January 2018

STEP Bootcamp 2018

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About me

▪ Name
▪ Course
▪ Year
▪ Purpose

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Day 1

9:00 AM Introduction

10:00 AM Go big or go home

10:45 AM Break

11:00 AM Investment: why and how

12:30 PM Lunch

1:30 PM Individual exercise: Idea generation and 1-minute pitch

3:30 PM Break

3:45 PM Individual presentation: 1 minute pitch presentation and feedback

4:30 PM Group work: Teams discuss and select the best ideas to work on

5:30 PM Group presentation: 30-seconds shout-out on the selected idea

6:00 PM End Day 1/Individual exercise

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From Idea to Investment

Understanding the big picture

• Go big or go home
• Investment: why and how

Key elements for success

• Value proposition and innovation

• Competitive analysis and strategy

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Go big or go home

▪ Introduction to scalable entrepreneurship

▪ Understanding risk and return
▪ Let’s fail

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What is an entrepreneur?

▪ A person who organizes, operates, and assumes the risk for a

business venture.
▪ From Old French, from entreprendre, to undertake.
▪ Enterprise: An undertaking, especially one of some scope,
complication, and risk.
▪ Enterprising: Willingness to undertake new ventures; initiative:
"Through want of enterprise and faith men are where they are,
buying and selling, and spending their lives like serfs" (Henry
David Thoreau).

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What is an entrepreneur?

▪ A person who organizes, operates, and assumes the risk for a

business venture.
▪ From Old French, from entreprendre, to undertake.
▪ Enterprise: An undertaking, especially one of some scope,
complication, and risk.
▪ Enterprising: Willingness to undertake new ventures; initiative:
"Through want of enterprise and faith men are where they are,
buying and selling, and spending their lives like serfs" (Henry
David Thoreau).

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Small versus scalable business

Sustainable
$$
corporate
Scaler
Scale-up

Crossing
Early- the chasm
stage
barriers
Start-up

Time

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What are qualities of successful entrepreneurs?

▪ Intelligent
▪ Creative problem-solving skills
▪ Self-starting
▪ Committed
▪ Motivated
▪ Risk taking
▪ Leadership

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Why is entrepreneurship important to you?

“I always invented to obtain

money to go on inventing.”
Thomas Edison

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Obstacles to entrepreneurship

▪ Lack of entrepreneurial skills

▪ Attitude toward risk
▪ Cultural attitude toward failure
▪ Entrepreneurial success is difficult

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This could be you - Sparefoot

▪ 2007 – Chuck Gordon takes

TR3002, co-founds Ikatoo –
Winner, IDM Prize S@S and
i.JAM recipient
▪ 2008 – Returns to US and
founds Sparefoot, 2009 – $850K
seed round
▪ 2010 - $2MM Series A
▪ 2011 - $3.5MM Series B
▪ 2014 - $10MM Series C
▪ 2015- $33M Series D

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This could be you: Pirate 3D

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This could be you: Instagram

▪ 2010 - Kevin Systrom and Mike Krieger

focus their multi-featured HTML5 check-
in project Burbn on mobile photography
▪ Mar 2010 – Close $500K seed funding
round from Baseline Ventures and
Andreessen Horowitz; est. val. $5 MM
▪ Oct 2010 – Product launches on Apple
App Store
Millions of Users
▪ Feb 2012 – Raise $7MM Series A 35
funding; valuation $25 MM 30
25
20
▪ Apr 2012 – Raise $50 MM at $500 MM 15
valuation; sold to Facebook, val $1 B 10
5
0

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This could be you: YouTube

▪ Feb 2005: Chad Hurley, Steve Chen,

and Jawed Karim found YouTube, Inc.
▪ Nov 2005: YouTube receives funding
from Sequoia Capital
▪ Dec 2005: YouTube service is officially
launched
▪ Nov 2006: Google acquires YouTube
for US$1.65 billion, 20 months after the
company was founded

