Deloitte VC Successful Pitch

Fundraising Workshop
Mark E. Jensen, Partner & Director of National Venture Capital Services Deloitte & Touche LLP
Todays Objectives
Develop a more compelling elevator pitch Provide a methodology to analyze and improve investor presentation materials Learn what you need to know and do before the first investor meeting to be prepared
Copyright 2007 Deloitte Development LLC. All rights reserved.
Are You Prepared for Fundraising?

Do you have the right track record? Have you obtained strong external validation? Can you demonstrate deep knowledge of your domain and your business economics?
Is the model defensible, leading to significant profits?
Is your presentation ready?

Is it concise, compelling, organized and well told?
Can you show to the investor a great return?
Anatomy of a Successful Investor Presentation Package

Before you get started, have a well thought out:
Elevator pitch
Executive summary
PowerPoint presentation References/validation Proof of concept/demo (if appropriate) Then deliver with
PASSION, COMMITMENT, AND CREDIBILITY!
Building External Validation

Build a list of ideal customers and partners
Focus on most valuable market segments Consider future natural owners of your firm
Engage to validate value proposition

Consider other geographies if needed Utilize network to open doors
Recruit directors, advisors, and references

Must add value and be available to provide validation Coach references to assure desired outcome
Validate target customer needs

Offer services/consulting before first product(s) are ready
Copyright 2007 Deloitte Development LLC. All rights reserved. 5
Validation Template
Ideally, identify references that can make three key assertions:
1) The Problem: Yes, Company X is addressing a significant problem in our industry 2) The Budget: Weve committed Y dollars to fix this problem 3) The Solution: Weve hired Company X to fix the problem or (second choice) we are prepared to hire Company X to fix this problem upon meeting _____ specifications.
Identifying the Right Investors

Develop a target list
Tap current investors and advisors
Review press releases of other firms in your space

Check with law firms, banks, CPA firms, and others Western Association of Venture Capitalists (WAVC)
Review fundings on news wire for comparable situations
Research firms to find right fit

Sector complementary vs. competitors
Network for referral to the right partner

Ask referral source to make the introduction!!!!!
The Elevator Pitch

Goal: Buy-in
Investors Employees
Customers and partners
Critical Attribute: Focus

What do you want remembered?
Result: Motivate
Listener wants to hear more
The Elevator Pitch

The order is flexible, but cover these points:
What market are you in? What urgent problem are you solving?
What is the size of the opportunity?

Why will you win? Where is the validation (customers, investors, etc.)?
Elevator Pitch: Communication Imperatives

Show passion, energy, and enthusiasm Use appropriate eye contact when face-to-face Slow down and speak clearly
Be brief (target 60 seconds)

Be Confident
Use understandable vocabulary
10
Elevator Pitch Example

P1 Diamond develops proprietary thin film diamond products and equipment that dramatically improve heat dissipation on microprocessors, solving one of the highest priority pain points in the industry. We address growing markets that will exceed $1.5B by 2006 and will become the dominant supplier with the best team having the most comprehensive patent position in the industry. Intel is our largest current investor, and we are actively engaged with other top target customers and partners who provide very strong references.
Elevator Pitch Exercise

Your name and the name of your firm Your pitch
Ranking by group on a scale of 1 to 10

Urgent pain Large growing market Unique, defensible position Validation
Communication skills
Desire to hear more
12
Building and Delivering the Presentation
13
The 12 Slides
1- Overview 2- The Problem 3- The Solution 4- Opportunity and Market 5- Technology 6- Unique Competitive Advantages 7- Competitive Landscape
8- Go to Market Strategy
9- Financial Roadmap 10- The Team
11- Current Status

12- Summary
Why 12 Slides?
Goal of the first meeting is to get the second meeting
Increase receptivity and find your champion
Focus
What are most important factors?
Efficient use of time

Convey the basics Time is limited
YOU are the real story

Dont hide behind slides
Order of slides will depend on your situation

Introductions
Begin by introducing your team
60 seconds or less Save team detail for later
Mention any common links

Referral sources, other relevant contacts
16
Title Slide
Name of your firm
Date
Name of investor firm
Optional: How much money is being sought for this round?

