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Some Suggestions for Writing Business Plans that Raise Money Notes for discussion

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Title: Some Suggestions for Writing Business Plans that Raise Money Notes for discussion


1
Some Suggestions for Writing Business Plans that
Raise MoneyNotes for discussion
Kenneth P. Morse Senior Lecturer and Managing
Director MIT Entrepreneurship Center
55 Hayward Street, E39-115 Cambridge, MA
02142 USA phone 1-617-253-8653 fax
1-617-253-8633 e-mail kenmorse_at_mit.edu
http//entrepreneurship.mit.edu
2
Current Scene B2B Back to Basics
  • The Laws of Gravity Were Never Repealed
  • Entrepreneurs need to have outstanding
  • Team
  • Technology
  • Value Proposition
  • Market
  • Customers
  • Applies to Corporate VCs as well

IT WAS the best of times, it was the worst of
times, it was the age of wisdom, it was the age
of foolishness, it was the epoch of belief, it
was the epoch of incredulity, it was the season
of Light, it was the season of Darkness, it was
the spring of hope, it was the winter of despair,
we had everything before us, we had nothing
before us, we were all going direct to Heaven, we
were all going direct the other way- in short,
the period was so far like the present period,
that some of its noisiest authorities insisted on
its being received, for good or for evil, in the
superlative degree of comparison only.
Tale of Two Cities, Charles Dickens
3
Future Outlook After the Shakeout
  • The superficial VC gamblers are dying or dead.
  • A line of bull .ppt is no longer enough. DAD
    gtgt MBB
  • The number of MIT spin-offs and 50K teams have
    not decreased significantly.
  • Serious entrepreneurs, angels, and VCs are
    quietly and carefully moving forward.
  • This is a great time to be starting a company
  • Expectations and time horizons are realistic.
  • Recruiting top talent is easier.
  • Office space is available, at more reasonable
    prices.

4
Our Message to EntrepreneursBuilding Your
Company
  • Need an A Team 3K experience
  • Serious Technology sustainable advantage
  • Solve an important, valuable problem
  • For clients who have money
  • Who want to pay well
  • With a short sales cycle
  • And will buy more, soon

YOUR VALUE PROPOSITION MUST BE COMPELLING,
QUANTIFIABLE, PROVEABLE, REFERENCEABLE, AND
EASILY EXPLAINABLE
5
Our Message to EntrepreneursSelecting Your
Financial Partners
  • Seek True Value Added Blue Money
  • Operating Experience
  • Rolodex/Network
  • Awesome Portfolio (in your space)
  • Cool Limiteds (in your space)
  • Deep pockets / courage to stay the course
  • Keep Realistic Expectations
  • Time to Market
  • Revenue growth
  • Valuations

6
Entrepreneurs Funding Many Options
  • Your Personal Funds
  • 3F Friends, Family, and Fools
  • Personal Credit Cards and Other Borrowings
  • Business Angels
  • Venture Capital
  • Corporate Direct Investment
  • Venture Leasing
  • Mezzanine Financing
  • Merger and Acquisition
  • Initial Public Offering
  • Secondary/Follow-on Public Offering
  • Private Placements Debt Equity
  • Buyout/Acquisition Financing
  • Corporate Debt

7
Trends in Startups
  • Need an A Team 3K experience
  • Honest Bankruptcy is no shame
  • Babe Ruth home runs and strike outs
  • Serious Technology sustainable advantage
  • Solve an Important, Valuable Problem
  • For clients who have money
  • Who want to pay well
  • With a short sales cycle
  • And will buy more, soon

8
Business Plan Suggestions (1/2)
  • Executive Summary
  • Name your first ten customers
  • Be brief
  • Business Plan
  • Be optimistic, but realistic
  • Know your competitions numbers
  • Be brief
  • Advisors
  • Get good people with gray hair (or no hair)
    involved early
  • Understand that investors will call them
  • Focus on how and why prospective customers will
    buy from you, and pay you money.
  • Focus on milestones (more than calendar dates)

9
Business Plan Suggestions (2/2)
  • Plan how to build your company without any
    outside investment (bootstrap). Then, maybe, you
    are ready to speak to VCs.
  • Most business plan judges focus on
  • Customer needs
  • Value proposition
  • Sustainability
  • Team
  • Your investors should bring you both customers
    and management talent (Akamai case).
  • Realize that this business plan competition is an
    educational process. It does not particularly
    matter if you win.
  • It does not matter that you won or lost, but
    how you played the game . (Grantland Rice)

10
Akamai Financing Strategy (1/2)
  • 50K finalist, not winner (1998)
  • Value-add, not valuation philosophy of funding
  • Financing brings
  • Credibility
  • Customer/partner introductions
  • Management expertise
  • Faster growth
  • Cash
  • First round angel investors
  • First customers
  • Network deployment
  • Special thanks to Jonathan Seelig, Co-founder,
    and frequent guest lecturer at MIT Sloan School

11
Akamai Financing Strategy (2/2)
  • Second round VCs
  • Build operations management
  • Battery Ventures Polaris
  • Third round
  • Broadband International
  • Baker Communications
  • Fourth round
  • Industry leadership, standards, cachet
  • Apple, Cisco, Microsoft
  • IPO
  • Serious company
  • Currency for growth acquisitions

12
Traditional vs. Entrepreneurial Career Paths
High School University Practical
Experience Management Training Well Managed,
High Growth Firm Startup Venture Another
Startup? Venture Capital or Angel
Investor Never really retire
High School University Big Company Re
tire
13
Some Critical Success Factors in Entrepreneurship
  • Believe that Startup Ventures can Succeed
  • Parent(s) who are entrepreneurs
  • Early contact with successful entrepreneurs
  • Exposure to success stories and case studies.
  • Gain practical, real world experience before,
    during and after university studies.
  • Be willing to be Unusual/Unconventional.
  • Agree to Embrace Risk, and possibly failure.
  • Want to leave a large Company.
  • Live in a society that sees the above as normal,
    not a strange exception.
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