Axel Springer Plug & Play March 25,2015

1. Best Practice Business Case Modeling
Axel Springer – Plug & Play!
March 25th, 2015!
Uwe Horstmann, Founding Partner, Project A Ventures – uwe@project.com!
Benjamin Bolland, New Business Analyst, Project A Ventures – benjamin.bolland@project-a.com!

2. Venture Capital in Germany 2014!
> 50% of all European startup !
invests go to Germany!
Increased share of foreign investors !
since 2013!
22%  29%!
2,1 BN EUR!
Overall investment volume for Germany !
37% of all invests in German !
startups go to Berlin!
RANKS 4!
in international comparison !
by number of tech exits!
970 MIO EUR !
VC invests for tech startups in Berlin!
Sources: Deutscher Start-up Monitor 2014, E&Y Studie: Technologie Start-ups 2014, Dow Jones Venture Capital Report!
1!

3. Approach!
FOCUS.! CORE COMPETENCIES.!
» Operational early-stage investor and
company builder in Berlin and São
Paulo!
» Incubation of ideas and !
acceleration of existing startups!
» Building sustainably successful
companies!
» Operational expertise and financing
with own €80 Mio. fund!
Transactional and innovative !
digital business models especially for !
» Marketplaces and E-Commerce!
» Software as a Service!
» Digital Infrastructure Solutions !
» IT/Product !
» Performance Marketing!
» Business Intelligence !
» Organization Building!
PROFILE.!
2!

4. 3 Years: Interim Results!
Co-investments of !
230 MIO EUR !
> 710 MIO EUR!
Value of companies in the current portfolio !
Involved in building 35 startups!
Employee Satisfaction!
94% would recommend Project A as an
employer to their friends!
3!

5. Current Portfolio!
5!

6. Where does Project A invest?!
MARKETPLACES & E-COMMERCE!
6!
DIGITAL INFRASTRUCTURE! SOFTWARE AS A SERVICE!
• Vertically integrated brands!
• Marketplaces: localized and in real
time!
• Performance marketing and business
intelligence!
• B2B software products!
• Transferring our learnings into tools
and enablers!
• Vertically sliced!
• B2B and SMB focus!
• Teams that create / bring optionality
• Incubation, Seed and Series A investments, 500K to 3M EUR investment per round!

7. Cash flow is more important than your mother!
7!
€(2,000,000.00)!
€- !
€2,000,000.00 !
€4,000,000.00 !
€6,000,000.00 !
€8,000,000.00 !
€10,000,000.00 !
1 2 3 4 5 6 7 8 9 10111213141516171819202122232425
Base your financing rounds planning on
cashflow rather than EBIT or other profit
KPIs.!
!
Cashflow shows the true current face of the
company – other accounting tools try to
represent the “normal state”!
!
VCs like to see a cash flow hockey stick
(see left). Plan financing rounds so that you
never have a negative cash position.!
actual cash position!
no financing!
„99.5% of incoming
business cases show a
hockey stick“!
Holger Witte, Director New
Business at Project A!

8. Make
assumptions
Define basic!
KPIs
(educated
guess)!
Combine with
top line
What‘s in a business case?!
8!
Financial Statement!
(Profit contribution)!
Cash Flow Forecast!
(Financing timing)!
Balance Sheet!
(Financing timing)!
=!
very basic parameters:!
e.g. tax rates, days payable,
average cost per employee!
Industrie-specific, but not really
in your control!
Key metrics for your business!
e.g. basket size, cost structure,
customer acquisition!
How big is this going to be
when?!
Bottom-up prediction of sales,
revenues, etc.!
Cohort analysis?!

9. Unit economics!
9!
Questions to be answered
• What are the most important drivers in
this business model?!
• What should we focus on?!
• Where is most room for improvement –
and which improvement would help us
most?!
• How much marketing and overhead can
we afford?!
Note: This is a sample for a classical retail
business (high CoGS!) – a “digital”
business model like online dating would
look totally different.!

10. Top line for sales & revenues!
10!
Usage of bottom-up methods, sales as a result of
marketing activities!
“I only need 1% of the market” won’t get you anywhere
Methodology of this example:
Input is the answer to three questions:!
• How many visitors per channel can I get per day?!
• How much does a visitor per channel cost me per
day?!
• How many of these visitors convert into customers per
day?!
 gives you CPO and # of orders!
 Also works with offline sales forces, offline shops, b2b
sales, etc.!
Eliminate the mean – split up where it makes sense (see
variety of CPOs!)!

11. Where could financing go?!
11!
Marketing investment – CPO vs CAC vs CLV
KPI Definition Calculation Example
CLV
Customer
Lifetime
Value
Accumulated Profit
Contribution 2 in a
certain time frame
Net Sales after returns +
cancellations (initial order + following
orders):
– COGS:
– Logistics&Packing:
– Payment Cost:
50,83€
- 19,50€
- 5,30€
- 0,25€
= 25,33€
CAC
Customer
Acquisitio
n Cost
Marketing Cost / # of
Orders
of New Customers
Marketing Cost:
Orders of New Customers:
15.000 €
/ 1.500
= 10,00 €
CPO
Cost per
order
Marketing Cost / # of
Orders
Marketing Cost:
Orders:
25.000 €
/ 5.000
= 5,00 €
CRR
Cost-
Revenue-
Ratio
Marketing Cost /
Gross Revenue
Marketing Cost:
Gross Revenue:
25.000 €
/ 230.000 €
= 10,87%

12. Where could financing go?!
12!
Proof of concept and !
establishing the right !
cost base
• Returns!
• COGS!
• Discounts!
• Logistics!
• Payment!
• Marketing!
Plan Plan Plan
2010 2010 2010
Business Case 2010 Okt Nov Dez
KPIs
Sales
Gross Sales before Cancellation [in k EUR] 10.000 12.000 14.000
# Orders 50.000 60.000 70.000
Rates
Return Rate II [in %] 20,0% 22,0% 24,0%
Cancellation rate II [in %] 10% 8% 5%
Fraud Rate [in %] 1,5% 1,2% 1,2%
Basket Size
Gross average Basket Size [in EUR] 50 50 50
Net average Basket Size [in EUR] 40 42 45
Average Items per Order 1,9 1,9 1,9
Average item value [in EUR] 25 28 30
COGS
Basic COGS [in %] 54% 52% 50%
Discounts [in %] 5% 5% 10%
COGS [in %] 59% 57% 60%
Logistic Costs
Logistic Costs per order [in EUR] 9 8 7
Logistic Costs per delivered Item 6 6 6
Logistic Costs per Returned Item 6 6 6
Payment Cost
Payment Costs per order [in EUR] 1 1 1
Marketing Cost
CPO 14 13 12
Customer Acquisition Costs [in EUR] 20 24 20
# returning customers 200.000 250.000 300.000
# new customers 150.000 175.000 200.000
Share of returning customers 75% 70% 66%
Sales returning customers (per month) 30% 25% 20%
Return Rate of returning customers 50% 40% 43%

13. Lessons learned!
18!
• Think first – avoid “technical debt”
• Build a „living case“
• Aim for the right balance between detail and abstraction
• Document your changes (e.g. version control)
• Set conventions and stick to them (formatting, input cells, formulas, assumptions, ....)
• Avoid spurious accuracy – it‘s still a model!
• Don’t model for output – focus on your input assumptions
• QA your case
• Create sanity checks
• Learn shortcuts ;-)

14. Thank you very much
uwe@project-a.com – @uwehorstmann
benjamin.bolland@project-a.com – @benjaminbolland