Appropriate graphics (logo, etc.)
17
April 2002
Seeking $5M
Once Upon A Time

During the title slide
Start with a 2-minute story

Hook em! Make it compelling and memorable Tie the story to your overall message PRACTICE!
19
Slide 1: Overview
Two to five high level bullets
Refer to key points to keep attention for the rest of the presentation (your elevator pitch) If you dont get their attention here, you wont get their check later
20
Making Business eCommerce a Reality
Automate financial processes and operations Drive transaction cost efficiencies IT Managers of Fortune 100 companies rank this as among the top five areas to invest in over the next five years Beta agreements have been signed by three Fortune 100 companies.
Slide 2: The Problem

Compelling problem(s) to be solved
Whats the pain? revenues, costs, time, market reach
Faster, better, smaller, etc. are solutions, not problems
Best to include validating quotes

Customers are best Analysts when applicable
So what? Problem must suggest a large market

Corporate Data isnt Safe
Fake Payables *Billions Lost Annually $70K
Deleted40% *Up to Chart of Accounts wasted IT time

Our margins depend on a secure Vendor Fake platform.
$100K
$3.7M
- Sam Hein, VPO XYZ Airlines
* IDG Group Study 23
Slide 3: The Solution

Describe your business
Product or service
Compelling benefits
Must-haves not nice-to-haves
Defining graphic
Illustrating your product or service
Hooked?
If you havent set the hook by now, you are dead!
24
Solution
Intrusion Detection Access Control Easy Integration
25
Slide 4: Opportunity and Market

Market details
Size and growth rate for five years Focus on your segment(s) of the target market
$100M+ run rate opportunity in five years? Demonstrate defensible % of market share
Why you wont get squashed
A graph format works well
26
27
Slide 5: Technology
Translate key points from business to technical domain
Show how customers and partners fit in, if possible
Best to use animated graphics

Before and after diagrams often work well
Concentrate on essential value proposition!!

Talk to important but peripheral issues and details, avoid clutter
Address invent vs. integrate issues

Show that you will invent only uniquely competitive elements
Show incremental development path that reduces risk, if possible
>>> Technology
EXECUTE ANALYZE PLAN Enterprise Portal Integration
Inventory Fulfillment Warehousing Distribution
OPTIMIZE
Customer Mgmt
Supply Chain
Business Applications
XML
Web Store Call Center Email Direct Mail Field Service Point of Sale SFA
Analytics Engine
Rules Engine
Planning Engine
Workflow Engine
XML
EDI
Platform Framework
J2EE Application Server
EDI
Manufacturing
Logistics Procurement
ODBC
Relational Metadata IT Infrastructure: Hosted or in-house
ODBC
Data Flow
Technology Overview
30
Slide 6: Unique Competitive Advantages

Team, relationships, intellectual property, new insights, domain expertise
Are they yours alone? Will they provide a 10X+ advantage?
How long will they last?

What will it take to overcome them?
Why will customers care?
31
Unique Competitive Advantages

Team has strong background in key technical areas
CEO, Chuck Smith, 5 years of speech systems experience at Nuance VP Engineering, Dave Johnson, built enterprise software products for TenFold Team has nearly 20 years collective experience in computer telephony
Partnerships in place with dominant market players
Speech Technology Nuance and Speechworks Voice Portals TellMe and BeVocal Authorization Software Netegrity and RSA Security Provisioning and Management BMC and M-Tech
Patenting innovations in technology and applications

Voiceprint store & forward from PC voiceprinting on internet from standard PC Voiceprint store & forward from IVR allows bolt-on rather than re-write Several other patentable innovations coming
32
Competitive Advantage
Next Generation PSA Strategic Management Capability 2000 V3.1 Global Enhancements
1999 Connected Service Chain
1st
Generation PSA
1998 Resource Management
Global & Collaborative

Slide 7: Competitive Landscape

Discuss current and potential competitors
Demonstrate knowledge of the landscape The answer no competition red flag no market
Provide framework to differentiate

Use customer-centric attributes and dimensions Reinforce your unique competitive advantages
Upper right quadrant graphic?

VCs see em everyday risk of being clich
Quote prospective customers

What do they say about your competitors? Why would they rather buy from you?
34
Competitive Advantage
Product GA Production Customers Highly Scalable Architecture >$10 per IP-DSO
Acme
Company A
Company B
Company C Company D Company E Company F
35
Slide 8: Go to Market Strategy

Who are the key players?
Profile the customer Discuss critical partner relationships (current and future) Describe who (in/out-house) sells your product or service
How and what do customers buy?

