The Basics of Venture Capital series
Access to capital is the top issue facing Central Europe’s young technology champions. Just under half of the Deloitte & Touche Fast50 winners in the region cited raising capital as their ‘key concern’ and 25% plan to raise in excess of 5m USD.
First Tuesday addressed this issue in Hungary with the Basics of Venture Capital presentation series. Created by Steven Kopits former MD, T-Venture Hungary, the series provides entrepreneurs a practical education on the fundamentals of starting a business, raising capital and planning for success.
MOTEPPCABE: Getting the business plan right
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
Business plans and information memoranda often fail to address critical issues regarding the investment, and often considerable effort is invested in the wrong activities. Many of these problems can be overcome with MOTEPPCABE analysis:
MO: Market Opportunity
TE: Team
PP: Profit Potential
CA: Comparative Advantage
BE: Barriers to Entry
Download this presentation (PowerPoint – 64K)
Thoughts about Communication and Distribution
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
Most of the companies we see tend to be technology-driven companies (about 90% of the time, i.e., that means you). Typically, the entrepreneur starts with a great technology, and then tries to figure out how to sell it. (The other alternative is to take a customer, and try to figure out what they want. Much rarer, but much easier.) Because young entrepreneurs tend to focus on technologies, they are often at a loss regarding advertising, marketing, and distribution. That is, how do I get my fantastic innovation into the marketplace? How big should our advertising budget be? Where should we advertise? What’s the importance of distribution? What’s the difference between advertising and marketing?
Download this presentation (PowerPoint – 128K)
Market Analysis: From Research to Business Model
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
Generally, technology companies tend to be technology-driven, and not customer-driven. As a result, we often see solutions in search of a problem, and a lack of understanding of the customer and competitor environment. So, our presentation will address the basics of market and competitor analysis and how we use this information to create a strategy and a business model. We’ll address issues like the role of questionnaires and surveys; sales conversion cycles and customer decision-making factors; managerial vs structural competitive advantage; time to market; distribution channels; ‘first-mover’ advantage; the importance of detailed letters of intent from potential customers; ‘must have’ vs ‘nice-to-have’ businesses; credibility and security issues; and how market knowledge is used to create comparative advantage and barriers to entry. All this from market research. And that’s the point: good market research is 90% of a durable strategy and business plan.
Download this presentation (PowerPoint – 208K)
The Politics of Valuation
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
We use more than a dozen different measures to value both a company’s prospects and the investor’s share of the company. These include measures like price-to-book, and discounted cash flow, which are reasonably familiar. Then there are other methods which I call, for example,?”sweq”, “swill”, “golden handcuffs”, and “Turkish bazaar”. And we use all of these in valuation negotiations, although you will rarely find them in a textbook. We’ll also cover the basis of funds’ IRR expectations: Why do funds require an IRR of 35-50% to finance an early stage company? We address that issue. This presentation is not intended to be a technical primer in classical valuation methods like discounted cash flow. Instead, it is intended to provide some rules of thumb for the entrepreneur and some insight into?the valuation techniques and negotiating tactics that will be encountered when dealing with a VC fund.
Download this presentation (PowerPoint – 272K)
Credibility
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
Entrepreneurs often ask the question: “Why did those other guys get financing, and we didn’t?” The answer: Credibility. The venture capitalists believed the other guy’s pitch. Was the other guy’s business plan better? Maybe. But maybe not. But you can bet that they better understood how venture capitalists make an investment decision, including factors other than the business plan. So if you want to get capital, you need to address all the factors in the decision. My presentation will talk about these factors, and how to manage them.
Download this presentation (PowerPoint – 336K)
Term Sheets Basics
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
Term sheets (which represent the main agreed deal points between the investor and the entrepreneur) fill the entrepreneur with either dread or dismay.It sounds terribly technical, and, well–legal. It’s usually not so bad, only a few pages, and it can be written in comprehensible English. On the other hand, term sheets deal with two key issues: value and control–control over management decisions and management itself. Term sheets can make a mockery of nominal valuations and even majority control. So they are important, and every entrepreneur should have a good understanding of the issues a term sheet will address before they sit down with a VC>
.
Download this presentation (PowerPoint – 224K)
Surviving Due Diligence
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
Like ‘term sheet’, ‘due diligence’ is one of the ominous expressions of the venture capital world. It means someone is going to examine you and your company in detail, poke into your books and check your background. In this presentation, we address the purpose of due diligence, who is going to examine what and why, and what steps you should take today to make sure you can pass due diligence two years from now. We also talk about the relationship between due diligence and those equally ominous ‘representations and warranties’ that you will be making as part of your capital raising contract.
Download this presentation (PowerPoint – 192K)
Investor Presentation Template
Presented by Steven Kopits
Former MD T-Venture Hungary
skopits (at) hu (dot) inter (dot) net
The Presentation Template is the summary document of all the information below. In essence, the other presentations tell you how to fill out–or think about filling out–this template. Entrepreneurs often write detailed business plans, sometimes 50-70 pages in length. In general, it is a waste of time, for two reasons. First, a VC fund manager never reads more than a couple of pages. Second, the fund raising process is also typically so protracted that you have to keep updating the document. The bigger the document, the more work the updating. The attached power point presentation is a 19 page template that you have to fill out if you want to convince a nuts-and-bolts vc like me. The good news: there’s hardly any writing. The bad news: it requires massive amounts of thinking and analysis behind those few words. There’s also some other good news: you don’t have to fill in the punchline (summary box) on each page. I’ve already done that. All you have to do is make sure that the statements above each summary box support the pre-ordained conclusion.
Download this presentation (PowerPoint – 112K)
