Altaf Khan University of Management & Technology

1. raising venture capital for developing IT products Altaf Khan University of Management & Technology

2. ? Would you persuade, speak of interest, not of reason. Benjamin Franklin.

3. Assumptions • Software product or Internet-based business • Pre-seed, seed, or start-up stage

4. Sources of Capital • Own funds • Friends and family • Angel investors • Local • Overseas • Venture capital companies • Banks • Other • PSEB ??? • International organizations

5. GICT(IFC - World Bank)Global Information & Communication Technology Dept • Stage-independent investments • Typical investment $2-10M • Value-added services: • Participation on boards of directors • Co-investors • Introductions to strategic partners • Follow-on financings • Business plans can be submitted online

6. GICT Investment Examples • Provide IT services to developing countries, such as locally based systems integrators and SW developers • Deliver SW solutions or new technologies from a base in the emerging markets • Deliver ITES, such as offshore SW development and BPO, to global markets from emerging markets • Provide solutions for e-governance applications • Design and manufacture IT components & products

7. to get what you want, you have to know what the investor wants

8. The investor wants … … to assist the entrepreneurs in transforming their great ideas into world-class businesses …

9. So that the investor … … can make lots of money

10. Chances of making lots of money increase if the proposed business is based on … • An innovative idea • Unbounded target market • Entry barriers • A reasonable execution strategy • A persistent, energetic, smart team Moreover, the investor also requires …

11. an exit strategy

12. Exit Strategy • IPO • Merger/Acquisition

13. to get the investment, you have to outline a reasonable scenario in which the investor ends up making a lot of money

14. to get the investment, you have to outline a reasonable scenario in which the investor ends up making a lot of money

15. Write a Business Plan

16. One Page Business Plan

17. onepagebusinessplan.com

18. Conventional Business Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis

19. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis A concise summary of the entire business plan

20. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis Background info about the company, including capital structure

21. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis What will the company provide its customers? How will customers benefit from the company's product/ services compared to what they currently use/have?

22. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis How many potential customers benefit from the company's product/ services compared to what they currently use/ have? Growth rate? Marketing strategy?

23. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis Who are the key competitors? In what areas are you stronger/weaker than them? Are there barriers to entry that can stop others enter the market?

24. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis How will the business plan be implemented? Strategies? Timeline? Budget? Tactics? Alliances?

25. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis Who are the people in the company? What experience, track record, expertise do they bring?

26. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis How much does the company require to implement the plan? How does the company value itself to investors? Expected burn-rate?

27. Contents of the Biz Plan Write the biz plan that includes: • Executive summary • Company description • Product/service • Market analysis • Competitive analysis • Execution of biz plan • Management team • Capital requirements • Financial analysis Financial projections, including cash-flow analysis

28. ? What’s your current valuationHow much are you seeking

29. Company Valuation • An art; not a science • May vary drastically from one investor to another; do shop around

30. What do investors look for in a team? • Do they share a common vision, values? • Are they flexible about their roles? • Are they smart, energetic, persistent? • Do they work with a sense of urgency? • Are they worthy of my trust?

31. how to build trust?

32. Be very open with the investor about the risks involved and your weaknesses Try to develop strategies for overcoming/minimizing each

33. You are developing something that will come to market 1-5 years down the road. During that time: • The targeted market may disappear • Someone may come up with the same product, first!

34. Things to look for in investors • Their track record • Their contacts • Their people

35. Mentor-Investors • Individual investors who bring added value to your venture due to their: • Inside knowledge of the target industry • Industry contacts • They can: • Lower your risk • Reduce your time-to-market

36. Improving the Odds • Actively seek value-adding partners & affiliates • Build an unfair advantage • Look for smart capital, mentor-investors • Leverage Pakistani expatriates • Focus on the customer • Outsource non-core tasks • Successful marketing is critical • Stay focused on your business objective • Be flexible; change your biz plan, if required • Create a high-energy organizational culture • Form a core team which is: • Homogeneous in terms of the vision • Heterogeneous in terms of skills and experiences

37. network tirelessly

38. be business-driven, not technology-driven

39. investors fund people, not ideas!

40. Reward excellent failuresPunish mediocre successesPhil Daniels, Sydney exec

41. ! Would you persuade, speak of interest, not of reason. Benjamin Franklin.