Altaf Khan University of Management & Technology raising for developing IT products venture capital

? Would you persuade, speak of interest, not of reason. Benjamin Franklin.

Assumptions 1.Software product or Internet-based business 2.Pre-seed, seed, or start- up stage

Sources of Capital Own fundsOwn funds Friends and familyFriends and family Angel investorsAngel investors –Local –Overseas Venture capital companiesVenture capital companies BanksBanks OtherOther –PSEB ??? –International organizations

GICT (IFC - World Bank) Global Information & Communication Technology Dept Stage-independent investmentsStage-independent investments Typical investment $2-10MTypical investment $2-10M Value-added services:Value-added services: –Participation on boards of directors –Co-investors –Introductions to strategic partners –Follow-on financings Business plans can be submitted onlineBusiness plans can be submitted online

GICT Investment Examples Provide IT services to developing countries, such as locally based systems integrators and SW developersProvide IT services to developing countries, such as locally based systems integrators and SW developers Deliver SW solutions or new technologies from a base in the emerging marketsDeliver SW solutions or new technologies from a base in the emerging markets Deliver ITES, such as offshore SW development and BPO, to global markets from emerging marketsDeliver ITES, such as offshore SW development and BPO, to global markets from emerging markets Provide solutions for e-governance applicationsProvide solutions for e-governance applications Design and manufacture IT components & productsDesign and manufacture IT components & products

to get what you want, you have to know what the investor wants

The investor wants … … to assist the entrepreneurs in transforming their great ideas into world-class businesses …

So that the investor … … can make lots of money

Chances of making lots of money increase if the proposed business is based on … An innovative ideaAn innovative idea Unbounded target marketUnbounded target market Entry barriersEntry barriers A reasonable execution strategyA reasonable execution strategy A persistent, energetic, smart teamA persistent, energetic, smart team Moreover, the investor also requires …

an exit strategy

Exit Strategy IPOIPO Merger/AcquisitionMerger/Acquisition

to get the investment, you have to outline a reasonable scenario in which the investor ends up making a lot of money

Write a Business Plan

One Page Business Plan Vision Within the next five years grow Innofy into a $47 million provider of quality assurance services that cover the complete life-cycle of financial and telecommunications software Within the next five years grow Innofy into a $47 million provider of quality assurance services that cover the complete life-cycle of financial and telecommunications software Innofy – headquartered in Dubai – will have sales and support offices in Singapore, Washington and London, and engineering centers in Dubai, Lahore, Karachi and Islamabad Innofy – headquartered in Dubai – will have sales and support offices in Singapore, Washington and London, and engineering centers in Dubai, Lahore, Karachi and Islamabad Mission Enable the client companies get premium rates for their services by measurably enhancing the quality of he software they develop Enable the client companies get premium rates for their services by measurably enhancing the quality of he software they develop Cultural Mission: Speed through innovation; Craftsmanship Cultural Mission: Speed through innovation; Craftsmanship Objectives Grow revenue-per-SQA-engineer from $30k to $36k to $47k to $56k to $62k during the first five years Grow revenue-per-SQA-engineer from $30k to $36k to $47k to $56k to $62k during the first five years Grow the number of professionals from 50 to 130 to 262 to 513 to 800 during the first five years Grow the number of professionals from 50 to 130 to 262 to 513 to 800 during the first five years Grow revenue from $0.63M to $3.9M to $11M to $26M to $47M during the first five years Grow revenue from $0.63M to $3.9M to $11M to $26M to $47M during the first five years Achieve profits before tax of $4.0M and $13M in the fourth and fifth years, respectively Achieve profits before tax of $4.0M and $13M in the fourth and fifth years, respectively Raise investments amounting $1.4M, $2.1M and $1.4M during the first, second and the third years Raise investments amounting $1.4M, $2.1M and $1.4M during the first, second and the third years Strategies Sell to Asian operations of US businesses; Leverage those relationships to get work from their parents Sell to Asian operations of US businesses; Leverage those relationships to get work from their parents Focus on: i) Small-to-medium sized projects. ii) Companies in a hurry. iii) Telecom and finance sectors Focus on: i) Small-to-medium sized projects. ii) Companies in a hurry. iii) Telecom and finance sectors Focus on verification assurance initially; Expand into higher value-adding validation assurance later Focus on verification assurance initially; Expand into higher value-adding validation assurance later Attract, retain excellent individuals by ensuring their professional growth, equity sharing Attract, retain excellent individuals by ensuring their professional growth, equity sharing Hire non-computing graduates with analytical skills or domain expertise Hire non-computing graduates with analytical skills or domain expertise Leverage the under-utilized, attractively-priced HR available in Pakistan Leverage the under-utilized, attractively-priced HR available in Pakistan Train, tirelessly; Ensure an expanding supply of SQA-engineers through a separate training operation Train, tirelessly; Ensure an expanding supply of SQA-engineers through a separate training operation Give new clients the assurance of working with a world-class player through certifications Give new clients the assurance of working with a world-class player through certifications Build an organizational culture rooted in shared-values, and keep on enhancing it Build an organizational culture rooted in shared-values, and keep on enhancing it Plans Recruit a chief sales/marketing officer (2002) Recruit a chief sales/marketing officer (2002) Establish a temporary headquarters and the main engineering center in Lahore (2002) Establish a temporary headquarters and the main engineering center in Lahore (2002) Establish a sales & support offices in Singapore (2002) and Washington (2003) Establish a sales & support offices in Singapore (2002) and Washington (2003) Move headquarters to Dubai and establish a engineering center there (2003-4) Move headquarters to Dubai and establish a engineering center there (2003-4) Establish a sales & support office in London (2003-4) Establish a sales & support office in London (2003-4) Establish engineering centers in Islamabad (2004-5) and Karachi (2005-6) Establish engineering centers in Islamabad (2004-5) and Karachi (2005-6) Hire 90% of SQA-engineers with analytical training or domain expertise, e.g. engineering, finance Hire 90% of SQA-engineers with analytical training or domain expertise, e.g. engineering, finance Focus on verification assurance services initially, then expand into validation assurance in 2006 Focus on verification assurance services initially, then expand into validation assurance in 2006 To ensue continuous improvement of training, spin it off into a separate business-unit (2003) To ensue continuous improvement of training, spin it off into a separate business-unit (2003) ISO9000 quality certification (2003); CMM-L3 (2005); CMM-L4 in (2006); CMM-L5 (2007) ISO9000 quality certification (2003); CMM-L3 (2005); CMM-L4 in (2006); CMM-L5 (2007)

