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What is the BIG Idea? by Paul Ahlstrom

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Ideas to take the Puerto Rico VC Industry (or any country for that matter) to the next level. Policies, ecosystem development, think globally, liquidity and trust.

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What is the BIG Idea? by Paul Ahlstrom

  1. 1. 1 WHAT’S THE IDEAPAUL AHLSTROM @PAULAHLSTROM
  2. 2. 2 Building a Vibrant Entrepreneur Ecosystem A critical mass of entrepreneurs, innovation, and connected capital in a trusted, business-friendly environment. Can these 3 key drivers of Silicon Valley’s success be engineered and replicated elsewhere? Entrepreneur Activity Innovation Capacity Investment Capacity Significant entrepreneurial activity and high-trust culture, deep bench strength, healthy social dynamics (e.g., ok to fail, ok to be rich, etc.) Robust investment capacity (i.e., full funding continuum) Significant Intellectual capital (e.g., Stanford, Xerox PARC, IBM Research Labs, etc.) Trusted, Business-Friendly Environment: Trusted informal networks, trusted service providers, shared community vision, predictable and supportive government. Trust
  3. 3. 3
  4. 4. 4 INNOVATI ON ENTREPRE NUR CAPIT AL
  5. 5. 5 ENTREPRENUERSHIP IT ALL STARTS WITH AN IDEA.
  6. 6. 6 1CO’S 1
  7. 7. 7 1CO’S 1
  8. 8. 8 1CO’S 1
  9. 9. 9 1CO’S 1
  10. 10. 10 1CO’S 1
  11. 11. 11 1CO’S 1
  12. 12. 12 1CO’S 1
  13. 13. 13 1CO’S 1
  14. 14. 14 YOU CAN DIG DITCHES YOU CAN BUILD ROCKETS. OR
  15. 15. 15 1CO’S 1 Wouldn’t it be more fun to go to the moon?
  16. 16. 16 WHERE IS THIS IDEA TAKING YOU? THE STARS? A DEAD END? IT’S BETTER TO SHOOT FOR THE STARS AND LAND ON THE MOON THEN TO AIM FOR THE GUTTER AND HIT IT. “ “
  17. 17. 17 “TOM” (1988) FOLIO (4.5YRS) KNOWLIX (1993)
  18. 18. 18 Source: NVCA Yearbook 2013. VENTURE CAPITAL UNDER MANAGEMENT IN UTAH (millions) 0 200 400 600 800 1000 1200 1400 1600 18 Almost 3 million people, no startup $ Less than $20 million of Capital in Utah
  19. 19. 19 Held 140+ meetings understand opportunities and challenges of doing business in Utah and create a unified vision Government Industry Co-Investors & Angels Research/Univ ersities LPs/Financial Centers of Excellence, Departments of Commerce and Economic Development, State Governor, Utah Office of Technology Development, Utah State Senate, Utah Technical Finance Corporation Dorsey & Whitney, Ernst & Young, Gamut Technology Group, Japan Works, Jones Waldo, KPMG, Merrill Lynch, Silicon Valley Bank, Snell & Wilmer, UITA, Utah Valley Venture Forum, Wayne Brown Institute, BizCradle, HP, Glen Media, Studeo, American Express, Convergys, Discover Card, Next Page, Novell, 10Fold Visited with more than two dozen of the most prolific co-investors and angel investors in Utah, including Mt. West Venture Group, Utah Angels, Accel Partners, Ash Capital, Benchmark, Cornerstone Capital Group, Dominion Ventures, Draper Fisher, Granite Capital Partners, Canopy Group, Bain Capital Brigham Young University, University of Utah, Utah State University, Westminster College Sterling Financial Group, Chase Capital Partners, Deutsche Bank, Alpine Consolidated, APV, Boston Millenia Partners, Goldman Sachs, American Health Plans, Utah State Retirement Fund, McMann and Associates 19 On-the-Ground Meetings
  20. 20. 20 Source: United Way of Salt Lake and Stanford Social Innovation Review (Kanla and Kramer) 20 Unified Vision Enables Real Change
  21. 21. 21 8 VENTURE FUNDS $1B RAISED 125 CO’S INVESTED
  22. 22. 22 Buenos Aires Lima, Peru Mexico City Monterrey San Francisco Lehi, UT Santiago, Chile
  23. 23. 23 Alta acts as a bridge accelerating Latin American innovation into global markets LATAM Portfolio Companies Alta Investment Strategy
