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Countdown to Launch

Startup 101

Patrick VernonClinical Assistant Professor, Executive Director

Center for Entrepreneurial Studies

©2013 Patrick Vernon

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Agenda• Value Network• VC’s Razor• Value Proposition

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Your startup idea

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Your startup idea

You

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You and your idea

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I Have a Dream!

Is it a good idea? Is it feasible?

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Your Startup

Idea

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Value Network

Customer

Customer

Customer

Competitor

Competitor

Competitor

Customer

Partner

Partner

PartnerCompetitor

Supplier

Supplier

CustomerCustomer

Your Startup

Idea

Competitor

Service Provider

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Value Network

Customer

Customer

Customer

Competitor

Competitor

Competitor

Customer

Partner

Partner

PartnerCompetitor

Supplier

Supplier

CustomerCustomer

Competitor

Service Provider

Your Startup

Idea

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Value Network

Customer

Customer

CompetitorCompetitor

Competitor

Partner

Partner

Competitor

Service Provider

Customer

CustomerYour Startup

Idea

Partner

CustomerCustomer

Supplier

Supplier

Service Provider Partner

MarketIndustry

Competitor

CustomerSupplier

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Value Network

Customer

Customer

CompetitorCompetitor

Competitor

Partner

Partner

Competitor

Service Provider

Customer

CustomerYour Startup

Idea

Partner

CustomerCustomer

Supplier

Supplier

Service Provider Partner

MarketIndustry

Competitor

CustomerSupplier

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Agenda• Innovators’ Dilemma• VC’s Razor• Value Proposition

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18th century definition:

“Bearing the risk of buying at certain prices and selling at uncertain prices”

Entrepreneurship

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PV’s Definition:

“Taking good ideas, assessing the value they could create, and building an organization (people and systems) to distribute that value”

Entrepreneurship

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Taking good ideas, assessing the value they could create, and building an organization to distribute that value

Begs the questions: what value can you create? And is it enough to sustain a new venture?

Entrepreneurship

Opportunity

Risk

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VC’s Razor

Go or No-Go?

Razor

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Go or No-Go?

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1. Value Proposition2. Market Size3. Return Potential4. Team5. Competitive Advantage6. Business Model7. Customer Pain

VC’s Razor

DefiningOpportunity

MitigatingRisk

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VC’s Razor

MitigatingRisk

1. What problem do I solve?

2. How big could this get?

3. What’s in it for me?

4. Why me?

5. Can I prevent copycats?

6. Can this sustain itself?

7. How bad might anyone want it?

DefiningOpportunity

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Go or No-Go?

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Value Proposition

A statement explaining the value creating features of a platform

of products

Challenge: move away from “what is the idea“ toward “what value does it create”

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How big could this thing get?

1. TAM (total addressable market)

2. Comparable products or ventures

3. Size of Cost Savings

4. Data from Existing Markets– Total Market Size– Market Penetration– Market Trends

5. Limitations

Market Size

TAM =

# customers

x price

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What is in it for us? • Defining Success• Comps• Milestones• Cash and Equity / ROI • Exit Strategy• Non-Financial Return Potential

Return Potential

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Why me? #1 way to mitigate risk (by far!)• Track Record• Skills and Attributes• Connections• Commitment• Motivations

Team

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How do we prevent copycats? • Intellectual Property Law• Trade Secrets• Partnerships and Exclusive Contracts• Switching Costs • Location, Location, Location• Talent• Network or Critical Mass

Competitive Advantage

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Can this venture sustain itself? • Startup capital

(including customer acquisition costs)

• Scalability• Margins• Revenue model

Business Model

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Will the dogs eat the dog food?• Keyword: validation

– #1 – paying customers– Non-paying (beta) customers– Sales of comparables or substitutes– Letters of Intent (LOIs)

• Go-to-Market Strategy

Customer Pain

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• Iterative tool• First pass is shallow, 2nd pass is

deeper…

1.What problem do I solve?

2.How big could this get?

3.What’s in it for me?

4.Why me?

5.Can I prevent copycats?

6.Can this venture sustain itself?

7.How bad might anyone want it?

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Value Proposition• A clear and concise statement that

explains the value creating features of a platform of products

• Individual products will also have their own value propositions

• The venture needs an overarching VP• Ideally includes tangible results that

customers would get from using products

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Defining “Value”Creating vs. DestroyingFreedom vs. Corruption

Peace vs. War Healthcare vs. Disease

Traffic Laws vs. AccidentsInsurance vs. Disaster

Construction vs. DestructionFood Production vs. Soil Erosion

Not the same “value” as used by your grocery store.

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Getting From “Idea”

Product Description

Problem Being Solved

For Exactly Whom?

Specific Customer

Pain Points

to “Value Proposition”

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• WasteVentures is a web-based marketplace for posting, buying, and selling waste-related materials and services

• “eBay for landfills”• WasteGrid provides the global Waste industry

what Electronic Trading Systems has provided Wall Street.

Product Description Problem

Being Solved

For Exactly Whom?

Specific Customer

Pain PointsIdea to

VP

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• Extreme inefficiencies in waste disposal result in: – Loss of millions in potential new revenue– Unnecessarily cost on excessive waste

disposal, often including expensive and divisive political battles to create new landfills

Product Description

Problem Being Solved

For Exactly Whom?

Specific Customer

Pain PointsIdea to

VP

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• Municipalities• Waste disposal contractors

Product Description

Problem Being Solved

For Exactly Whom?

Specific Customer

Pain PointsIdea to

VP

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• Economy and real estate values are down -> lower sales and property tax revenues

• Recycling programs have helped, but landfills continue to fill

• Less space for new landfills• Divisive political battles for new landfills

Product Description

Problem Being Solved

For Exactly Whom?Specific

Customer Pain Points

Idea to VP

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Value Proposition

“WasteVentures provides an online marketplace, like eBay for landfills, enabling municipalities to save $XX (or x%) in excessive disposal fees while raising $X in new tax revenues to replace shrunken sales and property tax income.”

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Getting From “Idea”

Product Description

Problem Being Solved

For Exactly Whom?

Specific Customer

Pain Points

to “Value Proposition”

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Feasibility Key Dates• 8/21 – Kickoff + Network

• 8/26 – VC 101 + Network• 8/28 – Idea Roundtable• 9/4 – Idea Roundtable

• 9/9 – MBA 101 + Network• 9/18 – Idea Roundtable

• 9/23 – Startup 101 + Network

• 10/6 – Application• 10/8-10 – Interviews• 10/11 – Admit

Notification• 10/21 – Class Starts

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Countdown to Launch

Startup 101

Patrick VernonClinical Assistant Professor, Interim Executive Director

Center for Entrepreneurial Studies

©2012 Patrick Vernon