Download - 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
Lead to Win Slide 13
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:
Lead to Win Slide 14
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
Lead to Win Slide 15
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
Lead to Win Slide 16
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
Lead to Win Slide 17
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
Lead to Win Slide 18 Slide 18
Days 4-6 overview
October 27, 2010
Tony Bailetti
Lead to Win Slide 19 Slide 19
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
Lead to Win Slide 20 Slide 20
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
Lead to Win Slide 22
Agenda
• So, you want to be an entrepreneur
• Funding your firm and your family
• Your runway
• Sources of funding
• Key take aways
• Scenario
Lead to Win Slide 23
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
Lead to Win Slide 24
Becoming an entrepreneur
• Pros – What are these
• Cons – How high are these
So what’s the worst that can happen – ??????
Lead to Win Slide 25
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
Lead to Win Slide 26
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
Lead to Win Slide 27
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
Lead to Win Slide 28
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
Lead to Win Slide 29
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
Lead to Win Slide 30
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
Lead to Win Slide 31
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
Lead to Win Slide 33
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
Lead to Win Slide 34
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
Lead to Win Slide 35
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
Lead to Win Slide 36
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
Lead to Win Slide 37
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)
Lead to Win Slide 39
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….
Lead to Win Slide 40
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!
Lead to Win Slide 41
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
Lead to Win Slide 42
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
Lead to Win Slide 43
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
Lead to Win Slide 44
Government (continued)
• 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
Lead to Win Slide 45
Government (continued)
• 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
Lead to Win Slide 46
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
Lead to Win Slide 47
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
Lead to Win Slide 48
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
Lead to Win Slide 49
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.
Lead to Win Slide 50
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!
Lead to Win Slide 51
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
Lead to Win Slide 52
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
Lead to Win Slide 53
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
Lead to Win Slide 54
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
Lead to Win Slide 55
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
Lead to Win Slide 56
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
Lead to Win Slide 57
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
Lead to Win Slide 58
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
Salaries - Position 2 0
Salaries - Position 3 0
Salaries - Position 4 0
Salaries - Position 5 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
!
Lead to Win Slide 59
Company – Cash Flow Forecast, Yr 2
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 18 18 18 18 18 10 10 10 10 10 10 168
Other (specify) 0
Total Cash Receipts 0 0 18 18 18 18 18 10 10 10 10 10 10 168
Cash Disbursements:
Company - Direct Labour 0 Fringe Benefits 0 Material Purchases 0
Overheads - Utilities 0
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
Interest & Bank Charge 0
Income Taxes 0
Fixed Asset Additions 0
Loan Repayment 0
Other Company Costs 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
Salaries - Position 3 0
Salaries - Position 4 0
Salaries - Position 5 0
Subcontractor / Cons 1 7 7 7 7 7 7 42
Subcontractor / Cons 2 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
Other Project Costs 0 Exp Sub-Total 0 24 24 24 57 57 27 13 13 13 13 13 13 304
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
??
Lead to Win Slide 60
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
Lead to Win Slide 61
Company – Cash Flow Forecast, Yr 3
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 50 50 100
Loans 0
Government Forecast 40 10 10 10 80
Other (ANGEL) 30 30 30 30 30 30 30 30 30 300
Total Cash Receipts 0 40 30 30 30 30 90 40 40 80 30 0 0 480
Cash Disbursements:
Company - Direct Labour 0 Fringe Benefits 0 Material Purchases 0
Overheads - Utilities 0
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
Interest & Bank Charge 0
Income Taxes 0
Fixed Asset Additions 0
Loan Repayment 0
Other Company Costs 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
Salaries - Position 2 5 5 5 5 5 5 5 5 5 5 5 60
Salaries - Position 3 5 5 5 5 5 5 5 5 5 5 5 60
Salaries - Position 4 0
Salaries - Position 5 0
Subcontractor / Cons 1 7 7 7 7 7 7 42
Subcontractor / Cons 2 7 7 7 7 7 7 42
Project Material 30 30 90
Rental Equipment 3 3 3 3 3 3 3 3 27
Project Travel 0
Project Overhead 0
Other Project Costs 0 Exp Sub-Total 0 29 29 29 32 32 32 48 48 18 18 18 0 381
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
Lead to Win Slide 62
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
Lead to Win Slide 63
Lead to Win Slide 64
Day 3 takeaways October 27, 2011
Janice Singer and Deborah Dexter
Lead to Win Slide 65 Slide 65
Day 3 takeaways