Intro to Ent Final Study
Average Angel investment premoney valuation is
$1-3 million
Most seed rounds are between
$300 thousand and $1 million
User stories were put into 4 categories
(Backlog, in progress, built, and validated)
Non-provisional patent duration
20 years
SnapTax
2009 startup that wanted to "liberate taxpayers from expensive tax stores by automating the process of collecting information typically found on W-2s"
_____ of all US businesses are corporations, but they account for about ____ of all business receipts
25% ; 67%
Startup
A human institution designed to create a new product or service under conditions of extreme uncertainty
Plant patents
A new kind of plant
Three A's of metric
Actionable, Accessible, Audit-able
Porter's 5 forces
Barriers to entry Buyer Bargaining Power Threat of substitutes Suppliers bargaining power Competitive
David Binetti
CEO of Votizen; 4 big leaps of faith
Identify _____ who could end up being _____ and even ____
COMPETITORS; STRATEGIC PARTNERS; acquirers
UPA defaults
Share profits equally and share losses how they share profits Equal, undivided right to management Death, insanity, insolvency, or departure of any partner dissolves partnership Dissolution requires requires notifying all creditors, winding up, and restarting Continuing to do business is ultra vires-without authority, meaning illegal \\ Partnership agreement can change this, which is best reason to write one
SBIR
Small business Innovation Research grant
Other funding sources
State resources SBIRs STTRs Grants Incubators
A way to gather information about new or small industries are:
Check business press Talk to trade associations Consult trade association journals Check organization journals Check orgs that list gov and agency resources Look at blogs, websites, and social media
Inter Partes Review and Post Grant Review
Come from 3rd parties that challenge the validity of a patent
5 principles of disruptive Innovation
Companies depend on customers and Investors for resources Small Markets Don't Solve the Growth Needs of Large Companies Markets that don't exist can't be analyzed An Organization's Capabilities Define its Disabilities Technology supply may not equal market demand
DMCA stands for
Digital Millennium Copyright Act
DRM stands for
Digital rights managemt
Markets that don't exist can't be analyzed
Disruptive innovations - know least about markets because no market data exists // Discovery planning - right markets and right strategy for exploiting them cannot be know in advance // *Must assume forecasts are wrong, rather than right ...drives managers to develop plans for learning what needs to be known
Small Markets Don't Solve the Growth Needs of Large Companies
Disruptive tech typically enable new markets to emerge // Large firms that have successfully captured strong positions in new markets enabled by disruptive tech have done so by giving responsibility to commercialize the disruptive technology to an organization whose size matched the size of the targeted market ... small organizations can respond easier to opportunities for growth in a small market
size, industry, or sector of the economy _______
Does not matter - still a startup
Barriers to entry
Economies of scale Brand loyalty Capital requirements Switching costs for the buyer Access to distribution channels Proprietary factors Government regulations
Gene or Biological patent
Edited forms of genes not found in nature
Intellectual Captial
Tacit knowledge such as leadership skills and intuition
Innovation Accounting
Entrepreneurs use innovation accounting - turn leap-of-faith assumptions into a quantitative financial model
Intellectual Assests
Explicit Knowledge / documented in physical form
copyrights governed under
Federal Law by Title I USC
IMVU Innovation Accounting flaws
Had low sales with first MVP and assumed it was because of poor product, so worked at improving quality
Attractive Industry
High barriers to entry Weak supplier and buyer bargaining power Not highly competitive
VCs are interested in
High growth companies
non-profit tax code
IRS: 501(c)(3)
After secondary research, move to primary
Industry observers and analysts Suppliers and distributors Customers Employees of certain firms Professionals in the industry Trade shows
Technology supply may not equal market demand
Pace of technology exceeds rate of performance improvement that mainstream customers demand or can absorb // In diverse markets - basis of competition (criteria by which customers choose one product over another) changes // Basis of product choice often evolves from functionality to reliability, convenience, and ultimately to price // Companies don't realize the speed at which they are moving up-market, over satisfying the needs of their original customers as they raise the competition toward higher performance and mkt margins ...in doing so, they create a gap at lower price points into which competitors employing disruptive technologies can enter
Sole proprietorship taxation
Pass-through
Examples of Resources
People, equipment, technology, product designs, brands, information, cash, and relations with suppliers, distributers, and customers
®
Registered Trademark
RPV stands for
Resources, Processes, Values
Partnership
Two or more natural persons engaged in a join venture for profit
USPTO
US patent and trademark office
what organization do you apply through for trademark
US patent and trademark office
