
Ventures
2014
29

THANK YOU
Questions?
Conﬁden'al
-‐
Cowboy
Ventures
2014
30

MARKET SIZING
& COMPETITIVE LANDSCAPE& COMPETITIVE LANDSCAPE
Steph Palmeri, SoftTech VC / @stephpalmeri
TOTAL ACCESS Fundraising Series, Part I
April 8, 2014
Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistribute

Our Three Asses Rule
This
Presentation’s
Focus

Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistributeproprietary &
confidential
blackbox.vc

Big-Ass Market
* “Big enough” stress test
– Greater than $1B market opportunity
– Company, not feature
– How does your startup get to $100M in revenue?
– How does your startup get to $100M in revenue?
• 10% of $1B market v. 50% of $200M (unrealistic!)
* By raising capital, you commit to match return
expectations

Market Types
Existing
Market
Resegmented
Market
New
Market
better, faster,
cheaper
fundamental
shifts, niche
brave new
world
which one is you?

Market Analysis 101
* Problem definition:
– What are the underlying needs you solve?
* Identify your customers
– What do they look like?
– How are you helping them?
– How are you helping them?
– Are your users also your buyers? (who pays?!)
* Addressable Market = # Customers * LTV
– What is the relevant market?
– Your expected share? (be reasonable, its not 100%!!)
– Growth / overall market potential?

Top Down Market Sizing
1. Industry, analysts estimates,
market data, etc.
2. Broken down to appropriate
sub-segment by:
1. Product Category
Addressable Market
≠ Total Market Size
Total Apparel
Market (US)
Total Kid’s Apparel
1. Product Category
2. Geography
3. Vertical
4. Sales Channel
5. Customer
6. Etc…..
Total Address Market (topdown)
Your revenue if you
captured 100% of your
addressable market.
Total Kid’s Apparel
Market (US)
Total Online Kid’s
Apparel Market (US)

Bottom Up Approach
Identify & multiply the following:
# of potential customers x est. revenue per user per year
Total Addressable Market(bottom up)

Now Compare
Top Down
Addressable
Market
Bottom Up
Addressable
Market
V.
Market Market
…. are they reasonably close?

Market Sizing Tips
* Existing: Known customer + understood need
– Know entities make it ‘easier’, for you and investors
– Understand market nuances, don’t be careless
* New markets: New customer + new use case
* New markets: New customer + new use case
– Emerging macro trends
– Adoption rate assumptions
– Timing matters
creativity + basic algebra + educated guesses
= bullshit but shows us how you think about your space

Market Attractiveness
Size matters…
(but don’t overlook)
* Competition
* Competition
* Monetization potential
* Market Growth
* Market Share
* Timing

Competitive landscape

You’ll probably have a slide that
looks something like this…
Feature list YOU! Giant
Incumbent
Fledging
Competition
Not even in
your market
Feature
everyone has
Feature that
✓✓ ✓✓ ✓✓ ✓✓
Feature that
some of the
competition has
Unnecessary
feature your
competition cut
Feature you
think you have
Feature you
wish you had
✓✓
✓✓
✓✓
✓✓ ✓✓
✓✓
✓✓

… or this...
Fast
Your Logo
Here!
Others
Others
Others
Prepared Exclusively for Orrick’s TOTAL ACCESS, Do to redistributeproprietary &
confidential
blackbox.vc
Slow
Traditional Modern
Others
Others
Others
Others
Others
Others

… or more recently this...
Adjacent
Market Segment
Adjacent
Market Segment
Adjacent
Market Segment
Your
Logo
Here
Adjacent
Market Segment
Adjacent
Market Segment

but regardless…
explain your startup in the context
of the environment in which you
operate including those who you
operate including those who you
partner with and those who you
compete against and those
who keep you awake at night
proprietary &
confidential
blackbox.vc

overview
* Competitive Landscape
– Examine the macro business environment
– Review your competition (past, present, future)
– Benchmark yourself
– Benchmark yourself
* Competitive analysis
– The classic SWOT analysis
* Competitive advantage

