October 2017

MNO 2009
Discussion slides

Douglas Abrams
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About the lecturer

• Wharton MBA
• JP Morgan – Vice President - IB Technology, Global
Markets Internet Marketing
• Parallax Capital Management – Co-founder and
MD - Venture Capital
• Extream Ventures – Co-founder and MD - S$20
million VC fund
• Expara – Founder and MD - IDM Ventures
Incubator, fund, advisory, training
• NUS – Adjunct Associate Professor, Business
School, Entrepreneurship
• Sasin – Visiting Professor, Venture Capital

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MNO 2009

Entrepreneurship

• What do investors look for in a startup?

• Presenting to investors
• Innovation and value proposition
• Market identification and analysis
• Competitive strategy
• Financing and fundraising

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Key elements for success

• Identify a painful customer problem – Value proposition

• Solve the problem with an innovative product – Innovation
• Identify your customers – Market identification and analysis
• Reach your customers – Marketing strategy
• Compete when others enter - Sustainable competitive advantage
• Make money – Business model and financial plan
• Team – A team or B team

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How to generate scalable business ideas

• Think product-based rather than service based

• Identify the right industry – fast-growing industry, trending, potentially large.
• Strong value proposition – solve a problem for customers, need to have
• Innovation – using technology – new products, new markets, new ways of
organizing, incorporating new raw materials, or use new processes
• Feasible – the product must be possible to produce
• Original – do a Google search to see how many people are doing already
• Use sources of opportunity
• Forces, trends and mega-trends - Tech, macro, social, demographic, political
• Changing market and industry structures and needs - market inefficiencies
• Personal experience, hobbies and pastimes, personal passions
• Strong barriers to entry, difficult to copy, have IP etc.

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Sources of IP for scalable businesses

• University technology transfer offices

• NUS ILO licensing opportunities
• NTU's Innovation and Technology Transfer Office
• US universities
• University of Pennsylvania
• Stanford
• MIT
• Research institutes
• Exploit - commercialization arm for A*STAR technologies
• US Federal labs – US Federal Laboratory Consortium for Technology Transfer
• Private technology licensors
• Yet2.com
• freepatents.com
• Professors, researchers, colleagues, friends
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Communicating with investors

• Business plan
• Executive summary
• Investor presentation
• Formal and informal presentations

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Expara Business Model Canvas

Problem Solution Innovation Sustainable Customer
Top 1-3 customer Your solutions to and value competitive segments
problems customer
problems proposition advantage
What is innovative How will you Who are your
about your create barriers to target customers?
solution? Why are entry for
you better than followers?
existing solutions?
Market size
How big is your
market and how
Existing Key Metrics Channels fast is it growing?
solutions Key numbers that How will you get
tell if you are your product to
How are these succeeding Customer
problems solved customers?
today? archetype
High concept Characteristics of
One sentence that your key
says it all customers

Cost drivers Revenue model

What are your key How do you
cost drivers? generate
revenue?

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Writing a model business plan

Overview, innovation, market Execution and financials

1. Executive summary 6. Company products and services

2. Value proposition and 7. Team
innovation
8. Expansion plan
3. Market identification and
analysis
9. Operational plan

4. Marketing and sales strategy

10. Finances – Revenue and cash
flow, valuation, funding required,
5. Sustainable competitive equity offered, ROI
advantage

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Getting to gatekeepers

• It’s not what you know; it’s who you know

• Network, network, network
• Strong ties and loose ties

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Connecting to my network

• My company website: www.expara.com

• My blog: www.douglasabrams.com
• E-mail: dka@expara.com
• Facebook: bizadk@nus.edu.sg
• Linked-In: dka@parallaxcapital.com

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MNO 2009

Entrepreneurship

• What do investors look for in a startup?

• Presenting to investors
• Innovation and value proposition
• Market identification and analysis
• Competitive strategy
• Financing and fundraising

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How long does it take to make a first impression?

