Lead To Win Bootcamp - Day 3

Lead to Win Slide 1

Welcome to Lead to Win Thursday, October 27, 2011

Lead to Win Slide 2

Day 3

David Hudson

(Carleton)

Day 3 opportunity assessments

David Hudson

(Carleton)

Reviewers comments

Eric Dormer (Dawnsuite Communications) & Jason Daley (UcreateMedia)

Founders Club welcome

Tony Bailetti

(Carleton)

Growth & Days 4-6

Lori O’Neill (Deloitte & Touche LLP)

Funding your startup

Janice Singer & Deborah Dexter (IRAP) Day 3 takeaway messages

Wrap-up

Lead to Win Slide 3

Day 3 Opportunity Assessments

October 27, 2011

David Hudson

Lead to Win Slide 4

Ottawa-Gatineau experience

Opportunity development

Deal development

1 2 3

4 5 6

4 wks

Jun 09

Aug 09

Nov 09

Mar 10

Jun 10

Nov 10

Nov

11

Total

Applicants 82 66 98 69 41 49 59 464

Day 1 accepts 62 46 55 49 35 29 46 322

Day 4 accepts 51 35 44 37 22 18 ? 207

Admitted to Phase 3 (passed Day 6)

Founders 39 27 34 26 14 13 ? 153

New startups 30 19 21 18 11 11 ? 110

75 start-ups active as of October 15, 2011

Lead to Win Slide 5

Day 3 opportunity reviews

• Criteria and process to assess opportunities set by representatives of nine LTW Strategic Associates – Part A - scoring

1. CUSTOMER VALUE

2. COMPETITIVE

3. PARTNER VALUE

– Part B - opportunity’s readiness for Day 4: Operations

– Part C - substantive feedback to opportunity proponents

• Scoring of 1/2/3 – Green: OK

– Yellow: OK with a specific action

– Red: Considerable work still required

• Reds are not invited to join Days 4-6

Lead to Win Slide 6

28 Reviewers

1. Consumer products (Daisy, 1st floor)

• Line Brabant (LINE International)

• Chris Cope (City of Ottawa) • Dan Istead (Fed Government) • Christine McCrady (RBC) • Jonathan Wells (Carleton) 2. HW & SW products (Marigold, 1st floor) • Peter Carbone (PJCI) • John Fielding (OCE) • Farzi Khazai (Tech Gemini) • Raina Sharma (BDC) • Stoyan Tanev (U Southern

Denmark)

3. Internet services A (Blue, 2nd floor)

• Hanan Anis (uOttawa) • Mark Antaya (Investors) • Rob Collins (YearOne Labs) • Llynne Plante (IRAP)

4. Internet services B (Red, 2nd floor) • Elizabeth Gilhooly (Nuvance) • Claude Haw (VentureCoaches) • Harriet Waterman (IRAP) • Michael Weiss (Carleton)

Lead to Win Slide 7

28 Reviewers (continued)

5. Services

(Violet, 1st floor)

• Saad Bashir (City of Ottawa)

• Candace Enman (Welch Group)

• Fiona Gilligan (Fiona Gilligan)

• David Hudson (Carleton)

• Sophia Leong (Industry Canada)

6. Special

(Lilac, 3rd floor)

• Diane Isabelle (National Research Council)

• Carole Lair (OCRI)

• Karen Letain (ETIS Technologies)

• Steven Muegge (Carleton)

• Ian Scott (City of Ottawa)

Lead to Win Slide 8

Process

• Presentations are made only to panel of reviewers

• 20 minutes is allocated to each opportunity. 20 minutes is a hard limit.

• Lead reviewer is responsible for:

– Distributing / collecting Opportunity Assessment Forms

– Assigning ID codes to reviewers to guarantee reviewer anonymity

– Keeping time and smooth running of the reviews

– Ensuring forms are properly completed

– Dealing with issues

– Improving the opportunity assessment process

• Each reviewer rates each opportunity independently before the next group/individual is allowed into the room

• If reviewers and opportunity proponents wish to exchange cards, arrange follow ups, etc.; they should do so during lunch or the social and not take time away from the assessment process

