Stanford Startup School
How to Write a Fundable Business Plan
Investing in Software Ann Winblad awinblad@humwin.com
Hummer Winblad Venture Partners
• First Fund Exclusively for Software Investing
– Founded September 1989
• $1B Under Management
– 8 investment professionals – Fund V: $420M (raised 2001)
• All Stages, focus on early stage including seed
– Usually Part of First Round of Venture Funding – Usually Lead or Co-Lead
• 98+ Investments to Date: 16 IPOs, 31 Acquisitions
2
Investing: Steady State, „Rational‟ Exuberance
• 2005: - $21.7B, 2,939 deals
3
Hummer Winblad Active Investments
SUCCESS METRICS
4
Software: The Real Boom is Now
New Ira of Innovation
Economic Value of Each New Use Case
Architectures
New Uses
Number of Uses
5
Challenge for Founders
Product and Technology
Customer Understanding Unfair Competitive Advantage
Team Software Economics
6
Starting your Software Business Plan
What is your IDEA? Who are the CUSTOMERS? What is the SECRET SAUCE? Can you attract EXCELLENCE? 5. Do the NUMBERS make sense? 1. 2. 3. 4.
7
Hooked in 15 Minutes
8
1. What is the Business?
“Voltage replaces Public Key Infrastructure (PKI) with identity based encryption”
VS.
“Voltage Secures Anytime, Anywhere business communications”
9
2. Do YOU understand the market?
“It‟s a billion dollar opportunity”
UNMET CUSTOMER NEED + GROWTH
10
2. Is the Need Real?
OR
11
Market Timing
Defining the Market
OR
Jumping Hurdles Already in Place
12
2. Up and to the Right?
YOUR COMPANY HERE!
13
2. Product or Company?
COMPANIES Do not live only in the PRODUCTS Tab!
14
3. Will Customers Beg?
“There is an unlimited demand for our unreleased product”
vs.
15
3. What is the Secret Sauce?
-
Technology / IP Business Process Partners Domain Knowledge
16
4. Engineering Roadmap
Can the product be built in less than one year?
17
4. Can you Attract Excellence?
CEO CEO
CFO
President
Co-CEO
Vice Chairman
VP Eng.
Marketing
Sales
18
4. Do you Know what you Don‟t Know?
19
5. Do the #‟s Reach Software Economics?
Gross Margin
80/20
EBITDA
Revenue - Are services a major fraction? Capitalization – Total < 15M ? COGS – Are COGS > 30% ? Sales & Marketing – Commissions and quotas in line? Engineering – Does the Eng. plan match the Op. plan? G & A – Is the G&A < 10%, is it outsourced? P & L – Q over Q growth? Revenue per employee? Model – Enterprise vs. Salesforce model Cash Flow – How long does the initial investment last?
20
5. The Market Bats Last
“I only swing at strikes”
- Warren Buffet
Customers:
They believe in your product and team They have a budget There is a common problem You know how to reach them
Venture Investors will dive deep with your customers
21
What VC‟s Bring to the Table
$
3 P’s: People, Partners, Process
22
Business Plan?
“Why should I write a business plan – nobody reads them anyways”
• • • • •
Why should I write a plan? How long should it be? Who will read it? Do I need an NDA? Do I need an exec summary?
23
10 Slides to Cover the Basics
1. Executive Summary (Problem + Unfair Advantage) 2. Team 3. Market Analysis (Size, Position, Competitors) 4. Secret Sauce Overview/Background 5. Key Assumptions 6. Customers (Potential or Reference-able) 7. Product Plan 8. Engineering Plan 9. Sales Model and Marketing Outline 10. Business Model / Financials/ Cash Flow
24
Ann Winblad
awinblad@humwin.com www.humwin.com
415- 979-9600
25