• First impressions are critical

• You make yours in the first 7
seconds of your presentation

• How long to feel someone is

trust-worthy? 0.1 second

• How can people decide so

quickly? Appearance and
body language.

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Presentation dos and don'ts

Do Don’t

• Stand up straight, open body • Rock back and forth - nervous

language – nothing crossed
• Fidget - nervous
• Arms at side - relaxed and proper
gesticulation – hands below chin
• Shake leg while sitting – bored,
nervous
and within shoulder ranger
• Be aware of hands and feet • Too many um and uh

• Face smiling and inviting • Voice too soft – shy; too loud –
overbearing
• Silent pause – thoughtful and • Rubbing back of the neck – bored
confident

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Maintain proper eye contact

• Too little eye contact – lying

• Too much eye contact – stalker stare
• Look directly at the audience for emphasis or conviction
• Sweep and click to create connections
• Handshake – strong and confident. Pump 2-3 times, then release.
Don’t use two hands

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Pitching to VCs

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Getting past gatekeepers

• Why are presentations important?

• Understand gatekeepers’ incentives
• Avoid raising red flags
• Attention to detail
• Get it right the first time

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Less is more

• Your message needs to be clear and concise

• Clean visual design – avoid chart junk and “design-itis”
• On presentation slides, less is more – slides, bullet points, text
• If you can't explain your message simply, you need to re-formulate
your message.

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Why are presentations important? You’re fired!

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What causes choking?

• Top performance under pressure

requires focus and relaxation
• Too much focus on performance
causes skill to break down
• Forget about your bad shots;
remember your good shots

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Use meaningful titles

• The title of each slide should communicate the key message for
that slide.

• For example, if you have a slide that shows projected sales, do not
make the title "Projected Sales."

• Instead, make the title something like, "Projected Sales in 2003 are
$3 Million."

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Create takeaway messages

• People remember the first or last things that you say, so start and
end the presentation strong

• Communicate your important points clearly, concisely and

memorably.

• People remember stories more easily than lists of facts, so if you

can make any of your key points in story form, that can be helpful.

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Do not read your slides

• Do not just stand and read your presentation slides.

• Makes your presentation redundant and therefore uninteresting,
since the audience can just then read the slides.

• Try to pick out one or two important points on each slide to discuss
in more detail.

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Practice and test

• Analyze the details of your presentation, then master those details

by practice, practice, practice.

• Arrive early and if you are using any technology, test it

• If you can not get in early, try to test the night before
• It is OK to be nervous before you begin

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Q&A is the most important part

• Audience has a chance to ask you about what is on their mind.

• Q&A is do or die time.
• Prepare for Q&A by studying your material in-depth
• Anticipate likely difficult questions and formulate answers
• Note questions you are asked and if you did not have a good
answer to a specific question, formulate one for next time.

• Don’t disagree - agree

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Fight or flight response to difficult questions

• Defensive
• Contentious – most
damaging as it shows loss
of control
• Never become angry; firm
and calm

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How to react

• Listen correctly – lock eye contact

• Don't point
• Don't fidget – fingers together
• Don't call by name (unless you know all)
• Voice assent – Uh huh
• Answer correctly

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Answer correctly

• Identify the key words – one or two words

• Do not answer until you are sure you know
• Keep your answers short – 60 seconds
• Keep your answers focused – don't offer tangential information

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When you get a challenging question

• Do not answer until you fully comprehend the key point and do not
repeat
• Paraphrase
• “ What . . . ? ” “ Why . . . ? ” “ How . . . ? ”
• Conclude your paraphrase with a question mark but not a question
• The voice drops at the end of the sentence , as opposed to a
question in which the voice rises inquisitively .

