Strategy Brief Updates:

NEW: Sales Strategy, Sales Plan, Business Metrics

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Investor Prospectus (New Venture)

The Investor Prospectus for a New Venture refers to the document that provides the fundamental information about a business proposal.  It articulates in writing the detailed and specific information about the offering, and includes much of the information found in the Business Plan including company background, management and stakeholders, financial performance and projections, company valuation, and use of funds raised through the offering.  The Investor Prospectus is the “take away document” given to a serious prospective investor (VC, angel, friends and family, etc.) during or following a New Venture Pitch meeting.

Note: The Investor Prospectus described in this article is in the context of a new business venture or “startup”, and not meant to be confused with a prospectus commonly referenced in the finance world, which is a legal document that institutions and businesses use to describe the securities they are offering related to mutual funds, stocks, bonds and other investments.

The Investor Prospectus (New Venture) should be thought of as a constantly evolving document, with many of the same components of the Business Plan, yet fine-tuned to its audience with an emphasis on articulating the specifics of the offering.  Some components may be custom written for a specific prospective investor, and some Business Plan sections may be left out, condensed, referenced or summarized depending on the prospective investor’s familiarity with the proposal to date.  However, an effective Investor Prospectus for a new business venture (i.e. Startup) should have most of the sections listed below.

Cover Page (with publication date and the word “Confidential” clearly visible)

Table of Contents

Executive Summary / Situation Update

Company Profile: (Mission Statement, Elevator Pitch, company form, list of key management / stakeholders)

Company History / Background

Management and Stakeholder Profiles (include organizational chart)

Product / Service Description (Value Proposition)

Pricing Strategy

Technology Knowledge Base

Situation Analysis

Market Analysis

Marketing Strategy

Industry Analysis

Sales Strategy

Marketing Plan

Competitive Analysis

Strategic Positioning

Competitive Strategy

Statement of Differentiation / Competitive Advantage

Current Revenue & Expenses

Projected Revenue & Expenses

Growth Strategy

Business Development / Partnership Strategy

Valuation

Investment Strategy 

Exit Strategy

Appendix (all items should be referenced in body of Business Plan)

·       Notable customer case studies

·       Notable new articles (about company or proving claims in plan)

·       Notable communication (letters, emails, etc.) from key partners

·       Notable legal info (patent, trademark, copyright, license agreements, etc.)

·       Notable financial info (credit report, letter from banker, valuation, etc.)

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New Venture Pitch

The New Venture Pitch refers to the formal presentation of a new business, product, or service with the goal of achieving “buy in” from the presentation audience in the form of investment capital, partnership or management approval. The New Venture Pitch summarizes the information in the Business Plan and Investor Prospectus into a compelling story that clearly defines the value proposition, and can be delivered in less that 30 minutes (15 is ideal). Most pitches are allotted an hour of time, and at least half of that should be reserved for a question and answer session.

The most important thing to remember when putting together a New Venture Pitch is that most serious pitch audiences (VC’s, angel investors, prospective partners, internal executives, etc.) will make up their mind in the first 5 minutes about whether the pitch is a worthwhile idea or a waste of their time. Therefore it’s important to be as clear as possible about what the business proposition is and why the pitch audience should consider getting involved. While market research, pie charts and projection graphs can be effective with limited use, its important to not overdo it with this information in the pitch, as it can unintentionally clutter the message. Back up slides with this kind of data can be kept on hand and referenced as needed in the Q & A session, or in follow up communication with interested parties.

Below is a suggested framework of slides for a generic “pitch deck” for a fictional product we’ll call a “SuperWidget”. Each section has an explanation of the purpose for the slide(s), and a generic example of the information that should be included. Of course, not all New Venture Pitches will have the same combination of slides and should be adjusted as necessary, keeping with the spirit of “informative simplicity”. Some final thoughts about the New Venture Pitch preparation are included in the conclusion of this article.

PRESENTATION TITLE:

This is the first slide in the presentation, and ideally will be what is up on the screen as people are filing into the presentation room. It should be simple with the title of the presentation and a picture or logo. Optional additions include info about the nature of the pitch, such as “Investor Prospectus” or “New Product Line Proposal”, but it’s important to not include so much info that is clutters the screen.