First LLC law was passed in the state of ___ in ___
Wyoming; 1977
Types of pivots:
Zoom-in pivot Zoom-out pivot customer segment pivot customer need pivot platform pivot business architecture pivot value capture pivot Engine of growth pivot channel pivot Technology pivot
Angel investor often expects
a board seat or observation rights
Kanban
lean manufacturing principles (capacity constraint)
Common theme among all failures
decisions that led to failure were made when the leaders in question were widely regarded as among the best companies in the world
prioritization decision among engineers
design choices
Wealthfront Mission:
disrupt the mutual fund industry by bringing greater transparency, access, and value to retail investors
Unless otherwise stated in partnership agreement, partnership _____ when a partner either leaves or ____
dissolves ; dies
Tuning the engine
each initiative should be targeted at improving one of the drivers of growth
values of small companies can
embrace small markets
Growth stages and financial Sources
emergence -> Transition - > Rapid growth
If a company wants to survive
employees must prioritize those things that help the company to make money in the way that it is structured to make money
resources and processes are often
enablers that define what a company can do
Intrapreneurs
entrepreneurs who operate inside an established organization
6 stages of industry
entry / emergent growth differentiation competition / shakeout maturity decline
Trends have been to _______ copyright and ______ patent holders
expand ; restrict
formal processes
explicitly defined and documented
Learning
forces the team to execute with discipline, you need to look at information that helps it grow rather than traditional "vanity metrics"
trade secrets
formulae, customer lists, internal processes, manufacturing methods
sometimes managers succeed
from reasons not of their own making
Dormant partner
generally not known to the public and not active, but still shares in the profits and loss of a partnership
Equity investment
giving shares of the company in exchange for cash
informal processes
habits and rituals that ave evolved
1/3 of all venture-backed companies that went public between 2006 and 2012
had at least one immigrant founder.
Sole proprietorship investment potential
hard to get investment
proceses define
how an organization transforms inputs into things of higher value
Enabling processes include
how market research is habitually done, how such analysis is translated into financial projections, how plans and budgets are negotiated and how those numbers are delivered
Xerox missed
huge growth and profit opportunities in the market for small tabletop photocopiers
Trademark infringement is found
if a mark is likely to cause confusion with something already in the marketplace
Optimization
improving a product's performance
trademark lifetime
indefinite as long as it is still in use and renewal fees are paid
Auditable
information must be credible to employees (data must be simple and easily tested)
2nd Votizen pivot
instead of trying to get customers to pay, he went to large organizations with interest in political campaigning, and they paid
disruptive innovation happen so ____ that no company has____
intermittently; a practices process for handling them
deliberate copying of a mark
is a particular form of trademark infringement that is subject to civil and criminal penalties
Customer need pivot:
keeping the customer segment (gotten to know them well) but changing the idea/need solved
Customer segment pivot:
keeping the functionality of the product the same but changing the audience focus
In the beginning, a startup is _______ and financials are_____
little more than a model on paper; ideal projections
Cohort Analysis
look at data based of the group of customers, rather than the cumulative data
Patent trolls
look for patents as assets
Vanity metrics
looking at the most positive facts, rather than all the facts
Votizen used ____ and ___ to increase ___
lots of split tests; time; numbers
Pandesic team was
made of capable, respected, and experienced managers
Resource that often trips up new ventures is
managers
hiring specifications 2nd step
match circumstances with the managers who have had challenges like them
Actionable metrics
metrics that allow you to see where you need to improve
Innovator's Dilemma: Sears example
missed the advent of discount retailing and home centers
Why Sears failed
missed the advent of discount retailing and home centers
Patents expiration
most patents expire 20 years from the date of issue
Equity investment / Angel Deals
mostly earlier than VCs
Actionable
must demonstrate clear cause and effect or it is a vanity metric
over time, a company's values
must evolve to conform to its cost structure or its income statement
Accessible
need to have genuine feedback that everyone can understand and use to improve
Platform pivot
new growth model, self-serve sales platform where anyone could become a customer with just a credit card
protect trade secrets through
non-disclosure / confidentiality agreements
Examples of Fair use
noncommercial / scholarship / excerpts / parody / reviews
hiring specifications 1st step
not right-stuff attributes, but the first step specifies the circumstances in which the new team will be asked to manage
Innovation
novel sceintific discoveries, repurposinf an existing tech for new use, devising a business model, or bringing a product / service to a new location
