Commercial in Confidence. © 2014 Saasu Pty Ltd. All Rights Reserved.

!14th May 2014 !BY Marc Lehmann CEO, Saasu ceo@saasu.com @saasu @marclehmann

CEO INSIGHTS

Funding Fears

About me

Marc Lehmann CEO, Saasu.com !Launched Saasu with a self-funded approach to creating a great value, cloud-based accounting solution for businesses worldwide. Prior to Saasu, Marc was a Director of Principal Finance and Credit Trading Risk at Deutsche Bank. Marc’s ethos is that businesses should automate as many processes as possible, giving their owners and staff the gift of time to spend with their families and exploring the world. !Email: ceo@saasu.com Twitter: @saasu @marclehmann

Disclaimer

General and Educational. !

These are take away ideas only, not advice. Your financial planner & accountant are your advisors for your specific circumstances.

What is your business model?

Speaker Notes • You want to own a business for some valid reasons. • Make it an enjoyable journey and not one based on funding fears. • First we’ll discuss just a couple of model forming techniques. • Lean canvas - evolved in the startup arena. • Deal flow - evolved in financial sector.

Lean Canvas business modelling

• More practical and valuable than a business plan in many ways.

Value flows business modelling• Deal flow modelling - Transactions are mapped with their two way flows. • Flows are intangible or tangible. Visit Board of Innovation and get their toolkit.

Growth Models

Speaker Notes • It’s such a big element of spend it has to be done in detail. • It leads the funding conversation not the other way around.

Growth Hacking Journey

EARN • SEO • Email • White Papers • Videos • eBooks • Webinars • PR • Social Media • Speaking BUY • Digital Ads • Traditional Ads • Sponsorships • SEM

ACQUIRE👫

ADOPT👫

RETAIN👫

LEVER👫

Word of Mouth Social Media Email friend

Referral Rewards

Service as Retention Customer

Experience !

Instant Value Service as Sales

Unblocking strategy

Exciters and Delighters Experience Collection

Out/Inbound Landing pages

Call centres Meetings etc.

ATTENTION👫

Speaker Notes • Attention economy is very important. Curation of what content is critical. • SEO, SEM and Content Marketing are dominating now. • Read “Web Marketing that works” by Adam Franklin and Toby Jenkins.

Gravity Sales

SERVICE

👫ECOSYS

👫

YOUR BUSINESS

👫CONTENT

👫

EXPERIENCE

👫

SEO, SEMContent

TRUST👫

Sales not pushy Keeping promises

Profitability Redundancy

Service, Product, Onboarding

Social Media, Learning Events, Personal Touch

Phone, Humans, Simple Docs, relationships

Speaker Notes • The most attention economy centric model • More suited to organic growth businesses. • Apple and Atlassian are good examples.

Manufactured Sales

1. Raise capital to buy market share.

2. Use increased Customer Growth Rate (CGR) to go back for capital.

3. Rinse and repeat.

• Can lead to bubbles, butterflies and bullets.(equity value bubble, flighty clients, sacking staff to get profitable)

• Seducing versus Attracting clients = weaker LTCV • Often the most shareholder driven at the expense of customers & late investors.

Funding the business

What’s the experience of funding a business?

Fear

Endless cycle

De-moralising

Deceptive

Really hard

Losing

Photo: http://twitter.com/Alex_Trukhin

Default sources of external funding…

FAMILY

👫FRIENDS

👫FINANCE

👫

Dispelling some funding myths

• Funding is not a treasure hunt or a business model.

• Growth model are not funding models.

• You don’t have to fund sales operations.

• Growth isn’t a capital problem, it’s a decision problem.

• All business models need high momentum - set the momentum appropriately for industry vertical, product life cycle and other factors specific to your situation.

Speaker Notes • classic startup mistake • you don’t grow from funding, you grow for sales, marketing and product strategy • sales can be run off balance sheet. e.g. our industry, affiliates, network karma etc.

