Hello, this is Victoria here with my last blog for the New Ventures BC seminar sessions. Basil Peters is up talking about the exit strategy. Most of you know him already and I think that there is no better person to be giving us all this seminar about this topic. If you want a more in-depth overview of the talk, please have a look at the video.
Basil is going over some very successful companies that were all acquired for under $20 Million. He is saying that big companies want to buy things for $10-30 million. Why? Because big companies don’t want to spend money on R&D, but would rather acquire companies. Examples with Club Penguin started in Kelowna. In just two years, they sold the company for $350 million. When can you sell the company? When you’ve proven the business model. It’s often the best time to sell. You have to sell on an upward trend. Sell on the promise and not the reality. Next side asks if you even need investors. He says because technology, networks and this huge global market evolving, you can build a valuable company for tens of thousands of dollars. Club Penguin, MetroLyrics, Plenty of Fish, all bootstrapped. So Basil says– if you can– bootstrap! If you don’t have an other option you have to raise private capital from either VCs or angel investors.
Definitions: What is venture capital really? He shows some graphs, but the point is that it’s changed. Here’s some interesting data. In America, each year VC Funds invest about 20 billion. So do angels. Even more surprising? Friends and Family investors invest about 5 to 10 times more. So the pot we thought was little, is actually a lot bigger and influential than we thought. Angel Co-Investment: it’s when groups of angels invest $5 million to $10 million together. Basil says there is no shortage of capital today.
Why do you need an exit strategy first? And how do you develop it? Sometimes there is no exit strategy and that is a strategy. Lifestyles business without investors is an exit strategy. The exit is just another business process. Start at the end and understand your goal. “Our exit strategy is to sell the company in X number of years for around X amount.” Check the alignment about how the ES will look like. Get a sign off on a written exit strategy.After going over some slides about why some exits are more successful without VCs, Basil explains how VCs block good exits.
Angels or VCs but not both: new research shows that based on 182 deals, when angels and VCs invest together, it didn’t work out as well. Basil recommends taking angel money and not VC money if you’re looking for less than $3-5 million.
Summary: Most acquisitions are done under $20 million and modern companies don’t need much capital. Bootstrap if you can, angels can finance up to $5-10 million. Basil encourages us to look at his blog and to get his book if we want to read and learn more about the exit strategy.
Hello, once again it’s Victoria here at NVBC’s night for learning how to pitch. David Shore from Stirling Mercantile and Jonathan Bixby from Strangeloop Networks will be taking the stage tonight.
What differentiates people who win? They have a focus. Have a thesis and they have greed around their focus. So, what is the structure of a business focused statement?
1. Thesis: Tell Me What You Do
We sell (blank) that helps (who, target market) and what does it do for them (save or make them money)
• do not tell us what the technology does
• it has to be simple and make sense
• differentiate yourself
2. Communication: Are they going to remember you?
Example with Barack Obama–he is a gifted communicator. He is going through a quick presentation about a. not including points you are speaking on a slide and to pause and b. to observe your audience, not just talk at them, lastly c. the judges will remember you, so show some excitement. Show the fact that you are excited about your business.
3. Presentation: Judges prefer graphical presentations. Colour, simple text, and go overboard.
Start with and include a title.
Include a snapshot of what you do, then include something about you, the team and those involves. Indicate who you are, CEO, CMO and indicate that you require the CTO or advisors. Brief description of where you’ve worked and who you’ve worked with.
Industry Problem: will your customer make money, save money or what? It’s a financial issue. *Customers are leaving. Problem can be societal.
Identify the solution: Uses Flickr as an example. If you have software, use screenshots. If you have hardware, show diagrams and tell a story. How did you get involved, or determine that there was a need? Introduce a third-party validation with a quote with a person’s name with a target company. This slide will take longer to present. Show your pride, the route you took etc.
