Countdown to Launch
Startup 101
Patrick Vernon
Clinical Assistant Professor, Executive Director
Center for Entrepreneurial Studies
©2013 Patrick Vernon1
Agenda
• Value Network
• VC’s Razor
• Value Proposition
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Your startup idea
3
Your startup idea
You
4
You and
your idea
5
I Have a Dream!
Is it a good idea? Is it feasible?
6
Your
Startup
Idea
7
Value Network
Supplier
Your
Startup
Idea
Competitor
Partner
Competitor
8
Value Network
Supplier
Your
Startup
Idea
Competitor
Partner
Competitor
9
Value Network
Industry
Market
Competitor
Competitor
Competitor
Supplier
Supplier
Service Provider
Partner
Your
Startup
Idea
Service Provider
Partner
Customer
Customer
Customer
Customer
Customer
Partner
Partner
Customer
Supplier
Competitor
Customer
Competitor
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Value Network
Industry
Market
Competitor
Competitor
Competitor
Supplier
Supplier
Service Provider
Partner
Your
Startup
Idea
Service Provider
Partner
Customer
Customer
Customer
Customer
Customer
Partner
Partner
Customer
Supplier
Competitor
Customer
Competitor
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Agenda
• Innovators’ Dilemma
• VC’s Razor
• Value Proposition
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Entrepreneurship
18th century definition:
“Bearing the risk of buying at certain
prices and selling at uncertain prices”
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Entrepreneurship
PV’s Definition:
“Taking good ideas, assessing the value
they could create, and building an
organization (people and systems) to
distribute that value”
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Entrepreneurship
Taking good ideas, assessing the value
they could create, and building an
organization to distribute that value
Opportunity
Begs the questions: what value can you
create? And is it enough to sustain a new
Risk
venture?
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VC’s Razor
Razor
Go or No-Go?
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Go or No-Go?
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VC’s Razor
1.
2.
3.
4.
5.
6.
7.
Value Proposition
Market Size
Return Potential
Team
Competitive Advantage
Business Model
Customer Pain
Defining
Opportunity
Mitigating
Risk
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VC’s Razor
1.
2.
3.
4.
5.
6.
7.
What problem do I solve?
Defining
How big could this get?
Opportunity
What’s in it for me?
Why me?
Mitigating
Risk
Can I prevent copycats?
Can this sustain itself?
How bad might anyone want it?
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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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Market Size
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
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Return Potential
What is in it for us?
• Defining Success
• Comps
• Milestones
• Cash and Equity / ROI
• Exit Strategy
• Non-Financial Return Potential
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Team
Why me?
#1 way to mitigate risk (by far!)
•
•
•
•
•
Track Record
Skills and Attributes
Connections
Commitment
Motivations
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Competitive Advantage
How do we prevent copycats?
• Intellectual Property Law
• Trade Secrets
• Partnerships and Exclusive Contracts
• Switching Costs
• Location, Location, Location
• Talent
• Network or Critical Mass
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Business Model
Can this venture sustain itself?
• Startup capital
(including customer acquisition costs)
• Scalability
• Margins
• Revenue model
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Customer Pain
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
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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?
• Iterative tool
• First pass is shallow, 2nd pass is
deeper…
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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
Freedom
Peace
Healthcare
Traffic Laws
Insurance
Construction
Food Production
vs.
vs.
vs.
vs.
vs.
vs.
vs.
vs.
Destroying
Corruption
War
Disease
Accidents
Disaster
Destruction
Soil Erosion
Not the same “value” as used by your grocery store.
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Getting From “Idea”
Product
Description
Problem
Being
Solved
Specific
Customer
Pain
Points
For Exactly
Whom?
to “Value Proposition”
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Product
Description
Specific
Customer
Pain Points
Problem
Being Solved
For Exactly
Whom?
Idea to
VP
• 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.
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Product
Description
Specific
Customer
Pain Points
Problem
Being
Solved
For Exactly
Whom?
Idea to
VP
• 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
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Product
Description
Specific
Customer
Pain Points
Problem
Being
Solved
For Exactly
Whom?
• Municipalities
• Waste disposal contractors
Idea to
VP
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Product
Description
Specific
Customer
Pain Points
Problem
Being
Solved
For Exactly
Whom?
Idea to
VP
• 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
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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
Specific
Customer
Pain
Points
For Exactly
Whom?
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
• 10/6 – Application
• 10/8-10 – Interviews
• 10/11 – Admit
Notification
• 10/21 – Class Starts
• 9/23 – Startup 101 + Network
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Countdown to Launch
Startup 101
Patrick Vernon
Clinical Assistant Professor, Interim Executive Director
Center for Entrepreneurial Studies
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©2012 Patrick Vernon