Setting good funding behaviours

• The funding search is on or off, don’t half do it.

• Search in parallel - price tension is critical.

• Never presume markets will be viable.

• It’s better to back of the accelerator pedal and conserve fuel.

Speaker Notes • Crashes happen and statistically businesses in financial weakness go down first. • They simply can reinvent themselves fast enough in crashing markets. • Conserve fuel to stay in the game. • Do this in respect to probability of funding success. • This is about cashflow planning. • Use a system like Saasu and keep good financials. • Get Alycia Edgars book Saasu Business in the Cloud.

Funding options

Equity: Founders

• Initial scrounge, old savings or retrenchment windfall

• Personal credit cards, mortgage extensions

• Use equity splitting techniques to work out what exactly makes up each founders investment.

Equity: Family and Friends

• Risks - marriages, health, impatient capital, privacy and… • Rewards - easiest to find from 100’s of contacts.

Speaker Notes • You can’t just shoot out requests for money to dozens of people due to securities laws around the world. • Instead you’ll need a prospectus or you can look at using crowd funding sites, it’s safer and you can get you friends

and family to invest via that mechanism and they get something out of it. • Be careful with F&F. Do you seriously want to hurt your relationship with these people if they lose their money.

Equity: 2nd job

Stay in your job !Board positions !Directorships !Coaching

Speaker Notes: • You can only carve out limited time • Lowest risk, least stressful but also the slowest. • Get frustrated wanting to leave and do it full time

Equity: Free-sourcing

free soho free garage

free mentors

free sales free products

free marketing

sweat equity

Speaker Notes • Free and near free resourcing of your business is as good as capital. • The highest equity ROI. • Free stuff sometimes doesn’t scale - future cost. • TRAP = people assume their time is free.

Equity: Lean-startups

• Incubators (fishburners)

• Accelerators (dozens)

• Co-investors (Pollenizer)

Speaker Notes • Key trait is MVP and focus. • These are the most popular way and for good reason - lowest risk to productivity ratio apart from free sourcing

Equity: Guardian Angels and Super Angels

• There’s a huge amount of private and angel money out there untapped.

• Stop obsessing over VC’s. That time will come.

Speaker Notes • This is the best non family and friends option. • There’s lots of great small investors in Australia in the angel space. • Included here is private money. They don’t call themselves angels. Just people wanting to invest in businesses.

Equity: Accretive M&A

• Complementary startups join -or- well funded startup buys another. • Often an equity swap if neither have cash. • Improvement in liquidity position through cost savings. • Setting equity swap levels is hard work = tax, valuation and control. • Some businesses use sherlocking threat to force the weaker partners hand.

Equity: IPO

• Big city, bright lights and flash money.

Speaker Notes: • End of the equity funding cycle. • After this it’s bank debt, corporate bond and hybrid markets. • You have to be a lot bigger than you think. • Not for the feint heated - compliance heavy, investor pressure. • You need a good investment bank and a really hot business in a hot industry. • Phote: http://twitter.com/andersjilden

Hybrid: Venture Capital

Founder👤

Co-founder

👫 Angel👤

Series A#

Series B# Series C

#

IPO🏦

Seed☇

Speaker Notes • This is a journey. Like lord of the rings. Walk a bit, fight a bit, run, walk fight run. • This isn’t pure equity because of the optionality and dilution usually exists. • Risk is reduced once in the VC club from 1/1000 -> 1/10 approx. • Photo: Ilham Rahmansyah

Hybrid: Convertibles and bridge loans

• Convertibles, hybrids, bank equity investment are later stage.

• Bridge loans - essentially convertibles, are used by VC’s and private money.

• If you can’t afford lawyers or corporate advisors don’t touch these structures.

• Optionality can get you really unstuck in this space.

