Raising Venture Capital for Developing IT Products - PowerPoint by znr91839

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									raising
 venture capital
   for developing IT products



                               Altaf Khan
        University of Management & Technology
Would you persuade,
   speak of interest,
       not of reason.
           Benjamin Franklin.
Assumptions
1. Software product or
   Internet-based business

2. Pre-seed, seed, or start-
   up stage
• Own funds
• Friends and family
• Angel investors
  – Local
  – Overseas                      Sources
• Venture capital
  companies                       of Capital
• Banks
• Other
  – PSEB ???
  – International organizations
 GICT (IFC - World Bank)
Global Information & Communication Technology Dept

    • Stage-independent investments
    • Typical investment $2-10M
    • Value-added services:
      – Participation on boards of directors
      – Co-investors
      – Introductions to strategic partners
      – Follow-on financings
    • Business plans can be submitted online
 GICT Investment Examples
• Provide IT services to developing countries, such as
  locally based systems integrators and SW developers

• Deliver SW solutions or new technologies from a base
  in the emerging markets

• Deliver ITES, such as offshore SW development and
  BPO, to global markets from emerging markets

• Provide solutions for e-governance applications

• Design and manufacture IT components & products
 to get what you
want, you have to
  know what the
 investor wants
The investor wants …

 … to assist the entrepreneurs
 in transforming their great ideas
 into world-class businesses …
So that the investor …

      … can make lots of money
Chances of making lots of money increase
  if the proposed business is based on …

 • An innovative idea
   • Unbounded target market
      • Entry barriers
        • A reasonable execution strategy
           • A persistent, energetic, smart team

              Moreover, the investor also requires …
 an exit
strategy
 Exit Strategy

• IPO

• Merger/Acquisition
to get the investment,
you have to outline a
reasonable scenario in
which the investor ends
up making a lot of money
to get the investment,
you have to outline a
reasonable scenario in
which the investor ends
up making a lot of money
Write a Business Plan
                                       Within the next five years grow Innofy into a $47 million provider of quality assurance services that
                            Vision
One Page Business Plan                  cover the complete life-cycle of financial and telecommunications software
                                       Innofy – headquartered in Dubai – will have sales and support offices in Singapore, Washington and
                                        London, and engineering centers in Dubai, Lahore, Karachi and Islamabad

                                       Enable the client companies get premium rates for their services by measurably enhancing the quality of
                           Mission      he software they develop
                                       Cultural Mission: Speed through innovation; Craftsmanship


