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THINK BIG BUT START SMALL FEBRUARY 27, 2008
FROM IDEA TO BUSINESS PLAN <ul><li>IDENTIFY A COMPELLING MARKET NEED </li></ul><ul><li>HUMBLE BEGINNINGS (THINK BIG, START...
HUMBLE BEGINNINGS Larry & Sergey Steve  Chad  Jawed Jerry & David
HUMBLE BEGINNINGS Steve & Steve Trip Sandy & Len
NEW PRODUCT STRATEGY
WHAT WE HOPE TO HEAR FIRST… 2. MARKET STRATEGY (UNFAIR ADVANTAGE) 3. PRODUCT & TECHNOLOGY 4. DEFINING TEAM 5. CAPITAL EFFI...
THE BIGGEST CHALLENGE…. A.K.A. THE “ELEVATOR” PITCH We networks networks. Sandy Lerner/Len Bozak Cisco “ “ 1. MARKET POSIT...
HELP FROM GEOFFREY MOORE For   [target customers]   Who have   [compelling reason to buy]   Our product is a   [new produc...
TWO DECLARITIVE SENTENCES For   movie producers   Who have   post-production special effects   Silicon Graphics   provides...
INTIMATE WITH TARGET MARKET  & BULLSEYE CUSTOMER? STRUCTURE SPEED LEVERAGE TRENDS VITAMIN? OR ASPIRIN? HOW PLUGGED IN ARE ...
CHANGE OR CREATE CATEGORY? MARKET DYNAMICS JOIN EXISTING CATEGORY DEFINE NEW CATEGORY Large Size, Strong Growth Small Size...
YOUR PLAN OF ATTACK? 2. MARKET STRATEGY
CREDIBLE DIFFERENTIATION? Y 1 Competitor 1  Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competitor 7 ...
DEFENSIBLE BARRIERS? 3. PRODUCT & TECHNOLOGY TECHNOLOGY PARTNERSHIPS SIMPLICITY BUSINESS PROCESS DOMAIN KNOWLEDGE NETWORK ...
MAGNETS? SCARS? PASSION? NewCo . 555 Main Street Tim Jones Anywhere, USA CEO (415) 555-5552 [email_address] NewCo. 555 Mai...
CENTRAL CASTING 4. DEFINING TEAM
DO THE #S MAKE SENSE? GROSS MARGIN REVENUE TRAJECTORY EBITDA CASH REQUIREMENT VS. OPEX %’S & RATIOS CASH FLOW TO BREAK EVE...
GRASPING UNIT ECONOMICS? <ul><li>ABANDONED CART RATE </li></ul>COST OF CUSTOMER ACQUISITION LIFETIME VALUE PRODUCT/BRAND A...
TAKES LONGER, COSTS MORE 5. CAPITAL EFFICIENCY
FINANCIALS SAY A GREAT DEAL ABOUT HOW YOU THINK… NOT A TIME TO BE NAÏVE UNREALISTIC OR MISLEADING FRUGALITY MARKET STRATEG...
MEETING MANAGING WITH VCS CHAOS? CONTROLLED?
MOST COMMON PITFALLS <ul><li>GORILLA ALUMNI &  AIRCRAFT CARRIERS </li></ul><ul><li>LACK OF FOCUS </li></ul><ul><li>OPPORTU...
LEARN FROM OUR MISTAKES MISREAD TEA LEAVES CLUTTERED MARKETS CAPITAL INTENSIVE SLOPPY DUE DILIGENCE MOMENTUM INVESTING WEA...
WHAT WE LOOK FOR IN A PLAN <ul><li>1. UNIQUE VALUE PROPOSITION/MARKET POSITIONING  CLEAR, CONCISE, ABOVE THE NOISE; CUSTOM...
WE’RE ONLY  AS GOOD AS OUR NEXT INVESTMENT.
 
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Jim Goetz of Sequoia Capital at Stanford

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Jim Goetz of Sequoia Capital explains to Stanford students what they look for in business plans - great pres.

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Jim Goetz of Sequoia Capital at Stanford