Lead to Win Slide 9

Suggested time allocation

• We suggest – Set up time and niceties: 2 minutes

– Presentation: 10 minutes

– Q & A: 5 minutes

– Day 3 Opportunity Assessment form completion: 3 minutes

• Up to Review Panel

Lead to Win Slide 11 Slide 11

Lead to Win Founders Club Co-chairs: Eric Dormer & Jason Daley

Lead to Win Slide 12

Blueprint to growth

(one more time)

October 27, 2011

Tony Bailetti


Distinct functions of entrepreneurs

1. Responds to existing or future profit opportunities, all of which consists of price differentials

2. Acts to move away or destroy her/his present state

– Seeks autonomy

– Authors relationships

– Makes declarations

Resources & processes

Decisions to employ resources & processes

P1 P2

Expects P2 > P1

Sales of:


Four key skills

• Make decisions when future is unknowable

• Identify, create, shape, develop and refine opportunity

• Acquire and combine resources

• Champion customer adoption of your firm’s products, services, solutions, processes


Blueprint to grow revenue

Revenue for 6+ jobs

Get house in order

Secure commitment

Close deals

• Raise bar • Divest what adds no value • Get legal, cash, IP & personal affairs right • Act based on results/facts

• Create mind share around offers & “why” company does what it does • Lever talent, technology & resources worldwide • Lower cost of customer acquisition & go to market • Skills

• $ • Access/reach • Time

• Implement growth formula • Increase # & diversity of players that make money when you sell • Develop differentiators for which customers pay • Keep pace delivering value to customers & players • Select right competitors • Embrace customers’ changes

Overcome consumption

barriers


Inventory of growth formulas for small companies

1. Help strong customers grow

2. Bring innovation to market as complementary offer to strong players’ offers

3. Apply good technology developed by others to different markets

4. Sell services to niche first & then develop & sell product

5. Demonstrate offer works, sell to first customers, & identify profitable business model at the price first customers are willing to pay

6. Demonstrate that offers provides value to users & economic benefits to customers & can be delivered at a profit


Inventory of growth formulas (continued)

7. Make competition irrelevant by concurrently delivering 2X the value at half the cost

8. Sell to narrow niche, cross-sell, then fill higher order needs

9. Sell to customers in mature markets abandoned by incumbents

10.Fill gaps that occur when migrating from an old to new system

11.Resell services in geographies that are too expensive for other service providers


Days 4-6 overview

October 27, 2010

Tony Bailetti


Tasks

• Harden and strengthen opportunity – Incorporate peer and Day 3 reviewers’ feedback

– Prepare presentation for Day 6 assessment

– Self assess presentation using 7 dimensions

• Expand network – Attend social and engage

• Gain knowledge to establish and grow tech business – Review and apply Day 1-3 course material

• Gain confidence, encouragement and motivation – Interact with peers

• Build foundation to sell to first customers – Identify first customers


Days 4-6

• Day 4

– Legal issues

– Business models

– Peers’ opportunity presentations

– Entering a market, lessons from an entrepreneur

• Day 5

– Team and steering, lessons from an entrepreneur

– Operations, lessons from an entrepreneur

– From idea to management to sale, lessons from an entrepreneur

• Day 6

– Day 6 Opportunity Assessment

– IRAP services to companies

– Social where we hand out LTW Certificates of Achievement


Agenda

• So, you want to be an entrepreneur

• Funding your firm and your family

• Your runway

• Sources of funding

• Key take aways

• Scenario


Funding your firm and your family

• Upon completion, – You will know . . .

• What it means to be an Entrepreneur

• How to separate family and firm

• How much money you need and when

• How much risk is for you

• Sources of funding

– You will know how to . . .

• Take stock of your personal and professional situation

• Engage your family in the process

• Understand your funding sources


Becoming an entrepreneur

• Pros – What are these

• Cons – How high are these

So what’s the worst that can happen – ??????


Becoming an entrepreneur

• Pros – Living the dream!

– Build a firm my way

– Possible comfortable living or exit in excess of $1m

– Innovative IP

– Capitalize on your strengths

• Cons – Give up on a full time job and

lose $100k income

– Go into debt for $100k

– Work very long hours

– Not see the family

– Learning process

So what’s the worst that can happen – out of work for 12 months and a $100k debt


Sharing with the family

• This is a dialog!