onepagebusinessplan.com

Conventional Business Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis A concise summary of the entire business plan

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis Background info about the company, including capital structure

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis What will the company provide its customers? How will customers benefit from the company's product/ services compared to what they currently use/have?

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis How many potential customers benefit from the company's product/ services compared to what they currently use/ have? Growth rate? Marketing strategy?

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis Who are the key competitors? In what areas are you stronger/weaker than them? Are there barriers to entry that can stop others enter the market?

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis How will the business plan be implemented? Strategies? Timeline? Budget? Tactics? Alliances?

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis Who are the people in the company? What experience, track record, expertise do they bring?

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis How much does the company require to implement the plan? How does the company value itself to investors? Expected burn-rate?

Contents of the Biz Plan Write the biz plan that includes: 1.Executive summary 2.Company description 3.Product/service 4.Market analysis 5.Competitive analysis 6.Execution of biz plan 7.Management team 8.Capital requirements 9.Financial analysis Financial projections, including cash-flow analysis

? Whats your current valuation How much are you seeking

Company Valuation An art; not a scienceAn art; not a science May vary drastically from one investor to another; do shop aroundMay vary drastically from one investor to another; do shop around

What do investors look for in a team? Do they share a common vision, values?Do they share a common vision, values? Are they flexible about their roles?Are they flexible about their roles? Are they smart, energetic, persistent?Are they smart, energetic, persistent? Do they work with a sense of urgency?Do they work with a sense of urgency? Are they worthy of my trust?Are they worthy of my trust?

how to build trust?

Be very open with the investor about the risks involved and your weaknesses Try to develop strategies for overcoming/minimizing each

You are developing something that will come to market 1-5 years down the road. During that time: The targeted market may disappearThe targeted market may disappear Someone may come up with the same product, first!Someone may come up with the same product, first!

Things to look for in investors Their track recordTheir track record Their contactsTheir contacts Their peopleTheir people

Mentor-Investors Individual investors who bring added value to your venture due to their:Individual investors who bring added value to your venture due to their: –Inside knowledge of the target industry –Industry contacts They can:They can: –Lower your risk –Reduce your time-to-market

Improving the Odds Actively seek value-adding partners & affiliatesActively seek value-adding partners & affiliates Build an unfair advantageBuild an unfair advantage Look for smart capital, mentor-investorsLook for smart capital, mentor-investors Leverage Pakistani expatriatesLeverage Pakistani expatriates Focus on the customerFocus on the customer Outsource non-core tasksOutsource non-core tasks Successful marketing is criticalSuccessful marketing is critical Stay focused on your business objectiveStay focused on your business objective Be flexible; change your biz plan, if requiredBe flexible; change your biz plan, if required Create a high-energy organizational cultureCreate a high-energy organizational culture Form a core team which is:Form a core team which is: –Homogeneous in terms of the vision –Heterogeneous in terms of skills and experiences

network tirelessly

be business-driven, not technology-driven

investors fund people, not ideas!

Reward excellent failures Punish mediocre successes Phil Daniels, Sydney exec

! Would you persuade, speak of interest, not of reason. Benjamin Franklin.