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Martial arts strategy

• Become one with your opponent

• Level the playing field
• Using agility to counter force
• Now a contest between equals

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Keep it in the cool zone

• Find the key words and keep it within the cool zone
• Use as few words as possible in your paraphrase
• Neutral nouns and verbs; no adjectives and adverbs
• Less is more
• Mirror your opponent and neutralize the hostile question

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Remove all these from your vocabulary

• Let me see if I have this right

• Could you repeat the question ? ”
• Does that answer your question ?
• Is what you’re asking
• I’m sorry , I didn’t follow , would you mind restating the question ?

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And definitely eliminate these

• To be honest – only now?

• As I said – condescending
• Like I said – condescending and ungrammatical
• Answering a question with a question – implies you weren't
listening and gives the stage back to the questioner
• No problem, the issue/concern is…

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In summary for difficult questions

• Neutralize hostile questions

• Turn negative questions positive
• Treat seemingly irrelevant questions the same as any other
• Manage multiple questions efficiently
• Convert charged statements into questions
• There are no stupid questions just stupid answers

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MNO 2009

Entrepreneurship

• What do investors look for in a startup?

• Presenting to investors
• Innovation and value proposition
• Market identification and analysis
• Competitive strategy
• Financing and fundraising

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Innovation and value proposition

• Innovation
• What is new about your product or service?
• “New ideas – plus action or implementation – which result in an
improvement, a gain or a profit” – 3M
• Think broadly about innovation
• Product, process, positioning, paradigm, technology,
operational, cost, customer experience, management, business
model, industry, disruptive
• Value proposition
• What problem are you solving for customers?

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Types of innovation

• Trend-driven: forces, trends and mega-trends

• Technological, macro, social, demographic, political
• Business model: changing market and industry structures & needs
• Market inefficiencies
• Attribute-driven
• Blue Ocean strategy

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Generating innovations

• Alternative approaches to existing innovations

• Second mover advantage
• Personal experience, hobbies and pastimes, personal
passions, annoyances
• De-commoditize a commodity
• Starbucks
• Drive an innovation down-market
• Spinbrush
• Import geographically isolated innovations, cross
regional, discipline or industry
• Red Bull, Starbucks
• Identify small companies with niche products with
broader market appeal potential
• Gyration and Nintendo
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Diamond Rio versus iPod

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Disruptive business model or disruptive tech

• Diamond is the first mover in

portable MP3 in 1998
• Apple enters in 2003 and
captures 90% of the market
• Business model innovation –
hardware + software + service

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Disruptive models from Gillette to Google

• Gillette – razor and blade

• Southwest Airlines – budget airlines
• Dell Computer – mass customization
• Charles Schwab – on-line broker
• Amazon – ecommerce
• eBay – peer to peer marketplace
• Google – search-based advertising

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Product or service: high risk, low return?

• Product-based start-ups
• High risk of failure
• High return if successful
• Service-based start-ups
• Higher risk of failure
• Lower return if successful

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Don’t go too early or too late

The technology adoption S curve

Measure of
performance

Measure of effort invested

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Value proposition and innovation

1. What is the painful problem you are solving for customers?

2. What is your product and what is innovative about it?
3. What are the shortfalls of the current solutions?
4. How do you solve this problem and can you quantify your benefit?
5. How does your innovation enable you to accomplish this?

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MNO 2009

Entrepreneurship

• What do investors look for in a startup?

• Presenting to investors
• Innovation and value proposition
• Market identification and analysis
• Competitive strategy
• Financing and fundraising

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Market and competitive analysis

 Identifying favorable markets

 Analyzing markets

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Choose an sector favorable to start-ups

• Increasing returns business: up-front costs are high relative to

marginal costs
• Network externalities
• Complementary technologies are important to use
• Producer learning is strong, switching costs are high

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Look for fast-growing, segmented markets

• The cost gap between new and established firms is smaller in

larger markets
• In fast-growing markets, new firms can serve new customers
rather than customers of existing firms
• Segmented market provide niches for new firms to enter and
reduce retaliation by existing firms