Addressable Market: these slides you need to go over quickly, use a graph or chart, name important points and graph them and talk about where they’re going, show where we are going as opposed to our competition
Sales and Marketing: data on marketing # helps (1 minute to 30 seconds on this slide)
Road Map: do a graph, design to full launch about where you are with raising money (this slide’s length depends on how complicated your business is)
Projections: busy slide with a lot of numbers, 5 years shown, number of customers and price are the most valuable numbers on slide. If your number is less than $10 million in the fifth year, raise that number. If you’re going after a trillion dollar market, it’s not unreasonable to have a half- billion of that market.
Investment Opportunity: name three stages, raising money at this stage, raising money at launch and scale and ask (%) of $$.
Summary: leave up for question period, flavour the rest of your discussion
Appendix: no end to that so make them and you can email the investors a softcopy, each slide can have a Q and A, slide. So 12 in a presentation and then 30-40 to prepare
Things to avoid saying:
Our projections are conservative
We have no competition
We have first mover advantage
We only need to capture x% of the tiny piece of huge market
Would you have more than one person present? Yes, but practice. Seemlessness is key. The CEO should be the one giving the presentation.
Hello, it’s Victoria here blogging from one of the most important topics (I think) in the series and it’s about funding.
Up first is Roger Killen tell us everything we need to know.
Become a worthy investment opportunity. This is how you raise money. What is a WIO? How do you become that? 8 steps in the chain. You can’t leave anything out. Day 1: Build an SME that is a Home Run in the making:
Start at the right fit: expectations and lifestyle need to fit, self-discipline needs to marry, then the right skills, the right market, the right product, the right exit strategy, the right startup people, the right legal structure, the right infrastructure
When we have achieved these milestones, this is what we have. A culture of self-discipline, confidence and attitude. This is achievable by the second Quarter (Q2). You can only do this if you follow this approach. Day 2: Leverage you home run potential into serious capital:
Start with the right money: 2 types
Equity–ownership, advantages is that it does not impair monthly cash flow, disadvantages are dilution
Debt-legally owing, minimizes dilution but it increases risk and turnoff to major investors (angels don’t like to follow debt)
Rule of Thumb: all business should be financed with Equity until they are producing revenue
Amounts of money: refer to financial model, understand you burn rate, runway length>6 months, raise capital in multiple rounds, need for cash trumps avoidance of dilution, Then the right investors: Early Stage is 4 stages (Seed, (Business Plan) startup, first stage, second stage, Expansion Stage is 3 stages (Third, Mezzanine, Bridge) Which business are you running?
1. Lifestyle Business: finances a lifestyle, subscribe enough seed capital, can be debt or equity, don’t issue many founders’ shares
2. Centred Business: subscribe enough seed capital, can be equity only, don’t issue many founders’ shares, design a vesting plan,
Founders’ Shares: this is how a company settles accounts, they’re common and inexpensive common shares, 1 founder = 4 million shares at .01 is $40,000, you can look into SR&ED and pay yourself
Vesting Formula: initially place the Founders’ Shares into Escrow, use a linear vesting approach 50% over 3 years, the remaining 50% becomes vested at liquidity, avoid milestone based vesting
the right valuation:
Commercial Banks: operating loan, line of credit, term loan, mortgage, credit card, cost and government programs, don’t live your life through government programs
Love Money has problems. It’s awkward and has many problems, but it has the potential to be top quality
How do we raise up to $2,000,000 of top quality Seed and Startup Canada?
1. the right offering: 16 valuations methods, the right presentation, the right financing campaign: 12-step sequential system for attracting several Financing Rounds of Seed and Startup Capital, contact financing does for Early Stage business financing does for selling a house
12 Step Program:
1. Build a positive image
2. Build a financing sales team
3. Recruit a financial team leader
4. Build a contact list
5. Convert contacts into invitations
6. Convert invitees into attendees
7. Host a series of seminars
8. Cater to investors
9. Understand RRSP
10. Understand trustees
11. Follow up and enroll
12. Repeat 3X
This will give us 25 people investing at $12,000 $400,000 3X= $1, 200,000. SME at Q4 is success. Success is knowing what to do and to act on that knowledge. If it is to be, it’s up to me.
