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Welcome to
Ideas 2 Business
Spark 100k Challenge
Entries close on 10 August!
Check out the info sheet in your packs for more details
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#Spark
IDEAS 2
BUSINESS
LAUNCH
VISION 2
BUSINESS
1
JULY
ONE-ON-ONE CLINICS JULY
MAR
TO
MAY
+ INNOVATOR SERIES
IDEAS
CHALLENGE
$100K
CHALLENGE
10
AUG
LAUNCH PAD
$100K GRAND
PRIZE GIVING
1st Prize:
3rd Prize:
$25,000 seed capital
3 Months Incubation at Icehouse
+ $5,000 seed capital
UniServices Research Commercialisation Prize:
$5,000 seed capital
+ 6 Months Incubation at Icehouse
2nd Prize:
$15,000 seed capital
+ 3 Months Incubation at Icehouse
Deadline: 10th August
12pm midday
• Discuss your business idea one-on-one with our experienced
industry experts.
• Receive help and guidance on developing a more effective venture
summary and on validating and developing your idea for the
$100k Challenge.
Deadline: 12th August
12pm noon
Registrations open today – go to
www.spark.auckland.ac.nz to secure a clinic time
WORKSHOP - RECEIVE GUIDANCE FROM $100K CHALLENGE JUDGE
• Learn what makes a good venture summary
• Tips from $100k Challenge judge
• Ask a $100k Challenge judge your questions
Held on the Wednesday 29th July
www.spark.auckland.ac.nz to register
Networking
$100k Team Builder
Offering to
join a team
Seeking team
members
Certificate of Attendance
• Register for a certificate on
our website
• Collect at $100k Workshop
and Qualifiers Ceremony
Feedback
110+ ventures launched
$200+ million in investment
Created 400+ jobs
Dr. Deb Shepherd
Outline
Welcome
Ideation Game
Session 1: Value Proposition: knowing your customers
Session 2: Business Model Canvas
Break: 10.40am - 11.05am
Session 3: Intellectual Property and Legal Matters
Lunch: 12.45pm - 1.40pm
Session 4: Knowing your Numbers
Session 5: Building Teams
Session 6: Business Model
Break: 10.40am - 11.05am
Next Steps: Entering the Challenge
Ideation Game
I2B 2015
Stage 1: Brainstorming problems
Technology
Select 1 topic
Food &
Beverage
Education
Brainstorm loads
of problems
Internet
Health
Energy
Environment
5 minutes
Stage 2: Brainstorming solutions
Select 1 problem
Solutions
Solutions
Brainstorm loads
of solutions
Problem
Solutions
5 minutes
Solutions
Stage 3: Business proposition
Select 1 solution
Brainstorm a business
proposition
5 minutes
Problem
Solution
Business
Proposition
Duncan Ledwith
Session 1: Market Validation
Mark Heine
Hudson Gavin Martin
Session 2: Intellectual Property and Legal
Matters
Understanding Intellectual
Property
Presented by Mark Heine
• What constitutes Intellectual Property
• How to protect Intellectual Property
• How to exploit Intellectual Property successfully
1. Copyright
2. Confidential Information / Trade Secrets
3. Trade Marks
4. Patents
5. Designs
6. Layout Designs
Copyright
Exclusive rights given to the owner of an original work
Right of exclusive use
 Right to stop copiers
 Right to distribute
 Right to license others to use
 Moral rights
Automatic right – no registration
©
Generally life of the individual author plus 50 years
 Literary, artistic works
If computer generative, 50 years from creation
If industrially applied:
 25 years for artistic craftsmanship
 16 years for other artistic works
 Protects original works
 Literary (includes computer programs) and dramatic
works
 Musical and artistic works
 Sound recordings, films, communication works,
typographical arrangements
 The work must be original
 Low threshold
 Not merit based
 Protects the expression of an idea, not the idea itself
The author is the owner unless:
 The work is authored in normal course of employment
 in which case the employer is the owner;
 The work is authored by a contractor carrying out a “commissioned
work”
 in which case the “commissioner” is the owner; or
 There’s an agreement to the contrary
In addition to copyright:
Moral Rights
 Right to be identified as author or director
 Right not to have work falsely attributed to you
 Right to object to derogatory treatment of the work
 Not assignable
 Expire when copyright expires (or 20 years after death with false
attribution)
 “Down Under” (2010)
 Single recorded by Australian rock group Men at Work in 1981.
 Went to no. 1 in Australia, NZ, Canada, USA, UK, Ireland,
Denmark and Switzerland.
 In 2009 Larrikin Music sued members of Men At Work for
copyright infringement, alleging that part of the flute riff had
been copied from the song “Kookaburra sits in the old gum tree”.
 Held: Larrikin’s copyright had been infringed because Down
Under reproduced a substantial part of the Kookaburra song.
 Larrikin to receive 5% of royalties from “Down Under” from 2002
onwards.
 Pros
 Automatic
 No registration
 Free
 Long duration – life of author plus 50 years
 Cons
 Records to show proof of ownership
 Prevents copying not independent creation
 Confidential information and trade secrets are valuable commercial
assets.
 Includes a wide variety of business knowledge and secrets
 E.g. production secrets, marketing information, computer code
 Unregisterable
 Information must be:
 Confidential; and
 Disclosed in a manner indicating confidence
 Information is marked confidential
 Confidentiality/non-disclosure agreements
 Contractual protection
 Mutual and one-way NDAs
 Jurisdiction clauses
 Cadbury Schweppes v FBI Foods – Supreme Court Canada 1999