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Industry life cycles and structures

• Choose a young industry – more demand and less competition

• Enter before a dominant design has been adopted
• Labor intensive rather than capital intensive
• Advertising and branding less important
• Less concentrated industries – smaller competitors

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Market and competitive analysis

 Identifying favorable markets

 Analyzing markets

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Market identification and analysis

1. Who is your customer?

2. How big is your market and how fast is it growing?
– Top-down approach
– Bottom-up approach
3. What are trends in your market are favourable for you?
– Technological, social, demographic, regulatory
4. Who are your direct and indirect competitors?
5. How is your market segmented?

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Top-down revenue projections

Total addressable market

Target market

Target segment

Market share

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Bottom-up revenue forecasts

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Select the best entry segment

• Product segments
• Size, price, features, technology, design, inputs, packaging,
performance, new vs. aftermarket, product vs. services, bundled
• Buyer type
• Industrial and commercial – industry, strategy, sophistication, OEM vs.
user, vertical integration, size, ownership, financial strength
• Consumer goods – demographics, lifestyle, language, DMU
• Channel
• Direct vs. distributors, direct mail vs. retail or wholesale, brokers, types
of distributors or retailers, exclusive vs. non-exclusive
• Geographic buyer location
• Localities, regions, countries, weather zones, stage of development

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MNO 2009

Entrepreneurship

• What do investors look for in a startup?

• Presenting to investors
• Innovation and value proposition
• Market identification and analysis
• Competitive strategy
• Financing and fundraising

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What is a market? What is marketing?

• Differentiation – how is your product different from competition

• Product - superior customer value – better, faster closer
• Cost leadership
• Positioning – market selection + differentiation
• Image for the product that embodies its values
• Marketing Execution – the 4 Ps
• Product, pricing, place, promotion

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Marketing strategy

1. How is your product differentiated from your competitors’ product?

Use a comparison matrix to illustrate.
2. What is your position in the market? Use a positioning map to
illustrate
3. What are your price, place, product, promotion and initial sales
plans

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Comparison matrix

Competitor Competitor Competitor Competitor Your

1 2 3 4 company
Benefit 1     

Benefit 2     

Benefit 3     

Benefit 4     

Benefit 5     

Benefit 6     

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Positioning map
Value

Competitor 3 Your company

Competitor 4

Competitor 1

Competitor 2

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Elements of the 4 Ps

• Product
• Name, functionality, styling, quality, safety, packaging, repairs and
support, warranty, accessories and service
• Price
• Pricing strategy, MSRP, volume discounts and wholesale pricing, cash
and early payment discounts, seasonal pricing, bundling, flexibility
• Place
• Distribution channels, market coverage, specific channel members,
inventory management, logistics
• Promotion
• Push/pull, advertising, selling and sales force, sales promotions, PR
and publicity, budget.
• How will you make your first sale?

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Customer segments: who/problem

• Customer problem • Customer archetype

• Latent
• Passive
• A day in the life of a customer
• Active or urgent • Organizational/influence maps
• Vision
• Consumer/web influence map
• Customer types
• End user
• Influencer
• Recommender
• Economic buyer
• Decision maker
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Customer archetype

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Do you love to sell?

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Sales and distribution

• Great sales and distribution vs great product

• Best sales is hidden
• Products don’t sell themselves

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Metrics for effective distribution

• CLV: total net profit earned over the course of relationship with
customer
• CAC: cost to acquire a new customer
• CLV>CAC

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Sales channels

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Viral marketing

• Core functionality encourages users to invite their friends

• Move first to dominate most important segment of market with viral
potential
• Get the most valuable users first
• Paypal – initial focus on 20K Ebay PowerSellers

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Power law of distribution

• Select one - one distribution

channel will be more powerful than
all others combined
• Most businesses get zero
distribution channels to work
• Poor sales rather than bad product
is most common cause of failure
• Sell your company to the media
• Everyone sells
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Competitors will enter

• How to compete with followers?

