1. Engineering 245 The Lean LaunchPad Lecture 8: Resources Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu/

2. 1 images by JAM customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition

3. KEY RESOURCES which resources underpin your business model? which assets are essential?

4. Key Resources

5. Four Critical Resources Physical Financial Human Intellectual

6. Physical Resources company facilities –office space, company location product/services –supply of silicon wafers or iron ore, or thousands of feet of warehouse space? Many physical goods are capital intensive

7. Financial Resources Friends and Family Crowdfunding Angels Venture Capital Corporate partners Others: SBA or SBIR grants Lease-lines Factoring Vendor-financing

8. Human Resources qualified employees mentors, teachers, coaches, advisors

9. Mentors, Teachers, Coaches Mentors, teachers, coaches advance your personal career –If you want to learn a specific subject find a teacher –If you want to hone specific skills or reach an exact goal hire a coach –If you want to get smarter and better over your career find someone who cares about you enough to be a mentor

10. Advisors Advisors are people you need to help advance your company’s success –Founders fail when they believe their visions are facts –Listening to experienced advice can help you sort through whether your vision is a hallucination –Getting an advisory board (by expanding your circle of accumulated wisdom past their investors) is so important that it’s an explicit step in the Customer Development process

11. Qualified Employees/Culture Are the difference between a good idea that never went anywhere and a billion dollar firm

13. MBA295F Customer Development in the High-Tech Enterprise Spring 2007 12

14. Executive Traits by Stage

17. Intellectual Property

18. Trademark protects branding & marks Trademark gives you the right to prevent others from using “confusingly similar” marks and logos Trademark protection lasts as long as you use the mark The more you use the mark, the stronger your protection Trademark registration is optional, but has significant advantages if approved Country by country

19. Copyright protects creative works of authorship Copyright gives right to prevent others from copying, distributing or making derivatives of your work –Protects “expressions” of ideas but does not protect the underlying ideas (Way) more than just technology: –songs, books, movies, photos, etc. Copyright protection lasts practically forever Copyright does not prevent independent development Registration is optional, but is required to sue for infringement

20. Trade Secrets Information that is kept secret and has economic value to the business Coke recipe, customer lists, product road maps. No registration required Can last for as long as you take reasonable steps to keep confidential

21. Contract Protection agreed to by contract No registration process You have whatever protection is defined in the contract (e.g., NDA gives you certain rights to protection of your confidential information) The protection lasts for the time period defined in the contract

22. Patents A government granted monopoly –prevents others from making, using or selling your invention –Even if the other’s infringement was innocent or accidental Invention must be non-obvious Protection lasts typically for 15-20 years Application and examination is required –Typical cost for application and exam is $10-30k –Typical time for application and exam is 1-4 years Must file in U.S. within one year of sale, offer for sale, public disclosure or public use Provisional application alternative

23. What Can be Patented? Just about anything... –Circuits, hardware –Software, applied algorithms –Formulas, designs –User interfaces – Applications, systems – Business processes (sometimes) But not these... –Scientific principles –Pure mathematical algorithms And, pending Supreme Court Case raises concerns regarding patentability of “methods” inventions

24. Venture Financing See: http://steveblank.com/tools-and- blogs-for-entrepreneurs

25. What are sources of funding? BanksAngels Super- Angels Micro-cap VC Traditional VC Size of Fund NA $5-20M$20-100M$100M+ Size of Investment NA$10-250k$100-500k$250k-1M$2M+ Source of Funds NAPersonalInstitutional Expected returns Interest rate2-3x 3-5x Length of commitment Long termASAPDepends10 years Expected ownership NA<10%<15%10-25%25-50%

26. Know what you’re getting into...

27. 80 winners per year* out of 1,500 VC backed deals exit >$50M 80 1,420 PASS FAIL *IT industry only

28. ...The 80 that “Made It” >$750M 8 7 20 45 $500-$750M $250-$500M $50-$250M Legendary Companies

29. Venture Economics Fund size $400M $1.5B 20% return in 6 years $ 7.5B Value creation required $5B

30. Decision Tree

31. Funding Mechanics

32. Valuation Still at your old job –You have an idea, You may have a prototype –Valuation range: Don’t bother. Pre-product –You have an idea, did customer discovery, no product –Valuation range $0 – $7M pre-money –Appropriate: $2-3.5M –Average Size of deal: $300K-$700K Prototype Built and in the market –Have a team, customer discovery, MVP –Valuation range : $2.5-6M pre-money –Appropriate: $3-4M –Size: $400K -$1M Source: jordancooper

33. How to calculate dilution Step 1: Determine post money valuation Money invested Pre-Money Post-Money Value + Step 2: Determine investor ownership Money invested Post-Money Investor Ownership ÷ Step 3: Negotiate employee option pool Investor Ownership Option Pool DILUTION + Source: Founder’s Fund