Thanks to the 25 people that attended Dave Thomas’ seminar on market research and product marketing. Hope you enjoyed it! And big thanks to Rob, Michelle, Georgia, Tessa, and everyone at VIATeC for hosting us in Tectoria.

Dave gave a similar presentation in Vancouver earlier this year with Claire Booth. If you want to watch it again, or watch Claire’s segment, the video is online here.

To access Dave’s slides, you can download them here.

Our next Victoria seminar is on November 2: Magnetic Startups: Build It Right & Money Will Come with Roger Killen. Register.

And, don’t forget to join us for our regional competition, deadline October 19.

BCIC-New Ventures is happy to announce we’ll be taking our seminar series around the province over the next few months with stops in Victoria, Kelowna, or Castlegar.

The first seminar is Assessing the Opportunity with Ralph Turfus next Monday, July 11th in Victoria.

Regional Seminar Series:

July 11th – Victoria: Assessing the Opportunity with Ralph Turfus
July 21st – Kelowna: Media Training for Start-ups with Elisha McCallum
August 25th – Kelowna: The Business Case with Mike Volker
September 15th – Victoria: Market Research and Product Marketing with Dave Thomas
September 27th -  Castlegar: Market Research and Product Marketing with Dave Thomas – Registration opening soon.

Join BCIC-New Ventures for our second annual golf tournament on July 19th!

This year we’re golfing Kings Links by the Sea, a traditional par 72 links style course with spectacular views of the surrounding Coastal Mountains.

We’ll be playing Texas Scramble rules. Create your own foursome, or let us put you in a group. Open to all levels, this is a great chance to network with the New Ventures community in a fun setting.

Your golf tournament fee includes a round of golf, dinner, and prizes.

Early Bird Registration by June 30: $90
Regular Registration by July 13: $105

Tee-offs start around 12:30pm. You will be notified of your tee-time in advance.

See you on the links!

REGISTER

Join us this week for the final seminar in our 2011 seminar series, Start at the End: Exit Strategy with Basil Peters of Fundamental Technologies II and author of Early Exits. His presentation begins at 6pm tonight and it will be live blogged and tweeted for those unable to attend (and future reference for those who do!).

Basil says that the best strategy for a startup is an exit strategy.

Entrepreneurs have complex motivations, he observes—why do you do what you do? Investors, on the other hand, are simple minded: they want capital gains. They’re also a pain in the ass, he admits (he is one himself). They demand documentation, board meetings, and of course their money back… which means you need to have an exit strategy.

Exits are Basil’s favourite part of the entrepreneurial life, as they’re so fulfilling and rewarding. But they’re also complex and confusing, filled with myths and misperceptions that are “dangerously wrong” to the entrepreneur, plus a few “dirty secrets.”

IPOS AREN’T THE WAY

Two ways to sell your company: an IPO, or an M&A. (Initial public offering, merger and acquisition transaction.) These days, there are very few IPOs since 2000. M&A has become the prominent way of exiting. The media distorts M&A exits, Basil says, by focusing on multi-billion dollar deals. Ironically though, these don’t work out for the buy—think YouTube (Google), Skype (Microsoft), and Flip video cameras (Cisco). Slowly, corporate America is figuring this out. So what does that mean for you, the smalltime entrepreneur? It means smaller M&As are ripe for the picking—small and fast exits that slip under the radar but still equate to big profits and successes for you.

SMALLER IS BETTER

The median price of exits is below $15 million. Why are there so many smaller transactions occurring? Because big companies aren’t good at new ideas or startups. They suck at building new sub-businesses. But they excel at growing companies that are already established and sizeable, and make them even bigger. They want companies under $100 million is out of the “sweet spot” to buy—they like companies worth $20 million. It’s simpler to acquire and easier to profit from.

In fact, many big companies are spending more on M&A and internal R&D. Some companies like Google prefer companies “pre-revenue”—startups with less than 20 people, worth less than $20 million, generating as little as NO revenue.