• The plan – Describes your thinking and planning

– Lets them describe their thoughts (may take weeks)

• The expectations – Articulate your expectations, listen to their expectations

– Describe the time invested

– Describe financial expectations and situation

• The exit – Establish your exit plan, with clear exit event or point

• The contract – Take the time and write it down and refer to it monthly


Sharing with the family

• Describe the plan – I would like to do this . . . (Start a firm, test equipment, etc)

• The expectations – Articulates the expectations – borrow $100k

– Work long hours, never home for dinner or always home for dinner but work in the evening??

– No vacations etc because of low funds

• Family response – They agree to do . . . (Look after the family single handedly)

• The exit – Establish the clear quit point – after 2 years if no sales then will

go find a firm to work for . . .

• The contract – Write it all down and everyone signs even the dog


Entrepreneur’s Life

• It’s lonely at the top – Find a trusted confidant to talk to when things are going well, so

you can confide when things are bad – spouses are not a good choice

• Constantly looking for funds – Never pass up funds because you think you have enough

– Ever opportunity must be taken

• Driving the direction of the firm – Dealing with challenging employees

– Selling to customers

• It’s the best job ever!! – Extreme highs and extreme lows


Setting up the firm

• Stock structure – capital structure

• Shareholder rights, drag alongs

• Incorporation

• What happens if you leave

• What happens if you fire your partner


Business corporation basics

Shareholders

Elect

Hire Retain

Appoint

Appoint

Appoint

Internal Auditor

Board of Directors

Management / Company

Employees Consultants & Advisors

Auditor

Audit Committee

Appoint

• Ownership is separate from management

• Board is responsible to manage or supervise the business affairs and may delegate its authority to management

• As a startup, you likely are all three, but need to understand the different rights and responsibilities


Different funding for different firms

• Consulting firms – Require virtually zero capital to start, usually all intellectual property is in

the heads of the employees

• Intellectual property license firms – Require minimal capital to build, usually the first invention (patent) can

be built with a couple of people with product launch via license or lawsuit

• Internet and mobile app firms – Require minimal capital to build, usually the product development can

be completed by a couple of people with product launch via the web

• Software firms – Require intermediate amounts of capital to build, because of longer

product development cycle, however, fixes can be applied after product launch

• Hardware firms – Require the most amount of capital to build, because of the longer cycle

coupled with any hardware rework costing significant time and money to implement


Remember “Cash is King!”

• Without cash – your family won’t eat – Stress? You need a $ platform to keep you whole!

• Without cash – your business won’t make payroll – How much?! Too little you choke, too much you waste it.

• How much $$ do you need? When do you need the $$

• It takes two plans – Family and Firm


It’s obvious .. .. ..

• Cash Flow and Risk are intertwined

• Family – Understand how much it costs to live

– Prepare the family budget (even if its just you)

– You can’t just move money between home and your business

– What’s the worst case scenario? – What can you live with?

• Business – Understand how much it costs to build

– Prepare a business cash flow forecast

– Be pessimistic (2x the time and 2x the cost)

– Know the bottom line costs


Example : monthly cash flow plan

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CASH OUTFLOWS

Rent (600) (600) (600) (600) (600) (600) (600) (650) (650) (650) (650) (650)

Utilities 0 (50) 0 (50) 0 (30) 0 (30) 0 (30) 0 (50)

Phone and Internet (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40)

Materials 0 0 0 (200) (500) 0 0 0 0 0 0 0

Testing 0 0 0 0 0 0 (500) 0 0 0 0 0

Advertising 0 0 0 0 0 0 0 (400) 0 0 0 0

TOTAL CASH OUTFLOWS (640) (690) (640) (890) (1140) (670) (1140) (1120) (690) (720) (690) (740)

CASH INFLOWS

Savings 6000 0 0 0 0 0 0 0 0 0 0 0

Government Grant 0 0 0 0 0 0 0 0 500 0 0 500

Family loan 0 0 0 0 0 0 0 0 0 0 5000 0

TOTAL CASH INFLOWS 6000 0 0 0 0 0 0 0 500 0 5000 500

Opening balance 6000 5360 4670 4030 3140 2000 1330 190 (930) (1120) (1840) 2470

Closing balance 5360 4670 4030 3140 2000 1330 190 (930) (1120) (1840) 2470 2230


Example of cash flow projections

Company Name Forecast operating results & cash flow from operations Currency $’000’s

