What’s Next???? Today-2/18

Report
What’s Next????
Today-2/18
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Market readiness checklist and Executive Summary (15’)
Finances- expenses, revenues, and summary (35’)
Work Session (60’)
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Review Market Research Questions
Executive Summary
Review and refine expenses
Assignments: Complete expense, revenue & financial summary.
Prepare Executive summary for discussion with Bill Newman. BRING A COPY TO BILL
NEWMAN MEETING, AND E-MAIL TO INSTRUCTOR.
Mon- 2/23
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Scheduled meetings with Bill Newman- choose a half hour time slot between 1:00 and 4:30 pm. All
group members should plan on attending and participating- 30’ each (325 Bexell)
Work Session- Preparation of Commercialization Plan (2:00-3:00)
Bill Newman “VC Expectations and Venture Funding” (3:00-4:00)
NOTE CHANGE IN LOCATION – 325 Bexell NOT Weatherford
Wed-2/25
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And after that….
Source of Financing and Connecting to Milestones (30’)
Commercialization Plan Checklist (30’)
Work Session (50’)
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Refine Revenue and Financing Plan
Outline for commercialization plan
Assignment: Begin preparing slides for in-class presentations
Mon- 3/2
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Scheduled meetings with Paul Gulick (1/2 hour between 11:00 and 2:30)
Paul Gulick- “VC Expectations and Venture Funding” (60’)
Assignment: Complete slides for in class presentations (Wed)
Wed- 3/4
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In class presentations- with audience
Market Research Questionnaire
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This is a list of forty questions about your
commercialization plan
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Divide these up among group members and discuss the
answers
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If you don’t have solid answers, you should do additional
research to get them!
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Include them in your presentation or written report. Even
if they are not a part of your plan or presentation, these
will be likely questions from Paul, Bill or the judging
team…
The Executive Summary
A concise ~1-2 page summary to provide an overview and
get their attention. Should cover…
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The Company and Product- company concept, product or service form, and
position in value chain
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The Market: Reasons this market is appealing: revenue base, trends, sector
growth rates, and typical margins.
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The Technology: brief description and inventor details, stage of
development, collaborations, current interest, or other context
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The Customer: features, performance and benefits vs competitors, why they
will buy, pricing, time to payback for customer
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Financial: investment and resources to get technology developed, revenue
projections, time to break even
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Future plans: future products or extensions to other markets
Review your expenses
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Yes- you should sweat the small stuff- cash is king for a startup!
Some considerations you may have missed…
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Employees
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Is full time needed, or can you subcontract early on?
Hire when needed, not before
Don’t forget the cost of benefits (30-50% adder to salary)
Marketing, Sales and legal fees
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This are essential functions for a start-up
Costs are often overlooked, but substantial- travel, conferences, customer visits, etc
Can you subcontract this?
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Licensing costs (expect to negotiate this as a percentage of revenues)
 Distribution costs (getting the product to customers)
 Facilities for office space, manufacturing and R&D (find out costs for commercial
real estate- monthly $/sq ft)
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The end result should be a year-by-year budget for total expenses
for the first 5 years
Generating Revenue Estimates
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Needed information for each product
A. Size of total size of potential market (units or
customers)
B. Acceptance or market penetration rate (% of total
market per year)
C. Your unit selling price ($/unit)
Yearly Revenue= A*B*C
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The end result should be a year by year revenue projection for
the first 5 years
Sample Revenue ProjectionsBiofuels Unit
Year 1
Year 2
Year 3
Year 4
Year 5
Total Potential
Customers
500
505
510
515
520
Market
Acceptance (%)
0.2%
1%
2%
5%
7%
Cost per Unit ($)
$16K
$14K
$14K
$12K
$12K
Estimated
Revenue ($/yr)
$16K
$70K
$142K
$309K
$436K
Complete a similar projection for each product or source of revenue
Revenue Forecasting- Pitfalls to avoid
1.
An overly aggressive acceptance rate
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Include considerations such as
Overall market growth rate
 Aggressiveness or conservatism of target customer
 Competitors
 Barriers to entry
 Be optimistic but realistic- investors will mentally derate your revenue
estimates in any case!
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2.
Aiming for a very small percentage of a huge
market
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Targeting 0.03% of $100B market after 5 years. What is wrong
with this revenue estimate?
Financial Summary: Positive Cash Flow and “Break Even”
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You can use other financial approaches, but the needed end result should
be a year-by-year summary of expenses and revenues for the first five years
Revenues
$
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Expenses

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