Cisco, Google, Microsoft, Apple, Oracle, and Intel all have between $18 billion and $40 billion in cash. This isn’t a good thing—cash doesn’t grow. Shareholders pressure these companies constantly to put this money to work. How? All-cash M&A of small innovative satrtups.

But it’s not just big companies snapping up the tiny fish. Medium sized companies are also aggressive buyers, especially public ones. Even many wealthy individuals not ready to retire are now eyeing up these startups, and grouping up to buy them. In fact, there is so much demand so little supply in this space that there can be bidding wars.

WHAT WORKS TODAY

1. Small companies innovate, bootstrap.

2. Angels and friends and family finance.

3. Big companies buy them.

4. Buyers grow the business from there.

How does an entrepreneur get to stage three? Prove your business model. It’s as simple as a spreadsheet that shows real results for basic metrics such as gross margin per customer, cost of customer acquisition, etc. Here’s the kicker—you do not have to be profitable!

Basil goes as far as today this is the optimum time: get out while you have momentum, while no major glitches are occurring, before you peak and then decline. Sieze the opportunity, carpé diem. Don’t let human nature “defeat” you—AKA let your ego overtake sensibility. If in doubt, look to sell before you think the prime time is. Don’t forget, the selling process can take six to eighteen months.

THE INTERNET SEA CHANGE

The internet has accelerated everything that we do. The startup lifecycle is no exception. An entire company can be built in a weekend (this has become almost a sport amongst entrepreneurs now). A true example is of a company being built in literally one day in London and it was sold in just 10 days over eBay. Nano-sized website-based are sold all the time on Flippa.com, too, for sums in the tens of thousands (or even hundreds!).

Other examples: Flickr sold for $30 million after 1.5 years. Delicious sold for $30 million in 2 yrs. Club Penguin sold for $350 million 2 yrs. YouTube sold for $1.6 billion at 2 yrs old. AdMob sold for $750 million at 3.5 yrs old. Mint sold for $170 million at 3 yrs old. Playfish sold for $275 million for at 2 yrs.

RAISING CAPITAL. FROM WHO?

Financing used to be much more necessary and much more tedious. Companies cost millions of dollars to build, no matter the kind. Now, you can use your own resources largely. Bootstrapping, Basil says, is the best way to run your company—and this is coming from an angel investor. Capital efficiency is the new name of the game.

However, not all companies can be bootstrapped. Basil asked the audience: who is planning to raise capital from VCs? Who from angels? Who will boostrap? Fascinatingly, no one plans to use VCs, while about a quarter plan to use angels, and roughly half intend to bootstrap—much different than even 5 years ago, where VCs still dominated.

VCs invest about $20 billion per year in America. Angels also invest roughly $20 billion. But friends and families invest five times more than either!

While raising capital still is and probably always will be difficult, there is a surplus of capital nonetheless floating about.

Entrepreneurial DNA is different than Investor DNA. For this reason Basil advises entrepreneurs to create an exit strategy before financing their company. You must understand that different investors are compatible with different types of exit strategies, so select investors whose DNA mingles well with that of you and your exit plan. An investor vehemently opposed to the entrepreneur’s exit strategy can be a severely detrimental conflict down the road.

Ultimately, the exit strategy is just another business process. And it can be simple. In its most basic form, “Our exit strategy is to sell our company in X years for approximately Y million dollars.” THis can  be expanded on, maybe to half a page, but it doesn’t have to be. This concrete clarity works wonders even as a single sentences. Make sure you have investors and partners and shareholders to sign this exit strategy and formally check its alignment annually (if possible, have everyone re-sign it).

SUMMARY

1. Most acquisitions are under $15 million.

2. Modern companies require minimal capital.

3. Bootstrap your company if you can; if not, use friends and family.

4. Angels before VCs.

5. Optimum exit strategy: target your exit for under $30 million.

6. Start at the end!

QUESTIONS

Q: How can you be so general about the $30 million exit?