1970s - Mott’s began producing Clamato juice– mixture of tomato juice, spices and clam
broth.
Mott’s licensed the production and sale of Clamato to Caesar Canning (Caesar).
To enable it to produce Clamato, Mott’s gave Caesar information about the recipe and
manufacturing methods.
Mott’s later terminated the Clamato licensing agreement. After licence was terminated,
Caesar used the Clamato formula to create a new type of tomato juice.
Mott’s sued in breach of confidence – Caesar had knowingly and improperly used
confidential information that Mott’s had given to Caesar for the purpose of producing
Clamato under the license, not for producing its own competing product.
Held: Clamato recipe was confidential information – Mott’s had used time, money and
effort to produce it. Caesar’s obligation of confidence was based on the licencing
contract, common understanding in the food industry that recipes not widely known
should be kept confidential, and because the recipe had been communicated to Caesar
for the limited purpose of producing Clamato under the licence.
Held: Canning had misused the confidential information because they used it to produce
a competing juice, a purpose for which it had not been given.
 “Unique identifier” often referred to as a “brand” or “logo”
 Distinguishes products from a competitor product
 Does not need to be registered but this has benefits

if registered;
if unregistered
 Helps create brand association
 E.g. origin, quality, status
Word - e.g. ZESPRI
Shape - e.g.
Device - e.g.
Colour - e.g.
for “block chocolate”
Sound - e.g. a squeak on a plate
Signature – e.g.
Smell - e.g. the smell of
cinnamon for “pharmaceutical
preparations and substances”
Animation – e.g.
Benefits of registration:
 Exclusive right to use your trade mark in NZ to promote your
goods
 Deter others from trying to imitate your brand or benefit from its
success
 Prevent dilution of marks
 Helps to ensure that you will not infringe on others’ rights
Registration - Trade Marks Act 2002
 Class based
 Territorial
 Duration is infinite, if fees are paid
To register a trade mark:
 Must be distinctive
 Must be a trade mark – i.e. used to identify products/service
 Coca-Cola v Pepsi (December 2013)
 Coke registered trade mark for 3D shape for its contoured bottle for goods
including non-alcoholic drinks (using this shape since 1915)
 Pepsi launched contour shaped bottle in NZ in 2009
 Coke argued that the Pepsi bottle was ‘similar’ to its shape trade mark and
was likely to confuse or deceive the public – thus infringed trade mark
 Held: Pepsi did not infringe Coke’s shape trade mark
 Must compare Coke’s trade mark to Pepsi bottle without Pepsi branding –
as bottle design / product packaging can indicate origin of goods
 Pepsi bottle was not similar – e.g. Coke TM had pronounced pinch at
bottom, broad horizontal belt, concaved neck – not on Pepsi bottle
 No evidence of any confusion or deception
 Pros
 Indefinite
 Relatively cheap
 Powerful marketing tool
 Cons
 Territorial
 Exclusive right (not monopoly)
 Market policing
Patents
 Registration required
 Protection for 20 years (subject to payment of renewal fees)
 Monopoly
 Territorial
 Must be

an application, not an idea

not obvious, and

new or novel
 Covers

products

processes of manufacture

improvements to existing products or processes

business methods
 First owner is registrant (inventor unless he has assigned his rights)
 Confidentiality essential prior to application for patent registration
 Apple v Samsung






