Patents and Pizza
  Presentation
   Applied Physics Lab
           JHU
      Oct 3, 2002

       Rami Habal
  Mohr Davidow...
Scope of talk

   MDV Intro and Venture Capital
   Qualities of great entrepreneurs
   Practical Advice
   What it mea...
About MDV
   Founded in 1983
   Focused on Early Stage IT investments
    – Enterprise Software, Networking and Communic...
Our role after investing
   Business and marketing strategy reviews:
    – regular team meetings with our partners to dev...
How Venture Capital Works
                                     Committed                             Invested
            ...
The role we would play with APL


                                   $,
                                 active


        ...
The question that must be answered
   before we make an investment:

     Who is the entrepreneur?
Common denominators:
qualities of great entrepreneurs
   Magnet for other great people
   Tenacious
   Articulate
   S...
“Those entrepreneurs who start
out thinking they’ll make it big –
     and in a hurry – can be
      guaranteed failure.”
...
Not all entrepreneurs…

 …have all of those qualities on day one
 …make good long-term CEOs
 …want to stay in a company...
© 2002 The New Yorker Collection from cartoonbank.com. All Rights Reserved
Practical advice to people in
this room…
Customers: #1 Most Important

   Technology is not enough
    – Customer validation is essential for funding

   Compres...
2) Just Do It… All

             Develop
             Product




     Raise                Get
     Money             Cus...
3) It’s about the Business AND the
Technology

   What problem will you solve? Why did you build this technology?
   Who...
4) Think Through your Intellectual Property Strategy
   Be careful of your IP trails
     – Get a good attorney from the ...
5) Startup Marketing is
About…
    1.  Getting the right first customers
     2. Developing the right 1.0 product
   3. Cr...
a) Understand tech adoption
                  Pragmatists:              Conservatives:
              Stick with the herd! ...
b) Translate the Grand Vision to
Narrow Go-To-Market Strategy
   Pick your market entry point
    – Highest pain
    – Ta...
c) Pinpoint Market Entry Point
with Customers
  Meet with 30 prospective customers in 3 months


       Listen            ...
d) Engineering Marries 2-4
Customers
Customer must           Engineering must
  – Have consistent       – Work very closel...
e) Marketing Develops Sales Tools
   Must have learned firsthand what it takes to get
    paying customers
   Leverage w...
Elements of a viable startup

   Customer focused
   Selling into a large market
   Keenly aware of the competition and...
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 Habal
               www.mdv.com
              Rhabal@mdv.com...
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  1. 1. Patents and Pizza Presentation Applied Physics Lab JHU Oct 3, 2002 Rami Habal Mohr Davidow Ventures
  2. 2. Scope of talk  MDV Intro and Venture Capital  Qualities of great entrepreneurs  Practical Advice  What it means to build a viable company  Q&A
  3. 3. 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
  4. 4. 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
  5. 5. How Venture Capital Works Committed Invested Capital $$ Limited General Entrepreneurs Partners Partners Liquidity Event (IPO, Sale) = Gains for all parties Pension Funds VC Firms (e.g. Mohr Davidow) Someone in this room! WHO: University Endowments Rich people and trusts Allocate a portion of funds to Pick great companies, Build great companies FUNCTION: Venture Capital asset class (~5%) smart entrepreneurs Money in + about 70-80% of Gains Yearly Management fees to Portion of IPO or PAYBACK: keep VC firm operating + Sale of business (Gains) 20-30% of Gains
  6. 6. The role we would play with APL $, active Spin-off Company ideas, inventors, technology
  7. 7. The question that must be answered before we make an investment: Who is the entrepreneur?
  8. 8. 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
  9. 9. “Those entrepreneurs who start out thinking they’ll make it big – and in a hurry – can be guaranteed failure.” – Peter Drucker
  10. 10. 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
  11. 11. © 2002 The New Yorker Collection from cartoonbank.com. All Rights Reserved
  12. 12. Practical advice to people in this room…
  13. 13. 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
  14. 14. 2) Just Do It… All Develop Product Raise Get Money Customers
  15. 15. 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?
  16. 16. 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”
  17. 17. 5) Startup Marketing is About… 1. Getting the right first customers 2. 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
  18. 18. a) Understand tech adoption Pragmatists: Conservatives: Stick with the herd! Hold on! Visionaries: Get ahead! Skeptics: No way! Techies: Try it! Innovators Early Early Late Laggards Adopters Majority Majority
  19. 19. 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
  20. 20. c) Pinpoint Market Entry Point with Customers Meet with 30 prospective customers in 3 months Listen Learn Refine What are their priorities How are they organized Where is greatest pain Who has the budget What do they do now to address it Who makes decisions
  21. 21. d) Engineering Marries 2-4 Customers Customer must Engineering must – Have consistent – Work very closely with requirements with them through each other development and deployment – Be referenceable – Do whatever it takes – Pay for product to make them happy – Deliver a GA product Result: A GA product and reference customers at the same time
  22. 22. 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
  23. 23. 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
  24. 24. The important thing in life is to have a great aim and to possess the aptitude and perseverance to attain it." – Goethe
  25. 25. Q&A Contact Information: Rami Habal www.mdv.com Rhabal@mdv.com (703) 547-3480 Mohr, Davidow Ventures 12010 Sunset Hills Road, Suite 730 Reston, VA 20190
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