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| 3 Things every VC firm looks at when evaluating a company |
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| Most important difference causing variation in the emphasis between the 3 things every VC uses to evaluate a company |
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| The current stage of investment |
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| Early stage investors look more to... |
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| Late stage investors look more to... |
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| Where does the first evaluation of market size come from? |
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Definition
| An assessment of the problem the company solves and how much people and companies will pay for the solution |
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| Market Opportunity formula |
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Definition
| # of potential customers x the amount each customer will pay |
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| How is the consumer market generally cut? |
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| By age, geography, or gender |
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| How is the corporate market cut? |
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| By geography, industry, or company size |
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| If a prospect falls into the middle area (unclear market size but believe there is potential), the next two steps are... |
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Top down analysis
Bottom up analysis |
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| Looking at what analysts like Forrester and Gartner have to say about a market |
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| Two items to watch out for during top down analysis |
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Definition
1. Distinguish between overall market size and the truly addressable market
2. Many startups are at the beginning of new markets that analysts have yet to start covering |
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| An attempt to calculate 1) exactly how many people might be in the market for a given product and then 2) what they might pay |
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| Except for within the most mature markets, what is often one of the most difficult tasks in market sizing? |
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Definition
| Estimating what people will pay is difficult to do with accuracy, because different customers will pay different amounts |
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| What is considered a critical input to any bottom up analysis? |
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Definition
| Data from existing customers |
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Term
| Types of intellectual property infringement |
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Definition
Most popular: Licensing violations
Others include plagiarism, software piracy, and corporate espionage |
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Term
| Organizations who enforce IP rights worldwide |
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Definition
o World Intellectual Property Organization (WIPO)
o World Customs Organization (WCO)
o World Trade Organization (WTO)
o United Nations Commission on International Trade Law (UNCITRAL)
o European Union (EU)
o Trade-Related Aspects of Intellectual Property Rights (TRIPs) |
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| 4 classifications of Intellectual Property protected by US Law |
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Definition
Patents
Trademarks
Trade Secrets
Copyrights |
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“The grant of a property right to the inventor” – defined by the US Patent and Trademark Office (PTO)
- A patent grant confers upon the owner "the right to exclude others from making, using, offering for sale, selling, or importing the invention."
- This is an exchange with the government, you must disclose how the product is made in detail – after the patent runs out, the rest of the world can make your product |
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Definition
Granted by the US PTO for an invention that has been sufficiently documented by the applicants and has been verified as original by the PTO
- Valid for 20 years (used to be 17)
- Effective only within the US, including territories and possessions |
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| Patent Cooperation Treaty |
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Definition
| Provides international protection for more than 130 countries who have adopted the PCT |
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“Any word, name, symbol, or device, or any combination, used, or intended to be used, in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others." – US PTO
- Corporate brands and corporate system logos |
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| Which law provides some international protection for US-Registered trademarks? |
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| US Public Law 105-330, the Trademark Law Treaty Implementation Act |
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A form of protection granted to the authors of "original works of authorship," both published and unpublished
- A copyright protects a tangible form of expression rather than the idea or subject matter itself |
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| Publication was generally the key to obtaining a federal copyright |
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Definition
| Changed copyright protection to now apply to any original work of authorship immediately from the time it’s created in a tangible form |
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Term
| Copyright registration and length |
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Definition
Copyrights can be registered through the Copyright Office of the Library of Congress, but a work doesn't need to be registered to be protected by copyright
- Protection generally lasts for the lifetime of the author plus 70 years |
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Definition
Proprietary or business-related information that a company or individual uses and has exclusive rights to
- Attorneys aren’t necessary for trade secrets, they aren’t filed as patents |
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Term
| 3 requirements to be a trade secret |
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Definition
1. Must be genuine and not obvious
2. Must provide the owner a competitive or economic advantage and, therefore, have value to the owner
3. Must be reasonably protected from disclosure |
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Term
| What are 3 questions that need to be asked when sizing a market opportunity (video)? |
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Definition
How many customers are in that market?
How much do they spend in that market?
How many products are sold in that market? |
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| What does John Mullins of LBS advocate for in terms of potential markets? |
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Definition
- Don’t look for a small share of a big market
- Try to dominate a niche market – better way to start a business |
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Term
| What does Steve Blank say is the fundamental problem with most startups? |
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Definition
| Most startups are burning money by starting sales, marketing, and business and development activities either on the web or physically in the real world way too early |
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Term
| What percent of startups fail because their technology fails? |
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Definition
Less than 10%
- 90% fail because they didn’t find a market and customers |
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Term
| The ratio between the Googles/Facebook vs. failure |
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| How much of the value of EU and US companies are in intangible assets? |
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| Why did major companies like Kodak, Polaroid, and Nokia fail? |
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Definition
| Because they all missed the moment when they should have rethought their business model and missed out on radical innovation (focused on serving current clients) |
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Term
| What are 2 of the outcomes of innovation? |
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Definition
| Either increases the customer value of a product or service (Apple), or lowers it costs and becomes a competitive advantage (Dell) |
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Definition
- Innovation stems from ideas no one has had before
- Big success requires big resources
- Innovation breakthroughs are always based on fascinating technologies |
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Term
| What 4 questions does a business model answer? |
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Definition
1. Who is your target customer?
2. What do you offer to the customer?
3. How do you create the value proposition?
4. How do you generate revenue? |
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Term
| How many dimensions must change to be considered a business model innovation? |
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| What is the form of nearly 90% of business model innovations? |
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Definition
| Merely adapted, refined, or combined patterns of other company innovations |
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Term
| 4 steps to innovate a business model |
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Definition
1. Initiation
2. Ideation
3. Integration
4. Implementation |
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Definition
| Analyze current business model |
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| Confront business model with the 55 business model innovation patterns and develop new models |
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| Check the consistency of the business model, examine all 4 questions regarding organizational fit |
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Definition
Design a business model, build a pilot, test the pilot, and return to the design phase
- Quantitative and qualitative data are needed to verify or falsify assumptions about new business model |
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Term
| What percent of all change initiatives fail? |
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Definition
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Term
| 5 rules to keep in mind when innovating a business model |
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Definition
1. Only implement 1 business model at a time
2. Clearly communicate new business model and need for change
3. Don’t overemphasize short term KPIs (innovation needs time)
4. Get top management commitment
5. Overcome the “not invented here syndrome” |
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Term
| What is the key factor to defeat path dependency and stay competitive? |
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Definition
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Term
| A few ways Kevin Rose comes up with new app ideas |
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Definition
- Ask themselves what kind of new market is this app creating?
- What part of their day or problem are they solving - Took entire catalog of day and explore if there are ways to make life easier
- Look at (100) industries and go down 1 by 1 to see where there are any pain points, anyone who is slow to adopt to new technologies
- Random middle of the night/in the shower ideas |
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Term
| 8 techniques from Key and other experts to get the creative juices flowing |
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Definition
1. Ask yourself, “what’s next?”
2. Do something about what bugs you
3. Look for new niches
4. Apply your skills to an entirely new field
5. Find a category lacking recent innovations
6. Make a cheaper version of an existing product
7. Talk to shoppers
8. Play the mix and match game |
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