Ongoing lawsuits relating to design of smartphones and tablets.
Began April 2011 – Apple alleged that eight of Samsung’s Android phone and
tablets infringed Apple’s patents, e.g:
 Bounce-Back Effect, i.e. the bounce-back that users get when they scroll
to the bottom;
 On-screen Navigation;
 Double-Tap to Zoom;
 Siri voice search technology (later suits).
Samsung filed similar complaints in Seoul, Tokyo, Germany and UK alleging
that iPhone 4 and iPad 2 infringed Samsung’s patents.
Apple successful in US – damages of 450 million but Samsung products will
stay on shelves.
Samsung has won rulings in South Korea, Japan and UK.
Litigation is ongoing – Apple continues to add Samsung products to its suits as
they are released, Samsung now alleges that “all generations” of iPhone and
iPad infringe its patents.
 Incorporate a company or enter an agreement between your team members
 Understand what constitutes the Intellectual Property
 Who owns the intellectual property?...

Company

Individual

Joint ownership
 Before starting to market or sell a product or services, seek professional advice
regarding:

“Freedom to operate” searches

Novelty or opportunity assessments

Correct form of protection
 To register or not…

Protection vs. speed to market

Cost of registration

Cost of dealing
Alastair Marsden
Session 3: Knowing Your Numbers
Spark: Ideas 2 Business
What basic numbers do I
need to understand?
Value creation for new innovations or
start-ups
DECISIONS
INVESTMENT
FINANCING
WHAT TO INVEST
IN
HOW TO PAY
FOR IT
“SUCCESS” IS JUDGED IN TERMS OF VALUE CREATION
WHY UNDERSTANDING NUMBER IS
IMPORTANT? INVESTMENT PROCESS
-
R&D
New Products
Market
validation
THE IDEA
(Planning)
ESTIMATE
CASH FLOWS
EVALUATION
OF CASH FLOWS
ACCEPT/REJECT INVESTMENT
OPORTUNITY
ONGOING EVALUATION
Role of numbers – Financial
Statements
■ Statement of Financial Position
■ “Income” or “Profit and Loss Statement”
(or “Statement of Financial
Performance”)
■ Statement of Cash Flows
■ Statement of Movement in Equity
Statement of financial position
■ Statement of financial position (Balance
sheet)
 Assets = Equity + Liabilities
A
=E
+L
Statement of financial position
■