Discuss high level pricing (e.g., annuity or one fee) Describe what the customer will get (today and beyond)
Marketing and sales plan

Explain value chain and sales cycle Compare and contrast to other firms
Graphics work well

Emphasize external validation
Go To Market Strategy
Today
Distributors
INDIRECT SALES
6 US 10 European 2 Asian
MIDMARKET
18%
Strategic Partners
IBM
82%
F1000
DIRECT SALES
$4B Market
37
Go To Market Strategy
Tomorrow
Distributors
Sirrius AvNet Support Net
INDIRECT SALES
Strategic Partners
IBM ISS Symantec Tripwire
MIDMARKET
50%
Independent Software Vendors

JD Edwards SAP Infinium
50%
F1000
DIRECT SALES
$4B Market
38
Slide 9: Financial Roadmap

Provide high level 5 year projections
Revenues and expenses by major categories
Pretax profit (loss), cash flow from operations, capital requirements
Highlight milestone targets

First revenues Cash-flow positive Tangible competitive barriers (customers, IP, etc.) $100M/yr run rate in year 5 is clich, but expected
Prepare hip pocket detail slides

Best for a second meeting, but produce if requested
Financial Overview
Revenues ($K) Expenses ($K) Profit ($K) Investment ($K) Headcount Customers 2002 $1,500 $2,500 ($1,000) $5,000 15 5 2003 $7,000 $10,000 ($3,000) $5,000 60 20 2004 $25,000 $24,000 $1,000 150 50 2005 $60,000 $49,000 $11,000 300 150 2006 $105,000 $79,000 $26,000 450 250
Investment Sought
$5M Series A: Now $5M Series B: 12-18 months after Series A
Use of Proceeds
Get product into Beta/GA, implement with 1-3 beta customers Build solid pipeline, sign initial partnership deals Stage scaling of Sales / Prof Serv / Engineering / G&A
Future Timeline
March 2003 January 2003
Begin Marketing Efforts for AEDI
Complete identification of management team
December 2002 August 2002 July 2002
Begin strategic product development
Elevate marketing of DD to achieve sales goals
Close A-round
41
Whats Behind the Financial Slide?

Deep understanding of the business model
Be prepared to discuss key assumptions Revenue analysis market penetration and timing
Top-down (supportable percentages) Bottom-up (pipeline, revenue by customers, validation)
Expense analysis
Validate with comparable companies, as available
Other (capital equipment, A/R & A/P turnover, etc.)

Detailed proforma backup (P&L, cash flow, balance sheet, use of proceeds & headcount)
Slide 10: The Team

Previous relevant accomplishments
Include academic credentials
How does this team work together?

Be honest - whos missing?
Discuss your hiring plan to fill key slots
Relate to unique competitive advantages Emphasize what YOU bring to the table
The CEO is the most critical team member
Demonstrate your competence through your presentation
Management Team
Chuck Smith, CEO
9 years enterprise systems expertise IBM 10 years call center systems expertise ROLM/IBM and Tandem 5 years speech solutions expertise Nuance BS Mathematics, Loyola University, Los Angeles
Dave Johnson, VP Engineering
6 years telecom & imbedded systems expertise Tanner 6 years enterprise software integration expertise TenFold BS Engineering, CalTech 20 years of sales success in Call Center market Teknekron and Teloquent Sales process expert with 8 years sales management experience BA Philosophy, Bloomfield College, NJ Mike Baker, Chairman of Blue Note Software Bruce Davidson, retired VP Sales, Nuance Charlie Clay , board member SRI
44
Herman Lewis, VP Sales
Board of Directors
Slide 11: Current Status

Highlight milestones achieved to date
What have you already accomplished with other investors money?

