Go-to-Market Strategy Accelerating Your Go-to-Market Strategy By Randy Goldsmith, PhD www.t3dc.org www.venturecapitaltools.com

Every Entrepreneur Needs Investment Capital I’d like to start with this cartoon to emphasize a point. Regardless of the size of the venture or the type of venture, every venture requires capital from somewhere and someone. It might be the entrepreneurs own capital, bank financing, friends and family, or investors. It might be a tiny amount of money or it could be substantial. The cartoon suggests that regardless of the need and source, the better the entrepreneur understands the investment process the more likely they are to get funding….any type of funding even from themselves. As a coach, part of your job to ensure your client understands the dynamics of capital investment.

© 2005 Goldsmith

Venture Investors Accelerating Commercialization Hello, and welcome to the Venture Coaching Academy You are the first students in the first class of the VCA. Based on your experience and feedback, we hope there will be many more to follow. My name is Randy Goldsmith. I am the designer of the coaching process and author of the venture development tools used in the VCA. The development of the tools began in 1994 when I was with the NASA TT program and the coaching process began in 1998 when we were launching more than 200 companies per year over a 4 year period of time.

1st Five Fundamental Investor Questions How big is the market pain? How good is the solution? Is there a profit opportunity? Is this the right entrepreneur? Can it be done? Every investor has their own approach to evaluating a deal. Some will want to read a business plan first. Some will want to have a one-on-one discussion first or see a ppt. Regardless of the preference, they all will be looking for answers to big questions first. These questions are: How big is the market pain? How good is the solution? Is there a profit opportunity? Is this the right entrepreneur? Can it be done? This will be the investor’s first filter. If the answers to these questions intrigue the investor, they will move on to a deeper level of discussion.

2nd Five Fundamental Investor Questions How much money do you want? What are you going to do with it? How much money will I get back? When will I get my money back? How will I get my money back? The next set of questions relate to money. After all that is the reason you are talking to an investor…. To get money! So, it is only reasonable that they would ask and you should be immediately ready to respond to these questions. Any inability to speak specifically and in depth to these questions will indicate you are not prepared for investment. Keep in mind, these questions apply not only investors and/or lenders but also to the entrepreneur themselves. How much money do you want? What are you going to do with it? How much money will I get back? When will I get my money back? How will I get my money back?

Investigation Feasibility Development Introduction Growth Pre Seed Seed Early Stage Mid Stage Late Stage IPO This slide titled Agony and Ecstasy reflects the venture development pathway of moving from idea to market to profitability. The horizontal yellow line separating the “valley of death” and the “mountain top” represents the point in time a company is cash flow positive. All companies go through a period of time when they are cash flow negative due to operating costs exceeding revenues. Some companies like pharmaceutical ventures can expect much deeper and longer valley’s than software companies. The objective for any new ventures is to make the “valley of death” as short and shallow as possible. In other words to become cash flow positive as soon as possible. For those of us who work with new ventures know that it requires a good plan with support resources to successfully navigate the valley. The Venture Capital Tools are designed to facilitate and accelerate the commercialization process of bringing innovations to market. While these tools are designed to assist ventures seeking investor capital, they apply to any venture regardless of industry, stage of development, or source or type of venture financing. There are 3 typical venture models that represent most companies going through the valley of death. © 2005 Goldsmith

Venture-backed Financing Debt and/or Equity Equity

Process & Toolkit Innovation Readiness Entrepreneur Readiness Product Business Plan Readiness Venture Readiness Venture Valuation The commercialization process can be confusing and chaotic for entrepreneurs and companies who have never traveled this path before. This tool kit is applicable for new startups as well as existing companies who are developing products or services for market. The challenge for a startup is clearly the most difficult and risky because not only is the company developing a product or service for market, but it is establishing the business model and all of the business systems and processes at the same time. The eight tools listed above apply to any company commercializing a product, and all but the Innovation Readiness tool which is primarily for existing companies apply to new venture startups. Each of these tools is designed to reflect how an investor views the entrepreneur’s readiness to assume control of the venture, the commercial potential of the product, the risk in the business venture, the quality of the business plan, and the value of the venture. Risk Readiness Capitalization Evaluation

www.venturecapitaltools.com You will find all of the tools available at www. Venture capital tools . Com Before developing these web apps, these tools first administered manually in spread sheets, followed by incorporation into an electronic database format. You will receive a user name and password to this site in the next few days. This site provides a critical core component of the VCA.