Personal asset:
Asset = Equity
+ Liabilities
House = My equity + BNZ Mortgage
500,000 = 200,000 + 300,000
■ Business asset:
 Assets
= Equity or
= Shareholders’ funds
 1,000,000
=
700,000
+ Liabilities
+ 300,000
64
Statement of financial position
ABC Ltd
Balance sheet as at 30 June 201X (NZ$)
Current Assets
$3,000
Non-current assets
$2,000
Total assets
$5,000
Shareholders’ funds or
equity
Liabilities
$4,000
Total equity and
liabilities
$5,000
$1,000
ChangesReports
in Equity
BalanceAccounting
The
Sheet
(start)
Income
Assets
Liabilities
Equity
Revenue
Less Expenses
Net Profit
Contributions
Distributions
Changes in equity
Cash flow
Operating
Investing
Financing
Changes in cash
Balance Sheet
(end)
Assets
Liabilities
Equity
Financial Models
Irwin/McGraw-Hill
Why need a financial model
•
Analytical View: Forces you to construct numbers around each
assumption you have about your business model.
Roadmap: A model can be a time-line of what you expect to happen
– i.e., a roadmap for your business.
Risk Assessment: to identify the key levers (and sensitivities) of
the business helps:
-Illuminate the risk points of your start-up;
-To help us predict and monitor our "cash burn rate"
Solar Trash Can
Is there an opportunity?
Yes – in the US garbage trucks
consume over 1 billion gallons of
fuel
Average truck costs over $100
per hour to operate
By compacting rubbish may cut
the number of pick-ups and save
labour costs?
Source:
http://news.brown.edu/features/2011/02/belly
Business Model – Developing the
Numbers
Question: What market validation analysis may you
wish to undertake if this project was at the initial stage
of the idea or project development?
Market Validation
• After we have undertaken market validation –
know:
– Costs to establish or produce product or service
– Customers, the problem and how currently solved
– How much is the customer willing to spend to solve
their problem
– Competitors and price of competitive products
– Market size, potential growth rate
Solar Trash Can
Time 0
“X” Years
Development /
Idea and Seed
•
Initial market
Validation
•
•
Product design
Patent
investigation
Start-up
•
Build Prototype
•
•
Test Product
Market Product
•
•
Patents / IP
Regulatory
Approval
Survival /Early
Expansion
•
•
Small scale
production
Initial sales
Growth Stage
•
•
New model
features
Ramp up
production and
sales
Financial Projections: Bottom-up
Modelling
At the initial idea / start-up stage we are often
concerned with (i) cash forecast only; and
(ii)how long to achieve first sales and customer
acquisition costs (iii) capital costs. For example
–
–
–
–
–
–
–
–
–
–
–
R&D expenses
Market (beta) testing
Production costs
Costs to set up distribution channel
Marketing, brand building.
Employee costs
Sales costs – how long to achieve sales/ ramp up production
Legal and accounting costs
Lease / rental costs
Other fixed costs – e.g., rent, telephone, power.
Costs of any fixed assets
Top-Down Revenue Forecasting
• More useful years 3 onwards
Steps
1) What is total market size? – Often based on 100%
market penetration.
2) Current penetration or degree of current market
saturation.
3) Projected market penetration of new product on yearby-year basis
4) What is your business’ share of the projected market
penetration and revenues (based on market
competition and response to existing market
incumbents).
Top-Down Revenue Forecasting
• Revenue Forecasting
Revenues = Demand for
×%
Product /service Market
share ×
Price per unit of
product / service
• Expense breakdown consider typical industry
key ratios – e.g.
Gross margin (GOGS) as a % of revenues
Costs as % revenues
R&D as % of revenue
Accounting Income Statement
We can now project the business’s future performance
■ Income or P&L Statement
Revenues
Less Expenses
Operating profit
Less Tax on operating profit
Net operating profit after tax (NOPAT)→ Measures
assets’ performance funded all capital providers
Less Interest expenses (net of tax benefit)
Net profit after tax (NPAT) → Measures performance of
funds provided by equity or shareholders
Cost Structure
• Fixed Costs
– Employee numbers
– Other fixed costs e.g. rent, power, telephone
• Variable Costs – these are a function of sales or
revenues – e.g., cost of raw inputs into making a
product.
• The higher your fixed costs the higher your
risk.
Breakeven Analysis: Some Basics
• Basic Equation – Accounting Breakeven:
Sales (S) - Variable Costs (VC) – Fixed Costs (FC) = zero
• What do S – VC represent
• S- VC = No of units sold × gross profit per unit
Where gross profit per unit = sale price per unit – variable
cost per unit.
BUT Accounting Profits NOT equal CASH: An
example
Revenue Recognition:
Product
marketing
Orders
Received
Production
