Augusto Coppola co-founder & CEO ERIS4

Starting Up! A Short Introduction to Business Plan Concepts for Seed Companies Augusto Coppola co-founder & CEO ERIS4

1. Presentation Focus I used to think that the problem with American business was a lack of focus. Now I realize that it’s a lack of courage (J. Foxworthy)

Italian software seed companies • Inception team based on students • You need a stronger team! • International company able to potentially attract professional private investors • Say, €50M in annual revenues within 5 years

Inception team based on Italian students? ah! ah! ah! I apologize if the truth offended you (R. Buttler, Gone with the Wind) All the best things that I did at Apple came from (a) not having money and (b) not having done it before, ever. Every single thing that we came out with that was really great, I'd never once done that thing in my life. (S. Wozniak) in 1996 Larry and Sergey, now Stanford computer science grad students, begin collaborating on a search engine called ... Yahoo began in 1994 as a collection of links maintained by two Stanford grad students... PayPal was founded in December 1998 by a college grad and a business angel... Mark Zuckerberg is 24 and is the youngest self-made billionaire ever... In 2005 Blake Ross took a leave from Stanford University to start up Firefox with his friend... RIM was founded by two undergraduates at the University of Waterloo...

2. The Need for a Plan The nicest thing about not planning is that failure comes as a complete surprise and is not preceded by a period of worry and depression (J. Preston)

Happy families are all alike; every unhappy family is unhappy in its own way (L. Tolstoj, Anna Karenina) I have been thwarted by luck and chance, those wreckers of all but the best laid plans (Lord Voldemort, Harry Potter and the Deathly Hollows) Plan is nothing. Planning is everything (D. Eisenhower)

3. The Most Fundamental Concept A great industrial nation is controlled by its system of credit (W. Wilson)

NEVER ENOUGH MONEY and I’m speaking about cash

4. Vision, Mission & Team Nothing will ever be attempted if all possible objections must be first overcome (S. Johnson)

Microsoft Announces Vision and Strategy to Accelerate Virtualization Adoption (http://www.microsoft.com, press release Jan. 21, 2008) A lazy lawyer and two smart guys: - IBM counts the carbon copies - You fools! On-line search engines are commodities Vision Market Size Company Value You need to relentlessly gather evidences your vision is right

A mission is a usually short statement describing what you do the world's information Google's mission is to organize the world's information and make it universally accessible and useful (http://www.google.com/corporate/) organize useful universally accessible A good mission is: - Focused but not too narrow - Clear and short You need to relentlessly gather evidences your mission is addressing a market need

Questions asked by investors about the team • Where are the founders from? • What have they accomplished in the past? • What is their reputation? • Whom do they know? • Who else needs to be on the team? • Are they prepared to recruit high-quality people? • How realistic are they about the venture chances? • How will they respond to adversity? • Do they have the mettle to make the inevitable hard choices that have to be made? • How committed are they to this venture? • What are their motivations? You need to work from day 1 on a strategy to make your team stronger!

Good teams usually have 3 – 4 people - R&D - Administration (Finance) - Marketing & Sales (Product Management) Team roles should be clearly and explicitly agreed - Team dynamics should be known - Investors and customers are critical factors - What happen if ...? should be deeply discussed There can be no friendship without confidence, and no confidence without integrity (S. Johnson)

No Lobby, No Party! Advisors and influencers should be on board as soon as possible Advisor/influencer motivations and reputation should be ruthless scrutinized by the founders Founders have to clearly define what they expect from each single advisor/influencer Possibly pay success fees only (and in cash)

5. Market & Competitive Landscape If you want to make enemies, try to change something (W. Wilson)

I often went fishing up in Maine in the summer. Now, I am very fond of strawberries and cream, but I have found that, for some strange reason, fishes prefer worms (D. Carnegie) Use quantitative analysis to size your market Market structure has to be carefully considered and described to support your assumptions • Average expenditure for customer type and location • How such an expenditure is structured • Market share, revenue and profit of largest players • Average profit in the market • Average company size in the market • M&A dynamics • ... Use market evidences to support your size estimation

Pay attention to your enemies, for they are the first to discover your mistakes (Antistene) You need to know almost everything about your competitors Before you criticize a man, walk a mile in his shoes. That way, when you do criticize him, you’ll be a mile away and have his shoes (S. Wright) You need to carefully manage your Intellectual Property

Stupidest (and quite classical) things you can write • The market size is $10B. We have an unparalleled technology and an incredible business proposition. With a very conservative forecast we can target a 5% market share, then we will get $500M • We have no competition

6. Business and Financial Model However beautiful the strategy, you should occasionally look at the results (W. Churchill)

How much does it cost (in time and resources) to acquire a customer? How much does it cost to support a customer? How easy is it to retain a customer? How will the product/service be priced?

