"Transforming your idea into a business plan" Kim Fisher, Managing Director,

1. Business Plan Basics "Transforming your idea into a business plan" Kim Fisher, Managing Director, The Women's Technology Center November 12, 2001

2. AudioBasket Fund Raising History • Four rounds in one plus years, over $25 Million total • July, 1999: Raised $500,000 from 30 individuals • October, 1999: Raised $4,500,000 from VC’s • May, 2000: Raised $2,000,000 bridge from VC’s • October, 2000: Raised $21,000,000 From VC’s, Time Warner, Panasonic, and Deutsche Telekom

3. Lessons Learned Lessons Learned • Don’t expect to do much else • Be persistent • Listen, but not to everyone • Have a President and / or a great management team • Have a CFO or someone who can crunch out serious due diligence • Don’t count on anything– you have nothing until the money is in the bank • Leverage contacts you don’t know you have • Start at least 9 months before you need the financing • Speak at venture forums • Know your financing market

4. Lessons for Today’s Market • Be sure you have a business • Bootstrap or start with friends and family • Work with customers • Get experienced people on your team • If you want VC, have: • A big company idea • Customers • Proof that your technology works • A clear business model

5. Why do you need a written plan? • To ascertain the viability of your business • To plan and strategize • To ensure all founders are on the same page • As a retrospective tool • As a document to obtain funding today “It is better to write an objective business plan and not get the financing because the business is a bad risk than to have hypnotized oneself into thinking the risk is less” E&Y

6. Most important points • What is the problem you are solving? • How does your solution solve it? • How does your solution solve it better than other solutions? • How does this create financial value and make you (and your investors) money?

7. Length of Plan “Not that the story need be long but it takes a long while to make it short” Thoreau “I didn’t have time to write you a short letter, so I wrote you a long one” Mark Twain

8. Business Plan Contents • Executive Summary: 2-3 • Company Description: 1 • Products and Services: 2-3 • Marketing: 5 • Technology: 1-2 • Operational Plan: 1 • Management and Organization: 1-2 • Funding and use of Proceeds: 1 • Financials: Current and Projections

9. Company Description • Vision • Problem you are solving • Relevant company history • Markets you will serve (industry as well as geography) • Where the company is located • Stage of business

10. Products and Services Outline: • What is the product? • Benefits to users • How it works- step through • Product line extensions Tips: • Make this section meaningful to both laypeople and experts. • Avoid technical jargon. • Include photographs or diagrams where possible.

11. Marketing • Market Overview • Customer Targets • Market Size and Growth • Competition • Competitive Advantages/Barriers to Entry • Positioning • Pricing • Revenue Model • Marketing and Sales Plan

12. Market Overview • Why is this a good opportunity now? • New technology • Customer trends • New regulations • What is the current status of the market?

13. Customer Targets • Define whole market • Define the best niche to target initially • Work with customers to develop your concept and product • Remember the business plan is a “vision” document

14. Market Size and Growth • Define market size and growth– triangulation method: • Bottom-up • Top-down • Comparables • Or Bottom-up year 1, Top-down 2-5 • Top down: plan to capture at least 20% of market by year 4

15. Competition Include: • Direct Competitors • Substitutes • Potential Entrants Tips: • Never say there is no competition • Take the competition seriously

16. Competitive Advantages / Barriers to Entry • Patents pending • Partnerships formed • Key customer contacts • Industry expert management team • Product superiority • First to market • Cost advantages– scale manufacturing, access to low-cost resources • Switching Costs

17. Positioning • Low cost strategy or • Differentiation strategy • Open standards • More robust • More reliable • More targeted to chosen market • Superior product

18. Revenue Model • How will you make money? • Multiple revenue streams vs. focus • Product vs. consulting services • Don’t forget maintenance, upgrades, etc. • Revenue projections– be reasonable

19. Pricing What you will charge and why. • Why should be market-based (considering what customers will pay and what competitors charge) • Pricing should eventually cover your costs. • Include initial market entry pricing strategy.