Dispatch
Goods &
Invoice
Customers
Inventory
Cash
Received
Recognise for Accounting
• Revenue can be Measured
• Expectation Customer will
Pay
Implication – we need cash to fund working capital
Statement of Cash Flows – often more
important that accounting profits
Statement of Cash Flows:
• Where did cash come from – Where did it go?
Three
•
•
•
Sources:
Operating Activities (Cash from sales less cash costs)
Financing Activities ( new equity / money FFFs etc.)
Investing Activities
• Cost of set-up or fixed asset costs
Projections of Cash Flows
Simple Excel Cash Book
Opening cash
Month
June
15,000
July
6,800
August
1,700
September
-2,950
150
150
250
Cash receipts from operations
Receipts from sales
Cash receipts from financing
Receipts from new equity / FFFs
Total cash Receipts
1,000
1,000
150
150
250
Less cash payments
Cash payments from operations
Purchase goods / services
Wages
Marketing
Operational costs
Administration
Rent / power
Other
Sub-total
-1,000
-500
-1,000
-200
-250
-150
-100
-3,200
-1,000
-500
-1,000
-200
-250
-150
-150
-3,250
-1,000
-600
-500
-200
-250
-150
-100
-2,800
-1,000
-600
-1,000
-200
-250
-150
-150
-3,350
-2,000
-2,000
-1,000
-1,000
-4,000
-6,000
-2,000
-2,000
-2,000
Total Cash Payments
-9,200
-5,250
-4,800
-5,350
Closing cash
6,800
1,700
-2,950
-8,050
Cash Payments from Investing
Machinery
Software development
Prototype product
Sub-total
-2,000
Cash Flow
• Cash in and out of the business
• Cash burn rate – how much time until the
business will run out of money
Cash flow
0
Time
• Profitable business can run out of cash and fail
Sources of Finance
Irwin/McGraw-Hill
Sources of Capital
Development
/ Idea
Seed
Start up
Survival /
Early
Expansion
Growth and
early
maturity
Stage
Own Finance and FFFs
Angels
VCs
Private Equity
Sources of Finance at Development
/ Idea Stage
Bootstrapping
Innovator / Entrepreneur to:
– “live on a shoestring”
– Mortgage his/her house
– Use credit cards
– Barter for products / services
Friends, Fools and Family
• A significant source of funding in the NZ market at the
development or idea phase.
• Not sophisticated but is it loan, gift or shares. Need to define
(don’t want “giver” to decide ex-post)
Angel Investors – Some reasons
Why
1. Make Money
Plus others such as:
• Give something back / benefit New Zealanders
• Access to deal flow
• Part of network/club/team, excitement, fun,
passion
• Keep up with Trends etc.
Valuation of Start Ups
The Dave Berkus Method www.berhomics.com
Assume: Max valuation of an entity is $2.5
million.
Thus
If Exists
Add to Company Value
(1)
(2)
(3)
(4)
Sound idea (base value, product)
Prototype (reduce technology risk)
Quality management (execution risk)
Strategic relationships (market and
competitive risk)
(5) Product rollout or early sales
(financial or production risk)
Also see website of Bill Payne: Scorecard method
$500,000
$500,000
$500,000
$500,000
$500,000
Crowd Funding
Gaming crowd backs NZ studio with US$2.5m
• A kiwi game development studio (Grinding Gear Games
popular online role-playing game Path of Exile ) has
been left stunned after a crowdfunding round aimed at
raising "a few hundred thousand" ended up raking in
US$2.5 million (NZD$2.9).
•
Source: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10862594.
Ben Chapman-Smith, Friday Feb 1, 2013
Financial Conducts Bill and NZX
new markets
• Financial Markets Conduct Bill effective April
2014
– Peer-to-peer equity investment and lending via an
Online Platform
See for example,
http://www.snowballeffect.co.nz/
• New NZX Growth Market
https://www.nzx.com/companies/NZX/announce
ments/248270
Equity Crowd Funding
•
•
•
•
http://www.snowballeffect.co.nz/
Register
– The investor registers to use Snowball Effect
Make Investment
– Identify a company to invest in, and commit to invest any amount between the minimum set by
the company and the maximum amount being raised
– Investments are made via a secure platform
– Funds are held in trust from the time the commitment is made through to the company's offer
closing
Offer Closes
– The offer remains listed for a period determined by the company, up to a maximum of 60 days
– Companies that reach their funding targets receive their capital once the funding round closes,
and shares are issued to investors
– Companies that do not reach their target walk away, and any funds raised are returned to
investors
Post-Offer
– As a shareholder you can expect ongoing communications from the company - they have
statutory obligations, but also have an incentive to keep you engaged as part of their "crowd"
– Snowball Effect does not manage this communication, but we will offer tools and services to
companies to facilitate and encourage ongoing flows of information to investors