You need to know the basics A seed plan needs to be extremely detailed about the first 12 months Beware of your hidden, greed and stupid partner (guess who?) Payment terms and schedule must be realistic Warning: dates in the calendar are closer than they appear

7. Understanding Investors We believe that according the name "investors" to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a "romantic” (W. Buffett)

What’s easier to understand? Please bring your vehicle to a speed not exceeding zero miles per hour at this coordinate in space and time as there is other vehicular traffic moving in a direction perpendicular to your own and may intersect with your vehicle’s current trajectory STOP Keep it simple: - Investors are overwhelmed by business plans - You need to catch their attention in a very short time - Don’t assume they understand your technology - Don’t assume they know your business domain

Business Angels Wealthy people, with a business/technology background and good business relations, ready to risk 50k-500k in the early stage of your venture usually for a couple of years and aiming at 2-4 RoI Venture Capitalists Companies able to collect funds from financial institutions and very wealthy people in order to invest in potentially huge RoI (>10) ventures. Usually they invest 500k-30M on a 3-5 years plan Industrial Partners Companies interested in funding technologies that have synergies with the company core business

Investors (VCs, in particular) might have preferences - Geographic preferences - Sector preferences - Stage preferences - Investment size preferences Do not waste your time with wrong investors Investors needs to rapidly know the exit strategy Show them the money. QUICKLY! Make them dreaming!

If you think that finding an investor ready to listen to you is painful, you should try to negotiate with an investor! Term sheet: everything is negotiable! Ask for an expert You need to be ready to dilute. The earlier phase, the greater dilution Pre-money evaluation and liquidation preferences goes hand in hand Remember the only way to happily close a negotiation is to be ready not to close it

Don’t give up, you know it’s never been easy (P. Gabriel, Don’t Give Up) This ‘telephone’ has too many shortcomings to be seriously considered as a mean of communications (Western Union memo, 1876) We don’t like their sound. Groups of guitars are on the way out (Decca Records rejecting the Beatles, 1962) There is no reason for individuals to have a computer at their home (K. Olsen, president of Digital Equipment Corp, 1977)

8. Being Ready to Talk (Packaging) Wise men talk because they have something to say. Fools talk because they have to say something (Plato)

One minute (i.e. 60 seconds) elevator pitch (approx 120/150 words) • Seven minutes (i.e. 420 seconds) short PowerPoint presentation (approx 6 slides) • Business Plan Executive Summary (max 2 pages/1000 words) • Business Plan (max 20/25 pages or 50/60 slides) • Financial Projections • Demo Environment • Non Disclosure Agreement

Elevator pitch for a seed company (a 60 seconds/120 words example): I am Jena Plinsky the co-founder and CTO of QQ7. QQ7 is developing a patentable software for meeting the need to discover in real-time web page updates and correlate them with the information coming from the financial market By correlating virtually any web update with the information flowing on the main financial networks, we can reduce the investment risk for individual brokers and institutions up to 75%. We believe we are addressing a market worthing more than $3.7B growing at CAGR exceeding 22% We are going to release the alfa version of our technology and are seeking 500k€ to implement a one year plan to release the beta version, strengthen our team, find and support our first beta tester and get ready for the series A

9. Resources (a Starting Point) Look and you will find it as what is unsought will go undetected (Sophocles)

Early Stage Venture Capitals Books & Movies http://www.dpixel.it Founders at Work http://www.believing.it Rule for Revolutionaries http://www.innogest.it What they don’t teach you at Harvard Business School http://www.garage.com http://www.earlybird.com Saving Capitalism from Capitalists http://www.italianangels.net StartUp.com (Artisan Entertainment) http://www.360capitalpartners.com Miscellaneous http://www.techcrunch.com http://www.1generation.net http://www.redherring.com http://www.tornado-insider.com http://www.siliconvalleyitalia.com http://en.wikipedia.org/wiki/Mark_Zuckerberg

10. Pubblicità La pubblicità è l’anima del commercio (H. Ford)

TO WHOM MAY BE INTERESTED: A seminar focused on Product Strategy will be held on January 9th 2009 at 2PM (during professor Atzeni course)

Premio di laurea Giorgio Santini - 9.000€ offerti da ERIS4, Active Partners, Sytel Reply - Cerimonia di premiazione: 19 dicembre 2008 - Attendiamo le candidature per l’edizione 2009 ERIS4 offre opportunità per lauree, stage e tirocinii - Product Strategy - Quality Engineering - Software Development

No one knows for sure what the future will bring. If you would risk, create and lead, we would like to meet you. Come join us as we continue to change the way technology companies do business. You might think you have to live on the Silicon Valley to be able to participate in a company on the leading edge of high technology, especially if you are hoping for the kind of professional growth shown by the hottest start-ups. That is not the case. ERIS4 has its offices in the centre of Rome, Italy, and we strongly believe that no one else can offer the same exciting environment we can offer. Company culture is based on strong professional know how, ethical behaviors, personal accountability and freedom to perform. Our team has a deep understanding of technical and business processes in our industry. The ability to fluently speak Italian and English are a must. ERIS4 offers some of the best salary packages in the industry. ERIS4 is an equal opportunity employer

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Cominciate col fare ciò che è necessario, poi ciò che potete. E all'improvviso vi sorprenderete a fare l'impossibile (San Francesco) The only real security that a man can have in this world is a reserve of knowledge, experience and ability (H. Ford) Domande?

Augusto Coppola co-founder & CEO ERIS4