A. We’re working with statistics here, the median of M&A transactions etc. It’s not an absolute fact that every exit should be this size. I am generalizing in a huge way but the reality is that most acquisitions are this small or much smaller, so my advice to plan for something within that range.

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Q: What about Apple and Microsoft? Did they have exit strategies?

A: Their exit strategy was to file an IPO, raise massive capital, and scale.

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Q: Can I lower my price to sell my company faster?

A: It depends on a great number of factors. The problem with selling as fast as possible can create problems that price reductions simply cannot speed up. Due diligence must be done. Wealthy individuals can close fastest, private corporations somewhat fast, and public companies very slow.

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Q:  Are “weekenders” really selling a company or just an idea?

A: They’re not selling ideas. Ideas are nearly impossible to sell. Even weekenders must prove their business model with fundamental metrics.

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Q: If my company isn’t approached by buyers, how do I get on their radar?

A: If buyers come knocking on your door, it’s usually bad news for the sellers. Why? These guys typically have their performance rated by how little they buy your company for. They come to negotiate a low price with you before anyone else knows you exist. They’re professional and sophisticated at this game and not your ideal buyer.

The truth is that most of the time sellers must reach out to potential buyers. And it’s a good idea to have at least three buyers bidding on you.

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Q: When looking for a buyer, do I look for a buyer within my industry?

A: It’s all about strategic fit. You’ll more likely find a willing inquirer within your industry, but regardless of industry, make sure they have a strong balance sheet and an history of acquiring smaller companies.

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Q: Does having debt change my exit strategy?

A: Warren Buffet once said “There’s nothing inherently good or bad about debt.” Having some debt won’t change much for the buyer in most circumstances.

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Q: What are deal breakers when it comes to exiting?

A: CEO makes the mistake of trying to exit it himself without experience. Entrepreneurs should seek outside professional help. Deals also fall apart on represenations and warranties a lot—more than price.

Have an exit team including the CEO, an experienced attorney, and an M&A expert. Use the latter to actually sell the company, not the attorney or CEO.

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That’s it!

Join us this week for the final seminar in our 2011 seminar series, Start at the End: Exit Strategy with Basil Peters of Fundamental Technologies II and author of Early Exits. Note that our final seminar is this Tuesday, June 7th (not our usual Thursdays).

Register online now and head on over to the SFU Segal Graduate School of Business to network starting at 5:30pm and then grab a seat for the 6:00pm seminar start.

If you’re registered in the 2011 Competition, the seminar series is included but these events are also open to the public. The cost is $20 for each individual seminar or $100 for the series. Students with valid ID can attend for free.

Presented by David Shore of local investment bank Stirling Mercantile, this week’s seminar is titled “Perfecting Your Pitch.”

David will talk about communication, focus, and performing a financial presentation in this seminar.

COMMUNICATION IS KEY

Sometimes when taking pitches on behalf os Stirling Mercantile, 20 minutes into a one-hour presentation, David won’t have a clue what a company does or is about. This is a big problem and can make or break millions in funding or a key strategic partnership deal.

David points out that textual presentations don’t work well—people will read the text on the slideshow faster than you are speaking it, and you’ll become out of sync with your audience.

Apple is a good example of this. In Steve Job’s keynotes, the screen behind him typically has very few images and words, often a single image and a single line. It emphasized what he talks about and makes it obvious but his own words clarify and expand on the topic, grabbing the audience’s attention but still utilizing the slideshow.

An effective powerpoint presentation is graphic-based and minimalist in design. Do not distract your audience from your verbal presentation!

At 6:20, David says to never sit behind your audience so that they can be closer to your slideshow (as happens with text-based slideshows). Stand up front beside your screen and make eye contact and get a feel or the audience’s body language.

Avoid videos unless you feel they are truly an integral component of your presentation. It can disrupt the flow.

David’s slide then goes blank, a black screen. Everyone suddenly pays attention. Did it break down? No. It’s a tactic you can use to command attention and turn everyone’s focus to you so that you can make a key point.