ELEVATOR PITCH:

An Elevator Pitch is the official quick answer to “what does your business do?”, or in the context of a New Venture Pitch, it’s the answer to “What is your business idea?”. The Elevator Pitch slide will communicate in the simplest terms possible the answer to the question stated above, and will also explain to the pitch audience why it will be worthwhile for them to pay attention to the rest of the presentation.

Example text on an “Elevator Pitch” slide:

SuperWidget is a _____ device for doing this, this, and this.

  • It’s a market ready product with proven test environment success stories.
  • It fills a current void in an enormous and rapidly growing marketplace.
  • There is an opportunity for the right investor / partner / business unit to make a lot of money in a relatively short period of time.

THE PROBLEM:

This slide gets to the heart of the problem the new venture will solve. While different than the Market slide (below), it’s the underlying reason for the existence of the Market.

Example text on “The Problem” slide:

SuperWidget-itis is a condition of the ____ that affects 50 million Americans and is the fastest growing condition of its kind around the globe.

  • 80% of SuperWidget-itis sufferers say there is no effective product on the on the market
  • Last year Americans spent $$$ on alternatives to solve their SuperWidget-itis
  • Other Factors contributing to the SuperWidget-itis problem include…

(include an image that captures the essence of the “The Problem”)

THE SOLUTION:

This slide explains how the business / product / service that is being pitched is uniquely qualified to address The Problem shown on the previous screen. It’s important to sell the Competitive Advantage on this slide, and show that the new venture is not just another “me too” product addressing an already crowded marketplace.

Example text on “The Solution” slide:

SuperWidget gets to the heart of the SuperWidget-itis problem by using patented cutting edge technology to do this, this and this. Usage in test environments show that SuperWidget results in the following benefits…

  • Benefit #1…
  • Benefit #2…
  • Benefit #3…

(If possible, include a short, embedded product demo video of the SuperWidget in action)

MARKET:

This slide provides a snapshot of the current and near-future marketplace for SuperWidget sales. It is a summary of the Market Analysis section of the Business Plan, and is critical for showing the scope of the opportunity for the pitch audience. This section should reference credible market research, and estimate 100% market penetration (both current and in the near future). For example, if every person in the market bought a SuperWidget (assume zero sales lost to competitors), this slide should provide an estimated answer for how many unit sales this would translate into.

Example text on the “Market” slide:

SuperWidget fills a void in a currently enormous and rapidly expanding market for SuperWidget-itis sufferers

  • 25% of all Americans will experience some form of SuperWidget-itis in their lifetime
  • There are 10,000 stores across the US that carry devices that address SuperWidget-itis
  • Current Estimation for 100% Market Penetration = 20 Million Units
  • 2015 Estimation for 100% Market Penetration = 30 Million Units

COMPETITION:

This slide provides a snapshot of the competitive landscape in the marketplace for SuperWidget sales. It is a summary of the Competitor Analysis section of the Business Plan, and is critical for providing context for the proposed opportunity, and competitive positioning strategy.

Example text on the “Competition” slide:

Competitor #1

  • Brief description of company focus
  • Estimated sales revenue (if available)
  • Estimated market share

Competitor #2

  • Brief description of company focus
  • Estimated sales revenue (if available)
  • Estimated market share

Competitor #3

  • Brief description of company focus
  • Estimated sales revenue (if available)
  • Estimated market share

(Consider a market share pie chart if enough accurate data exists)

SALES / DISTRIBUTION STRATEGY:

This slide lays out the plan for getting the product / service into the marketplace. It is a summary of the Sales Strategy section of the Business Plan, and should cover the basics of the immediate Market Penetration strategy, and explain how this strategy will evolve over time enabling the business to scale.

Example text on the “Sales / Distribution Strategy” slide:

Market Penetration

  • Direct sales to local SuperWidget-itis sufferers
  • Online sales
  • Goal: X unit sales by 2013

Long Term Sales Strategy

  • Sales rep program
  • Distribution through X retail store chains
  • Goal: X unit sales by 2016

CURRENT / PROJECTED REVENUE:

This slide should include a brief explanation about current and projected sales, and how that translates into current and projected revenue. The growth chart should provide most of the explanation, but be prepared to explain the math behind it.

Example text on the “Current / Projected Revenue” slide:

Estimated retail price for the SuperWidget is $199 per unit

(Include a 5-year projection growth chart that shows unit sales and revenue)

CURRENT / PROJECTED EXPENSES:

This slide should address expenses from both a unit Cost of Goods Sold (COGS) perspective, and estimated annual Operating Expenses for the first 3 years. It’s probably best to make this two slides under the same heading.