Doctrine of equivalents
protects patents for small differences
Silent partner
provide capital, but does not actively participate in the management of the business
Once a patent is issued, it becomes ______, so some companies keep their ideas as ______
public ; trade secrets
prioritization decision among production schedules
putting one order ahead of another
Use a minimum viable product to establish
real data on where the company currently is
Channel pivot:
recognition that the same basic solution could be delivered through a different channel with greater effectiveness
votizen 3rd pivot
reduce staff, since he couldn't close sales & companies that signed intent forms weren't early adopters
Zoom-in pivot
refocusing the product on what previously had been considered just one feature of a larger whole // what previously was considered a single feature in a product becomes the whole product
be wary of friends and family
relationships can go south if the business does
Exemptions to DMCA
research and reverse engineering
2 jobs of a startup
rigorously measure where it is now to confront hard truths Devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan
test ____ assumptions first
riskier
Split-test experiment (A/B testing)
send two versions of a products and observe the changes in behavior between the two groups
There was a ____ in IPOs from ___
serious dropoff; 2008-13
Want a ______ turnanround; ____
shorter; 3-5 years
Sole proprietorship ownership
single person owns 100% of company
Innovation generally happens in
situations or uncertainty
what do trademarks identify?
slogans, logo, sounds, company name, product names, shapes, and colors // Identify the mark, good, or service
Resources are much more important to the growth of
smaller ventures than larger ones
disruptive products provide low gross-profit per unit
so they are often inconsistent with leading companies' values
2/3 of American businesses are
sole proprietorships
product
something that adds a source of value for people
trade secrets governed under
state law
No government issues a copyright
submitted to register of copyrights in library of congress
industry leaders almost always emerge victorious in _______ and almost always lose in ________
sustaining-tech battles; disruptive-tech battles
Business architecture product
switching architectures from high margin/low volume to low margin/high volume or vice versa
Runway:
the amount of time remaining in which a startup must either achieve lift-off or fail
Size is a constraint in larger companies because
the company is unable to focus on smaller markets
Wealthfront launched paid product
the conversion rate was close to zero
The most crucial processes are
the enabling, or background processes that support investment decisions.
schools of experience
the jobs and problems managers have wrestled with in the past
why do many hot-product companies burn out when they go public
the key initial resource - the founding team - fails to institute the processes and values that help the company follow up with a sequence of successful products
True measure is how many pivots a startup has left:
the number of opportunities it has to make a fundamental change to its business strategy
Angel investors invest in ____; VCs invest in _____
the person; the business
Customer segment pivot
the product solves a problem, but for a different customer than originally anticipated
Runway is Usually defined as
the remaining cash in the bank divided by the monthly burn rate, or net drain on that account balance
An organizations values are
the standards by which employees make prioritization decisions
Those with the right stuff on paper are often
the wrong people
often the cause of a new venture's failure is that
the wrong processes were used to build it
Risk of projections with osme positiveresults
they bumble around in the land of the living day, causing some to persevere too long
prioritization decisions include
those by which employees judge whether an order is attractive or unattractive, whether a particular customer is more important or less than another, whether an idea for a new product is attractive or marginal
Team could only have ____ projects in each category and could not move into the next category until ____
three; they did something with a previous project
management skills and intuitions that enable people to succeed are shaped
through their experiences and careers
Wealthfront Pivoted
to allow customers to invest with professional managers; got rid of game
even the most senior manufacturing execs from a stable "school" are likely
to be weak in starting a new plant
Sole proprietorship liability
unlimited liability
There are _____ co-invesotrs in a VC deal
usually not
User stories were not complete until they led to
validated learning
when a company begins to become financially successful by prioritizing various uses of resources according to criteria that reflect the founder's priorities
values begin to coalesce
once members of an org begin to adopt ways of working and making decisions by assumption, rather than conscious decision,
values come to constitute culture
Resources are
visible, and often measurable - easily assessed in value
Processes include
ways that products are developed and made and the methods by which procurement, market research, budgeting, employee development, and compensation, and resource allocation are accomplished.