Up next is Tanner Philp of Lions Capital. He is discussing BC Advantage Funds. What is a VCC? Get to know it.
- 30% refundable tax credit
- cash back to investors
- GOOGLE investment capital branch
- less than a 100 employees
- operating in BC and developing a technology
Financing Strategy: CEO’s job, fund to milestones, leave a cushion, 4-9 months, expertise required, directors and advisors needed, bankers, investors
What you need in a financing process is to make deadlines. What are sources of capital? Banks, angels and VC’s. Friends and family and angels answer to themselves. VC’s work in teams. Discusses government programs (SRED, **IRAP, government funds, VCC program, innovation grants, EDC, Non Dilutive) banks, angels (relationships are important), VC’s
What are investor motivations?
1. Banks, 2. Angels, 3. VCs
Getting paid: 1. interest, 2. exit value, 3. exit value
Fee Structure: 1. Interests, 2. exit value, 3. 2%-20%
Liquidity Horizon:( (how long do you hold an investment ) 1. 1-3 yrs., 2. 5-7 yrs., 3. 5-7 yrs.
Portfolio Approach: (multiple early stage investments) 1. Yes, 2. No, 3. Yes
Fiduciary Responsibility: 1. corporate, 2. self, 3. investors,
Who to call and how do you get to these people? There are only 6 VCs in BC. www. cvca.ca. G to the VCs web Site and see if your business fits into the portfolio. Learn who the major players are in your industry and have them on a list and learn who you will be working with.
How do you contact investors? Direct introduction or mutual contact…the least effective is the most successful.
1. Go for a coffee, first 30 minutes you talk about how you make money
2. Second 30 minutes 50% LISTEN and 50% TALK (bring a second person who does not talk)
3. Follow up that day, suggest another meeting and answer any questions you couldn’t
Presentation Etiquette: It’s chaotic and non-linear. It’s critical that you ask what the people are investing in and the investment process. What is the time frame, what does it look like?
1 Hour, 12 sides: Sell the business, not the technology, Know your audience, Don’t contradict, Contents: Product, Addressable Market, Team, Competition, Financial
What are investors looking for? Do you have a quality team? Addressable large market, competitive advantages, clear and scalable, market validating, credible vision of success
Take away investors’ reasons to say no, they won’t tell you what is wrong. A maybe is no. Can’t get money? It’s an ugly world out there in VC landscape. What investors don’t want to invest in? LOTS. U.S. investors invested less in Canada by 50%. What other words mean no? Maybe, no, it’s too early, later, doesn’t fit our mandate, we have no money, we want to follow a lead.
What are you looking for in an investor?
- experience, people you like, experienced management, contacts, domain knowledge, confidence Deal Terms and Structure: after a lot of discussion Valuation: If you’re raising less than a million, you should be doing common shares. What is valuation? You can’t value startups. You have no cash flow or historical revenues. Tanner says the most single important thing you have is your team. Tanner ran out of time, so he is summarizing definitions of preferred shares. Goes over negotiating terms and closing the investment. Do not take your eye off the ball.
Hello, it’s Victoria Revay here again blogging from the seminar. As always I am trying to get the most important points across, so some things might be in point form. Don Linder from Major Client Selling is first up. Don say don’t try to sell your product and listen to more than you speak. 80/20 rule. After we’ve identified the customer and other factors, the customer won’t buy if the amount that you are selling for is too high. He lists 5 major things we need to understand in terms of customer relations and product. The Business Case. Names a check-list that we need to go through to calculate the benefits and business case. You need a diagnostic approach to selling and easy usability. Does that customer have a customer? Let’s write this down. Help you customer identify the problem. Unrecognized Problems. Unanticipated Solutions. What do you need? You need to understand critical customer issues, outcomes/results, use business technology, and refer to metrics. “Going for the No.” This means to understand if your customer will benefit. You need to diagnose the problem. Use questioning system: SPIN selling. Stages of Sales conversations: What is most important? Obtaining the sale, investigating? Depends on what you’re trying to do. How often do I demonstrate before we agree on a business case?