Forecast For Years Ending (Month and Day)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Revenue xxx xxx xxx xxx xxx xxx

COGS xxx xxx xxx xxx xxx xxx Gross Profit xxx xxx xxx xxx xxx xxx Operating expenses xxx xxx xxx xxx xxx xxx Operating expenses 1 xxx xxx xxx xxx xxx xxx Operating expenses 2 xxx xxx xxx xxx xxx xxx Operating expenses 3 xxx xxx xxx xxx xxx xxx Total operating expenses xxx xxx xxx xxx xxx xxx Operating income/(loss) – EBIT xxx xxx xxx xxx xxx xxx Interest expense xxx xxx xxx xxx xxx xxx Earnings (loss) before tax xxx xxx xxx xxx xxx xxx Income tax xxx xxx xxx xxx xxx xxx Net income (loss) xxx xxx xxx xxx xxx xxx

Operating income/(loss) – EBIT xxx xxx xxx xxx xxx xxx Add: Depreciation /amortization xxx xxx xxx xxx xxx xxx

EBITDA xxx xxx xxx xxx xxx xxx Less: Cash taxes xxx xxx xxx xxx xxx xxx Less: Working capital investment xxx xxx xxx xxx xxx xxx Less: Capital expenditures xxx xxx xxx xxx xxx xxx Cash flow from operations xxx xxx xxx xxx xxx xxx


Sources of funding

• You build runway with $$ – Angels, friends and family

– Venture Capital

– Banks

– Government

– Strategic Investment

– Capital Pool Company (CPC)

– Initial Public Offering (IPO)


Angels, friends and family

• Earliest investors

• Desire for privacy makes them difficult to identify/find

• Deploy small amounts ($10k – 500k)

• Often participate as angel “groups” • Longer term investment horizon, often with high return

expectations

• Provide funds for product development

• Provide cash for common shares, convertible debt

• Valuation of shares a question

• May provide services for shares

• Need a shareholder agreement to set out the terms

• Realize this could ruin relationships with whomever invests….


Venture capital

• Equity investor looking for high growth over 5-10 years

• VC Status – Canadian VC LP system is in distress

– WW VC funding is reducing to pre-2000 levels (half the current rate)

– Number of VC firms and funding to be reduced to 50% of current levels

– Expectation that it will be significantly more difficult raise funding than even today

• VC Game – Experienced teams, large markets, significant traction

– In the beginning of the firm’s life, firms need to tap other funding sources

– Eat a share of your firm every time they invest

– Leave you with 1 or 2%!!!

– You may be pushed aside

• Risk – if the plan fails VC’s will own/control your firm!


Banks

• There are many types: charter (eg big five), quasi-banks, government (BDC, EDC), investment

• Need assets to secure the funds – Your house – Your receivables

• They do not take risks – they are lenders, not investors • They are very useful at various times but look for the collateral

– After you file income tax, an SRED claim is collateral – After you ship, accounts receivable is collateral – After you own inventory, its collateral – Etc.

• RISK – if the plan fails, you could lose your house! • Reward – non-dilutive to your ownership, use someone else

money


Government

• Government Funding – Policy based, such as employment driven – Long gestation cycle, may take a year – Funds arrive in buckets (they can run out part way through the

year) – Competitive in nature – your proposal must be better than others – Avoid people who promise to get you funding – Watch out for repayable loans, they have expensive reporting

requirements

• RISK – As long as you complete the project as outlined, little risk

• Reward – Non-dilutive source of funds


Government (continued)

• SDTC – Sustainable Development Technology Canada

– Projects must demonstrate new technology with environmental sustainability

– Collaborative with industry/academic partner

• ETF – Emerging Technologies Fund

– For Ontario innovation

– Clean technology, life sciences, digital media, information communication technology

– Passive equity investment

• OCE – Ontario Centers for Excellence

– Funds for research, commercialization and talent

– Must collaborate with academic initiation



• OCE – Investment Accelerator Fund

– Seed money preparing company for first round funding

– Joint between MARS in Toronto & ministry

– For Ontario innovation, clear path to commercialization

• IDF – Innovation Demonstration Funds

– Environmentally friendly technologies

– Ontario based, global market, tested technology

– Combined grant and debt vehicle

• SADI – Strategic Aerospace Defense Initiative

– Aerospace & defense activities

– Working with research and academic institutions

– Promotes innovation

– Contributes % of expenses, repayable royalty



• IRAP – Industrial Research Assistance Program

– Help small/medium business commercialize IP

– Typically provide < $200k

• Market Access Program

– Global expansion for small/medium business in Ontario

– More than 5 employees and minimum $500k

– Eligible for trade shows, market research etc. up to $30k per project to a max of 50% of costs