  24. 24. 24 US Portfolio Companies Focused in LATAM Alta accelerates distribution for proven technologies into Latin America Alta Investment Strategy
  25. 25. 25 CAPITAL VENTUR EINVESTMENT MODEL
  26. 26. 26 BABE RUTH • 714 Home runs • 1330 Strike Outs
  27. 27. 2727 Typically 1/3 of VC Investments will Fail …Total Write-Offs Return Investment Drive Returns 1/3rd 1/3rd 1/3rd Typically 1/3 of investments will fail
  28. 28. 28  Wrong people?  Disharmony on team?  Lose focus?  Lack passion?  Burn out?  Poor product?  Product mis-timed?  Failure to pivot?  Legal challenges?  Poor marketing?  No market need?  Get out-competed?  Need/lack business model?  Pricing/cost issues?  Run out of cash?  No investor interest?  Disharmony w/ investors?  Bad advice? Startups Fail for Many Different Reasons…
  29. 29. 29 Source: Small Business Trends Published 2008. Data from Bureau of Census Most Startups Fail!
  30. 30. 30 AEROpriseEROpriseAAEROpriseEROpriseA $500M – Direct Investment(8 Funds) $850M – Co-Investors $1.4B – Total Invested X X X X X X X X X X X X My Failure Credentials: 100+ Direct Investments
  31. 31. 31 Building products before you nail the pain Writing marketing materials before you nail the solution Hires sales teams before you know how to sell Spending money before you understand the business model Premature Scaling #1 Cause of Startup Failure 70% of Startups Fail for this reason:
  32. 32. 32 Entrepreneurs are doing good things, but not doing them in the right order. More than 80% of the time entrepreneurs are ignoring customer demand the right product mix until after they have started to scale their business. * Harvard Business Review: Beating the Odds When you Launch a New Venture by Clark G. Gilbert and Matthew J. Eyring * Entrepreneurs mis-prioritize key activities
  33. 33. 33 “They spent so much money on all this infrastructure, which was basically part of their business model. But what they hoped was going to be their advantage turned out to be their downfall. They got big fast, but size turned out to be an albatross when the demand wasn’t there.” “One reason demand fell short was that Webvan wasn’t as convenient as it billed itself.” Source: SFGATE Premature Scaling: Webvan $830M Invested
  34. 34. 34 Premature Scaling: Kozmo.com Raised $280M
  35. 35. 35 Identify product opportunity Create product specs Build alpha product Test product, build beta product Sell product to customers The Roots of the Startup Failure Trace back to the Traditional “Waterfall” Product Development Model  Waterfall Product Development Model
  36. 36. 36  Traditional Startup Model Based on Execution Not Research Entrepreneur has a idea Discuss with / raise money from friends, family and fools Find a location, develop the product Perfect the product and add features for broad appeal Sell the product “Escalation of Commitment” Stage “American Idol” Stage “Midnight Genius” Stage “Feature Lock- in” Stage Russian Roulett e “Sales Pipeline Problem” Stage The Startup Process Copied The Waterfall Model
  37. 37. 37 Nathan Furr, PhD Paul Ahlstrom, VC www.NailThenScale.com Available on Amazon.com Nail It Then Scale It (NISI)& Big Idea Canvas
  38. 38. 38 Entrepreneur has a idea (based on core competency) Identify Monetizeable Customer Pain Identify Minimum Feature Set (of the customer) Nail the Product… Begin with the Customer! (customer centric approach) Customer Centric Innovation. NISI Model: Put the customer up front in the process
  39. 39. 39 Big Idea Canvas http://www.bigideacanvas.com MONETIZABLE PAIN EXIT STRATEGY MARKET-ENTRY STRATEGY PROPOSED SOLUTION MARKET POTENTIAL 1 2 3 4 5
  40. 40. 40 ONCE YOU HAVE A GREAT IDEA, STOP!!!