  1. 1. THINK BIG BUT START SMALL FEBRUARY 27, 2008
  2. 2. FROM IDEA TO BUSINESS PLAN <ul><li>IDENTIFY A COMPELLING MARKET NEED </li></ul><ul><li>HUMBLE BEGINNINGS (THINK BIG, START SMALL) </li></ul><ul><li>WHAT WE HOPE TO HEAR FIRST </li></ul><ul><li>HI-TECH MARKETING CAN BE DIFFICULT. SOME RESOURCES </li></ul><ul><li>A COUPLE OF ANECDOTAL EXAMPLES </li></ul><ul><li>WHAT WE HEAR WAY TOO OFTEN </li></ul><ul><li>GETTING TO TECHNOLOGY, TEAM, and FINANCE </li></ul><ul><li>MEETING MANAGEMENT WITH VCs </li></ul><ul><li>SOME COMMON PITFALLS </li></ul><ul><li>ENJOYING THE JOURNEY </li></ul>
  3. 3. HUMBLE BEGINNINGS Larry & Sergey Steve Chad Jawed Jerry & David
  4. 4. HUMBLE BEGINNINGS Steve & Steve Trip Sandy & Len
  5. 5. NEW PRODUCT STRATEGY
  6. 6. WHAT WE HOPE TO HEAR FIRST… 2. MARKET STRATEGY (UNFAIR ADVANTAGE) 3. PRODUCT & TECHNOLOGY 4. DEFINING TEAM 5. CAPITAL EFFICIENCY ENTREPRENEUR’S CHALLENGE 1. MARKET POSITIONING
  7. 7. THE BIGGEST CHALLENGE…. A.K.A. THE “ELEVATOR” PITCH We networks networks. Sandy Lerner/Len Bozak Cisco “ “ 1. MARKET POSITIONING
  8. 8. HELP FROM GEOFFREY MOORE For [target customers] Who have [compelling reason to buy] Our product is a [new product category] That provides [key benefit (which solves problem)] Unlike [competitor in new product category] We have [key point of differentiation] *Source: Crossing the Chasm 1. MARKET POSITIONING
  9. 9. TWO DECLARITIVE SENTENCES For movie producers Who have post-production special effects Silicon Graphics provides computer workstations That integrates digital fantasies with film footage Unlike IBM or Sun Microsystems SGI has made a no compromise commitment to meeting film makers’ post-production needs. *Source: Crossing the Chasm 1. MARKET POSITIONING
  10. 10. INTIMATE WITH TARGET MARKET & BULLSEYE CUSTOMER? STRUCTURE SPEED LEVERAGE TRENDS VITAMIN? OR ASPIRIN? HOW PLUGGED IN ARE YOU? 2. MARKET STRATEGY
  11. 11. CHANGE OR CREATE CATEGORY? MARKET DYNAMICS JOIN EXISTING CATEGORY DEFINE NEW CATEGORY Large Size, Strong Growth Small Size, Explosive Growth ADVANTAGE Price/Performance IP, Functionality, Brand CUSTOMERS Opportunistic Loyal MARKET SHARE Lower (often less than 10%) Higher (often greater than 50%) GROSS MARGIN Lower (often less than 50%) Higher (often greater than 65%) ACHIEVABLE GOAL Acquisition Public Company LEGACY Single Generation Reign Dynasty 2. MARKET STRATEGY
  12. 12. YOUR PLAN OF ATTACK? 2. MARKET STRATEGY
  13. 13. CREDIBLE DIFFERENTIATION? Y 1 Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competitor 7 Competitor 8 Competitor 9 Competitor 10 Competitor 11 Y 2 X 1 X 2 New Co 2. MARKET STRATEGY
  14. 14. DEFENSIBLE BARRIERS? 3. PRODUCT & TECHNOLOGY TECHNOLOGY PARTNERSHIPS SIMPLICITY BUSINESS PROCESS DOMAIN KNOWLEDGE NETWORK EFFECT
  15. 15. MAGNETS? SCARS? PASSION? NewCo . 555 Main Street Tim Jones Anywhere, USA CEO (415) 555-5552 [email_address] NewCo. 555 Main Street Barney Baker Anywhere, USA CFO (415) 555-5553 [email_address] NewCo . 555 Main Street Ajay Singh Anywhere, USA COO (415) 555-5554 [email_address] NewCo . 555 Main Street Vlad Krunis Anywhere, USA General Counsel (415) 555-5555 [email_address] NewCo . 555 Main Street Karen Williams Anywhere, USA President (415) 555-5556 [email_address] NewCo. 555 Main Street Bob Smith Anywhere, USA Chairman (415) 555-5552 [email_address] 4. DEFINING TEAM