R&D tax credit program

• Combined tax credits available to qualifying Canadian Controlled Private Corporations (CCPCs): – Claim is filed annually via corporate tax return (after money is

spent)

– 35% enhanced refundable credit on first $3 million

– 20% on balance (may be partially refundable)

– Taxable income and taxable capital tests must be met to qualify

– Additional credits available from Provinces

– Deadline to file a claim is 18 months after fiscal year end

– Must have documentation & evidence that criteria are met


Capital Pool Company (CPC)

• Capital Pool Company (CPC) – publically traded company with cash and no operations

• Exists as vehicle for small business to obtain funds and become public

• A TSX Venture Exchange program

• Filing and clearing of a prospectus, completion of an IPO and listing of the CPC’s common shares on the exchange

• Agreement in principle in respect of a proposed qualifying transaction

• Provides entry-level public vehicle for small businesses

• Public offering is a minimum of $200K and maximum of $1,900K.

• Gives access to future equity financing

• Expensive process – legal and compliance requirements


Strategic investment

• Possibly at later stage

• Equity financing form strategic investor

• Motivated by business/strategy/fit as opposed to financial opportunity

• Complementary to your business?

• Consider whether this might limit potential for future financing/exit


Initial Public Offering (IPO)

• Co offers common shares to the general public, in CDN or US

• Typically when revenue growth & profitability trending very positive

• Need underwriter, lawyers, accountants

• Complex, costly legal process involving filing of “prospectus”

• Process takes 3-6 months, completion depends on market conditions

• Provides liquidity exit to investors and cash to company for growth acquisitions, etc.


So… can your firm generate any cash?

What is your business model??

•No revenue, small costs

•No revenue, lots of costs

•Revenue from services while concurrently developing product

•One partner has a job and pays the rest to develop product

•Revenue from customers at the outset

•Revenue from R&D and selling IP

•Revenue from selling product or service that complements a large firm's product or service

•There are many business models!


Key Takeaways

• Family is as important as the firm

• Know your limits

• Many sources of funding exist

• Plan for it to take 2x in time and cost 2x in funds than your forecast

• Things change as you grow, be prepared to exploit changes

• Don’t isolate yourself, build and value your peer community


Two Friends with a Plan

• Person 1 – Bill is a new PhD grad who has been doing work on innovative “test instrument” to measure very low analog signals

• Person 2 – James is a test and measurement industry veteran with experience in selling and marketing products to semiconductor firms world wide

• Opportunity – to commercialize the new “test instrument” technology to test battery packs, a need in the emerging green automobile market.

• Implementation – to create, build and sell a new hardware based “test instrument” into the automotive sector


Background on James

• Age 40

• Married for 15 years with two children, a girl 14 and a boy 10

• Comfortable life, low debt load (can afford a $100k loan)

• No significant retirement savings for James

• Spouse works for Fed Gov ($60k per year)

• Always talked about starting his own business

• Met Bill through a university – industry project and liked him and his technology


Becoming an Entrepreneur - James

• Pros – Living the dream!

– Build a firm my way

– Possible comfortable living or exit in excess of $1m

– Innovative IP

– Knows how to sell

• Cons – Give up on a full time job and

lose $100k income

– Go into debt for $100k

– Work very long hours

– Not see the family

– Doesn’t know the automobile industry

So what’s the worst that can happen – out of work for 12 months and a $100k debt


Sharing with the family - James

• Describe the plan – Describes thinking and planning with spouse and children

– Lets them describe their thoughts (may take weeks)

• The expectations – Articulates the expectations – borrow $100k

– Work long hours, never home for dinner or always home for dinner but work in the evening??

– No vacations etc. because of low funds

• The exit – Establish the clear quit point – after 2 years if no sales then will

go find a firm to work for . . .