• How to compete with existing companies?
• Sustainability of technological lead
• Competitors cannot duplicate the technology
• Firm can innovate as fast or faster than competitors
• First-mover disadvantages
• Last-mover advantage

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First mover advantage?

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Strategies to last-mover create advantage

• Create competitive barriers to entry

• IP strategy – patents, copyrights, trademarks, trade secrets

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Creating last-mover advantage

Advantages Disadvantages

• Reputation • Pioneering costs

• Preempting positioning • Demand uncertainty
• Switching costs/Lock-in/Network effects • Changes in buyer needs
• Unique channel access • Specificity of investments
to early generations
• Move down learning curve
• Technological
• Favorable access to inputs discontinuities
• Definition of standards • Low-cost imitation
• Institutional barriers – IP protection
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Established company strengths and weaknesses

Advantages Weaknesses

• Learning curve • Difficult to innovate

• Reputation effect • They need to satisfy existing customers,
partners and supply chain
• Cash flow
• Existing organizational structure is appropriate
• Economies of scale to current tasks
• Complementary • Risk aversion
assets

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Opportunities that favor new firms

• Existing firms frozen in the headlights

• Disruptive technologies and business models
• Uncertainty: existing firms’ advantages in market research are
neutralized; risk propensity
• Technologies: Discrete versus systemic technologies, based on
human capital, general purpose rather than specific
• Bad customers: Enter market that is unattractive to existing
competitors due to established cost structure

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IP Strategy

• Patents
• Copyrights
• Trade Marks
• Registered Designs
• Trade secrets

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Patents

• Technical inventions
• Novelty, inventiveness & industrial application
• Registration system – national & PCT systems
• Novelty & infringement searches
• 20 years, if continuously renewed
• Exclusive monopoly
• Business methods & computer programs, algorithms, ideas

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Copyrights

• Exists on creation, no registration procedures

• Searches are therefore not available
• Expression not ideas – words, music, art, film, sound, broadcast,
cable, publishing, live performance
• Life or author/ creator+ 50 years; or 50 years
• Copy, publish, perform, broadcast, cable, adapt
• Software, databases, GUI, multimedia
• International protection e.g.., Berne, TRIPs
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Trade Marks

• Registration system – national, CTM & Madrid treaties

• Capable of distinguishing & earlier marks
• Substantive examination
• Searches? – national or CTM
• 10 years, renewable indefinitely
• Right to use in the course of trade
• Domain names, marketing, web partnerships

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Design registration

• National registration system

• Novelty and mass-produced articles
• Formal examination only
• 15 years / 25 years protection, if continuously renewed
• Exclusive monopoly
• Computer icons
• Register or almost no protection, not even copyright

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Trade Secrets

• Formula (e.g. Coca Cola formula)

• Pattern, Plan, Customer Lists, etc
• Process, R&D Data
• Device, Apparatus, Machinery etc

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Advantage of Trade Secrets

• No fees
• No time limits
• Information not available to competitor for improvements
• No blocking patents
• Freedom to operate
• Proprietary position

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Forms of organization

• Sole proprietorship
• Partnership
• Limited Liability Partnership
• Companies
• Private Limited companies
• Public companies
• Listed public companies

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Key agreements

• Shareholder agreement
• Investment agreement
• Employment agreement

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MNO 2009

Entrepreneurship

• What do investors look for in a startup?

• Presenting to investors
• Innovation and value proposition
• Market identification and analysis
• Competitive strategy
• Financing and fundraising

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In the financial section of the business plan

 Business model
 Financial projections
 Valuation
 Funding required and equity offered
 Use of Proceeds
 Exit Strategy and ROI

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Business model – how will you make money?