Question from audience: Do you give it away for free or charge for example as a software as a service? People believe you demonstrate more and the product should sell itself.
“Seven Deadly Mistakes That Cause You to Lose Large Sales”
Don is going over some buyer profiles, having a coach (because 90% of the selling occurs while you are not around), structured strategy planning process helps you succeed and optimize efforts. Right now, we’ve spent 15 minutes discussing how to leave a voice mail, so I won’t go into it. People are asking how you get through secretaries on the phone. First Impressions are important, so you need to assess the competition. Create initial communications. Establish credibility: referral, triggering events, research. Some deadly mistakes: failing to confront reality, no business case, wasting resources, letting customer define solution amongst others.
Hello, it’s Victoria here…once again live-blogging the seminar tonight. I will be picking up key points so excuse the impartial sentence structure.
First up: Steven Lukas from Fasken Martineau. He talks about options of making your company an association.
Goes over shareholder, employee, director options. Anybody can be a shareholder and you can have as many as you want! His opinion is that you need to see a lawyer before you raise money. As a shareholder, the only liability is your initial investment. All shares are not created equal. Shareholders have pre-emptive rights. They can decide who the director is going to be, they have to have at least one and there are no residency requirements. He says it takes time and effort to find directors. It’s not a position that many want to fill quickly.
Why? Directors have a lot of responsibility. They manage the affairs of the company, they have duties to the company and they appoint the officers. They don’t manage the day to day. Officers: you can have as many as you want. CEO, COO, CTO. Under the officers are the employees. They do the work and they are different from contractors. Other issues that might arise? Conflict of interest, investor and inventor, public vs. private, within other companies.
Initial Corporate Structure: Incorporation-US vs. Canada vs. International
Financing: Where is your company going to come from?
Government grants: only available to Canadian companies
Taxation and employment issues: simpler if you are building here
BC vs. Federal: either BC Business Corporation, or Canada BC Act
are fine and both are investor friendly. If you incorporate federally, you have to register externally in BC. It’s filing a piece of paper and paying for it. Steve recommends we have an unlimited # of common shares and a “blank-cheque” preferred shares. (these have been approved by shareholders) The financiers dictate the financing terms. If you can avoid: issuing secured debt, using shareholders’ loans because they’re complex, using multiple shares that have classes, incorporating offshore. I asked if you had to incorporate to get a loan. For insurance purposes he says, yes. A question was asked about which state to incorporate in for the US? Nevada or Delaware.
What are Founder’s Shares?
Large block of shares issued at a low price, it recognizes the sweat-equity contribution. They should be common shares and preferred shares. To who should they be issued? Founders and senior officers. Common mistakes in allocating issues? Not setting aside enough shares (4-8 million), not setting aside for future management team (15-25%), not vesting it (2-4 years), or issuing to the wrong people. Preparing a Road Map for Financing
What are the milestones? They have to be integrated into the budget and you need a timeline. Initial equity seed financing can come from: friends and family (50-150K), founders (variables), pre-public, angels (250-500K), VC (1-3 million), investment bankers, underwriters (1-5 million), public financing, IPO, Strategic Partners (this is big, they can be a good source, supplier etc.)
Securities Legislation: You can’t just take $$ from anyone that you want. You need a prospectus or rely on exemptions (family and friends, accredited investors, private issuer, offering memorandum). Goes over Offering Memorandum and Stock Options plan. He says it should be issued at last round of financing 10-25%. Companies must plan for growth and make notional allocation.