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This could be you: Facebook

▪ Feb 2004: Mark Zuckerberg, 19, launches The Facebook from

his Harvard dorm room, with ~10K investment. Half of Harvard
signs up in the first month
▪ June 2004: Facebook receives $500K funding from Peter Thiel
▪ Mid 2005: Accel partners invests $12.7MM and Greylock
$27.5MM
▪ Oct 2007: Microsoft buys 1.6% of Facebook for $246MM
▪ Nov 2007: Li Ka-shing invests $60MM
▪ 2009-10: Elevation partners invests $210MM at valuation $12 -
23B
▪ 2011: Goldman Sachs buys shares in the secondary market at “The youngest
an implied valuation of $50B billionaire on
earth” - Forbes
▪ 2012: Goes IPO at valuation ~$100B

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This could be you: Google

▪ 1995: Sergey Brian and Larry Page,

two Stanford University graduate
students develop the technology that
will become the Google search engine.
▪ 1998: Sergey and Larry raise $1
million in funding from family, friends,
and angel investors to start Google in a
friend's Menlo Park, Calif. garage with
four employees.
▪ 1999: Google raises $25MM from VCs
and angel investors
▪ 2004: Google goes IPO at a valuation
of US$23.1 billion. Sells 7% to public
for $1.67 billion.

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Go big or go home

▪ Introduction to scalable entrepreneurship

▪ Understanding risk and return
▪ Let’s fail

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What is the relationship between risk and return?

▪ Risk and return are highly correlated

▪ You cannot increase return without taking more risk

Return
Potential outcomes

Risk

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Go big or go home

▪ Introduction to scalable entrepreneurship

▪ Understanding risk and return
▪ Let’s fail

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LETS FAIL

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Evolving cultural attitudes toward failure

Traditional

Failure is
bad; avoid
at all costs

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Evolving cultural attitudes toward failure

Traditional Current

Failure is Failure is
bad; avoid acceptable;
at all costs leads to
learning

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Evolving cultural attitudes toward failure

Traditional Current Future

Failure is Failure is
Failure is desirable;
acceptable;
bad; avoid necessary for
leads to
at all costs innovation
learning

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Why is failure desirable?

▪ Willingness to fail – allows risk-taking and innovation

▪ Risk and return – high risk ventures means they are likely to fail
▪ Innovation – key to scalable ventures – innovators will fail

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Rate of tech change is increasing exponentially

100,000,00
1 10 100 1,000 10,000 100,000 1,000,000 10,000,000 0
First Humanoids

Language

Agriculture

Abacus

Calculating machine

Telegraph

Stock Ticker

Light Bulb

Recording sound

Television

General purpose computer

Stored program computer

Integrated circuit

Mini computer

Microprocessor

Personal computer

IBM PC

Pentium

World Wide Web

Deep Blue defeats Kasparov

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The rate of innovation is increasing

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Sometimes failure itself is innovation

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Success from failure – Apple and Steve Jobs

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Product failures – from Apple III to Apple Newton

• 1980 - Apple III - 75k units sold

• 1983 – Apple Lisa - 40K units sold in
1984 vs. 80K forecast
• 1986 – Pixar Image Computer - <
300 units sold
• 1990 – NeXT workstation – 50K
units sold
• 1993 – Newton – 100MM spent on
development – 80K units sold

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Market failure - Apple stock price – 1988 to 1998

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Competitive failure – AAPL vs. MSFT 1980-2005

• 1980 – Apple’s share of PC

market 15%
• 1996 – 4%
• 2005 – 2.2%

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Steve Jobs career timeline

Success - 1977 Failure – 1980 Failure – 1983 Success – 1984 Failure – 1985
• Apple II • Apple III • Lisa • Macintosh • Ousted from Apple

Failure – 1988 Failure – 1990 Failure – 1993 Success – 1995 Success – 1996
• Pixar Image • NeXT Workstation • NeXT discontinues • Toy Story; Pixar • Apple buys NeXT
Computer HW IPO

Success – 1997 Success – 1998 Success 2001 Success 2007 Success 2010
• Return to Apple • Apple profitable • IPod • Iphone • iPad

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Success from failure

• Pixar animated films – 1995 (Toy Story)

• 26 Oscars, 7 Golden Globes, 3 Grammies
• Films have earned > $6.3 billion worldwide
• iPod - 2001
• 300 MM units sold
• 90% market share
• iPhone – 2007
• > 75 MM units sold
• 50% of profits from global mobile phone sales
• iPad
• > 15 MM units sold, more than all other tablets combined
• 83% market share

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Apple stock price 2004 – 2015 +7,910%

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From Idea to Investment

Understanding the big picture

• Go big or go home
• Investment: why and how

Key elements for success

• Value proposition and innovation

• Competitive analysis and strategy

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Investment: why and how

▪ Why entrepreneurs raise money

▪ How to raise venture funding

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Why investment?