Example text on the “Current / Projected Revenue” slides

Per Unit Cost of Goods Sold (COGS)

Materials $______

Assembly $______

Equipment Lease $______

Contracted Services $______

Freight $______

Other $_____

TOTAL $______

Annual Operating Expenses (Years 1 – 3)

Product Inventory $______

Legal Expenses $______

Consulting Fees $______

Sales & Marketing $______

R & D $______

General Operating Expenses $______

TOTAL $______

PRODUCT / SERVICE STRATEGY:

This slide should identify the core product / service, and any secondary products or services currently available or expected down the road. It will be a snapshot of the Growth Strategy section of the Business Plan, and provide context for the long-term prospects of the new venture opportunity.

Example text on the “Product / Service Strategy” slide:

Core Product / Service: SuperWidget

Secondary Product / Services:

  • SuperWidget Accessories
  • SuperWidget mini

Future Product / Services:

  • SuperWidget version 2.0 (due in 2013)

(use images of products / services on this slide)

TESTIMONIALS:

This is slide is a great place to provide a few quotes from satisfied users of the product / service, or ideally an endorsement from an industry expert. A video testimonial from someone famous or from a highly regarded organization can be very effective for the right product / service.

COMPANY OVERVIEW:

This slide is a summary of the Company Overview section of the Business Plan. It includes basic background information such as: Listing of founders and key stakeholders, background of executive management, company founding year, company form (LLC, Partnership, etc.) and state of origin / headquarters, and the company Mission Statement.

VALUATION:

A valuation slide will give the pitch audience an estimation of how much money the company is looking for, what percentage of the company the founders are willing to give up, and a what the post-investment valuation of the company might look like. The Valuation slide is a good place to include a pie chart with estimations of ownership percentages in the event of an investment from the pitch audience.

Example text on the “Valuation” slide:

$1 Million Seed Capital Investment = 40% stake in company

Post-Investment Valuation = $2,500,000


SEED CAPITAL:

One of the first questions investors who are interested in the opportunity will ask is “How are you going to spend the money?” The best way to present this answer in a limited amount of time is to assume that the target amount of seed capital has been acquired, and then estimate average annual expenses for the first 3 years by breaking them down in to pie chart percentages.

Example text on the “Seed Capital” slide:

$1 Million Seed Capital Investment will be spent over the next three years on the following:

IDEAL INVESTOR:

Now is a good time to stop the formal presentation and open things up for Question and Answers. The presenter should be less than 30 minutes into the hour at this point. The key to a successful Q & A session is to prepare for all possible questions in advance, and have a slide ready to facilitate the answer of any question. Each New Venture Pitch will require it’s own unique set of back up slides, however as a rule of thumb it’s a good idea to have a summary slide for each major section in the Business Plan not already covered in the core presentation. This is also a good place to include extra information on compelling market research, should the question come up. While most back up slides will probably not be used, some suggested ones to have ready are the following:

  • PRODUCT TECHNOLOGY
  • PRICING STRATEGY
  • COMPETITIVE ADVANTAGE
  • SWOT ANALYSIS
  • MARKETING STRATEGY
  • MARKETING PLAN
  • INDUSTRY ANALYSIS
  • MARKET ANALISIS / STATISTICS
  • GROWTH STRATEGY
  • BUS. DEV. / PARTNERSHIP STRATEGY
  • EXIT STRATEGY

CONCLUSION / FINAL THOUGHTS ON PREPARATION:

  • Always arrange to arrive at a pitch location with plenty of time to set up, and communicate with the room host about what technology will be available for the presentation (Web access, InFocus projector, etc.). Be prepared to avert last minute technology glitches by having plug-in adapters (i.e. Mac-to-PC, etc.), and put a digital copy of your presentation in multiple formats (PowerPoint, Keynote, PDF, etc.) online or in “the cloud” where you can access it in an emergency.
  • Bring executive summary printouts of the presentation and pens for all attendees so they can take notes in the context of your slides. If using PowerPoint or Keynote, use the 3 slides per page printout option from the print screen.
  • Put a lot of time into selecting the right theme and transitions so the presentation flows smoothly. Avoid displaying all information on each slide — start with just the Header of each section and use the transition feature in the presentation software (PowerPoint, Keynote, etc.) to fade in each bullet point as you talk about it. This will help the presenter avoid the impression that you’re just reading each slide.
  • Always have some kind of takeaway documentation for the pitch audience This could be a one page case study that captures the essence of the opportunity, an Investor Prospectus, or copy of the Business Plan.
  • Understand that much like the Business Plan, the New Venture Pitch should be seen as a constantly evolving medium that you are continually adding to, editing, refining, and improving. Every time you use the “pitch deck” it should be little better than the last time you used it.
  • Practice. Practice. Practice. Some people are naturally better public speakers than others, but there is no substitute for practice. Do dry run presentations for your wife, girlfriend, mom, husband, dog… it doesn’t matter — the key is getting used to the projection of your own voice, and developing a feel for the “rhythm” of your presentation. The last thing you want is to get in front of the right investor, and then have them lose confidence in you because you got nervous or stumbled through your slides due to lack of preparation.

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The Business Plan

The Business Plan is a strategic document that works as a “road map” for reaching an organization’s stated business goals. It’s primary purpose is to articulate and communicate the Business Strategy —  a “charted course” designed to maximize the use of an organization’s resources in order to enhance performance and meet business goals.  This strategic document is comprised of all the background information on an organization, including the supported reasons why the organization can reach it’s goals, and detailed steps for achieving them.  In addition, the Business Plan works as an informational resource to draw from when unforeseen events in the marketplace require adjustments to the direction the organization is headed. It is the ideal document to have handy (and up to date) when new people are added to the executive team and need to get up to speed as quickly as possible, or when potential investors become interested in the company and want to assess its position.

An effective Business Plan is constantly evolving and being refined based on the most recent and accurate information available from its inter-related components.  A common mistake many organizations make is thinking that a Business Plan is “done” when all the sections have been written and it’s been printed up, bounded and distributed to the leadership team.  In reality, the usefulness of a Business Plan is dependent on time sensitive information and constantly evolving circumstances, making it effectively out of date the minute it is printed and distributed.  Therefore, an organization should think of a Business Plan as a constant “work-in-progress”, with regular periodic updates (quarterly is recommended) to all of its components.  All organizations should have someone (e.g. Director or VP of Strategy) designated to manage the research and production of each quarter’s updated Business Plan, and conduct regular live presentations / Q & A sessions regarding the evolution of the critical components. Below are listed the critical components of a comprehensive Business Plan.

Cover Page (with publication date and the word “Confidential” clearly visible)

Table of Contents

Executive Summary

Mission Statement

Elevator Pitch (i.e. The official quick answer to “What does your company do?”)

Company / Organization History

Management and Stakeholder Profiles (include organizational chart)

Product / Service Description (Value Proposition)

Pricing Strategy

Technology and Knowledge Base

Situation Analysis

Market Analysis

Marketing Strategy

Industry Analysis

Sales Strategy

Marketing Plan

Competitive Analysis

Strategic Positioning

Competitive Strategy

Statement of Differentiation / Competitive Advantage

Current Revenue & Expenses

Projected Revenue & Expenses

Growth Strategy

Business Development / Partnership Strategy

Valuation

Investment Strategy (Investor Prospectus)

Exit Strategy

Appendix (all items should be referenced in body of Business Plan)

·       Notable customer case studies

·       Notable new articles (about company or proving claims in plan)

·       Notable communication (letters, emails, etc.) from key partners

·       Notable legal info (patent, trademark, copyright, license agreements, etc.)

·       Notable financial info (credit report, letter from banker, valuation, etc.)

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What is a VP of Strategy?

The Vice-President of Strategy (a.k.a. VP of Strategy) is the person in an organization directly responsible for researching, planning, defining, articulating, updating, presenting, and managing the ongoing execution of an organization’s strategic business goals. Typically this involves a focus on the following components of the Business PlanSituation Analysis, Market Analysis, Competitive Analysis, Industry Analysis, Business Development / Partner Strategy, Marketing Plan, Sales Strategy and Growth Strategy.  An effective VP of Strategy will provide a clear direction or “road map” for the leadership of the organization, usually in the form of a regularly updated written Business Plan, supported by periodic live presentations.

When you partner with VP of Strategy, LLC  you effectively outsource the position of VP of Strategy to Scott M. Eilers, saving you a full-time executive salary expense and freeing up the rest of your leadership team to focus on day to day execution of the business.

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