                                       Grow revenue-per-SQA-engineer from $30k to $36k to $47k to $56k to $62k during the first five years
                         Objectives    Grow the number of professionals from 50 to 130 to 262 to 513 to 800 during the first five years
                                       Grow revenue from $0.63M to $3.9M to $11M to $26M to $47M during the first five years
                                       Achieve profits before tax of $4.0M and $13M in the fourth and fifth years, respectively
                                       Raise investments amounting $1.4M, $2.1M and $1.4M during the first, second and the third years
                                       Sell to Asian operations of US businesses; Leverage those relationships to get work from their parents
                         Strategies    Focus on: i) Small-to-medium sized projects. ii) Companies in a hurry. iii) Telecom and finance sectors
                                       Focus on verification assurance initially; Expand into higher value-adding validation assurance later
                                       Attract, retain excellent individuals by ensuring their professional growth, equity sharing
                                       Hire non-computing graduates with analytical skills or domain expertise
                                       Leverage the under-utilized, attractively-priced HR available in Pakistan
                                       Train, tirelessly; Ensure an expanding supply of SQA-engineers through a separate training operation
                                       Give new clients the assurance of working with a world-class player through certifications
                                       Build an organizational culture rooted in shared-values, and keep on enhancing it
                                       Recruit a chief sales/marketing officer (2002)
                             Plans     Establish a temporary headquarters and the main engineering center in Lahore (2002)
                                       Establish a sales & support offices in Singapore (2002) and Washington (2003)
                                       Move headquarters to Dubai and establish a engineering center there (2003-4)
                                       Establish a sales & support office in London (2003-4)
                                       Establish engineering centers in Islamabad (2004-5) and Karachi (2005-6)
                                       Hire 90% of SQA-engineers with analytical training or domain expertise, e.g. engineering, finance
                                       Focus on verification assurance services initially, then expand into validation assurance in 2006
                                       To ensue continuous improvement of training, spin it off into a separate business-unit (2003)
                                       ISO9000 quality certification (2003); CMM-L3 (2005); CMM-L4 in (2006); CMM-L5 (2007)
onepagebusinessplan.com
   Conventional Business Plan
Write the biz plan that
includes:
   1.   Executive summary
   2.   Company description
   3.   Product/service
   4.   Market analysis
   5.   Competitive analysis
   6.   Execution of biz plan
   7.   Management team
   8.   Capital requirements
   9.   Financial analysis
         Contents of the Biz Plan
Write the biz plan that
includes:                       A concise summary of
   1.   Executive summary       the entire business
   2.   Company description     plan
   3.   Product/service
   4.   Market analysis
   5.   Competitive analysis
   6.   Execution of biz plan
   7.   Management team
   8.   Capital requirements
   9.   Financial analysis
         Contents of the Biz Plan
Write the biz plan that
includes:
   1.   Executive summary       Background info about
   2.   Company description     the company, including
   3.   Product/service         capital structure
   4.   Market analysis
   5.   Competitive analysis
   6.   Execution of biz plan
   7.   Management team
   8.   Capital requirements
   9.   Financial analysis
         Contents of the Biz Plan
Write the biz plan that         What will the company
includes:                       provide its customers?
   1.   Executive summary
   2.   Company description     How will customers
   3.   Product/service         benefit from the
   4.   Market analysis         company's product/
   5.   Competitive analysis    services compared to
   6.   Execution of biz plan
                                what they currently
   7.   Management team
                                use/have?
   8.   Capital requirements
   9.   Financial analysis
         Contents of the Biz Plan
Write the biz plan that
includes:                       How many potential
   1.   Executive summary       customers benefit from
   2.   Company description     the company's product/
   3.   Product/service         services compared to
   4.   Market analysis         what they currently use/
   5.   Competitive analysis    have?
   6.   Execution of biz plan
   7.   Management team         Growth rate?
   8.   Capital requirements
                                Marketing strategy?
   9.   Financial analysis
         Contents of the Biz Plan
Write the biz plan that
includes:
   1.   Executive summary       Who are the key
   2.   Company description     competitors?
   3.   Product/service
                                In what areas are you
   4.   Market analysis
                                stronger/weaker than
   5.   Competitive analysis
   6.   Execution of biz plan
                                them?
   7.   Management team         Are there barriers to
   8.   Capital requirements    entry that can stop
   9.   Financial analysis
                                others enter the market?
         Contents of the Biz Plan
Write the biz plan that
includes:
   1.   Executive summary
   2.   Company description
                                How will the business
   3.   Product/service
   4.   Market analysis
                                plan be implemented?
   5.   Competitive analysis    Strategies?
   6.   Execution of biz plan
                                Timeline?
   7.   Management team
                                Budget?
   8.   Capital requirements
                                Tactics?
   9.   Financial analysis
                                Alliances?
         Contents of the Biz Plan
Write the biz plan that
includes:
   1.   Executive summary
   2.   Company description
   3.   Product/service
   4.   Market analysis
   5.   Competitive analysis    Who are the people in
   6.   Execution of biz plan   the company?
   7.   Management team
   8.   Capital requirements
                                What experience, track
   9.   Financial analysis      record, expertise do
                                they bring?
         Contents of the Biz Plan
Write the biz plan that
includes:
   1.   Executive summary
   2.   Company description
   3.   Product/service         How much does the
   4.   Market analysis         company require to
   5.   Competitive analysis
                                implement the plan?
   6.   Execution of biz plan
   7.   Management team         How does the company
   8.   Capital requirements    value itself to investors?
   9.   Financial analysis
                                Expected burn-rate?
         Contents of the Biz Plan
Write the biz plan that
includes:
   1.   Executive summary
   2.   Company description
   3.   Product/service
   4.   Market analysis
   5.   Competitive analysis
   6.   Execution of biz plan
   7.   Management team
   8.   Capital requirements    Financial projections,
   9.   Financial analysis      including cash-flow
                                analysis
What’s your current valuation

How much are you seeking
         Company Valuation

• An art; not a science

• May vary drastically from one investor to
  another; do shop around
What do investors look for in a team?

  • Do they share a common vision, values?

  • Are they flexible about their roles?

  • Are they smart, energetic, persistent?

  • Do they work with a sense of urgency?

  • Are they worthy of my trust?
  how to
build trust?
Be very open with the investor
 about the risks involved and
 your weaknesses


   Try to develop strategies for
     overcoming/minimizing each
You are developing
something that will
come to market 1-5
years down the road.
During that time:
                       • The targeted market
                         may disappear
                       • Someone may come
                         up with the same
                         product, first!
Things to look for in investors

        • Their track record

        • Their contacts

        • Their people
          Mentor-Investors
• Individual investors who bring added value
  to your venture due to their:
  – Inside knowledge of the target industry
  – Industry contacts


• They can:
  – Lower your risk
  – Reduce your time-to-market
                     •   Actively seek value-adding partners & affiliates
Improving the Odds   •   Build an unfair advantage
                     •   Look for smart capital, mentor-investors
                     •   Leverage Pakistani expatriates
                     •   Focus on the customer
                     •   Outsource non-core tasks
                     •   Successful marketing is critical
                     •   Stay focused on your business objective
                     •   Be flexible; change your biz plan, if required
                     •   Create a high-energy organizational culture
                     •   Form a core team which is:
                         – Homogeneous in terms of the vision
                         – Heterogeneous in terms of skills and experiences
 network
tirelessly
 be business-driven,
not technology-driven
 investors fund
people, not ideas!
Reward excellent failures

Punish mediocre successes


        Phil Daniels, Sydney exec
Would you persuade,
   speak of interest,
       not of reason.
           Benjamin Franklin.

								
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