Investors like to see efficient, productive use of resources
Historical timeline format can be useful
Emphasize where you go from here

Show you are in position for some key next steps
45
Current Status
Launched: January 2001, angel funding
Product Status

prospects
Wells Fargo US Bank Hewitt Visa Password Reset Password Reset Password Reset Password Reset
Password Reset announced 5/01, available 9/01 Confirmed Caller announced 2/02, available 4/02 Voice Secure Web prototype available
Customer Status

Hartford Life Password Reset 9/01 Bank of America Password Reset 1/02
E*TRADE GE Card Services
Confirmed Caller Confirmed Caller
Partnerships complete and functional

Nuance and Speechworks both contributing funding Netegrity, RSA Security and BMC
Seed team effective and efficient

Slide 12: Summary

Summarize your three strongest points
Have these distilled down to memorable sound bites
Highlight synergies with prospective investor (portfolio, GP background, domain expertise, etc.)
Solicit feedback
Identify and address concerns
Call to action
Ask about the process, and what it takes to do a deal
Next steps
Determine conditions for second meeting Set up follow-up meeting, if possible
summary
Great opportunity to impact security market Voiceprints are best authentication approach Proprietary advantages in place
Proven team and initial results Delivering products to paying customers Established partnerships with market leaders
Seeking support to capture the opportunity Financing Building management team

After the Meeting

Immediate follow-up email
Thank prospective investors for their time
Address any unresolved issues

Stress points that resonated
Follow-up with additional information

Support due diligence process
Reconnect with referral source Coach your references
49
Building the Executive Summary

Primary uses
Initial introduction to investors (may accompany introductory email) Prepares investors for meeting
Best practices
Word doc. derived from your 12 Magic Slides Drill down in key areas, but be concise Highlight external validation Less than 10 pages Use as tool to sell the team
Supporting materials
Operating plan, sales pipeline, IP roadmap, competitive landscape, etc. Make available only as appropriate (avoid material overload)
Next Steps
Involve your team
Set format, timelines, and delegate
Re-build your story

Elevator Pitch PowerPoint Executive Summary Demo
Create investor/customer target lists
Seek external feedback

Go back to referral sources for dry run
51
Q&A
52
53

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Fundraising Workshop

Copyright 2007 Deloitte Development LLC. All rights reserved.

Are You Prepared for Fundraising?

Is your presentation ready?

Can you show to the investor a great return?

Copyright 2007 Deloitte Development LLC. All rights reserved.

Anatomy of a Successful Investor Presentation Package

PASSION, COMMITMENT, AND CREDIBILITY!

Copyright 2007 Deloitte Development LLC. All rights reserved.

Building External Validation

Engage to validate value proposition

Recruit directors, advisors, and references

Validate target customer needs

Copyright 2007 Deloitte Development LLC. All rights reserved.

Identifying the Right Investors

Review press releases of other firms in your space

Review fundings on news wire for comparable situations

Research firms to find right fit

Network for referral to the right partner

Copyright 2007 Deloitte Development LLC. All rights reserved.

The Elevator Pitch

Customers and partners

Critical Attribute: Focus

Copyright 2007 Deloitte Development LLC. All rights reserved.

The Elevator Pitch

What is the size of the opportunity?

Copyright 2007 Deloitte Development LLC. All rights reserved.

Elevator Pitch: Communication Imperatives

Be brief (target 60 seconds)

Use understandable vocabulary

Copyright 2007 Deloitte Development LLC. All rights reserved.

Elevator Pitch Example

Elevator Pitch Exercise

Ranking by group on a scale of 1 to 10

Copyright 2007 Deloitte Development LLC. All rights reserved.

Building and Delivering the Presentation

11- Current Status

Efficient use of time

YOU are the real story

Order of slides will depend on your situation

Mention any common links

Copyright 2007 Deloitte Development LLC. All rights reserved.

Optional: How much money is being sought for this round?

Copyright 2007 Deloitte Development LLC. All rights reserved.

Once Upon A Time

Start with a 2-minute story

Copyright 2007 Deloitte Development LLC. All rights reserved.

Copyright 2007 Deloitte Development LLC. All rights reserved.

Making Business eCommerce a Reality

Slide 2: The Problem

Best to include validating quotes

So what? Problem must suggest a large market

Corporate Data isnt Safe

Fake Payables *Billions Lost Annually $70K

Deleted40% *Up to Chart of Accounts wasted IT time

- Sam Hein, VPO XYZ Airlines

Copyright 2007 Deloitte Development LLC. All rights reserved.

* IDG Group Study 23

Slide 3: The Solution

Copyright 2007 Deloitte Development LLC. All rights reserved.

Copyright 2007 Deloitte Development LLC. All rights reserved.

Slide 4: Opportunity and Market

A graph format works well

Copyright 2007 Deloitte Development LLC. All rights reserved.