FOCUS & PRESENTATION: BREAKING IT DOWN SLIDE BY SLIDE

Describe the problem you solve. This is the whole point of your existence.

Then say, we sell X product or service that helps Z (target market) to either save money or make money. If you can’t, is your business model really viable?

Each slide should last for anywhere between 10 seconds to two minutes each, depending on their importance and the length of your presentation (is it fifteen minutes long or an hour?). While not mandatory, 10 to 12 slides is generally a good number (less is okay, more usually becomes problematic).

At 6:35, David suggests to start with a title slide that displays your logo and is uncluttered. One type of slide early you can use is a “snapshot,” an image of your product with a punchy one-line that sums up a key aspect of what your business does or can do.

After the opening slide, start with your team. David says team slides often occur at the end, but there are advantages to having it at the beginning. It lends credibility to everything you say afterward and establishes you as a team of humans who have valuable knowledge and experience. Include titles and past stints, but keep it as succinct as possible.

The second-most important thing to get across to your audience (and therefore the third slide at this point) is the industry problem. What is it? After that, follow up immediately with your solution in slide four: this is how we’ll solve that problem.

Next, talk about the size of your addressable market. Throw up a pie chart that breaks down the market so investors can see the potential.

At this point, if your product is software or something otherwise demonstratable, such as a hardware prototype, bring it out and show it off at this point.

Next, David says to highlight your competition and how you can positively differentiate for them. After that, discuss execution: your sales strategy, your marketing strategy, your channels and partners—the real mechanics of how you’ll be able to succeed with your product in the market. If you’re an established company, you can use a visual timeline to keep the slide graphical; startups can use a roadmap chart.

What’s left? Financials, of course. But companies often struggle predicting future revenue. The trick is to realize that this is not trying to predict the future, it’s about saying “These are the numbers we’ll hit if we reach our planned milestones on point.” Include things like gross revenue, direct operating expenses, profitability, etc., each year for one, two, three, four, and five years. No need to go after five years but never go below that; investors don’t want to do the math for you and if they do, it will probably be underestimated against your favour. Use a graphic chart to portray this data visually.

Even if you don’t feel tremendously confident that your money numbers are accurate, you simply must have these numbers regardless: if an investor doesn’t see that you have a plan of what to do with his or her money, that’s a huge red flag. Know your “runway”—that is, how long you have before you run out of money, or runway, and your plane, or your business, doesn’t take flight.

Your final slide should be a summary that you leave up  that succinctly summarized your team, market opportunity, timing, etc. (and include contact information as well). This summary allows investors to recall the presentations and makes for a superior Q&A session, which is often at least as long as the presentation itself—sometimes twice as long!

In the slide that you send to the audience ahead of time, include a detailed appendix that includes everything your 10 to 14 slide presentation doesn’t have room to include. And have these on your slide in the presentation too, just don’t use them unless someone references it in a question afterward. Then you look tremendously prepared with your response.

To follow up to the presentation: send off a short email to the audience that same night.

NEVER SAY…

“Our projections are conservative.” Investors won’t believe you.

“We have no competition.” Is this because your product is not needed, or because you’ve failed to adequately research your industry?

“We have a first-mover advantage.” First movers are often at a disadvantage. Facebook, Ebay, PayPal, etc. all beat the true first movers. (It does work sometimes though; think Groupon.)

“We only need to capture x% of the market share.” It’s a cop-out that shows you don’t know how to execute on your business plan.

The eighth seminar in the BCIC-New Ventures 10-week seminar series is this Thursday, June 2nd.

Presented by David Shore of Stirling Mercantile, this week’s seminar is “Perfecting your Pitch.”

Register online now and head on over to the SFU Segal Graduate School of Business to network starting at 5:30pm and then grab a seat for the 6:00pm seminar start.

If you’re registered in the 2011 Competition, the seminar series is included but these events are also open to the public. The cost is $20 for each individual seminar or $100 for the series. Students with valid ID can attend for free.

If you can’t end up making this week’s seminar, I will be live-blogging and tweeting the event for your convenience.