• The contract – Write it all down and everyone signs even the dog


Personal/Family Budget

Jan Feb March April May June July Aug Sept Oct Nov Dec Year

Wages 3,000.00 3,000.00

Interest/dividends 0.00

Miscellaneous 0.00

Income totals 3,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,000.00

Mortgage/rent/taxes 0.00

Utilities 500.00 500.00

Home and mobile telephone 150.00 150.00

Food 700.00 700.00

Clothes and cleaning 0.00

Entertainment 500.00 500.00

Car, Bus, Fuel 500.00 500.00

Insurance 300.00 300.00

Health 50.00 50.00

Subscriptions 0.00

Dues 0.00

Charity 0.00

Recreation 0.00

Team dues 0.00

Courses 0.00

Kids Stuff 400.00 400.00

Vacations 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Home totals 3,100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,100.00

Long-term savings 0.00

Retirement (401k, Roth IRA) 0.00

Credit card payments 0.00

Line of Credit 0.00

Other obligations 0.00

Financial obligation totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other 0.00

Other 0.00

Other 0.00

Other 0.00

Other 0.00

Misc. payments totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total expenses 3,100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,100.00

Cash short/extra -100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -100.00

INCOME

Misc. payments

EXPENSES

Financial obligations

Home


Funding - Needs and Sources

• Year 1 – capital $100k (see spreadsheet) – Bill stays at university to teach and continue research (prototype)

• Applies for NSERC to pay him for 1 year

– James consults half time (all goes into firm) • Builds business plan, researches funding options

– Firm applies for IRAP support, meets with OCE • Firm is incorporated, shareholder agreements, etc prepared, taxes filed • All costs deferred by lawyers and accountants • IRAP supports technical intelligence search, OCRI supports business

intelligence search – firm closes in on marketing plan and business plan

• Year 2 – capital $100k (see spreadsheet) – Bill stops teaching, works on product full time, paid by OCE research – James stops consulting, leads firm full time, draws no salary – Firm hires first two key technical people, rest on contracts

• Firm completes prototype to show to potential customers (auto parts) • IRAP supports project to 75% of salaries and contractors • Capital is used to pay for rent (cheap building), material etc


Company – Cash Flow Forecast, Yr 1

Company Name In Thousands Cash Flow ProjectionPrepared By: For the Year Ending: Date:

Month -1 1 2 3 4 5 6 7 8 9 10 11 12 Total

Cash Receipts:

Cash Receipts:

Act Pay Receipts 0

Loans 0

Government Forecast 0

Other (James contract) 10 10 10 10 10 10 10 10 10 10 10 120

Total Cash Receipts 0 0 10 10 10 10 10 10 10 10 10 10 10 120

Cash Disbursements:

Company - Direct Labour 0 Fringe Benefits 0 Material Purchases 0

Overheads - Utilities 0

Rent / Mortgage 0

Insurance 0

Property Taxes 0

Office Supplies 0

Automobile 0

Travel 0

Maintenance 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.3

Admin - Salaries 0

Professional Fees 0

Advertising 0

Interest & Bank Charge 0

Income Taxes 0

Fixed Asset Additions 0

Loan Repayment 0

Other Company Costs 0

Company Exp Sub-Total 0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.3

Employee Expenses

Salaries - Position 1 0





Subcontractor / Cons 1 0

Subcontractor / Cons 2 0

Project Material 0

Rental Equipment 0

Project Travel 0

Project Overhead 0

Other Project Costs 0 Exp Sub-Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Disbursements 0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.3

Net Cash Over (Short) 0 -0.1 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 118.7

Cash Balance, Beginning 100 100 99.9 109.8 119.7 129.6 139.5 159.3 169.2 179.1 189 198.9 208.8

Cash Balance, Ending 100 99.9 109.8 119.7 129.6 139.5 149.4 169.2 179.1 189 198.9 208.8 218.7

!