Peer-to-peer lending
https://www.lendingclub.com/
. Notes are graded A1 through G5 and carry
an interest rate commensurate with their
risks, so you can build a portfolio that fits
your investment objectives.
In Summary: What do owners /
innovators / investors want to know
when starting up a business?
•
•
•
•
Current statement of financial position;
Key revenues and cost drivers with assumptions;
Expected cash generation and “cash burn” rate;
How much funding do you require?
You also need to think about:
• At what stage should you raise funds?; and
• Source of funding?
END
Good luck!
Networking Questionnaire
• Meet new people
• Gain valuable contacts
Ben O’Brien - StretchSense
Session 4: Teams
Dr Deb Shepherd
Session 5: Business Model
The Business Model Canvas
(C) Alex Osterwalder Business Model Canvas
Turning first class ideas into world class businesses
Defining: Business Model
“A business model describes the rationale of
how an organization creates, delivers, and
captures value.”
– Osterwalder & Pigneur (2010; p. 14)
“Create value for customers, entice payments,
and convert payments to profit.”
– Teece (2010; p 173)
Customer Segments
For whom are we creating value?
Who are or most important customers?
Segmented?
Mass Market?
Niche Market?
Multi-sided platform?
Diversified?
Value Propositions
What value do we deliver to the customer?
Which one of our customers’ problems are we trying to solve?
Which customer needs are we satisfying?
What bundles of products and services are we offering to each customer segment?
Newness (new set of needs)
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
Channels
Through which Channels do our Customer Segments want to be reached?
Which are most cost-efficient? How are our Channels integrated?
Direct: Sales force, Web sales
Indirect: Own stores, Partner stores, Wholesaler
Customer Relationships
What type of relationship does each of our Customer Segments want?
What kind of relationship do we want? How much would this cost?
Would this fit with the rest of our business model?
Personal Assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
Revenue Streams
For what value are our customers really willing to pay?
How would they prefer to pay?
How can we structure this so that we can actually make money from it?
How much does each REVENUE STREAM contribute to overall revenue?
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
Pricing Mechanisms
Fixed Menu Pricing
Dynamic Pricing
Predefined prices are based on static variables
Prices change based on market conditions
List Price
Fixed prices for individual products, services or
other VALUE PROPOSITIONS
Negotiation
(bargaining)
Price negotiated between two or more parties
depending on negotiation power
Product
feature
dependent
Price depends on the number or quality of VALUE
PROPOSITION features
Yield
management
Prices depends on inventory and time of purchase
(e.g. hotel rooms or airline seats)
Customer
segment
dependent
Price depends on the type and characteristic of a
CUSTOMER SEGMENT
Real-timemarket
Price is established dynamically based on supply and
demand
Volume
dependent
Price as a function of the quantity purchased
Auctions
Price determined by outcome of competitive bidding
Key Resources
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Physical
Intellectual Property
Human
Financial
Key Activities
What do we need to do make our VALUE
PROPOSITION happen?
Our DISTRIBUTION?
Production
Problem Solving
Platform/Network
What about our CUSTOMER RELATIONSHIPS?
Key Partnerships
Who are our main PARTNERS and suppliers?
What do we get from them? (RESOURCES)
What do they do for us? (ACTIVITIES)
• Optimization and economy
• Reduction of risk and uncertainty
• Acquisition of particular resources and
activities
Cost Structure
What are our important costs?
What are our most expensive RESOURCES? Most expensive ACTIVITIES?
Is your business more…
Cost Driven:
• leanest cost structure
• low price value proposition
• maximum automation
• extensive outsourcing
Value Driven
• focused on value creation
• premium value proposition
Summary- Know your Business Model
Intimately
• How do we make money in this business?
• What is the underlying economic logic that explains how we
deliver value to customers?
• What are all of our revenue, funding, investment channels
• What is our margin position in the supply chain?
• What is our “easy to explain” story that gets everyone
aligned around how we create value?
• How do we clearly capture our business:
– E.g. Sam Walton of Walmart: “put good sized stores into little one
horse towns which everybody else was ignoring”
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