The Process First: The VCA coaching process has been used with literally 1000’s of entrepreneur. This coaching process takes a strategic approach. It assumes the entrepreneur will recruit critical management elements or align themselves with critical SP’s. This process does not focus on the tactical elements of business systems. The process is designed to accelerate the commercialization process. This Coaching Process is primarily designed to assist entrepreneurs who are perfecting a product and a business at the same time.

Funding Pathway $$$$$$$$$$$ Due Diligence Term Sheet Investor Presentation Valuation Risk Assessment Business Plan Assessment The Coaching Process follows a very predictive sequence of activities. The activities with the yellow starburst indicate the VCA approach has tool to facilitate the process. Commercialization Strategy Venture Assessment Product Assessment Readiness Assessment Entrepreneur Assessment © 2009 Goldsmith

Funding Pathway $$$$$$$$$$$ Due Diligence Term Sheet Investor Presentation Valuation Risk Assessment Business Plan Assessment Non profits typically assist in the lavender colored activities…. Explain “honest broker.” Commercialization Strategy Venture Assessment Product Assessment Entrepreneur Assessment © 2008 Goldsmith

VALIDATED The Ideal Deal A high performance enterprise A radical, disruptive, platform innovation Exponential growth potential Serial entrepreneur Reliable financing resources In the last 20 years I have worked with thousands of entrepreneurs. And I can tell you with great satisfaction that every venture is unique with unique opportunities. I must confess that with each engagement I am hoping to find the Ideal Deal. Some business plans often purport to be the Ideal Deal but it requires Validation. Validation means the entrepreneur has verified all critical assumption in the business model with outside third-party market experts. This validation applies to all technical, market, and business elements. The quality of the validation process is what separates good deals from great deals. VALIDATED

Typical Clients All have an innovation. All want money. Few are investor ready. Some have intellectual property. Most have an innovation. All want money. Few are investor ready. Majority have intellectual property. 33% will be commercially viable.

Entrepreneur Readiness Assessment Hello, and welcome to the VCA session on coaching the entrepreneur.

Entrepreneurial Readiness As we listen with our left brain to the quantitative aspects, we are also listening with our right brain to hear the qualitative content. We are processing information to determine whether this individual has the “personal right stuff” to be an entrepreneur. We will not learn everything we need to know or want to know in one meeting. It is a progressive process… learning a little bit with each meeting. In addition there is a survey to expedite the process – the Entrepreneurial Readiness Survey. Among all the assessments in the Venture Capital Tools, I suggest the Entrepreneurial Readiness Survey be first one taken. The Survey consists of 5 areas of assessment: Credentials, Capabilities, Character, Commitment, and Circumstances To take the survey simply respond to each statement that reflects your belief. For example, from the pull down menu click on “Strongly Agree” if you strongly identify with the statement. Answer “Disagree” or “Strongly Disagree” if you do not identify with the statement. This slide reflects a sample score to the survey. The survey provides a percentage score in each of the 5 categories and an overall percentage ERL Score. The overall score reflects your Entrepreneurial Readiness Level. The questions are weighted based upon responses investors believe most important. A score of 90% indicates you compare with other venture capital funded entrepreneurs operating high performance enterprises and reflect entrepreneurial characteristics preferred by investor’s. A score of 80% or higher indicates you demonstrate the skills, know-how and characteristics of a successful entrepreneur in a self-financed, high-performance business. A score of 70% reflects a good foundation for a future entrepreneurial engagement while a score below 70% suggests more work experience, training, or personal development is indicated to meet the rigorous requirements of entrepreneurship. Right Brain! © 2005 Goldsmith