20. Marketing and Sales Plan • How will you get your product to market? • Who are key potential customers? • How will you attract them? • Direct Sales • Distribution Partners • Advertising • Trade Shows • What will it cost? Initially and Ongoing

21. Technology • Brief description of main components of product, underlying technology, development environments, and functionality: • back-end or database • website • server side and client side components • hardware • Patents and patents pending • Talk about team if stellar • If not a technology product, you can skip this section.

22. Operations • Customer and tech support • Outsource plan or building in house team • QA testing • Outsource plan or building in house team • Documentation • Financial systems, integration with rest of company's systems Investors will just be happy to see you have these!

23. Management Tips: • Include key managers, advisory board members • Include highlights of RELEVANT experience. • Don’t talk too much about school. • Show the founders’ commitment. • Make yourselves money-grubbing opportunists. • Include any holes you are looking to fill. • Include key managers who will come on board once you are funded. • Have up-to-date resumes available. Pet peeves: • Combined years of experience. • Management team as a key differentiator when they are not.

24. Funding and Use of Proceeds Show that you will spend money to make money! Include: • Funding required • Use of proceeds • Additional funding requirements Tips: • Do not include a valuation • Do not include the date when you will close your financing

25. Executive Summary • Write this last! • Make it a stand-alone document • Include in the first paragraph: • The Problem and its’ Magnitude • Your Solution • The Superiority of Your Solution

26. Executive Summary: Outline • Opportunity or “The Pain” • Service or Solution • Revenue Model • Competitive Advantages and Barriers to Entry • Management (if this is an advantage) • Achievements or Milestones met • Financial Summary: Annual revenue, net income, break-even. • Funding requirements

27. Executive Summary: Making it Compelling • Keep it short: 2-3 pages • Highlight most recent accomplishments, milestones met: customer interest, pilot customers, funds raised, funds committed, revenue, prototype acceptance, etc. • Include industry market research statistics and what they mean for your business. • Clearly state how you will make money and how your investors will make money. • Have all top managers, founders, advisors, etc. read and provide feedback on the exec. summary.

28. Last tips • Include your contact info! • Spelll chek! • Keep it clear and simple—most investor readers are not technologists. They may not even have an intimate knowledge of your industry. Have laypeople read and try and understand your plan before submitting it to investors. • Don’t use business planning software • Revise the plan no more than once a quarter in the early stages and twice a year after your A round financing unless you have a major strategic shift. • Create a versioning system to keep track of minor, more frequent updates—new hires, new customers, new competitive info. Investors will expect an up-to-date plan. • Keep good track of who has the plan, and what version of it they have.

29. Resources Good books on business planning: • The Ernst & Young Business Plan Guide • Analysis for Marketing Planning, Donald Lehmann and Russ Winer • Model Business Plans for Product Businesses, William Cohen (sample business plans) • Crossing the Chasm, Geoffrey Moore (and all his other books too) • Starting a High-Tech Company, Michael Baird (great standard financial ratios for the SW industry) Good WebSites: • www.bplans.com (sample business plans) • www.businessplans.org (sample plans, links to hundreds of sites for getting started) • http://www.bplans.com/qa/ (good on-line advice: ask the experts) • www.sba.gov (great resources and links for small and new business) • www.edgar.com (financials for public companies) • www.fwe.org (good resources for female entrepreneurs) • www.entreworld.com (awesome website– tons of info. on bus. Plans) • www.allbusiness.com • www.springboard2000.org (learning center)

30. Resources Good resources: Incubators and Business Accelerators: • The Women’s Technology Cluster, San Francisco: www.wtc-sf.org, or e-mail: info@wtc-sf.org • Panasonic Digital Concept Center, San Francisco: www.vc.panasonic.com • The San Jose Software Business Cluster, San Jose: www.sjsbc.org • Communications Technology Cluster, Oakland: www.ctcluster.com Consultants: • Kim Marinucci, Winning Pitch, business plan presentations and general presentation skills: kim@winningpitch.com • Kim Fisher, Galima Consulting, business plan creation, review, and fund raising strategy: galima_consulting@yahoo.com • Mariesa Baiz, Baiz Consulting, Marketing materials and Marketing communications: marbaiz@yahoo.com 

31. Thank You! Kim Fisher, Managing Director Women’s Technology Cluster www.wtc-sf.org Kim@wtc-sf.org 415-970-5088