• Lifestyle or scalable?
Founder
• Paycheck or payout?
• A big piece of a small pie?
• A small piece of a big pie?
Investors

Investors

Founder

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But some failed…

Beepi HomeHero
Raised $148.95M in 5 rounds Raised $23.2M in 3 rounds

Auctionata Quixey
Raised $95.65M in 6 rounds Raised $16.49M in 4 rounds

Source: TechCrunch

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But some failed…

Yik Yak Hello

Raised $73.5M in 3 rounds Raised $40.51M in 4 rounds

Pearl Juicero
Raised $50M in 1 round Raised $111.5M in 4 rounds

Source: TechCrunch

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How to fund growth?

• Internally generated
• Debt
• Hybrid
• Equity

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Cost, control, growth and risk

Source of funds Impact of funding

Cost Lose Control Growth $ Risk

Internal
Debt
Equity

Low Somewhat High

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Financial leverage and firm value

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Companies founded with venture capital

www.nvca.org

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Industries created by venture capital

www.nvca.org

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Investment: why and how

▪ Why entrepreneurs raise money

▪ How to raise venture funding

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Entrepreneur and investor communication

• Executive summary – 1-3 pages

• Business plan – 20 pages
• Investor presentation slides
• Verbal presentations to investors – informal and formal
• Teaser slide
• Email introduction

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Step 1: Understand the investor’s mindset

Value proposition?
No
Yes

Innovative? No
Exit
Yes

Fast-growing market? No
Yes

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Step 2: Get to gatekeepers

• It’s not what you know; it’s who

you know
• Network, network, network
• Strong ties and loose ties

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Getting past gatekeepers

• Why are presentations important?

• Understand gatekeepers’ incentives
• Avoid raising red flags
• Attention to detail
• Get it right the first time

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Step 3: Present to investors

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Effective presentations are simple

• Your message needs to be clear, concise and simple

• Clean visual design – avoid chart junk and “design-itis”
• On presentation slides, less is more – slides, bullet points, text
• Use meaningful titles
• Do not read your slides

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Practice and test

• Analyze the details of your presentation, then master those details

by practice, practice, practice.

• Arrive early and if you are using any technology, test it

• If you can not get in early, try to test the night before
• It is OK to be nervous before you begin
• Rehearse the Q&A

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Is this right?

▪ Give me a call to hear about an opportunity that can’t fail

▪ Attached is a copy of my full business plan for your review
▪ Let me show you a demo rather than a business plan
▪ An additional level of detail is included in the various appendices
▪ I have generated “x” social media likes

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Idea generation: presentation and feedback

3. Innovation 1. Problem

4. Uniqueness
1m 2. Solution

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From your perspective- Theranos

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Day 2

9:00 AM Value proposition and innovation

10:30 AM Break

10:45 AM Market opportunity, competitive analysis and strategy

12:30 PM Lunch

1:30 PM Group work: 5-minutes presentation// From your perspective

3:45 PM Break

4:00 PM Group work: 5-minutes presentation//From your perspective

4:30 PM Group presentation: 5-minutes presentation and 5-minutes Group Q&A

6:00 pm End day 2

Individual exercise: 1-page executive summary

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From Idea to Investment

Understanding the big picture

• Go big or go home
• Investment: why and how

Key elements for success

• Value proposition and innovation

• Competitive analysis and strategy

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Product or service: which scales better?

▪ Product-based start-ups
▪ Value proposition is delivered
via product
▪ Service-based start-ups
▪ Value proposition is delivered
via people

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Value proposition – how much does it hurt?

