002 PRIORITY Flashcards
3 key financial statements
- cashflow statement –> cash = oxygen
- income statement –> profit = medium-term food
- balance sheet –> assets = substance
5 uses of patents
protect
build Reputation
attract investors
License & cross license
block others (patent trolls, esp. in the US)
–> BLARP reversed
7 possible exit paths
- no exit –> make it a lifestyle biz!
- close-down
- ramp-down
- bankruptcy
sell to someone else (in order of closeness from founders to market)
- buy-back –> other founders
- MBO –> managers
- secondary buy-out –> other investors
- M&A –> other Cos
- IPO –> market
“Entrepreneurship”?
The process of 1. creating something new with value by devoting the necessary time and effort, 2. assuming the accompanying risks (financial, psychic, and social) and 3. receiving the resulting rewards of monetary and personal satisfaction and independence.
Advisory Board - Features:
Loosely related to Co
Serves in advisory capacity w “Lighthouse” role = good names Compensated w shares, typically
+ consultants (many free from Gov, Uni…)
Avast:
- BM
- using…
BM = Freemium: free core functionality, some customers still pay for comfort, though free ~= fee version.
Using communities for support, marketing, localization (translations).
biz model canvas: def & 9 els
template w 1+2+1+2+1 / 1+1 els:
- partners
- key activities & resources
- VP
- CR & channels
- customer segments
- cost & revenue structures
BizModel: Claesson’s def w 3 els
- Co’s DNA
- delivers Value Added to clients
- entices clients into paying for VA
- transforms payments into profits
Board of directors:
How many (typically) Responsibilities / countries
- How many: typically 5 incl. chairman
- DE: just checks CEO CH: finances + strategy > responsible w their own money in case of illegal behaviour by Co, even if they represent another Co >> board members run away from Cos in trouble … (diff by country)
BP - Elevator pitch
- def
- goal
- freq f use
- 2 min summary f exec summary
- to awaken interest f potential investors
- used daily
BP: 8 inputs & various outputs
inputs:
- financing sources
- products, markets, marketing
- team
- IP
(activities)
- strategy
- sales
- growth mgmt
- exit plan
outputs: formats & lengths vary dep. on occasion & targets
(ingredients)
Business Plan
- 3 elements
- Goal
- typical length
- 3 things it is not
- biz opportunity, strategy, detailed implementation
- –>OSdI*
- It forces you into honest, disciplined thinking
- 20 pages
- not alibi, beauty contest, bureaucracy –> ABB
Business strategy process
- cycle, w important condition
- heart
- define SMART strategic goals, do SWOT, iterate based on feedback or w new goals in case of SWOT failure
- A SWOT analysis is performed to determine and leverage strengths and opportunities, and take action on weaknesses and threats
Cash Burn and Run Rate
run rate = cash available / cash burn = all expenses, w/o considering any payments from customers
Constitutional aspects -
3 most relevant forms under the Swiss law
- Sole proprietorship
- Limited-liability company (GmbH/Sàrl)
- Joint Stock Corporation (AG/SA/Ltd.)
Critical Qs to validate a new idea
idea
- What exactly is innovative about the business idea?
- How unique is the business idea? Can it be protected by a patent?
customer
- Who is the customer?
- Why should a customer buy the product?! What need does it meet?
product vs alternatives
- Why is the product better than comparable alternatives?
- What are the competitive advantages of the new product, and why can a competitor not simply copy them?
logistics & financials
- How does the product reach the customer?
- Can the product make money? What are the coats involved, and what price can be asked for it?
customer satisfaction
perceived value / expectation
design thinking: 3 guidelines
+ team requirement
- To get at customers’ needs, distinguish what ppl say, do, think, feel asking a lot of why’s.
- Suggested design thinking process:
- Empathize (separating from self)
- Define
- Ideate
- Test (early, w/o perfectionism!)
- Ideation phase: Encourage ppl to express their ideas with no judgment.
+ team should be diverse, well-selected, have trust
dilution exercise: 4 aggregate + 2 unitary values to track
invested capital CHF / # shares / ownership % / (post)value CHF
+ nominal & “market” value of 1 share
efficiencies of
- startups
- academic spinoffs
- startups coz free from legacy of Co internal boundaries
- academic spinoffs coz inventor remains involved
Elevator pitch - structure 6 elements
- For [target customers]
- Who have [compelling reason to buy]
- Our product is a [new product category]
- That provides [key benefit (which solves problem)]
- Unlike [competitor in new product category]
- We have [key point of differentiation]
–>ForOurUnlike
Entrepreneur character traits:
4 motivations, 3 characteristics, 2 beliefs, 3 behaviours
motivation
- believe in what you do: fire in the belly!