Entrepreneurial Assessment Credentials Character Circumstances Capabilities Commitment

Product Readiness Assessment Hello, and welcome to the discussion on the Product Assessment

Product Characteristics Types Process Product/Service Strategy Impact Sustaining Disruptive Value Enabling Competitiveness Profits Improvement Incremental Advanced Radical Utility Specific Platform Risks Development Market Financing Products vary widely in their commercial value with respect to commercial potential. Investors typically prefer to invest in products over services for a variety of reasons. Disruptive products are those that have the potential to change an industry or an entire economy. Sustaining products are typically improvements to existing products in the form of faster, better and cheaper. Investors place greater value on disruptive products. Products offer a value proposition to the user that either increases profits, competitiveness, or enables an increase in productivity. Users typically place their highest value on enabling products. Products can be classified by their degree of change when compared to competing products. This change can be an incremental, advanced or radical improvement. Investors seldom take an interest in an incremental improvement and prefer to invest in products that demonstrate advanced if not radical differentiation. Products are classified with respect to their utility. A product with a single purpose is considered to have a specific application. Products that have a single application across multiple industries, multiple applications within a single industry, or multiple applications across multiple industries is considered a platform technology. A product that meets the requirements to be a disruptive, enabling, advanced or radical platform product would be exceptionally attractive to an investor. In spite of a product’s unique commercial characteristics, successful commercialization is dependent on successfully overcoming all of the venture and market risks associated with bringing a product to market. © 2008 Goldsmith

Third-party Validation University scientist Industry subject matter expert Knowledgeable investor Consultant Third party validation is a critical factor for validation. There are a variety of subject matter experts who can speak to the commercial potential of a product or service. Normally, the coach will arrange for the entrepreneur to provide the expert with as much information as possible related to the technical features and functionality of the product or service as well as any market insight the expert might have. The expert will usually provide a one to five page report. Costs for third party validations range from free to $1000. The information provided is often reflected in the business plan. The report will normally generate as many questions as it does answers. These questions will justify the need for the coach to meet again with the entrepreneur in a timely manner.

Venture Readiness The Commercialization Pathway Hello, and welcome to the discussion on venture readiness. The Venture Readiness survey is the heart of the commercialization tool kit.

Commercialization Plan 7 6 Milestones Capital infusion Expenses Revenue 7 NO! Money 5 4? 4 Whether the company is an existing company bringing an innovation to market or a startup company launching the venture and product simultaneously, a commercialization plan is essential. A poor plan poorly executed will lead to a quick venture failure. 3 2 11 Time

Commercialization Plan Milestones Capital infusion Expenses Revenue 7 Money Yes! 7 6 A good commercialization plan is the quickest way to success which is translated as product, customers, sales, and cash. 5 4 3 11 2 Time

COMMERCIALIZATION MODEL © 2008 Goldsmith Stage I Investigation Stage 2 Feasibility Stage 3 Development Stage 4 Introduction Stage 5 Growth Stage 6 Maturity Technical Technical Analysis Technical Feasibility Engineering Prototype Pre-production Prototype Production Support Production Step 1 Step 4 Step 7 Step 10 Step 13 Step 16 Marketing Market need Assessment Market Study Strategic Market plan Market Validation Sales & Distribution Market Diversification Each Stage in the commercialization model is broken down into a logical and sequential set of steps. While it is possible to address activities within multiple steps at the same time, it is advisable not to deviate substantially from the sequential pathway in order since the activities of each step support each follow on step. Each step should be considered a stage-gate step providing valuable information to the potential viability of the opportunity. A “go/ no go” decision process will insure that the assumptions and data incorporated into the business model are validated and reliable. Step 5 Step 2 Step 8 Step 11 Step 14 Step 17 Business Venture Assessment Economic Feasibility Strategic B/plan Business Start-up Business Growth Business Maturity Step 3 Step 6 Step 9 Step 12 Step 15 Step 18