Candy Vitamin/supplement

Painkiller
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Value proposition – degrees of recognition

▪ Latent problem – they have a problem but don’t know it

▪ Passive problem – they know they have a problem but not
looking for a solution yet
▪ Active or urgent problem – they know they have a problem, are
actively looking for a solution but no serious work done yet to
solve
▪ A vision – they have an idea for solving the problem and a
home-grown solution but are prepared to pay for a better solution

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Diamond Rio vs iPod

▪ Tech disruptor

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Disruptive business model or disruptive tech

▪ Diamond is the first mover in

portable MP3 in 1998
▪ Apple enters in 2003 and
captures 90% of the market
▪ Business model innovation –
hardware + software + service

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Disruptive models from Gillette to Google

• Gillette – razor and blade

• Southwest Airlines – budget airlines
• Dell Computer – mass customization
• Amazon – ecommerce
• eBay – peer to peer marketplace
• Google – search-based advertising

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Value proposition and innovation

1. What is the painful problem you are solving for customers?

2. What is your product and what is innovative about it?
3. What are the shortfalls of the current solutions?
4. How do you solve this problem and can you quantify your benefit?
5. How does your innovation enable you to accomplish this?

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From Idea to Investment

Understanding the big picture

• Go big or go home
• Investment: why and how

Key elements for success

• Value proposition and innovation

• Competitive analysis and strategy

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Market timing – entering at the inflection point

The technology adoption S curve

Measure of
performance

Measure of effort invested

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Industry life cycles and structures

• Choose a young industry – more demand and less competition

• Enter before a dominant design has been adopted
• Labor intensive rather than capital intensive
• Advertising and branding less important
• Less concentrated industries – smaller competitors

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Market and competitive analysis

▪ Identifying favorable markets

▪ Analyzing markets

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Types of markets

• Existing markets
• Re-segmented markets/niche market
• New market
• Clone market

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Top-down market sizing

Total addressable market

Target market

Market share Target segment

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Complete business model diagram

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Case Study: NestProtect market sizing

The fire and smoke alarm market in the US is about $1.4B in annual sales,
made up of smoke detectors, heat detectors, and fire alarm control panels.
20.9% of sales are for residential buildings. NestProtect is expected to reach
5% market share in its first year. Set to launch across 5,000 stores, the
Company expects to generate 250,000 in sales at a price point of $129.
• What is the target market?
• What is the segment market?
• What is the market share?
• What is the addressable market?
• What it the total revenue based on the bottom-up approach?
Source: NestProtect

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Market identification and analysis

1. What is your market type?

2. How big is your market and how fast is it growing?
– Top-down approach
– Bottom-up approach
3. What are trends in your market are favourable for you?
– Technological, social, demographic, regulatory
4. Who are your direct and indirect competitors?

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Key elements for success

• Solve a problem for customers – Value proposition

• Develop an innovative product – Innovation
• Identify your customers – Market identification and analysis
• Reach your customers – Marketing strategy
• Compete when others enter - Sustainable competitive advantage
• Make money – Business model and financial plan
• Team – A team or B team

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Problem Value Key resources Competitive Customers

proposition advantage Who are your target
Top 1-3 customer problems
and Key partnerships- design, manufacturing,
outsourcing, marketing
customers? The
relationship and cost to
How are you
innovation differentiated?
establish
Human capital, financial, IP, network
Customer archetype-
How will you create
Your solutions to characteristics of your key
barriers to entry for
customers’ problems customers
follower?
Who are your existing
What is innovative about customers?
your solution?
Why are you better than
existing solutions?

Existing Key Metrics Channels

solutions
How can you effectively
Metrics to measure success.
bring your product to
How are these problems solved customers?
today? Include current, if any

Cost drivers Revenue model

What are your key cost drivers?
What is your monetization strategy?
Can you reduce the key cost drivers over time?
What value/percentage does each revenue stream contribute to the total?

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Writing a model business plan

Overview, innovation, market Execution and financials

1. Executive summary 6. Company products and services

2. Value proposition and 7. Team
innovation
8. Expansion plan
3. Market identification and
analysis
9. Operational plan

4. Marketing and sales strategy

10. Finances – Revenue and cash
flow, valuation, funding required,
5. Sustainable competitive equity offered, ROI
advantage

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What are the elements of marketing strategy?

