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Top 10 Questions From VCs

(And Some Sample Answers)

     

  1. What is the vision of this technology 2 years from now?

(i.e. Tell me about the technology path… Speed? Depth? Breath? Scalability?)

Possible Answer:

    • Fundamentally there are three vectors ( Directions) to take the technology:
  • Speed - Reliability/scalability is the focus now

  • Depth - added venues… www/Usenet/chat rooms/message boards/etc. is the next focus

  • Breadth - added applications… longer term focus

    1. How are you going to reach/obtain the $10MM in booking number from a $1MM base?

    (i.e. How specifically do you intend to scale the business – what’s your revenue model?)

    Possible Answer:

      • Rollover revenue, the renewals (700K)
      • Follow-on to existing customers
        • upsell & penetrate the a/c deeper
        • consulting services to existing clients
      • Direct Strategy
        • sales teams in place.
        • each teams 10-12 deals
        • small medium large transactions are working
        • coverage ratio 2-2.5 times in pipe
        • want 3 and working for it
      • Business development (verbal acceptance)
        • 2-3-4 deals planned $2mm new business
        • currently have PWC lead gen./ASCAP revenue
        • sharing/E&Y in process
      • Plus Jumbos not forecasted.
        • cannot plan them either upside or fill in from other

    Summary: Aggressive – yes

    Sandbag - no

    Crazy - no

    1. What is your plan for ramping sales?

    (i.e. What are the specific tactical ways you will grow the business to access your intended revenue streams and meet your targets?)

    Possible Answer:

      • Planning on a 25% turnover in sales force…industry average
      • New sales reps productivity: 0% in Q1

    50% in Q2

    100% in Q3

  • Goal is to beat these numbers, but planned for above turnover and productivity

    1. How durable is your competitive advantage?

    (i.e. How long can you stay on top, based on what advantages, how do you sustain those advantages, and how do you know?)

    Possible Answer:

      • It’s our Technology Focus…
        • On a scale of 1-10, with 10 being rocket science, we are a strong 6, maybe 7; We believe that gives us a 12-month advantage over any new entries
        • The knowledge base we have acquired by running our systems - this is probably a six-month advantage
        • Brand - we are the first to market… the leader... and we are raising our capital to stay in front.
    1. How are you going to recruit the doubling in staff size your plan requires?

    (i.e. What is your plan for headcount and how will you go about achieving it?)

    Possible Answer:

      • We are using "dedicated outsourced recruiters" on location and can scale them quickly. Competitive compensation, benefits and NOW, pre IPO options.
    1. Will you need another financing round before the IPO?

    (i.e. Do you have a cash needs understanding and a plan for obtaining it externally if you must?)

    Possible Answer:

      • We do not plan one for financing reasons. Only if a "STRATEGIC".
      • Played comes into view who can add significant Shareholder Value.
    1. What about vertical markets?

    (i.e. How does this business scale beyond the current market and what is your plan to access and defend?)

    Possible Answer:

      • We have made a conscious decision to go Horizontal at this time..
      • We believe the Vertcals will find us and then we will move into them.
    1. What’s /Who’s missing?

    (i.e. Where does your strategy have holes that you have not filled, what has held you back from addressing them, and how and when will you address them?)

    Possible Answer:

      • International
      • Consulting
    1. Who else are you talking to or have about this round?

    (i.e. What other venture firms are you in conversations with, what stage and level of interest, and what do they say about your understanding of the investor market?)

    Possible Answer:

      • ABS Ventures
      • Prudential
      • Morgan Stanley
      • No one has seen this presentation yet… we plan on opening it up Mar. 1
    1. ANYTHING ELSE THEY MAY ASK!!!!!!

    (i.e. Be prepared to defend your business and logic from every conceivable angle!)

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