- vision & inspiration
- need 4 independence
- need for achievement
characteristics
- DEVIANT
- Conceptual Ability
- Personal energy & emotional stability
beliefs
- internal locus f control
- constructive paranoia
behaviours
- constant learner
- innovative behavior
- calculated risk taker
Entrepreneur vs inventor, innovator, intrapreneur
Innovator (recombines > brings 2 market)
~=
Entrepreneur
~=
Intrapreneur (within big Co)
<>
Inventor (introverted)
equity vs debt: defs & tradeoff as financing sources
co-ownership & borrowing, w interest, against guarantee
debt does not dilute but requires guarantees & drains cash through interests & can be called at worst time
equity does not protect & dilutes –> loss of control, but interests are aligned
Exit strategies
- 6 possible why’s
situational:
- dire need = various problems
- preference = to get a normal life!
achievement level:
- biz plan = goals met
- investor driven = expectations NOT met
growth perspectives:
- growth induced = need resources to grow
- market driven = segment mature; competitors
–>DiMaGrI BpP
external growth:
3 ways
+ 1 property
- strategic alliances
- M&A
- franchising & licensing
+ can make growth steeper!
Formal org: Purpose
So that each knows the responsibilities expected of them n rewards
forms of intellectual property: 5
- copyright creative work
- patents technical inventions (must include a surprising element)
- trade marks brand names
- registered designs appearances
- trade secrets recipes (good idea only when you have just 1 actual recipe, not to save money)
Founder’s perspective
4 things needed on a great team:
+ what not to do n why
- more than 1 innovator
- mix of skills techies + managerial/financial ppl
- industry knowledge
- at least 1 “lighthouse” person who has entrepreneurial experience & reputation
–> ilM&M
+ do not assign C-level roles too early… they will need to be removed otherwise at the first transformation << a SMB is very different from an early venture –> need for constant evolution!
Gartner new tech hype cycle: key 3 features
- first there’s fast growth to a peak of inflated expectations, then
- trough of disillusionment
- slope of enlightenment, till productivity plateaus
Global Entrepeneurship Monitor (GEM)
conceptual framework: 3 elements –> 1 result
national & entrepreneurial framework conditions
+
social values about E.
+
individual psychology
=
output of economic growth & new jobs
growth hacking: 1 motto/def + 3 lessons + 1 process in 4 steps
- “Growth hacking is not a collection of tricks, but a mindset.”
- Do your market research before you build your product
- Correct mindset: resist the temptation to go back to your comfort zone of things that are already working for you.
- Success comes out of tracking & figuring out the reasons of failures.
- Experiment, document, learn, accumulate your learning –> EDoLAyl
guerilla marketing:
features
targets
features = invest time & smarts, based on human psy, rather than money
targets = individuals or small groups
Hofstadter’s law
+ also what
It always takes longer than expected, even considering Hofstadter’s law.
+ also more cash!!!
Innovation: 2 components
(successful) venture: 3 Components
Innovation = new idea (invention ~= implementation of sthing new) + diffusion (market penetration…) –>i(ii)d
(successful) venture = innovation + team + money –>MIT
internal / organic growth strategies: explained
= accumulating various S curves
–> prod dev + market dev + diversification
Investor’s perspective:
5 things needed
- Magnet Qualities = ability to attract other great ppl
- Intensity
- DNA Blend = diversity
- Domain Expertise
- Scar Tissue
–> MINDS
James Dyson as Entrepreneur:
8 Typical vs 5 atypical traits + 1 challenge
typical
- Conceptual Ability
- Vision & Inspiration
- Calculated(?!) Risk Taker
- Innovative Behavior
- Locus of Control (IP!)
- Paranoia
- Need for independence
- Deviant?!
atypical
- Inventor = Innovator
- No Team?!
- No recurring revenue!
- No market research
- Addressed saturated market, i.e. “Red Ocean”
challenge = succession
Joseph Schumpeter’s “Creative destruction”
+ tech startups peculiarity
EXAM Q
Both sides to E: The new destroys the old (Biz, Cos, jobs)
“Innovative entry by entrepreneurs is the force that sustain long-term economic growth, even as it may destroy the value of established companies.”
+ tech startups create 7 times more jobs on avg!
key findings by analysis Co Startup Genome
- pivoting brings more profit
- frequent premature scaling
- hands-on investors bring no value
- financed startups overestimate value of IP by 250% and market size by 100x
Know your customers & markets
- how, across 2 dims
- what to be careful for
- market segmentation, horizontal & vertical
- advice from 1 segment could cause you to fail in others!