Detailed Commercialization Model © 2008 Goldsmith Detailed Commercialization Model Stage I Investigation Stage 2 Feasibility Stage 3 Planning Stage 4 Development Stage 5 Growth Stage 6 Maturity Technical Engineering Prototype *Engineered prototype *Material, equipment, process requirements and sourcing plan. *Performance assessment plan. *Optimize design. Technical Analysis *Problem/Solution technical evaluation. *IP Review. *Preliminary subject matter expert review. *Preliminary cost analysis. Technical Feasibility *Bench design working model. *Proof of concept. *Customer-driven revisions. *Manufacturability and scalability analysis. Pre-production Prototype *Pre-production prototype. *Production process design. *Material and supplier agreements. *Pilot production. *Performance, reliability & Quality tests. Production *Equipment and facility. *Full scale production. quality tests. *Field support system. Production Support *Customer support. *New/improved products. *Warranty program. *Research and development. Marketing Strategic Market Plan *Market tests. *Advertising, sales, distribution plan. *Marketing materials. *Market development *Resource and timeline plan. Market Need Analysis *Problem/Solution market evaluation. *Industry trends analysis. *Preliminary competitive assessment. *Informal market validation. Market Validation *Initial sales. *Customer satisfaction survey. *Production, market adjustments. Sales & Distribution *Sales. *Market expansion. *Customer surveys. *Promotional campaigns. Market Diversification *Market trend analysis. *Marketing resource allocation. *New marketing strategies. Market Study *In-depth target market *In-depth competitive analysis. *Expression of interest from primary target market. Each Stage in the commercialization model is broken down into a logical and sequential set of steps. While it is possible to address activities within multiple steps at the same time, it is advisable not to deviate substantially from the sequential pathway in order since the activities of each step support each follow on step. Each step should be considered a stage-gate step providing valuable information to the potential viability of the opportunity. A “go/ no go” decision process will insure that the assumptions and data incorporated into the business model are validated and reliable. Business Strategic Business Plan *Business plan. *Venture financing.. *Operations implementation plan. *Advisory and director boards. *Staffing plan. Venture Assessment *Profitability assessment. *Preliminary business model design. *Capital requirement estimate. *Management requirements. Economic Feasibility *Develop 5-year pro-forma. *Develop financial requirements. *Business organization. *Secure seed financing. *IP filing. Business Start-up *Initial staff hires and training. *Business policy, procedures & operations. *Venture financing. Business Growth *Full staff. *Management operations. *Business systems. *Contracts. Business Maturity *Corporate development. *Financial management. *Return on investment. Enterprise growth Strategy.

Initial Assessment (completed ) Stage I Investigation Stage 2 Feasibility Stage 3 Development Stage 4 Introduction Stage 5 Growth Stage 6 Maturity Technical Pr Technical Analysis Technical Feasibility Engineering Prototype Pre-production Prototype Production Step 1 Step 4 Step 7 Step 10 Step 13 Step 16 Marketing Market need Assessment It is not uncommon to see entrepreneurs and companies (particularly those that are technically or engineering focused) expend time and resources to develop the technical steps first before addressing the marketing and business steps. This usually results in unnecessary delays when the implications from marketing research and business modeling are factored into the commercialization strategy. Step 2 Step 5 Step 8 Step 11 Step 14 Step 17 Business Venture Assessment Strategic B/plan Business Start-up Step 3 Step 6 Step 9 Step 12 Step 15 Step 18