• Revenue sources
• Cost drivers

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Key revenue model issues

Revenue streams Revenue models Pricing models

• Single stream • Subscription/membership • Value pricing
• Multiple streams • Volume or unit-based sales • Competitive
• Interdependent • Advertising-based • Volume
• Loss leader • Licensing & syndication • Portfolio
• Transaction fee • Razor/blade
• Pay-per-use • Subscription
• Referrals • Leasing
• Affiliate/revenue sharing • Product based
• Selling data
• Back-end offers

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Cost drivers

Types of cost drivers Cost structures

• Fixed • Payroll-centered (Direct)

• Semi-variable • Payroll-centered (Support)
• Variable • Inventory
• Non-recurring • Space/Rent
• Marketing/advertising

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Complete business model diagram

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Create financial projections

Scalability necessary for VC investment - $100MM in firm value

• 3-5 years of projected balance Yr 1 Yr 2 Yr 3 Yr 4

sheet, income statement and cash Gross Revenues

flow statements. Operating Expenses

• Project from bottom up and top EBITDA

down Metric: Ex: Units sold/leased

• Sales growth and market share are

key
• Project cash requirements using a
detailed budget

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Pro-forma financial statements

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Company valuation methods

• Price to earnings (p/e)

• Dividend yield
• Multiple of book value
• Comparables
• Discounted Cash Flow (DCF)
• VC method

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Valuation – how much is your business worth?

• How much is your business worth, based on comparables and a

DCF valuation of your projected cash flows at an 80-100%
discount rate?
• Make sure that you can explain how you arrived at this valuation.
• For seed stage companies, this should generally be in the range of
$1-3 MM.
• Pre-money valuation - worth of the business before VC investment
• Post-money valuation – after VC investment

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VC method of valuation

• Founders expect to sell company for $25 MM in 4 years

• Need to raise $3MM; investors require 50% return (discount rate)
• Post-money valuation = $4.9 MM ($25MM/(1.54)
• Pre-money valuation = $1.9MM ($4.9MM-$3MM)
• Equity required = $3MM/$4.9MM = 60.75%

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Returns to VC funds follow a power law

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Most VC investments will fail to return capital

Data on this and the following charts are from Venture Capital and the Finance of Innovation by Metrick and Yasuda, based on a
study of more than 17,000 VC invested companies and more than 60,000 funding rounds
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74% fail to return capital; 12% drive almost all

returns

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Larger size/later stage failure rates are similar

Returns 1st non seed Series A Series B

0 49.10% 46.56% 44.71%
<1 25.11% 27.83% 28.34%
1 to 5 13.79% 16.85% 21.35%
5 to 20 9.07% 7.78% 5.12%
>20 2.92% 0.99% 0.48%

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The main difference between rounds is dilution

At Exit

At Invest

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How do VCs make money?

• Trade sale – sell to

another company
• IPO – sell to the
public through listing
on an exchange
• For VCs, no exit = no
returns

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90% of venture funded exits are trade sales

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Median valuation of acquisitions is US$100MM

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Median for all exits = $127 MM

Years to exit: IPO – 8; buyout - 6.5, trade sale – 5

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Exit valuation determines current valuation

• VCs return = exit valuation/current valuation

• At seed stage VC required return = 30x
• Adjusted for dilution = ~ 50%
• Current valuation = exit valuation/60
• 20% IRR for 10 years = 6X gross multiple
• 20% of investments will exit
• For 20% to grow to 600% must increase by 30X after dilution

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Where do these numbers come from?

The VC’s Most VC- The small VC

Investors
portfolio invested number of holdings in
in VC
returns are startups winners successful
funds set
not fail to must pay startups
cost of VC
normally return for all the diluted by
capital
distributed capital losers follow-on

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VC cost of capital: 16% (mean) - 25% (top 25%) p.a.

