How to write your business plan - Rob Moffat, Balderton Capital
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As presented at campus EDU, London, 31 May
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How to write your business plan - Rob Moffat, Balderton Capital
- 1. How to write a business plan Campus EDU 31 May 2013
- 2. • Invest $0.1 - 10M in tech companies with $B potential • Invest across Europe, help businesses go international • Have invested in >100 companies over last 10 years 2 Balderton Capital – what we do
- 3. We back great entrepreneurs & disruptive companies 3 Europe’s leading vacation rental marketplace Top 2 global music publisher from zero: Prince, McCartney 1 Million loan applications per month 1M products sold per month
- 5. You 5 Written a business plan? Have an idea? Working on a business right now? Looked at their business plan this week?
- 6. • Pitch deck • Excel • Business plan • For you • For your co-founders / employees 6 Scope for today
- 7. 7 We’re not writing a dissertation…
- 9. 9 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 10. 1 0 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 11. 11 What is a problem? • Unmet need • Unmet want • Too expensive • Too time-consuming How many other people really care about this problem?
- 12. 12 What was the problem?
- 13. 13 Solution without a problem…
- 14. 14 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 15. 15 Your solution For… (target customer) who… (statement of the need or opportunity), we are a… (product type) that… (key benefit). Unlike… (main competitor), our product… (how we are different).
- 16. 16 Which company? For young travellers Who need somewhere cheap to stay, We are a marketplace for accommodation That gives you a better room for half the price. Unlike hotels or hostels Our product gives you the personality of the city
- 17. 17 Two acronyms BHAG MVP Big Hairy Audacious Goal Minimum Viable Product
- 18. 18 Which company? BHAG MVP The social network Online student directory
- 19. 19 Why now?
- 20. 20 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 21. 21 “We have no competitors” #1 reason for a VC to ditch your business plan?
- 22. 22 Know your competition Where are the weaknesses? What are they good at? Common mistake: Compare where you will be in two years with where they are today
- 23. 23 Disruptive innovation Film cameras -> Digital -> Smartphones TV -> Youtube Servers -> Cloud MSFT Office -> Google Docs
- 24. 24 Good & bad competitive advantages • Disruptive innovation • Speed • Unique technology / IP / data • Exclusive partnerships • Substantially lower cost • Quality of your team Good Bad • Features • Better service • Lower margins • Better for client but not for users
- 25. 25 How will you sustain your advantage?
- 26. 26 How will you sustain your advantage? • Network effects • Virtuous circles • More/better data • Brand • Depth of tech expertise
- 27. 27 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 28. 28 #2 reason for a VC to ditch your business plan? “Our market opportunity is $100B”
- 29. 29 Bottom up market sizing Number of potential users of your product % who are willing/able to pay Your annual revenue per user x x
- 30. 30 Example: Lovefilm Number of potential users of your product % who are willing/able to pay Your annual revenue per user x x 24 M UK households 40% ? Sky TV penetration (as a proxy) £120 £1.1BAddressable market =
- 31. 31 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 32. 32 Unit economics = can you make money? Contribution per order Revenue per order Variable Cost per order= - Cost Per Acquisition (CPA) Cost per lead % of leads that convert= ÷ Customer Lifetime value (CLV) Contribution per order Average # orders per customer before they leave = x Lifetime value (LTV) Making money Cost Per Acquisition (CPA) >=
- 33. 33 Unit economics = can you make money? Contribution per order Revenue per order= - Cost Per Acquisition (CPA) Cost per lead % of leads that convert= ÷ Customer Lifetime value (CLV) Contribution per order= x Lifetime value (LTV) Making money Cost Per Acquisition (CPA) >= Variable Cost per order Average # orders per customer before they leave
- 34. 34 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 35. 35 The necessaries: Product, Team, Capital Product • Minimum Viable Product • Make use of third party tech • ‘Mechanical turk’? Team • Skills that you need • Raw talent vs. experience? • Want VC investment? You need a CTO Capital • Running costs for 18 months, plus 25% • Sufficient runway to prove the product? • Use client work to help build product?
- 36. 36 Contents of a (software/internet) business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 37. 37 Milestones
- 38. 38 Milestones Prove the hard stuff first Postpone big costs Prioritize constantly
- 39. 39 First milestone Test the plan!
- 40. 40 Some ways to test a business plan • Talk to … • Potential clients / partners / similar companies • Smart 3rd parties (including investors) • Dummy ad campaigns to test messaging & CPC • Landing page & waiting list • Kickstarter • Minimum viable product • Work at your competitors
- 42. 42 Your turn 1. Write a simple business plan for your business/idea • If you don’t have an idea, pick your favourite startup 2. Get your neighbour to critique it 15 mins 10 mins
- 43. 43 Reminder: Contents of a business plan • The problem • Your solution • Competition, and why you win • Size of the opportunity • Unit economics • The necessaries: Product, Team, Capital • Milestones
- 44. 44 Discussion Which was the weakest part of your plan? What is the area that most needs more testing?
- 45. 45 Advice • Re:work: Guess not a plan – keep short & revisit often • Be clear on what problem you are solving. It’s best to do one thing really, really well • Cost is a disease • People don’t like giving ‘negative feedback’. Push them to find the weak points, and listen • Be optimistic (but not blindly so)
- 48. Your business plan The problem Competition / why you win Size of the opportunity Your solution Unit economics Necessaries: Product, Team, Capital Milestones
Editor's Notes
- 2007200820092010201120122013 European Union12,397,498.0 12,466,896.5 11,752,175.4 12,256,226.4 12,649,146.5 12,957,700.3 13,381,221.5
- 2007200820092010201120122013 European Union12,397,498.0 12,466,896.5 11,752,175.4 12,256,226.4 12,649,146.5 12,957,700.3 13,381,221.5
- 2007200820092010201120122013 European Union12,397,498.0 12,466,896.5 11,752,175.4 12,256,226.4 12,649,146.5 12,957,700.3 13,381,221.5
- 2007200820092010201120122013 European Union12,397,498.0 12,466,896.5 11,752,175.4 12,256,226.4 12,649,146.5 12,957,700.3 13,381,221.5