Next Up: Sean Hodgins, CA
BC Tech Bootstrap Model:
1 in 100 companies get VC funding so don’t quit your day job, adopt good expense reporting, register for GST to get your ITC’s back, raise your first $25K from friends and family, build in smart-sweat equity (R&D pay partially in equity, key hires and use stock options), register as an EBC, do the circuit, find customers who will help you, leverage telefilm, NRC-IRAP, NSERC, build SR&ED programs, build partnerships, visit Bootup Labs!
What to include in your financial modelling? (3-5 years) Income statement, balance sheets, cash flow, opportunity analysis, list of assumptions, capitalization table. Keep you business model simple and focus on revenues. Make it believable, test suing your network, costs should focus on R&D. Your revenue model needs to focus on very practical answers to questions.
Who’s buying what you’re selling?
What price are you going to charge?
Who’s going to your site?
Customer support growth?
Compare to competitors?
Opportunity Analysis: Calculate the size of your market, story to market take ratio (5-10%) rate of growth analysis, valuation analysis,
Hello everyone–it’s Victoria here live-blogging from the seminar. I’m grabbing relevant points, so once again if it’s not a complete sentence, please excuse. Today’s speaker is Mike Volker of the SFU University/Industry Liaison Office.
Mike is discussing the market right now and how it’s a good time to invest. What’s new? Companies are valued lower, there are more investors at smaller amounts, business structuring is getting more attention and it’s all about an exit strategy, politics. Mike stresses the fact that you need an exit plan.
What are the instructions to the jury? Pick the most likely to be viable and have the greatest value. What about scale? Do you want to be a hundred million dollar company or a lifestyle business?
Getting Started:What type of business are you? Proprietorship, partnership, LLP or Corporation. He says you should incorporate federally for a few hundred dollars. Structure of company: who owns it? Who runs it?
What’s the difference between early stage or start up? ES: team, products, business plan, customers, VCs maybe.
Start Up: one or two people ideas talk to mentors. Next: you have to sell your story. You have to convince yourself, others, employees, etc.
So what do angel investors want? Angels invest their own money. (VC’s invest others’ money, so they want to make money.) They also look for any amount to invest in.They want to have fun, coach, a willing protégé, make money, 10-100X their money made back.
Mike now talks about important characteristics for entrepreneurs:3 I’s: Intensity, Integrity, Immediacy, 3 G’s: Goodness, Greatness, Greed
It’s all about P&L: profit and loss. The Elevator Pitch: It’s easy. Just fill in the blanks: We, (company) ––––are (doing) ––––– for (who?)–––––– who need (address what pain?)–––––––that unlike (existing solutions)–––––– will (do what?)–––––––– unlike –––––––(competitors).
ROI? How do you calculate?
Eg: 2.6X in 3.5 years (ROI=28%) or 5X in 5 years=38%
He also advises us of having a cap table. It calculates or tables the cap in each round for your investment. Basically if you’re asking for $250K, you can keep 75% of your company and this is in the angel round. I asked if you should calculate on the higher side of the amount that you’ll need. Mike said yes. And then I asked if that will decrease your chances of getting the money. He said yes! It’s a gamble, a dating game.
The Terms Sheet? Mike goes over the sheet and discusses investment options. Some elements of the terms sheet are offering, valuation, vesting, capital and structure, governance, shareholders and agreement. Goes over Shareholders’ Agreement. He says we need to be thinking of this at the start:
Protect your project
How do you bring in new shareholders
How to buy and sell shares
Ask: What’s the worst that can happen to me?
Caution: Don’t go with boilerplate.
Now he goes over Round #2 requirements: (5 pages) on Web sites
Product, property, technology, status of business plan, market, distribution, competition, team and financial projections. Mike says the most important question to address is the market. He says don’t say you are selling into the overall general billion dollar industry. Who will buy it? Why? Potential? Can you make money? He examples with Apple computers. He says they own the Apple/Mac market. 100%. Lastly, about the money. It always comes down to this.He says to go to his web site and see the cash flow.Annual revenue is the easiest way to evaluate of a company?