Optimal Path (completed ) © 2008 Goldsmith Stage I Investigation Stage I Investigation Stage 2 Feasibility Stage 2 Feasibility Stage 3 Development Stage 4 Introduction Stage 5 Growth Stage 6 Maturity Technical Technical Analysis Technical Feasibility Engineering Prototype Step 1 Step 4 Step 7 Step 10 Step 13 Step 16 Market need Assessment Market Study Strategic Market plan The recommended approach to commercialization is to follow the sequential stepwise pattern. This insures the most efficient use of time and resources and minimizes the number of missteps. Step 2 Step 5 Step 8 Step 11 Step 14 Step 17 Business Venture Assessment Economic Feasibility Step 3 Step 6 Step 9 Step 12 Step 15 Step 18

Commercialization Strategy Vision Product Marketing Financing People Operations Once there is clear evidence that the product or service has commercial potential, the entrepreneur has the will and capacity to take the venture forward, there is consensus on venture progress and a realistic assessment of the venture risk level, it is time to develop a “go to market” commercialization strategy. The purpose of the commercialization strategy is to develop the most efficiently achievable pathway to being cash flow positive. The end product of this step is the business plan. There are dozens of books and templates available to assist in this process, but what most fail to address is risk. A fundable business plan will be written with a common theme of risk mitigation. Once again the 5 risk factors play a major factor in developing a commercialization strategy which will be incorporated into a written business plan. This is a team process. It is virtually impossible to write a fundable plan without a team of experts providing input in the form of legal, marketing, financial, engineering, and production information. Ultimately the plan will be only as good as the level of validation of the information provided. Ideally, a team effort!

Business Plan Readiness Accelerating Commercialization Hello, and welcome to the Venture Coaching session on BPR. My name is Randy Goldsmith, your instructor today.

Business Plan Readiness Assessment Executive Summary Introduction Company History Mission Objectives Product Description Technology Intellectual Prop Application Marketing Competitive Analysis Distribution Channel Marketing Strategy Pricing Management Executive Team Staffing Financing P&L Projections Proforma Use of Funds Offering The structure of the survey follows the five primary risks that investors consider in making an investment decision. It also provides an assessment of the quality of the executive summary in view of its importance to the investor’s first impression of the plan. We recommend that entrepreneurs use the business plan assessment to evaluate their own plan before sharing their plan with others. When scoring the plan, we encourage entrepreneurs to remember the following: Be honest with yourself. Remember - Investors look for reasons not to invest versus why they should. Remember - A score of “good” is not good enough for investors Remember - Have a qualified outsider read and score your plan. Remember – Be open to recommendations. Remember – As the business planning readiness results improve, the potential for funding increases. Score: The assessment provides a menu of responses to each question ranging from poor, fair, good, very good, and excellent. A score is generated for each of the risk areas as well as the overall plan. A score of 90% or higher is excellent while 80%, 70%, 60%, 50% correspond with very good, good, fair, and poor respectively. Investors would expect scores of 70 to 80% in all risk categories as well as the overall score. A score below 80% in any single risk category could disqualify the plan from investor consideration. © 2008 Goldsmith

A Fundable Plan: more than the average plan. If you are raising capital, your plan will differ significantly from other types of plans. One of the objectives of a well developed and well written business plan is that it present everything the investor needs to know, but nothing that is not critical and directly relevant to an investment decision. The investor does not want to read extra material. Maryann’s Law: You can always find what you’re not looking for.

Risk Readiness Accelerating Commercialization Hello, I am Randy Goldsmith and welcome to the Venture Coaching Academy session on Risk Readiness.

Identifying Risk: Fore warned Is Fore armed! When I think about coaching entrepreneurs, I am reminded of this cartoon and wanted to share it with you. Many people think going into business is a fairly simple process…. Hang out a sign, get a listing in the phone book, print some business cards, file with the secretary of state, and start selling or delivering your service. However, like this cartoon illustrates, the puddle may be deeper than it looks, and what you find when you fall in, is nothing like what you expected. Thus a coach can teach a client how to test the waters. Miller’s Law: You can’t tell how deep a puddle is until you step in it.

Risk Factors Product Risk Market Risk Financial Risk Management Risk Execution Risk

Did you ask your question? This concludes the session on the business plan readiness survey. Please submit any questions you have and I’ll see you next session