  41. 41. 41  In one sentence…  What is your story?  What makes this interesting?  If you were a reporter, where is the news?  Why should anyone care about this?  If you think you have something then... go to the BigIdeaCanvas.com and refine your idea & generate a hypothesis to go out and test
  42. 42. 42 BigIdeaCanvas.com
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  44. 44. 44
  45. 45. 45
  46. 46. 46
  47. 47. 47
  48. 48. 48 Shark Bite vs. Mosquito Bite What is the Level and Frequency of the Pain?
  49. 49. 49 Frequency Google’s Tooth Brush Test: Do you use it once or twice a day and does it make your life better?
  50. 50. 50 Entrepreneurs role is to innovate Customers role is to validate Entrepreneurs Job vs Customers Job
  51. 51. 51 INVENTION MARKET INSIGHT Science Industry INNOVATORS JOB
  52. 52. 52 Different Types of Innovation
  53. 53. 53 Disruptive Innovation the Best Market Entry Strategy
  54. 54. 54 MarketAdoption Time Market Entry Best way to take enter a Market?
  55. 55. 55 MarketAdoption Time Market Entry $1B Best way to enter a Market... Disrupt!
  56. 56. 56 MarketAdoption Time Market Entry $15B Best way to enter a Market... Disrupt!
  57. 57. 57 ? What does Disruptive Innovation Look Like?
  58. 58. 58 Hey! I got this great idea. We are going to let people rent their couches.”
  59. 59. 59 “Ok, how about his one? We are going to help people take the bus.”
  60. 60. 60 “Let’s help teenagers text each other while standing next to each other without wifi.”
  61. 61. 61 “So…you know when you want to stick all of your wedding ideas on a corkboard?”
  62. 62. 62 How does it feel to be a Visionary, Disruptive Innovator?
  63. 63. 63 The “Couch Surfing” Business
  64. 64. 64 The “Couch Surfing” Business
  65. 65. 65 AirBnB Stats
  66. 66. 66 The “Help People Take the Bus” Business
  67. 67. 67 Wanderu Wins the CES Startup Award
  68. 68. 68 Wanderu Growth
  69. 69. 69 Millennials are 74% of Intercity Bus Riders
  70. 70. 70 The “Help Teens Text Without Wi-Fi” Business
  71. 71. 71 The “Help Teens Text Without Wi-Fi” Business
  72. 72. 72
  73. 73. 73 The “Cork Boards for Weddings, etc.” Business
  74. 74. 74 The “Cork Boards for Weddings, etc.” Business
  75. 75. 75 40% 20% 0% - 20% 60% 80% 100 % TOP SOCIAL PLATFORMS: GROWTH IN MEMBERS AND ACTIVE USERS DURING 2014 Growth in Members Growth in Active Users 54 % 97 % 35 % 95 % 32 % 47 % 20 % 38 % 7% 13 % 10 % 7% 5% 6% 1% -9% Source: GlobalWebIndex
  76. 76. 76 Key Outcome Drivers of Silicon Valley A critical mass of entrepreneurs, innovation, and connected capital in a trusted, business-friendly environment. Can these 3 key drivers of Silicon Valley’s success be engineered and replicated elsewhere? Entrepreneur Activity Innovation Capacity Investment Capacity Significant entrepreneurial activity and high-trust culture, deep bench strength, healthy social dynamics (e.g., ok to fail, ok to be rich, etc.) Robust investment capacity (i.e., full funding continuum) Significant Intellectual capital (e.g., Stanford, Xerox PARC, IBM Research Labs, etc.) Trusted, Business-Friendly Environment: Trusted informal networks, trusted service providers, shared community vision, predictable and supportive government. Trust
  77. 77. 77 TRUSTED INFORMAL NETWORKS DRIVE POSITIVE OUTCOMES Startups happen at the Speed of Trust!