Considering it’s Game 1 of the Canucks in the playoffs, the room is full and people are ready to learn about market research and product marketing. Rocket Builders’ Dave Thomas is up:
How do I make sure that there is a market for my product? Resources for participants: LinkedIn Group and a poll Learning objectives for today:
1. Take time for market research:
Begin with the end in mind
Find which concept your market falls into, so is there a need, a large market or an emerging market for your product
Market, pains and requirements: every market has pains and requirements
Ask specific questions about your market, as in how big is the market, why do they need your product, who pays for it, who uses it and how much are they willing to pay for it. You also have to understand that the inferior substitute exists, even if you are offering a new and different product, people don’t want to change their behaviour easily
1. Revolutionary Product
2. Evolutionary Product:
- small incremental change, an iPod application, to those of us for an iPod application: how are you going to make money?
Why Segment? Focuses resources, narrows whole product, limits real competitors, leverages past successes, allows the benefits of market leaderships Where do you search these resources? Secondary search resources, customer interviews and partners and channel, customer interviews at trade shows are great for market research, retail customer service,
2. Understand concepts of technology adoption and whole product and how it impacts market. It provides an understanding of customer requirements and establishes focus for timing. Example is early adopters, late majority followers. Most people fall into the innovator position. This could change if there is a need for it.
Break: Canucks are up 1-o.
Whole Product Definition:
There is a core product, and complementary services and complementary products. So, there is consulting, hardware, software, and integrated services. What are some other questions to ask? What are the complementary services that have to be acquired, or the additional hardware required, will customers achieve ROI without other products?
How do you market the product is the next question? Now it’s an exercise called Ad-Hoc Whole Product Audit: what complementary services must be acquired, what additional hardware has to be purchased, how will these components affect your total cost of ownership?
Why will they buy from us vs. our competition?
Perceived status within market
Build relationships to secure and communicate competitive advantage
Working with other partners and leveraging that is crucial and this is also called positioning impact. Your positioning process is also important: market research, segmentation, differentiation, test, positioning, marketing plan. The project positioning exercise is 12-18 months, so don’t feel bad if your business plan takes 3-6 months.
A great plan has to appeal to customer and company, has to fit the trends and it has to be unique. Pricing software as a service. How do you do this? What is a business value? The market will do this for itself. When a product is innovative, it’s hard to price the product. When it’s too cheap, many think the product won’t work.
Pricing methodology: determine market size, don’t ask direct pricing questions, what are price objections you hear, how does your pricing model compare with the industry, how do you offer promotional pricing, what licensing alternatives do you offer, what discounts do you provide to resellers?
Recommended Books: Chasm Companion by Paul Wiefels
Once again, it’s Victoria here, blogging from the room. I’m writing down key thoughts or ideas the speaker emphasizes, so if it’s not a full sentence, sorry!
First Up: Doran Ingalls on the Four Pillars of Intellectual Property
What types of IP can protect software?
Copyright or code
1. Copyrights: protects the expression of idea, not the subject matter, sole right to produce work, needs to be original and fixation. Who owns copyright? The author, freelancers are considered authors, but employment is an exception to the rule (the assignment has to say it flows to you). Moral Rights can only belong to people, it arises automatically, registration of copyright enhances it, use copyright symbol. Management of Copyright? Focus on owner ship, how works are developed.
2. Trade-marks: they’re very valuable, consumer makes decisions based on trade-marks, protects the consumer, the goodwill associated with products reside in them, so pick a good one, register it and enforce it.
Picking a good TM: distinctiveness and descriptiveness are important: don’t pick words that describe wares or services, if you have a descriptive mark you can protect it like McDonald’s, but you have to do a lot of advertising, you can’t use a confusingly similar trademark to another.
