Patents and Pizza
Presentation
Applied Physics Lab
JHU
Oct 3, 2002
Rami Habal
Mohr Davidow Ventures
Scope of talk
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MDV Intro and Venture Capital
Qualities of great entrepreneurs
Practical Advice
What it means to build a viable company
Q&A
About MDV
Founded in 1983
 Focused on Early Stage IT investments
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– Enterprise Software, Networking and Communications, and
Semiconductors
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Six General Partners, Six Venture Partners, Three
Associates
Offices: Menlo Park; Seattle; Reston, Va.
Total capital under management: $1.3B
Companies: Agile Software; Brocade; Echelon; PMCSierra; ONI Systems; Rambus; MIPs
Our role after investing
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Business and marketing strategy reviews:
– regular team meetings with our partners to develop effective
business and market strategies for entering a market and
maintaining a leadership position
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Management team recruiting:
– assisting you to build the best team at the executive level
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Strategic partner and customer development:
– connecting you with key industry players and assisting you
in securing strategic partners and, ultimately, helping to land
early adopter customers
How Venture Capital Works
Committed
Capital
Limited
Partners
General
Partners
Invested
$$
Entrepreneurs
Liquidity Event (IPO, Sale) = Gains for all parties
WHO:
Pension Funds
University Endowments
Rich people and trusts
VC Firms (e.g. Mohr Davidow)
Someone in this room!
FUNCTION:
Allocate a portion of funds to
Venture Capital asset class (~5%)
Pick great companies,
smart entrepreneurs
Build great companies
PAYBACK:
Money in + about 70-80% of Gains
Yearly Management fees to
keep VC firm operating +
20-30% of Gains
Portion of IPO or
Sale of business (Gains)
The role we would play with APL
$,
active
Spin-off Company
ideas, inventors, technology
The question that must be answered
before we make an investment:
Who is the entrepreneur?
Common denominators:
qualities of great entrepreneurs
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Magnet for other great people
Tenacious
Articulate
Self assured & driven, but not arrogant
Affinity for customers
Smart
Giant consumers of what other people know
Willing to take risks but afraid to fail
“Those entrepreneurs who start
out thinking they’ll make it big –
and in a hurry – can be
guaranteed failure.”
– Peter Drucker
Not all entrepreneurs…
…have all of those qualities on day one
 …make good long-term CEOs
 …want to stay in a company after it reaches
steady state
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© 2002 The New Yorker Collection from cartoonbank.com. All Rights Reserved
Practical advice to people in
this room…
Customers: #1 Most Important
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Technology is not enough
– Customer validation is essential for funding
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Compressed time-to-market development
cycles
– Early customers are development partners
– Get something out and get feedback
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Customer references accelerate growth
– Market share matters
2) Just Do It… All
Develop
Product
Raise
Money
Get
Customers
3) It’s about the Business AND the
Technology
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What problem will you solve? Why did you build this technology?
Who currently has the problem?
How will you solve it?
How big is the market potential?
What is your distinct advantage?
How does the competitive landscape look?
What are the financial implications?
How much capital will you need to develop the solution (and the
company supporting it)?
What kinds of volumes and margins are reasonable to expect?
What are your team's qualifications? Are you committed?
Which partners?
Which customers?
4) Think Through your Intellectual Property Strategy
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Be careful of your IP trails
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The IP is your entrée, but don’t be over protective about it
– Get a good attorney from the start!
– You can disclose enough info without giving up the goods
– But in some cases you may have to give up the good to get that
customer, partner, or investor.
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In structuring relationships between company and tech transfer
office, “Simpler is Better”
– Best to keep everyone’s incentives aligned to build successful
company
– Equity model is best model; TLO is viewed as another equity
“investor”
5) Startup Marketing is
About…
Getting the right first customers
2. Developing the right 1.0 product
3. Creating a repeatable sales process
1.
Must be done in parallel with initial product
development and before building a sales
organization or risk major setbacks
a) Understand tech adoption
Pragmatists:
Stick with the herd!
Conservatives:
Hold on!
Visionaries:
Get ahead!
Skeptics:
No way!
Techies:
Try it!
Innovators
Early
Adopters
Early
Majority
Late
Majority
Laggards
b) Translate the Grand Vision to
Narrow Go-To-Market Strategy
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Pick your market entry point
– Highest pain
– Tangible, hard $ benefits
– Access to budget
– Solvable problem short term
– Competitive differentiation
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Build the 18 month road map
– Prioritize 1.0 features
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Learn how to sell your solution
c) Pinpoint Market Entry Point
with Customers
Meet with 30 prospective customers in 3 months
Listen
Learn
Refine
What are their priorities
How are they organized
Where is greatest pain
Who has the budget
What do they do now to address it
Who makes decisions
d) Engineering Marries 2-4
Customers
Customer must
– Have consistent
requirements with
each other
– Be referenceable
– Pay for product
Engineering must
– Work very closely with
them through
development and
deployment
– Do whatever it takes
to make them happy
– Deliver a GA product
Result: A GA product and
reference customers at the same time
e) Marketing Develops Sales Tools
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Must have learned firsthand what it takes to get
paying customers
Leverage with sales tools
– Messages that light up customers’ eyes
– Demos that say “a-hah!”
– Payback model showing quick return of incremental $
invested
– Clear competitive differences
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Complete business strategy
– Pricing and packaging
– Distribution model after direct sales entry
Result: A sales force who can sell
Elements of a viable startup
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Customer focused
Selling into a large market
Keenly aware of the competition and
marketplace dynamics
Adaptable to change
Execution machines
The important thing in life is to have a
great aim and to possess the aptitude
and perseverance to attain it." – Goethe
Q&A
Contact Information:
Rami Habal
www.mdv.com
Rhabal@mdv.com
(703) 547-3480
Mohr, Davidow Ventures
12010 Sunset Hills Road, Suite 730
Reston, VA 20190