• Net of fees, expenses

and carried interest
• For 10 years (typical VC
fund life)
• Requires 4-6x gross
multiple
• VC funds that don’t
exceed cost of capital will
exit the market

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Small number of winners must pay for losers

Input Value 
Fund size $              100 
Fund life 10 
# of investments 25
Amount per investment $               3.2 
# of exits 5
Success rate 20%
Gross returns $              500 
Net returns $              420 
Multiple 4.2
IRR 24%
Required per exit $              100 
Multiple per success 31.25 

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VC method of valuation

Stage of investment Seed

Investment required $ 500,000
Exit valuation $ 100,000,000
Required return 30
Retention percentage 50%
Cash out required at exit $ 15,000,000
Equity required at exit 15%
Equty required now 30.00%
Valuation now $ 1,666,667

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Why care about too high valuation?

• At some point the company will meet an investor (or an acquirer)

who prices properly
• If previous round valuations were too high, the entrepreneur will
suffer
• Down round with massive dilution (especially if anti-dilution)
• Investors block sale at too low a price
• Company is sold at low price; liquidation preferences take all

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Redmart – cautionary tale

• Jan 2016 - set out to raise $100 MM round (valuation ~ 500 MM –

1B)
• Nov 2016 – sold to Lazada for $30-40 MM
• Had raised $55 MM in VC funding
• Likely liquidation preference took all proceeds, leaving founders
with 0

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Current seed valuations with different exits

Exit Valuation Current

US IPO $    416.0  $         6.9 
SET $    360.0  $         6.0 
ASX $    155.0  $         2.6 
Trade sale $    100.0  $         1.7 
Catalist $       69.0  $         1.2 
MAI $       60.0  $         1.0 

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How much equity does the investor receive?

• Pre-money valuation
• Amount invested by VC ÷ (Agreed pre-money value of business
+ Amount invested by VC)
• $3MM pre + 1 MM VC = 25% VC equity
• Post-money valuation
• Amount invested by VC ÷ post-money valuation
• $4MM post = 25% VC equity

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In the financial section of the business plan

 Business model
 Financial projections
 Valuation
 Funding required and equity offered
 Use of Proceeds
 Exit Strategy and ROI

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How much funding is required?

• What are sources of funds – debt, equity, retained earnings

• Raise enough to get to next funding round or cash-flow positive
• How much money do you need to raise and how much equity will
the investor receive?
• You should generally be raising around $200-500K at seed stage

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VC investment process

Incubators Customers, suppliers,

OM corporations strategic partners
F,F&F government VCs, Banks for VC loans

Founder’s Seed/ Series Mezzanine Pre-Exit Exit

Capital Angel A, B, C

VC hurdle rates 60-100% 40-60% 20%

R&D Establishment GTM/Rollout Accelerated Expansion Maturity
Enablement growth

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Equity offered – how much do you need?

• What percentage does the company want to sell?

• Often too much or too little
• This is the wrong question
• Set performance and fund-raising milestones
• How much money do you need to achieve the next milestone?
• Divide defensible firm value by funds needed to determine
percentage to sell
• Equity offered in the seed stage should usually be in the range of
15-30%

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Use the funds to fuel company growth

• How are you going to use the money you are raising?
• Show a detailed breakdown
• Minimize investment in fixed assets
• No big salaries for founders

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Exit strategy and ROI

• How will your investors make money and how much will they
make?
• The most likely exit strategies are IPOs (sell to the public) and
trade sale (sell to another company), with trade sale the first choice
in most cases.
• For VCs, ROI should be 30 times over 5 years.

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Key elements of the deal

Economics Control

• Price-per-share • Board of directors

• Valuation • Protective provisions
• Amount of financing • Drag-along agreement
• Liquidation preference • Conversion
• Vesting
• Options pool
• Anti-dilution
• Pay-to-play

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Calculate investor’s ROI including dilution

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Contact us

• Douglas Abrams
• NUS Business School
• bizadk@nus.edu.sg
• Expara, Expara IDM Venture
• dka@expara.com
• 65-9780-5381

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