Professional Documents
Culture Documents
Gillian Lacey-Solymar
Lecture 7 - Marketing – Final frameworks and Sources of Finance
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Jason Williams-Guest speaker
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Adopter Categorisation
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Early markets: Innovators
Main characteristics:
Technology enthusiasts; appreciate technology for its own sake
Will forgive faults
Make great critics; Feel strongly involved in development of
innovations
Organizational challenges;
Innovators want cheap products; They generally work under strong
budgetary constraints
Innovators demand access; They often require to be closely
involved in the development of technologies
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Early adopters: Visionaries
Main characteristics:
▪ Driven by a dream; not looking for an
improvement but seek fundamental breakthrough
▪ Tolerance towards risks of working with new
vendors; willing to buy into new unproven
technologies; low price-sensitivity.
Organizational challenges;
▪ Visionaries easy to sell to but difficult to please
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Early majority; Pragmatists
Main characteristics:
▪ Goal is gradual improvements; want incremental,
measurable, predictable progress; Pragmatists tend to
keep low profile and to view ‘risk’ as a negative word
Organizational challenges;
▪ Importance of building trust; pragmatists are hard to win
over but loyal once won.
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Late majority; Conservatives
Main characteristics:
▪ Against discontinuous innovations; believe in
tradition rather than progress
▪ Fear of high-tech; only invest in technologies at end
of technology life cycle when products have become
commodities
▪ Customers don’t want to think about technology.
Organizational challenges:
▪ Hard to attract
Targeting conservatives involves offering pre-packaged solutions
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Laggards
Who cares???
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Innovation adoption – potential
examples
▪ INNOVATOR
Self drive cars??
▪ EARLY ADOPTER
Virtual reality gaming??
▪ EARLY MAJORITY
Alexa??
▪ LATE MAJORITY
i-phone 6, electric cars
▪ LAGGARDS
internet shopping, smart-phones
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Adapted technology
adoption curve
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Problems with traditional High-Tech Model
Chasm
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Problems with traditional High-Tech Model
Geoffrey Moore
Along the technology adoption cycle, firms will need to target
different groups of customers with distinctive needs and
motivations; this requires different marketing approaches.
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Moore’s “revised technology adoption life
cycle” Moving from
one segment
to another is
not smooth for
discontinuous
innovations
(those that
require change
in behaviour)
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Moore’s “revised technology adoption life
cycle”
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How to cross the chasm
▪ Target a niche.
▪ Force your competitors out of the
niche
▪ Use that for a base from broader
operations.
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How to cross the chasm: example
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Marketing Summary
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Marketing Summary
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Sources of Finance
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Agenda
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First rule of finance
It is always
easier to ask
for money
when you
don’t need it
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Bankers Are Just Like Anybody Else,
Except Richer - Poem by Ogden Nash
This is a song to celebrate banks, Yes, if they request fifty dollars to pay for a baby you must
Because they are full of money and you go into them and all look at them like Tarzan looking at an uppity ape in the
you hear is clinks and clanks, jungle,
Or maybe a sound like the wind in the trees on the hills, And tell them what do they think a bank is, anyhow, they had
Which is the rustling of the thousand dollar bills. better go get the money from their wife's aunt or ungle.
Most bankers dwell in marble halls, But suppose people come in and they have a million and they
Which they get to dwell in because they encourage deposits want another million to pile on top of it,
and discourage withdrawals, Why, you brim with the milk of human kindness and you
And particularly because they all observe one rule which woe urge them to accept every drop of it,
betides the banker who fails to heed it, And you lend them the million so then they have two million
Which is you must never lend any money to anybody unless and this gives them the idea that they would be better off
they don't need it. with four,
I know you, you cautious conservative banks! So they already have two million as security so you have no
If people are worried about their rent it is your duty to deny hesitation in lending them two more,
them the loan of one nickel, yes, even one copper engraving And all the vice-presidents nod their heads in rhythm,
of the martyred son of the late Nancy Hanks; And the only question asked is do the borrowers want the
money sent or do they want to take it withm.
Because I think they deserve our appreciation and thanks,
the jackasses who go around saying that health and happi-
ness are everything and money isn't essential,
Because as soon as they have to borrow some unimportant
money to maintain their health and happiness they starve
to death so they can't go around any more sneering at good
old money, which is nothing short of providential.
Ogden Nash
Presentation Title Page 25
Before you start to raise money, what are the
questions you need to ask?
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Before you start to raise money, what are the
questions you need to ask?
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How do you get money?
How can you persuade someone?
- Credibility that you won’t lose their money/track record
- Communication: show them you know your stuff
- Clarity: understanding the investors’ risk profile
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Persuading isn’t easy…
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Where does the money
come from: choices
▪ Personal investment
▪ Equity
▪ Debt/Loans
▪ Convertible Investments
▪ Cashflow finance
▪ Asset finance
▪ Crowdfunding (debt or equity)
▪ Grants and Government Support
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Personal Investment
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How to bootstrap!
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Bootstrapping
▪ Personal Savings
▪ Credit Cards
▪ Mortgages
▪ Pension Funds
▪ Moonlighting, Second Jobs
▪ ‘Sweat - equity’ (ownership earned in lieu of wages)
▪ Paying Late, supplier credit
▪ Early customer payment
▪ Poker??