Month -1 1 2 3 4 5 6 7 8 9 10 11 12 Total

Cash Receipts:

Cash Receipts:

Act Pay Receipts 0

Loans 0

Government Forecast 18 18 18 18 18 10 10 10 10 10 10 168

Other (specify) 0


Cash Disbursements:



Rent / Mortgage 2 2 2 2 2 2 2 2 2 2 2 2 26

Insurance 0

Property Taxes 0

Office Supplies 2 2 2 2 2 2 2 2 2 2 2 2 26

Automobile 0

Travel 0

Maintenance 2 2 2 2 2 2 2 2 2 2 2 2 26

Admin - Salaries 0

Professional Fees 0

Advertising 0


Income Taxes 0


Loan Repayment 0


Company Exp Sub-Total 0 6 6 6 6 6 6 6 6 6 6 6 6 78

Employee Expenses

Salaries - Position 1 5 5 5 5 5 5 5 5 5 5 5 5 65

Salaries - Position 2 5 5 5 5 5 5 5 5 5 5 5 5 65




Subcontractor / Cons 1 7 7 7 7 7 7 42


Project Material 30 30 60

Rental Equipment 3 3 3 3 3 3 3 3 3 30

Project Travel 0

Project Overhead 0


Total Disbursements 0 30 30 30 63 63 33 19 19 19 19 19 19 382

Net Cash Over (Short) 0 -30 -12 -12 -45 -45 -15 -9 -9 -9 -9 -9 -9 -214

Cash Balance, Beginning 218.7 218.7 188.7 176.7 164.7 119.7 74.7 58.7 49.7 40.7 31.7 22.7 13.7

Cash Balance, Ending 218.7 188.7 176.7 164.7 119.7 74.7 59.7 49.7 40.7 31.7 22.7 13.7 4.7

??


Funding - Needs and Sources

• Year 3 – capital $0k, need another $300k (see spreadsheet) – Bill joins firm full time, no salary

– James with firm full time, no salary

– Firm signs first customer order but product needs a complete redesign

• Contract worth $100k

• Funding from??, Angels, customer, supplier?

• Year 4 – capital $500k – Bill and James draw a modest salary, $40k ea

– Firm ramps business to $1m

• Firm signs second customer

• EDC and BDC and bank support SRED, accounts receivable, etc

• Capital is used to pay for rent (cheap building), material, salaries etc

• Still cash flow negative but burn is reducing




Month -1 1 2 3 4 5 6 7 8 9 10 11 12 Total

Cash Receipts:

Cash Receipts:

Act Pay Receipts 50 50 100

Loans 0

Government Forecast 40 10 10 10 80

Other (ANGEL) 30 30 30 30 30 30 30 30 30 300


Cash Disbursements:



Rent / Mortgage 2 2 2 2 2 2 2 2 2 2 2 2 26

Insurance 0

Property Taxes 0

Office Supplies 2 2 2 2 2 2 2 2 2 2 2 2 26

Automobile 0

Travel 0

Maintenance 2 2 2 2 2 2 2 2 2 2 2 2 26

Admin - Salaries 0

Professional Fees 0

Advertising 0


Income Taxes 0


Loan Repayment 0


Company Exp Sub-Total 0 6 6 6 6 6 6 6 6 6 6 6 6 78

Employee Expenses

Salaries - Position 1 5 5 5 5 5 5 5 5 5 5 5 60







Project Material 30 30 90

Rental Equipment 3 3 3 3 3 3 3 3 27

Project Travel 0

Project Overhead 0


Total Disbursements 0 35 35 35 38 38 38 54 54 24 24 24 6 459

Net Cash Over (Short) 0 5 -5 -5 -8 -8 52 -14 -14 56 6 -24 -6 21

Cash Balance, Beginning 4.7 4.7 9.7 4.7 -0.3 -8.3 -16.3 21.7 7.7 -6.3 49.7 55.7 31.7

Cash Balance, Ending 4.7 9.7 4.7 -0.3 -8.3 -16.3 35.7 7.7 -6.3 49.7 55.7 31.7 25.7


Overall Review

• The pro’s and con’s of being an entrepreneur • Clearly communicate specifics with your family

• Understand the basics of corporate ownership

• Amount of funding depends on business model – risk/reward tradeoff

• Sources of funding - at each stage of life cycle

– Angels, friends and family

– Venture capital

– Banks

– Government

– R&D tax incentives

– Capital pool company

– Strategic investment

– IPO

– Calculate your personal budget and corporate cash flow forecast


Day 3 takeaways October 27, 2011

Janice Singer and Deborah Dexter


Day 3 takeaways

Lead To Win Bootcamp - Day 3

Business

Transcript of Lead To Win Bootcamp - Day 3