On Ideas

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					On Speed to Market
MGT 709 New Venture Creation
 Adams
 Strategies that Work
 Legal Forms
 R&R
 Zipcars
  Adams On Speed To Market
 Myth: I have to ship a killer product
   Instead: Get to market fast with a product that
    solves customer pain
      Partnering/buying versus making
      Deliver a minimally acceptable feature set
      Contrarian: Information rules (Shapiro/Varian)
         Versioning: program all major features then offer
   New venture management is all about
    decreasing risk
             Boiling the ocean
 A good opportunity is by definition complex
 Boiling the ocean – solving the problem in its
   There once was a PhD student…
 Development costs and time will kill you
   Startups don’t have the resources
 When you start a company, you’re not delivering
  a product. You’re addressing a pain point.
 There is never enough money and time to
  fully address the customer pain
    Address the top pain points with minimum
    Integrate others’ products through a value-added
 Advantages
    Continued market validation
       learning by doing and proof people will pay for your
    Less capital expenditure and market risk
    Ability to hire a stronger management team
    Ability to raise more capital at better rates
    Credibility with customers
 You can’t achieve success trying to bring a
  complete solution to market by yourself
   What can you build in time/budget? What can’t you?
   What sort of partner do you need? Suppliers of
    solution components
      Strategic partners – marketing, investment, introductions
      Investors
   What’s in it for partners?
   Pitch to partners like they were customers then show
    how they fit…
      Concept of value-added solutions rather than products
 Identify a subset of the market
 Recruit early alpha customers (as early as
  idea stage)
 Focus your product’s functionality
   Microsoft Windows as good enough
 Market the path to the ultimate vision
   Show how current version is a building block
    of the overall solution
   Close gap between vision and functionality
    over time
    Strategies that Work
 By the time an opportunity is
 investigated fully, it may no longer
   Screen out losers
   Focus on a few important issues
   Integrate action and analysis
      Screen out losers
 Where do entrepreneurs get their
     71% of ideas replicate or modify an idea
      encountered through previous employment
     20% by luck, only 4% by analysis!
     41% of Inc 500 had no business plan, only
      28% wrote a full-blown plan
     Ability to roll with the punches much more
      important than planning
       Doing it quickly and doing it right more
        important than brilliant strategy
 Know your objectives
   Niche or large-scale
      Do you have the skill set
   Proprietary or hustle business
 Leverage external change
   Easier to start in a new or changing
      “We aren’t as incompetent as our
       The Ideal Startup
 Relatively low capital requirements
   Ability to keep large equity holding
 Substantial enough rewards
   Quick payback, options to cash out early
 Something you can be passionate
 Ability to recognize failure early
   Low shut down costs
      Time, money, reputation
     Analytical Priorities
 Some critical uncertainties cannot be
 resolved through more research
   E.g. truly novel ideas like copiers
   Avoid research you can’t act on
      Secondary analysis
   Understand what must go right and
    avoid some pitfalls
   Revenues are very difficult to predict
 Just do enough work to justify the next
   Work around problems
   Analysis should be focused on what to do
    next not what not to do
 Combine selling with research
   Evangelical investigation
   Alpha/beta sites
   Smart arrogance
      Be smarter, more creative, harder working
      Be prepared to change course and learn
      Persevere
                                     Legal Forms
                                     Pass     Limited     Flexible   Investor     Different   Emp.

                                 Through      Liability   Distrib#   Restricts.   Classes     Stock
Sole Proprietor                      Y         N           N            Y            N         N
   Partnership                       Y         N           Y            N            N         N
   Partnership                       Y        Y*           Y            Y*           N         N
S Corporation                        Y         Y           N           Y**           N         N
LLC                                  Y         Y           Y            N          maybe      maybe
C Corporation                        N         Y           N            N            Y         Y

# losses up to capital contributed
* must have at least one general partner
     ** must be US citizens, no more than 100 members
 Why was Reiss successful?
   What were the external factors creating
   What were the barriers/obstacles/risks to
   How did Reiss overcome them?
   How successful was Reiss?
      Consider risk and return
 What should Reiss do about Whoozit?
 Give an elevator pitch to the VC group on the
  Zipcar concept
 Zipcar group
   Take 30 mins to prepare a presentation to the
   VCs prepare questions based on:
      People, Opportunity, Context, Deal
      Exhibits 3 and 5
   Bottom line:
      Is it a viable business model? What would have to
      change? Would you invest $1million?