  78. 78. 78 78 Honesty & Integrity.. ...TRUST (enables speed & flexibility) FLEXIBILITY (Provides freedom to fail)  CREATIVITY INNOVATION (Deal flow) INVESTMENT (Fuels growth)
  79. 79. 79 “TRUST is like the air we breath. When it’s present, nobody really notices. But when it’s absent, everybody notices.” - Warren Buffett
  80. 80. 80 80 TRUST (enables speed and flexibility) FLEXIBILITY (provides freedom to fail) CREATIVITY INNOVATION (deal flow INVESTMENT (fuels growth) Funding Gap in Developing Regions Startups Happen at the Speed of Trust
  81. 81. 81 Can the key drivers of Silicon Valley’s success be engineered and replicated in Mexico? 81 Case Study: Mexico
  82. 82. 82 Guadalajara & Monterrey 60 student teams participated in the first year (2013) Launched in partnership with the Tec de Monterrey April 2010 Launched April 20, 2010 Guadalajara & Monterrey 82 Mexico Case Study
  83. 83. 83 Mexican PE investment grew to $1.3B (USD) in 2014, up from $651M in 2013. 0 4 8 12 16 20 24 28 32 36 40 2008 20142012 2 14 20 # OF VC FUNDS IN MEXICO ASSORTMENT OF INSTITUTIONAL FUNDS IN MEXIO Source: LAVCA. 37 2013 42 2015 Mexican Venture Capital Funds
  84. 84. 8484 Case Study: State of Utah
  85. 85. 85 THE UTAH VENTURE REPORT 85 Phase 1: Market Research
  86. 86. 86 1. Develop a “Friends of Utah” and affiliation group database. 2. Request alumni information from local universities and include in database. 3. Promote more educational opportunities for entrepreneurs. 4. Assist business schools in organizing “business treks.” 5. Encourage local universities to create “evening education” devoted to entrepreneurship. 6. Sponsor meet-up events to share ideas and get feedback. 7. Strengthen local venture capitalists by helping to raise capital. 8. Strengthen local venture capitalists by providing introductions to coastal venture firms. 9. Champion the formation of local angel networks. 10. Strengthen R&D efforts at all state research institutions. 11. Expand engineering programs in high education to grow technologists base. 12. Lobby one of the four major securities law firms to establish an office in Utah. 13. Lobby the Silicon Valley Bank to open a branch office in Utah. 86 Harvard Study Recommendations
  87. 87. 87 Held 140+ meetings understand opportunities and challenges of doing business in Utah and create a unified vision Government Industry Co-Investors & Angels Research/Univ ersities LPs/Financial Centers of Excellence, Departments of Commerce and Economic Development, State Governor, Utah Office of Technology Development, Utah State Senate, Utah Technical Finance Corporation Dorsey & Whitney, Ernst & Young, Gamut Technology Group, Japan Works, Jones Waldo, KPMG, Merrill Lynch, Silicon Valley Bank, Snell & Wilmer, UITA, Utah Valley Venture Forum, Wayne Brown Institute, BizCradle, HP, Glen Media, Studeo, American Express, Convergys, Discover Card, Next Page, Novell, 10Fold Visited with more than two dozen of the most prolific co-investors and angel investors in Utah, including Mt. West Venture Group, Utah Angels, Accel Partners, Ash Capital, Benchmark, Cornerstone Capital Group, Dominion Ventures, Draper Fisher, Granite Capital Partners, Canopy Group, Bain Capital Brigham Young University, University of Utah, Utah State University, Westminster College Sterling Financial Group, Chase Capital Partners, Deutsche Bank, Alpine Consolidated, APV, Boston Millenia Partners, Goldman Sachs, American Health Plans, Utah State Retirement Fund, McMann and Associates 87 On-the-Ground Meetings
  88. 88. 88 Source: United Way of Salt Lake and Stanford Social Innovation Review (Kanla and Kramer) 88 Unified Vision Enables Real Change
