Vision - Defining the opportunity Market Research Market Testing Stuart W. Hillston CEO, Constellation Capital Supported by

Semester 3 – Session 1 Vision –Do you have one? –Can you articulate it? –Do you want to be the best? –What is your right to exist, to succeed, to exceed? Market Research –Driven by a market need to create a solution; or –Looking for a market for a solution you created? Market Testing –How do you know anyone will actually pay for your product/service?

Vision Your right to exist! –It is a competitive landscape –Lowering barriers to entry –Investors are spoilt for choice –A great many ideas/companies looking for money Your vision will differentiate you Your vision will convey passion, enthusiasm, scale & ambition Your competition is the company in front of the investor before you, and the one after you

What is your right to exist? Investors want to know why you are investable You need to know why you are investable Could “anyone” do what you do? Is this just a hobby? What is your motivation? What are your goals? The tallest tree in the forest gets the most light

What do investors want? Clearly identified target market (Market research, testing, vision) Committed, focussed management TEAM (Vision) Scalable business – huge growth potential (Market research, testing, vision) Revenues – either now, or credible plan to get them (Market research, vision) Valuation – a credible valuation (Market research) An exit strategy (Market research, vision)

What do investors want? Clearly identified target market –Who specifically will buy your products? –What price will they pay? –How will you get to them? –How will they know about you? –How will you expand over time? –Think: Geography Age/sex/income/location/employment/education/health/dwelling/work… Relate to existing products/services/routes to market –Surveys, trial products, social media, research, reading, asking, observing

What do investors want? Committed, focussed management TEAM –How skilled, experienced are the individuals in the team? –How well do they work as a time? –Do you know your strengths and weaknesses? –How will you improve, grow? –How will you fill the gaps? –How will you cope with change, growth, stress, failure? –How have you proven your commitment? –Have you invested cash? –Do you have other commitments? –Have you done it before?

What do investors want? Scalable business – huge growth potential –Will your product (or service) fulfill the needs of a very large market? –Is it globally applicable? –Can the margins get better with scale? –Are you dependent on the number of staff for growth? –Will you sell directly or indirectly? –Can your product work in any language? –How will you cope with growth? –How long with the management team last? –Do you have succession plans?

What do investors want? Revenues – either now, or credible plan to get them –Do you have current revenues (if “no”, skip forward!) How big are they – are they significant? What is the quality of those revenues? Were they from early adopters? How did you achieve them? Can they be reproduced? –Are your revenue forecasts credible? Is the growth rate achievable? Do you have a detailed sales & marketing plan? Do they scale? Do you understand cash flow, margins, P&L, profit? Are you dependent on a third party to make money?

What do investors want? Valuation – a credible valuation –You will raise money at a valuation which is negotiated between you and your investors –Is your starting point credible? –How do you know? –What have other companies raised early money at? –What did they exit it? –Do you understand IRR, RoI, RoCD? –Do you understand fully-diluted valuations? –Are you SEIS, EIS eligible? –What is your personal goal?

What do investors want? An exit strategy –Every business plan says “flotation or trade sale in 3-5 years” –Research flotations – AIM, Plus, NASDAQ, main list How are they achieved, by which companies, what do they cost? What valuations? What happens post flotation? Which sectors are floating on which markets? At what point in their growth (how big)? –Research trade sales Who will by you – what type of company? Name some typically companies What valuations? Who has been acquisitive? –The third way – MBO to provide investors with an exit

Defining the market Can you clearly articulate: –What you do, what problem you solve –Who you do it for –Why they need it –What they will pay for it –Who else will solve the problem –What is different about you

Defining the market Do you know: –Your target customer(s) –The size of the market –Route to market –Best price point –Future trends –The barriers to entry (for you & your competitors) –Top conferences, exhibitions, networking events, commentators, blogs, key opinion leaders

Market Research The three main areas of research: –Commercial –Product –Investor What research have you done? How thorough was it? The better you know your market, your customers & your investors, the higher the chance of investment.

Market Research Did you: a)Develop a solution & then research the available (possible) market(s) or; b)Research a market and identify a gap which you develop a solution for? What do you think the relative merits are of each approach?

Commercial Research Demand Revenue Market creation –Truly unique solutions can be a problem Competitors (differentiation) Price/demand curve Target customer knowledge Route to market

Commercial Research Route(s) to market –Direct –Distribution –White label –Alliance(s) –Component of a bigger solution –What do your competitors do? Market “shapers” –Bloggers, commentators, thought leaders –Complementary products/services –Big buyers/users/market influencers –Investors

Product Research Position – where you fit in the competitive landscape Fit for market R&D Features/benefits/needs Supporting requirements (training, technical support, service, reseller support, maintenance) Product roadmap Minimum viable product

Investor Research Sector expertise Current investees Scale of investment Stage of investment Competitive threat – who funded your competitors? Differentiation Exit strategies References

Summary Your Vision defines you as an investable opportunity – or not! Understand how and why investors invest Know your market – now and for the next 3-5 years Understand your competition Understand your customers needs/wants/pain Understand how you will make (lots of) money!