How do you avoid these problems? Search your trademark.
Two types of rights: statutory rights and common law rights (Canadian Intellectual Property Office) How do you search? Knock-out search (CIPO, USPTO), full availability search, investigations and legal options. It takes about a year and a half to register and costs about $2500, trade mark can be expunged, so you need to use it, the owner of the trade-mark is responsible, trade-mark can also become the product (Kleenex, thermos) so differentiate product from brand. You need to keep on top of who is infringing on your trademark otherwise it becomes devalued!
Summary: Pick the right one, register it, use it or lost it, keep an eye out for infringements.
3. Patents: if you disclose you idea to the public you need a patent. What does it give you? It gives you the right to prevent others from making it, using it etc., lasts 20 years from filing date, in exchange you have to disclose it. What you don’t get with the patent? The right to make, use or sell the claimed invention, government enforcement of patent rights.
How do you get a patent?
Secrecy: Don’t talk about it. It can be taken and used against you, one-year grace, Patentability: not everything is patentable
Novelty: the invention must be new, (don’t go to the Canadian patent office) search USPTO, EPO, JPO, Google
Obviousness: grey area, since it’s wide open to interpretation
Subject Matter: it matters what it is, you can’t get patents for certain things
How do you apply for a patent?
Work with the patent agent and provide a detailed description. Where do you file? Patents are territorial, gets expensive, so take advantage of treaties: Paris Convention let’s you backdate and defer costs, PCT is a world patent and lets you do it for 2 ½ years. What’s a provisional application? Never becomes a patent, less expensive, useful for development stage, only claims priority. A PCT patent is about $18,000.
Patent Problems: cost, publication, limited duration (20 years), other alternatives
4. Trade Secrets: technology, recipes, know how, client customer information
How do you maintain a secret? Non-disclosure, contracts, mark documents as confidential, control access. Advantages? Never expires as long as it remains a secret, no filing or government approval (KFC and Coke). Disadvantages? Not everything can be protected, if secret exposed it is no longer a secret
Second Up: Dr. Mario Kasapi of UBC UILO expanding on this idea….
Take Home Messages:
1. Start good IP management practices NOW
2. Keep Good Records: easier to raise capital
3. Security Policy: date and sign policy, security policy
4. Consulting agreements (be careful because consultant owns everything they work on)
5. Third party agreements
6. Employee agreements (prior employment is important) IP assignment, waiver of moral rights
7. Put together a Due Diligence binder: this includes corporate document, HR, IP documents: freedom to operate opinions: What is this? He uses a “lid and pen analogy:” you invented a lid for a pen, but that doesn’t make the pen your patent, so you can manufacture the lid, but not the pen which includes the lid..so get third party contracts.
Types of Open Source Licenses: (is available but has to be licensed, free redistribution in modified or unmodified forms, etc.)
Reciprocal: GPL, LGPL
Patenting Issues: keep good records, don’t talk about it in public, understand inventorship, first-to-invent vs. first-to-file ..then talks about trade-marks, proprietary materials are also IP, know-how is a huge one..so it’s not only patent and trade-marks
So: Don’t forget the SR&ED Documents, tax credits which makes it one of the advantages of being in Canada, then talks about UBC assessment overview and reports, takes about 5-7 weeks to complete. You can contact him at 604-822-8996 or email him at firstname.lastname@example.org
Taking the first steps to Technology Entrepreneurship And Preparing Effective Business Opportunity Statement
It’s Victoria here…live-blogging from the first series of the NVBC seminar at SFU.
First Up: Angie from New Ventures BC talking about the competition and that it is now open. If you’re out of town, they are providing funding up to $750. Bob de Wit is the speaker: Bob talks about his bio. He is an entrepreneur, investor, advisor, mentor and WUTIF angel investor.