Zoom-out pivot
what was considered the whole product becomes a single feature of a much larger product
Pivot or persevere
when a company starts the process over again and creates a new baseline
Success is easier to sustain
when the locus of the capability to innovate successfully migrates from resources to processes and values
prioritization decision at the executive tier
whether or not to invest in new products, services, or processes
managers who have worked their way through a stable business unit
will have finely honed operational skills in managing quality programs, process improvement teams and cost-control efforts
DMCA
you are liable if you circumvent the DRM
don't give away too much of the company eary
you'll find yourself with nothing quickly
Votizen first pivot
zoom-in pivot
Seed round should provide ____ runway
12-18 month
VCs will ____; may
Demand a board seat; replace CEO
Provisional patent length
12 months from filing
Pre-money valuation minimum of ____ but ___
7 million; usually much higher
sole proprietorships make up more than
76% of all businesses in US
Path is still in early stages, recently raised over ____ and turned down an acquisition offer for _____
8.5M in venture capital; 100M from Google
Immigrants have started
>50% of startups currently valued at $1B or more!
doctrine of ostensible authority
All partners are bound by the terms of a contract
financial sources during transition
Angel investors, Debt, strategic investors, Customers, early-stage VC's
Ex Parte Reexamination
Any individual can request that a patent be reexamined in light of new evidence that may make it invalid
Path from Lean Startup Goal:
Create a more personal social network that maintains its quality over time
4 big leaps of faith
Customers would be interested enough in the social network to sign up (registration) Votizen would be able to verify them as registered voters (activation) Customers who were verified voters would engage with the site's activism tools over time (retention) Engaged customers would tell their friends about the service and recruit them into civic causes (referral)
Digital Equipment failure
Decisions that led to its decline were made at the time it was widely regarded as being an astutely managed firm - ignored the arrival of desktop computers
SnapTax info:
Found that people may have had access to printers/ scanners, but didn't know to use them Came up with the idea to take pics on phones This led to customers asking to do it all by phone started small with 1040 EZ tax return form only in CA and found success formed by Intuit, a large finance, tax, and accounting business Team leaders said success came from talent within and from having an "island of freedom" granted by their executives Scott Cook (Intuit Founder) found that the company was habing trouble innovating Decided to go back to their roots by building ent and taking risk in every division Instead of making one small change to TurboTax during tax season, they are updating it weekly
financial sources during emergence
Founders, Friends, family, Grants, Customer sales, Debt
Aspirin, Kleenex, Thermos are examples of
Genericide
Common Law trademark
Granted without registration / Lasts in perpetuity as long as not abandoned / only in states where you are using the mark
typical venture deal involves
Larger sums of money- in the millions of dollars
Copyright term extension Act
Life + 50 years -> Life + 70 for individual owned 70 years -> 125 years for corporate owned
Unattractive Industry
Low barriers to entry Strong supplier and buyer bargaining powers Many substitutes Intense competition
Things that are patentable
Machine or something with moving parts / circuitry Process or method used for producing a useful and tangible result Article of manufacture composition of matter A new use or improvement for one of the above that does not infringe on the patents associated with them Must have utility must not be obvious
Supplementary examination
Make sure nothing was missed in the first examinaiton
Importance of Accounting
Method that allows one to exert centralized control over far-flung divisins
Nonprovisional patent
Normal, official patent that is registered
Design Patent
Protects designs
Utility patent
Protects the functional parts of machines
angels are looking for ____, but average ______
ROI; ROI for all angel deals is around 21%
Companies depend on customers and Investors for resources
Supports the theory of resource dependence - while managers may think they control the flow of resources in their firm, in the end, it is really customers and investors who dictate how money will be spent b/c companies that don't satisfy customers and investors don't survive // Can succeed in disruptive tech when managers align their organizations w/ forces of resource dependence, rather than ignoring/fighting them
Trade Secrets
Under the Uniform Trade Secrets Act, a trade secret consists of a formula, device, idea, process, pattern, or compilation of information that gives the owner a competitive advantage in the marketplace.