• Differentiation – how is your product different from competition

– Product - superior customer value – better, faster closer
– Cost leadership
• Positioning – market selection + differentiation
– Image for the product that embodies its values
• Marketing Execution – the 4 Ps
– Product, pricing, place, promotion
– Go-to market strategy

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Comparison matrix

Competitor Competitor Competitor Competitor Your

1 2 3 4 company
Benefit 1     

Benefit 2     

Benefit 3     

Benefit 4     

Benefit 5     

Benefit 6     

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Positioning map
Value

Competitor 3 Your company

Competitor 4

Competitor 1

Competitor 2

Portability
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Blue Ocean strategy canvas

www.blueoceanstrategy.com
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Four factors model

www.blueoceanstrategy.com
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Case Study: Nintendo Wii

Nintendo found out the following from non-customers:

• Prefer something more affordable
• Like the graphics but the very high resolution wasn’t necessary
• Online play wasn’t necessary
• The number of games was still important for variety
• Disliked complexity, want something simpler
• Console specifications didn’t need to be so broad, difficult to learn
• Additional feature of activity
• Additional feature of being easy to use

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Four factors model: Wii

RAISE CREATE

Activity
Motion sensor
Ease of use

REDUCE ELIMINATE
Price
Complexity
Graphics
Specs
Online play

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Blue Ocean strategy canvas: Wii

High

Low

Price Graphics Console Online play Complexity # Games Easy to Activity Motion
specs use sensor
Wii Industry

www.blueoceanstrategy.com
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Blue Ocean strategy canvas: Wii

High

Low

Price Graphics Console Online play Complexity # Games Easy to Activity Motion
specs use sensor
Wii Industry

www.blueoceanstrategy.com
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Marketing strategy

1. How is your product differentiated from your competitors’ product?

Use a comparison matrix to illustrate.
2. What is your position in the market? Use a positioning map or
Blue Ocean Strategy canvas to illustrate
3. What are your price, place, product, promotion and initial sales
plans
4. What is your tagline?

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Competitors will enter

• How to compete with followers?

• How to compete with existing companies?
• Sustainability of technological lead
– Competitors cannot duplicate the technology
– Firm can innovate as fast or faster than competitors
• First-mover disadvantages
• Last-mover advantage

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Creating sustainable advantage

First Mover Advantages Disadvantages

• Reputation • Pioneering costs

• Preempt positioning • Demand uncertainty
• Switching costs/Lock-in/Network effects • Changes in buyer needs
• Unique channel access • Specificity of investments
to early generations
• Move down learning curve
• Technological
• Favorable access to inputs discontinuities
• Definition of standards • Low-cost imitation
• Institutional barriers – IP protection

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Questions: creating and sustaining advantage

1. How is your product better than your competitors?

2. How are you positioned in your market?
3. What are your IP and competitive strategies to create barriers to
entry for small followers and large companies?

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In the financial section of the business plan

1. Business model
– Revenue model
– Cost structure
2. Financial projections
3. Valuation
4. Funding required and equity offered
5. Use of Proceeds
6. Exit Strategy and ROI

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Elements of a business model

• Revenue models
• Cost structures

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Stages and sources of funds

Incubators Customers, suppliers,

OM corporations strategic partners
F,F&F government VCs, Banks for VC loans

Founder’s Seed/ Series Mezzanine Pre-Exit Exit

Capital Angel A, B, C

VC hurdle rates 60-100% 40-60% 20%

R&D Establishment GTM/Rollout Accelerated Expansion Maturity
Enablement growth

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Group work: business idea pitch

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Exercise guide
1. Value proposition and innovation
1. What is the painful problem you are solving for customers?
2. What are the shortfalls of the current solutions?
3. What is your product and what is innovative about it?
4. How do you solve the problem and can you quantify your benefit?
2. Market opportunity identification
1. Who is your customer?
2. How big is your market and how fast is it growing?
• Top-down approach
• Bottom-up approach
3. Who are your direct and indirect competitors?
4. Competition matrix/competitive positioning
3. Creating and sustaining advantage
1. How is your product better than your competitors?
2. How are you positioned in your market?
3. What are your IP and competitive strategies to create barriers to entry for small followers
and large companies?
4. Business model

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Contact information

Rosalind Tan
rosalind@expara.com

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