patents and pizza presentation applied physics lab jhu oct 3, 2002 rami habal mohr davidow ventures
TRANSCRIPT
Scope of talk
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
– Enterprise Software, Networking and Communications, and Semiconductors
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;
PMC-Sierra; ONI Systems; Rambus; MIPs
Our role after investing
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
Management team recruiting: – assisting you to build the best team at the executive
level
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
LimitedPartners
GeneralPartners
Entrepreneurs
Pension FundsUniversity EndowmentsRich people and trusts
VC Firms (e.g. Mohr Davidow) Someone in this room!
CommittedCapital
Invested$$
WHO:
Allocate a portion of funds to Venture Capital asset class (~5%)
Pick great companies, smart entrepreneurs
Build great companiesFUNCTION:
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)PAYBACK:
Liquidity Event (IPO, Sale) = Gains for all parties
Common denominators: qualities of great entrepreneurs 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
Customers: #1 Most Important Technology is not enough
– Customer validation is essential for funding
Compressed time-to-market development cycles– Early customers are development partners
– Get something out and get feedback
Customer references accelerate growth– Market share matters
3) It’s about the Business AND the Technology
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 Be careful of your IP trails
– Get a good attorney from the start!
The IP is your entrée, but don’t be over protective about it– 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.
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…
1. Getting the right first customers2. Developing the right 1.0 product
3. Creating a repeatable sales process
Must be done in parallel with initial product development and before building
a sales organization or risk major setbacks
a) Understand tech adoption
Conservatives:Hold on!
Visionaries:Get ahead!
Innovators EarlyAdopters
Early Majority
Late Majority
Laggards
Pragmatists:Stick with the herd!
Skeptics:No way!
Techies:Try it!
b) Translate the Grand Vision to Narrow Go-To-Market Strategy Pick your market entry point
– Highest pain
– Tangible, hard $ benefits
– Access to budget
– Solvable problem short term
– Competitive differentiation
Build the 18 month road map– Prioritize 1.0 features
Learn how to sell your solution
c) Pinpoint Market Entry Point with Customers
Meet with 30 prospective customers in 3 months
What are their priorities
Where is greatest pain
What do they do now to address it
Listen Learn Refine
How are they organized
Who has the budget
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 productResult: A GA product and
reference customers at the same time
e) Marketing Develops Sales Tools 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
Complete business strategy– Pricing and packaging
– Distribution model after direct sales entry
Result: A sales force who can sell
Elements of a viable startup 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 Habalwww.mdv.com
[email protected](703) 547-3480
Mohr, Davidow Ventures12010 Sunset Hills Road, Suite 730
Reston, VA 20190