  16. 16. CENTRAL CASTING 4. DEFINING TEAM
  17. 17. DO THE #S MAKE SENSE? GROSS MARGIN REVENUE TRAJECTORY EBITDA CASH REQUIREMENT VS. OPEX %’S & RATIOS CASH FLOW TO BREAK EVEN 5. CAPITAL EFFICIENCY
  18. 18. GRASPING UNIT ECONOMICS? <ul><li>ABANDONED CART RATE </li></ul>COST OF CUSTOMER ACQUISITION LIFETIME VALUE PRODUCT/BRAND ASSORTMENT INCENTIVE PROGRAMS ACTIVE CUSTOMERS/MO. CUSTOMER CHURN/MO. FREQUENCY PURCHASE TRENDS NEW CUSTOMERS/MO. TICKET SIZE PURCHASE TRENDS #ITEMS PURCHASE TRENDS # CLICKS TO CHECK-OUT REVENUE BY DAY/WEEK/SEASON GROSS PROFIT/TRANSACTION COST PER SKUS INVENTORY TURNS SHRINKAGE PICK RATES DELIVERY TIME MRR COST OF CUSTOMER SERVICE CUSTOMER CONTACT RATE 5. CAPITAL EFFICIENCY
  19. 19. TAKES LONGER, COSTS MORE 5. CAPITAL EFFICIENCY
  20. 20. FINANCIALS SAY A GREAT DEAL ABOUT HOW YOU THINK… NOT A TIME TO BE NAÏVE UNREALISTIC OR MISLEADING FRUGALITY MARKET STRATEGY SALES TACTICS MARKET SIZE MARKET UPTAKE MARKET VELOCITY REALISM 5. CAPITAL EFFICIENCY
  21. 21. MEETING MANAGING WITH VCS CHAOS? CONTROLLED?
  22. 22. MOST COMMON PITFALLS <ul><li>GORILLA ALUMNI & AIRCRAFT CARRIERS </li></ul><ul><li>LACK OF FOCUS </li></ul><ul><li>OPPORTUNITY EXISTS BEFORE THE MARKET ARRIVES </li></ul><ul><li>TOP HEAVY </li></ul><ul><li>COMPELLING?, UNIQUE? </li></ul><ul><li>SALES MODEL AND ASP DIVERGENCE </li></ul><ul><li>INCINERATOR SCHEMES </li></ul>
  23. 23. LEARN FROM OUR MISTAKES MISREAD TEA LEAVES CLUTTERED MARKETS CAPITAL INTENSIVE SLOPPY DUE DILIGENCE MOMENTUM INVESTING WEAK SYNDICATE UNPREDICTABLE DIRECTORS DAZZLED BY SCIENCE BOY SCOUT REFERENCES TOO MUCH MONEY LONG EVALUATION CYCLES SLOW PAYING CUSTOMERS GOING NATIVE TOO EARLY TOO LATE DECEIVED BY COMPARABLES DILUTIVE IPOs FEELING TOO WEAK FEELING TOO STRONG POOR CUSTOMER SELECTION STRETCHED TOO THIN NOT ADDRESSING A TRUE PAIN CAN’T ARTICULATE THE BUSINESS SMALL GROSS MARGINS SMALLER OPERATING MARGINS NO MODEL FOR MAKING MONEY A FEATURE, NOT A PRODUCT A PRODUCT, NOT A BUSINESS LACK OPERATING CONTROLS GROWING TOO FAST WRONG DNA BAD LISTENERS POOR CUSTOMER SERVICE DECEIVED BY SUCCESSES DRUNKEN PARADE LEADERS EYEBALLS CONVERTS TO $s CAPEX CONVERTS TO $s IGNORING FUNDAMENTALS REPEATING HISTORY
  24. 24. WHAT WE LOOK FOR IN A PLAN <ul><li>1. UNIQUE VALUE PROPOSITION/MARKET POSITIONING CLEAR, CONCISE, ABOVE THE NOISE; CUSTOMER VALIDATION? </li></ul><ul><li>2. EXPLOSIVE MARKET SECTORS, FULL OF DISCONTINUITIES AMBIGUITY AND CONFUSION ARE GOOD. HOW BIG? DEFINING? STRUCTURE/ACCESSIBILITY? READINESS? DISCONTINUITY—WHAT’S DIFFERENT? VALUE CAPTURE POTENTIAL? NO COMPETITION – OFTEN NO MARKET; ENTRENCHED PLAYERS: INNOVATOR’S DILEMMA? STARTUPS: HOW MANY? OUR TEAM? SOURCES FOR DIFFERENTIATION? </li></ul><ul><li>3. BREAKTHROUGH PRODUCTS/TECHNOLOGY SOURCES FOR DEEP SEPARATION AND ADVANTAGE? ORDER OF MAGNITUDE? DEGREE OF DIFFICULTY? ADOPTABILITY? COMPLETENESS? DEFENSIBILITY? </li></ul><ul><li>4. DEFINING TEAMS MAGNET QUALITIES? DOMAIN EXPERTISE? INTENSITY? DNA BLEND? SCAR TISSUE? </li></ul><ul><li>5. CAPITAL EFFICIENCY WHAT IS THE FULLY FUNDED PLAN? MARGIN? BUSINESS MODEL? DIRECT VS INDIRECT? EXPENSE MODEL? REVENUE ASSUMPTIONS? </li></ul>
  25. 25. WE’RE ONLY AS GOOD AS OUR NEXT INVESTMENT.

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