Classic completive analysis
* Examine the macro business environment
– Economic + political trends
– Cultural + social shifts
– Technological innovation
– Regulations + legislation
– Regulations + legislation
* Know the industry ecosystem surrounding your startup
– Competitors (direct, indirect, potential entrants)
– Suppliers/Partners
– Substitutes
– Customers

Pop Quiz
Q: Is your industry one or more of the following:
a. Considered crowded?
b. Fairly complex?
c. Scary to investors?
c. Scary to investors?
A: Consider making an
ecosystem slide
Show investors
how much you
know (and they
don’t) about your
space… OWN IT!

Competitive analysis
* Comparisons you might put in a competitive grid:
– Products / feature set
– Customers
– Market share
You Them
Feature #1
Feature #2
– Distribution strategy
– Technology
– Pricing
– Resources  are they well funded?
Feature #2
Feature #3
Wow, your startup
takes all the boxes
on your arbitrary
grid!

SWOT Analysis –
Your Competitive Position
Strengths: why you kick ass
- Team
- Technology
- Scalability
- Execution
- Customer acquisition & retention
Weaknesses: why you don’t kick ass
- Team
- Lack of Technology
- Scalability issues
- Inability to execute
- Unreliable product/service
- Customer acquisition & retention
- Distribution
Opportunities: why you might kick ass
- Early mover
- Emerging segments
- New technology
- New distribution channel
- Changing tastes
- Etc.
- Unreliable product/service
- Poor distribution
Threats: why you might not kick ass
- Competitors w/ more $
- Emerging segments
- New technology
- New distribution channel
- Changing tastes
- Etc.

Competitive advantage
* Barriers to entry
* Create a long-term sustainable advantage
– Continuous learning & innovation
– Continuous learning & innovation
– Excellence and speed in execution
* Don’t obsess about others
– A little competition is healthy
– Keep an eye on competition but don’t loose focus on
what’s really important … the customer

VC’s perspective
What VC’s MeanWhat VC’s Say
Who will you compete with
tomorrow?
When does Facebook plan to do
this?
How are you different from the 15
other dating services I this week?
Who do you compete with
today?
tomorrow?
[Insert name here] just raised
$50M from these 10 firms, how
are you differentiated?
this?
Your competition has deep
pockets…will anyone be willing to fund
your next round?

How to reach Steph Palmeri:
w: www.softtechvc.com
b: www.stephpalmeri.com
t: @stephpalmeri

Niko Bonatsos
@bonatsos General Catalyst Partners

@bonatsos General Catalyst Partners

 You always face competition
◦ It gets worse over time.
◦ Copying is the best form of flattery.
 Why will your company break out?
 What is your real advantage? What is your real advantage?
◦ Is it a technology advantage?
◦ Unique insights about the market?
◦ Timing re: seizing regulatory changes?
◦ Unique growth model?
@bonatsos

 Seek for FREE PR
◦ Techcrunch et al need to report on something
◦ Recruiting
◦ Fundraising
◦ Early Adopters
 Facebook Mobile Ads, New channels (e.g. Snapchat) Facebook Mobile Ads, New channels (e.g. Snapchat)
◦ “Golden Time” -> Cheap
 NEVER pay for users/customers early on
◦ Spend that $$ improving your product/dating life
@bonatsos

 Invest in growth and strategic value
◦ Revenue and profit$ will follow in time (we hope)
◦ Leverage your strengths
 Don’t focus on breaking even
◦ Diminish profits and slow growth◦ Diminish profits and slow growth
 Set personal goals (be realistic)
◦ Funding requirements
◦ Exit expectations
◦ Time horizon
◦ Social life
@bonatsos

 Iterate all the time
 Every business is different
 Great product is “table-stakes” today
 Advisors & experts vs. customers & market
Startup = Growth (Paul Graham) Startup = Growth (Paul Graham)
@bonatsos

Fundraising Series (Part One): Building Your Story

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