Intro to Ent Final Study

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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


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