Provisional patents
Undertake a first patent filing in the US at a lower cost than a formal patent application
Three learning milestones for startups:
Use a minimum viable product to establish real data on where the company currently is Startups must attempt to tune the engine from the baseline toward the ideal (takes many attempts) Pivot or persevere-when a company starts the process over again and creates a new baseline
Types of patents
Utility Design Plant Gene or Biological
financial sources during Rapid Growth
VCs, Strategic Investors, Debt, IPOs
An Organization's Capabilities Define its Disabilities
Values that cause employees to prioritize projects to develop high-margin products, cannot simultaneously accord priority to low-margin products
Three reasons entrepreneurs decide to pivot later than they should:
Vanity metrics can allow entrepreneurs to form false conclusions and live in their own private reality When an entrepreneur has an unclear hypothesis, it's almost impossible to experience complete failure (which often causes change) Many entrepreneurs are simply afraid!
Data collection should answer the following questions
What does the industry look like? Is the industry growing? What are the opportunities? What is the status of any technology? How much do companies spend on research and development? Who are the opinion leaders? Are there young, successful firms in the industry?
A startup is
a human enterprise
a corporation is
a legal entity
angels are willing to tolerate
a longer time to exit
Technology pivot:
a new way to achieve the same solution by using a completely different technology
A startup is not
a produce, tech breakthrough, or great idea
Pivot
a structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth
values of successful firms tend to evolve in 2 dimensions
acceptable gross margins and how big a business needs to be in order to be interesting
Infringement requires proving ___
access to copyrighted work
Exit for VC deal = _____; VC looking for
acquisition or IPO ; outsized ROI (10x or higher)
Secret Partner
active partner, but not publicly known
General Partnership
all partners have unlimited liability and are responsible for management
Wealthfront Began as
an online game called kaChing to identify the best amateur trading savants
copyrights provide protection for
anything textual, musical, artistic, sculptural
TM
applied for Trademark - can be used in commerce
VC deals invest in ___
areas of their expertise
"works made for hire"
assigned to employer
Partnership arises
automatically
copyright arises
automatically when an idea is "fixed in a tangible medium of expression"
Culture enables employees to act _____ and causes them to act _________
autonomously; consistently
Startups must attempt to tune the engine from the____toward the _____ (takes many attempts)
baseline ; ideal
be aware of whether or not you'll have the money to
buy out investors if something such as a death, divorce, or disability happens
Genericide
cant be protected when it becomes part of the regular languague
Platform pivot:
change from an application to a platform or vice versa
Engine of growth pivot:
change growth strategy (viral, sticky, or paid) to seek faster or more profitable growth
Value capture pivot:
changes to the way a company captures value
Pandesic failure
channel partners weren't motivated to sell because it was disruptive of their global model company ramped up expenses drastically increased the volume required to hit breakeven product evolved into a complex solution instead of a simple one
a better method for choosing managers is
circumstance-based
There are usually
co-investors in the Angel round
methods of working and interacting that have become established dover time that people follow them unconsciously
constitute company culture
values often represent
constraints that define what the organization cannot do
prioritization decision among salespeople
on the spot, day to day decisions about which customers to call on, which products to push to which customers, and which products not to emphasize
In order to be confident that managers have developed the skills required to success at a new assignment,
one should examine the sorts of problems they have wrestled with in the past
Processes are
patterns of interaction, coordination, communication, and decision making through which they accomplish the transformation of resources into products