• Photo: http://dribbble.com/AndersJilden

Hybrid: Crowd funding

Speaker notes: • Saasu client Pozible is a great Australian example • Kickstart is an awesome US based one. • Fun, low risk (mostly) but watch that you have a

contingent liability to deliver product to pledgers. • Hybrid because you have liability in product

delivery being cash received upfront.

Debt: Invoice financing

• Usually 80-90% of invoices can be funded.

• Invoices act as security so no real property or mortgage required.

• Funds usually available next day.

• Usually quite high minimums before banks will get involved. 100k+

Speaker notes: • Lots of product variation and names - Factoring, receivables financing, invoice financing. • Typically for mature businesses with significant receivables books above 100k. • Easier to access if you business receivables data is online. This is monitored by shadow ledger access from the bankers.

Debt: Trade Credit

• Trade Credit can fully fund significant businesses.

• The sooner you get paid and the longer your supplier terms the better your liquidity position BUT not your liquidity ratio which is a better KPI.

• You may think suppliers give free credit but they very often factor your account credit and limit into their pricing structures, so you still may pay.

Speaker notes: • Example: Your sales cycle on product ABC widget is 7 days on eBay. The suppliers you use give you 60 days credit. • You have a lot of stock turn you can do in 60 days, excellent cash-flow impact.

Debt: Overdrafts, Bank Loans & Bank Bills

• Can be a hassle to get until you have track record or provide guarantee’s.

• Higher rates than mortgages but not severe.

• Bank bill market is an option as you get bigger and has better rates.

Debt: Credit Cards

• Many small businesses are run on credit cards.

• It’s the easiest form of debt capital.

• It’s also the cheapest for 6-12 months then gets really expensive but,

• Smarties roll between cards using cash advances and taking advantage of interest free periods banks offer to acquire new cardholders.

Income: Grants & R&D Tax Incentives

• Grants aren’t as free and free as you think. Application and admin intensive.

• R&D Tax Incentives are worth looking at with an advisor. (NB: changes just announced for Australia reducing benefits last night).

• UK grant programs >> Gov.uk

• Australia >> ausindustry.gov.au

Income: Consulting/Services

• 37 Signals - transition from design agency to web app developer.

• Amazon - used etailing to become a Cloud Computing Business.

Income: Partnerships and Joint Ventures

• Access to distribution networks, sales resource, advisors, cross selling etc.

Speaker notes: • These work only if done on really tight upfront commercial agreements with even more solid exit documentation • My last project at Deutsche was a team building a wind farm. Could only be done as a JV. Sometimes it is the only option. • Think of JV’s like producing a movie and pulling together a team. If it works once repeat and continue. • Photo: http://500px.com/andreaboldizsar

Income: Profit reinvestment

• Instead of taxable profits or dividends.

• Pre-plan to spend through R&D and S&M activity - tricky balance.

• Tricky balance - negative EBITDA value but positive on LTCV models

Funding Options

Smarties Guide by Marc Lehmann

Top 5 Funding Tips 1. Set your business model and growth strategy. 2. Know your founders ideals, life plan and lifestyle. 3. Fit growth and preferred funding sources based on 1&2 above. 4. Do a breadth first search, weighted by expected value. 5. Don’t let funding become the business model. Full on or full off search.

Saasu Pty Limited ACN 093 453 886 http://creativecommons.org/licenses/by/4.0/

FUNDING SOURCE

☂ Founders

☂ Family and Friends

☂ Moonlighting

☂ Free-sourcing

☂ Lean-sourcing

☂ Angel & Super Angel

☂ Accretive M&A

☂ Initial Public Offering

☂ Exit Public Offerings

☂ Venture Capital

☂ Convertibles

☂ Crowd Funding

☂ Receivables Finance

☂ Supplier Financing

☂ Bank Loans & Overdrafts

☂ Credit Cards

☂ Grants & Tax Concessions

☂ Consulting/Services

☂ Partnerships & Ventures

☂ Profit ReinvestmentINCO

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STARTUP COMMERCIALISATION GROWTH MATURITY