On Speed to Market MGT 709 New Venture Creation Agenda 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 versions 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 entirety 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. Advantages There is never enough money and time to fully address the customer pain Address the top pain points with minimum functionality Integrate others’ products through a value-added approach Advantages Continued market validation learning by doing and proof people will pay for your product Less capital expenditure and market risk Ability to hire a stronger management team Ability to raise more capital at better rates Credibility with customers Partnering 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 Features 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 exist! Screen out losers Focus on a few important issues Integrate action and analysis Screen out losers Where do entrepreneurs get their ideas? 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 Screening 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 industry “We aren’t as incompetent as our competitors!” 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 about 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 Action Just do enough work to justify the next stage 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 General Partnership Y N Y N N N Limited 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 R&R Why was Reiss successful? What were the external factors creating opportunity? What were the barriers/obstacles/risks to success? How did Reiss overcome them? How successful was Reiss? Consider risk and return What should Reiss do about Whoozit? Zipcars Give an elevator pitch to the VC group on the Zipcar concept Zipcar group Take 30 mins to prepare a presentation to the VCs 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?