▪ Trading? (oneredpaperclip.com)
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One Red Paperclip
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Equity – what is it?
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Equity
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Who provides funds in return for equity?
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Equity – how do raise it?
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Equity–pros and cons
Pros Cons
▪ Permanent capital - ▪ You dilute your own
no need to repay share
(but VCs want an ▪ The more equity
exit) you give, the more
▪ Permanent capital – control you lose
equity holders can’t ▪ Not tax efficient
force winding up
(unless they have
over 75%)
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Debt – what is it?
▪ Loan
▪ Original amount must be paid back
▪ Carries interest rate
▪ Ranks ahead of equity in a bankruptcy
▪ Secured debt ranks ahead of unsecured
debt
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Debt: types of debt
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Financing: Banks & Borrowing
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Debt –pros and cons
Pros Cons
▪ Cheap now ▪ Very hard to get now
▪ Temporary whereas ▪ MUST pay back as a
equity is permanent priority (interest and
▪ If you pay regularly, capital)
lender has no say in ▪ Default can cause
business bankruptcy
▪ Interest is tax deductible ▪ Banks may insist on
personal guarantees
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Debt or Equity?
▪ BUT… Page
Debt or Equity?
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Convertible Debt
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Cashflow finance
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Asset Finance
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“Alternative” finance
11/23/17 Page 53
Crowdfunding
Source: Nesta
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http://www.kauffman.org/multimedia/sketchbook/kauffman-sketchbook-wizard-of-fundz
Financing new ventures – “new” entrants
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Focus in on crowdcube
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How much should you raise? ISSUES to consider
LESS MORE
Speed of growth
Pros Cons
▪ “Free money” ▪ “There is no such thing
▪ Generally doesn’t have as a free lunch”
to be repaid ▪ Cost of raising money is
▪ Multiple sources time and focus
▪ Sometimes come with (opportunity cost)
advice as well as money ▪ There are costs of
reporting back etc
▪ Matching often required
▪ Timing can be slow
▪ You have to fit your
project to their criteria
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Equity in more detail
▪ Angel investors
▪ Venture capitalists
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Who are the angels?
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Who are the angels?
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Raising Angel Capital
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Venture Capital
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Venture Capital/Private Equity
▪ The VC business
— Seeking exceptional returns
— Focus, Expertise
— Significant due diligence
— Offer more than just money
— Fund/Portfolio managers
— Management of risk => Ruthless decisions, pay in stages
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What is Venture Capital
(early stage)?
▪ A financial intermediary
▪ Invests only in private companies
▪ VC firms are organized as funds.
▪ Funds raised from pension funds/rich
individuals/stock market
▪ The fund managers/ general partners
get approx:
— 2% of the fund annually as a
management fee
— 20% of the fund's gains.
▪ Takes an active role in the companies
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Equity Investors Expect
High Returns
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A Good VC Offers Many Things
▪ Access to cash
▪ Leverage with other organisations (banks, lawyers, access to local
talent pools etc.)
▪ Raising the next round of money
▪ Extensive network of valuable contacts
▪ Experience of building internationally competitive companies
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VC Funding Should Accelerate Your Business
Optimal
Minimalist
Net Flow £
Time
Source: Atlas
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What makes an attractive VC opportunity?
▪ Scalability
▪ Potential to be market leader in high growth industry with few
competitors (£50m+)
▪ Committed and competent management team
▪ Sustainable competitive advantage -profitable, repeatable,
expandable, predictable, defensible
▪ Sound business plan with plausible cashflows
▪ Viable exit strategy
▪ Reasonable valuation of existing company
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https://www.cbinsights.com/blog/increasingly-crowded-unicorn-club/
Venture Capital Backed Ventures
(a typical portfolio – data courtesy of John Bates, LBS)
Source: Atlas
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Kleiner Perkins Caulfield & Byers: ‘80-99
Fund Vintage Multiple
KP II 1980 4.30X
KP III 1982 1.74X
KP IV 1986 1.83X
KP V 1989 4.01X But KP IX invested in Google.
KP VI 1992 3.33X
KP VII 1994 BEST 32.51X Yesterday it was worth $726bn
KP VIII 1996 17.00X
Put that in perspective:
KP IX 1999 WORST 0.40X *
.
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Source: Atlas
Remember !
50% of a
lot is more
than 100%
of nothing!
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Financing new ventures
▪ Personal investment
— Will you risk your own money?
▪ Equity
— Sale of future upside for money today
▪ Debt/Loans
— Must be repaid (generally with interest
and penalties)
▪ Grants and Government Support
— No future promise but defined use
▪ Crowdfunding
— Apples and pears
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Finance Summary
▪ You will need money from different sources
▪ Each source has different requirements: you
need to understand each and tailor your
proposal for each
▪ Timing is everything
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“Final-ish thoughts
Entrepreneurship You
▪ Entrepreneurship is not ▪ This has been fun
easy… ▪ Some of you are lovely
▪ But it can be amazing ▪ Some of you are super-
▪ Big risks, big rewards smart
▪ Not all of you should be ▪ Some of you are really
entrepreneurs going places…
▪ Are YOU one? ▪ Please keep in touch
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