Lean startup methodology:
- mantra in 3 words
- goals
- key author
- build - measure - learn –>BmL
- fail fast & learn & pivot -->FfLoP
- Eric Ries
LLC / AG tradeoff
(3 args each)
AG allows more flexibility & anonimity & ease of share transfer, but it requires a higher initial capital + more complexity & costs for running
market analysis 3 objects
- industry (big players, trends, events, legislation)
- market (size, structure, growth in worst & best case)
- competitors (price, quality, perception)
market S-curve =
+ “steepest” part of curve, aka…
+ conquering this can be more important than…
diffusion of innovation ~ contribution to profit curve = integral of bell-shaped adoption curve for new tech / prod: bell-shaped curve from innovators/visionaries, early adopters, early majority/pragmatists, laggards…
+ “steepest” part of curve is bw early adopters n early majority: called THE CHASM
+ …than being the first mover!
market strategy classification
dim1: red VS blue ocean strategies
dim2. horizontal VS vertical
- dim1: red ocean strat > beat competitors in existing market space VS blue ocean strat > create uncontested market space (prefer this!)
- dim2: platform/toolkit for wide array of biz problems VS focused strategy for specific problems (prefer this!)
patent: def
contract b/w society & inventor deal: - inventor tells everybody what they have invented - in exchange, they can use it exclusively for 20 years it is a negative right = it lets you forbid other ppl from using your work
premature scaling: frequent effect
most common reason for failure
B2B sales process
4 stages + some advice
by increasing cost of sale & long-term reward:
- sell prod & forget
- sell solution –> a package deal
- sell against competition –> win over
- strategic sale –> symbiosis w client
advice: start with a small CRM SW, simpler than salesforce
Silicon Valley
- copy attempts, but
- origin
- protagonists
- 170 copycats around the world, but there are cultural, social & political differences!
- kick-started by Cold War
- fuelled by hardworking immigrants
Small n Midsized Bizs are + Def
Backbone of society n bulk f employment in major economies (50% f employment created by 4% fastest-growing new ventures)
def: <250 employees, <50m rev, <25% shares f another Co, (<43m balance sheet)
4 strategy tradeoffs, 2 “unsolved” & 2 “solved”
- price skimming vs market penetration
- pioneers vs late entrants
- market risks vs tech risks –> never take both together!
- market needs beats product focus
the 3 requirements for patentability
- novelty wrt state of the art
- inventiveness = step not obvious to so skilled in the art
- sufficient disclosure for reproducibility, enough examples
transform data into insights - in 5 phases
- Start with (a precise) strategy identifying your Co’s data needs
- Measure: metrics and data
–> list data sources w properties, like volume & velocity & internal/external, structured/unstructured, cost of collection - Analyse your data - analysis can be descriptive or predictive, static or dynamic, w 4 levels of usage:
informative, diagnostic, predictive, prescriptive - Report your Results (visualization is important here)
- Transform your Thinking & decision making –> go to prescriptive
5 types of new ventures - by decreasing potential
- Gazelle = high growth n very high potential
- High potential venture
- Foundation Co
- Lifestyle Firm
- Living dead = too valuable to kill, not enough to invest more
–>GHipFoLifLiv
Venture life cycle in 6 stages
+ pitfall
Idea > Start-up > Early Growth > Expansion > Maturity > Exit
–>I.SEgE.ME
Includes “valley of death” of accumulated negative cash flow before breakeven
- Venture to Enterprise value chain in 4 stages & innovation gap
- New venture in 5 stages & funding gap
- Venture to Enterprise value chain:
- Basic research
- Technology Dev.
- Product Dev.
- Market Intro
- -> researchDevDevMarket
innovation gap is bw academia & industry
- New venture:
- eval. / founding
- pre-seed
- seed
- start-up
- growth
- -> EfPsSSuG
funding gap is at start before biz angels & VCs arrive
why should you patent IP aggressively?
because everybody else is aggressive with IP
–> patent or perish!
BP Executive Summary
- length
- audience
- content
- 1-2 pages (first & most important 2 of the BP)
- 90% of people only read this
- brief Co description with unfair advantage
Entrepreneurial marketing & issues for small ventures:
3 properties
- strong influence by entrepreneur
- not much formalization
- market does not trust you yet
Financial Planning:
wrong & right approach
+ key ingredient
- wrong approach: only top-down, long-term planning, focused on profits, Studybased on draft business model
- right approach: also bottom-up, shorter-term planning, focused on revenues, based on detailed business model
=> include a translation of the “hockey stick” exponential growth graph… which must be there to inspire hope, but must be also made somewhat credible