Intro to entrepreneurship: What is it? Who is an entrepreneur? A person who organizes, operates, and assumes the risk or a business venture. An innovator, renewing society by looking for opportunities to make products, institutions. Lists famous entrepreneurs like Ted Turner, Richard Branson, Bill Gates, Jimmy Pattison, Don Rix (Metro Labs), Thomas Jefferson, Sir John A. MacDonald, and more. What do successful E’s understand? The market, the edge of product, supporting team, “cash is king.” What are some risks investors look at? Market, technological, people, financial. Pros and cons of being an entrepreneurship are discussed, like being your own boss and stress, people will tell you one thing and do another, becoming cynical, not everyone will love your baby.
Tip 10 tips:
Find mentors, don’t over plan, hire people smarter than you, know your customer, always know your cash runway and know when not to be cheap, develop an elevator pitch, play to win, acknowledge the enemy, don’t let the hosers get you down ( I love this one) and have fun!
Where NOT to look? your bank, family and friends, outside your home market, business planning consultant
Bob discusses the New Venture BC Competition. In it’s 9th year, mentoring, education, networking, over $309,000 in prizes, discusses eligibility, see rules here. Are you eligible for SRED? Goes over the series. Rounds are described: Round 1 is a 2-page online description where most enter, about 150 companies, then a cut is made and a 5-page business overview (which is the toughest), then the major cut is made of 30 companies, you’ll need an 8-page executive summary and then it’s down to 10. This is where you make the oral pitch and final decisions are made. The prizes are all in cash. If you’re a bio-energy company you can win more money. For $100, you can enter..by April 20.
Who are the judges? Categorized by different sectors, like clean-tech, bio sciences etc. In Round 2, your entry gets evaluated by the appropriate judges. You can spend the cash anyway you want.
Back from break…
Preparing Effective Business Opportunity Statement:
Define the pain your solving, solution, why do we care, how are we going to win? Running through last year’s winner proposal by Saltworks. How do you get money? What do you need in Round 1? Describe the product, describe the innovation, the technology, provide a brief analysis.
What’s the definition of IP? Creation of the mind, industrial property and copyright.
Round 2 deadline is May 27, 2009 and it’s important to understand judging criteria. Five judges will review submissions, 30 companies go to Round 3. 9 questions and all matter:
Baseline (not important but can sell a judge) : product, tech development, team, business plan structure.
Describe your defensible competitive advantage! Include it in your story. If you’re worried about patent disclosure talk to a lawyer.Be specific about your target market. Describe your demographic-type, their value and why they will be customers.
Describe your revenue model. What are your market-penetration goals. (It takes at least a year for a good plan to come together.)
Distribution? What alliances do you have and do you intend to make them? How is your product produced?
Competition? who are they, what makes them unique or same, different?
Financial? How much have you spent? Don’t lump cash and equity together. How much did you raise? How much do you need? When will you be cash flow positive? What’s the return?
Present Value of your company, The VC vs. Angel views. Angels invest earlier and expect higher ROI 6-20x their money back over 5-10 yrs. VCs invest a bit alter and need at least 10x their money back over 5-7yrs. Angel valuations $500-$2mm, VC is $2-5mm. Angel Round $250-750K. VC Round $2-5mm.
Angel Rules of Thumb: A great idea with IP gets $500K, the right team with biz plan is $250K, some market validation is $250K, early revenue from early adopters is $500K, more than above justifies higher value.
Future (exit) value: usually by mergers and acquisition, typical multiples are 1-2 times revenue, much less for service businesses.
Implications for revenue growth: $2 mm pre-evaluation means you need to archive $20 mm in revenue. What are difference between VCs and Angels? Bulk money, governance, go big or go home, Angels will invest smaller.
How does an angel view a company that offers a product and or service? Angels are great because they have their own company? Inevitably, there will be lean times and you need service. Not many people want to invest in a service business. So, don’t tell them that. Recommends Bootup Labs for Web 2.0 companies as an incubator.