On Speed to Market

1
On Speed to Market

• MGT 709 New Venture Creation

2
Agenda

• Adams
• Strategies that Work
• Legal Forms
• RR
• Zipcars

3
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

4
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 dont have the resources
• When you start a company, youre not delivering a
  product. Youre addressing a pain point.

5
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

6
Partnering

• You cant achieve success trying to bring a
  complete solution to market by yourself
• What can you build in time/budget? What cant
  you?
• What sort of partner do you need? Suppliers of
  solution components
• Strategic partners marketing, investment,
  introductions
• Investors
• Whats in it for partners?
• Pitch to partners like they were customers then
  show how they fit
• Concept of value-added solutions rather than
  products

7
Features

• Identify a subset of the market
• Recruit early alpha customers (as early as idea
  stage)
• Focus your products 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

8
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

9
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

10
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 arent as incompetent as our competitors!

11
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

12
Analytical Priorities

• Some critical uncertainties cannot be resolved
  through more research
• E.g. truly novel ideas like copiers
• Avoid research you cant act on
• Secondary analysis
• Understand what must go right and avoid some
  pitfalls
• Revenues are very difficult to predict

13
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

14
Legal Forms
Pass Pass Limited Limited Flexible Investor Different Emp.
Through Through Liability Liability Distrib Restricts. Classes Stock
Sole Proprietor Y N N N N Y N N
General Partnership Y N N Y Y N N N
Limited Partnership Y Y Y Y Y Y N N
S Corporation Y Y Y N N Y N N
LLC Y Y Y Y Y N maybe maybe
C Corporation N Y Y N N N Y Y
losses up to capital contributed losses up to capital contributed losses up to capital contributed losses up to capital contributed
must have at least one general partner must be US citizens, no more than 100 members must have at least one general partner must be US citizens, no more than 100 members must have at least one general partner must be US citizens, no more than 100 members must have at least one general partner must be US citizens, no more than 100 members

15
RR

• 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?

16
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?