  89. 89. 89 1. E |100 2. Startup Grind Meet-ups 3. iTuesday Meet-ups 4. International Business Model Competition 5. Startupcore.co 6. Kickstart Seed Fund 7. Venture Capital Conferences 8. Utah TechX Accelerator 9. Alta Labs 10. Ecosystem Analysis & Assessment 11. Global Investor Network 12. Service Provider Assessment & Introductions 13. Big Idea Canvas 14. Big Idea Competitions 15. Student-run VC Funds 16. Utah Accelerator Link 17. Capital Formation Analysis Consulting (Univ. Venture Program, Fund of Funds, Angels, etc.) 18. Entrepreneur Mentor Network (Endeavor) 19. Corporate Strategic Partnerships (Spin-in, Spin-out, Build-to-Suit) 20. Technium 89 Alta Innovation Institute Ecosystem Catalyst Toolkit
  90. 90. 90 SEED/START-UP FUNDING DEVELOPMENT FUNDING EXPANSION FUNDING OPPORTUNITY DEVELOPMENT CONTINUED GROWTH ANGELS, FOUNDERS & SEED FUNDS VENTURE CAPITAL – GROWTH EQUITY PE - PUBLIC MARKETS VALUATIONS INCREASE BUSINESS RISKS DECREASE MENTORING NEEDS DECREASE $5M-20M$500K-5M$50K-500K >$20MSweat Community Fills Seed Gap
  91. 91. 91 Trusted, informal networks Startups Universit ies/ Labs Early Stage VCs Angel Investor s Industry 91 Capital, value add, syndication Technology transfer, student opportunities, economic development Deal flow, “clean” deals Deal flow, economic alignment, coinvestment and follow-on rights Deal flow, outsourced R&D, executive involvement & education Kickstart Seed Fund
  92. 92. 92
  93. 93. 93 Source: NVCA Yearbook 2013. VENTURE CAPITAL UNDER MANAGEMENT IN UTAH (millions) 0 200 400 600 800 1000 1200 1400 1600 93 Utah Results: Capital Under Management Up
  94. 94. 94 VENTURE DOLLARS INVESTED SINCE 1995 (millions) Source: NVCA Yearbook 2012. 0 100 200 300 400 500 600 700 800 900 Utah Kansas Nebraska Iowa 94 Utah Results: Beating Other Regions
  95. 95. 95 0.00% Source: PWC, MoneyTree – Venture Capital Report 2014; US Bureau of Economic Analysis. CA 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% 0.95% 0.64% MA 0.59% UT NY WA WV HI ND MT MS 0.27% 0.20% TOP 5 STATES 0.00%0.00%0.001%0.001%0.002% BOTTOM 5 STATES 95 2014 & 2015 Utah Results: No. 3 in VC as %GDP
  96. 96. 96 2009 – Acquired by Adobe for $1.8 billion; 1200 employees 2012 – $1.6 billion exit; 850 employees 2010 – Acquired by PE Firm Thoma Bravo (currently $1B+ valuation) 2007 – Acquired by Symantec for $830 million; 600 employees 2011 – IPO exit of $1.5 billion; 450 employees 2012 – Acquired by Blackstone Group for $2 billion; 5500 employees 2013 – IPO exit of $500 million; 500 employees 1985 – IPO exit in Jan 1985 – Acquired in 2010 by Attachmate for $2.2 billion 1994 – Acquired by Novell for $885 million. 96 Utah Unicorns
  97. 97. 97 2014 – Raised $150 million at $1 billion valuation 2014 – Raised $100 million at $1 billion valuation 2014 – Raised $113 million at $1 billion valuation 2015 – Raised $200 million at $2 billion valuation 2015 – $1.68 market capitalization at IPO. 2014 – $1.5 billion current market capitalization On Deck – Fastest Growing Startups 2015 – Raised $70 million at $500 million valuation 2015 – Over $100 million revenue run rate 2015 – #11 on the Inc. 5000 list (18,787% 3-year growth) 97 Utah Unicorns
  98. 98. 9898 Utah: The Next Silicon Valley
  99. 99. 9999 Utah: The Next Silicon Valley
  100. 100. 100 THANK PAUL AHLSTROM @PAULAHLSTROM
  101. 101. 101  Monetizable Pain. Understand the job the customer is trying to perform and then identify the problem the person is experiencing in context of doing that job. Context matters. Frequency matters.  Rapidly Growing Market. The market doesn't have to be large today, but it must be rapidly growing and have the potential to be huge.  Focus on the problem. "Fall in love with the problem not the solution." Uri Levine  Free. Good enough and free wins every time. Difficult to sell consumer apps, if you have critical mass, there are other ways to monetize the installed base.  Value for single user. Must provide enough value to a single user. (in other words a single user must get value out of the app and not require a network effect in order for it to be useful)  Data. Goal is to create critical mass of crowd knowledge - Accumulated or automatically generated (data is the end game)  Frequency. Must use it two or more times a day. (toothbrush) (Frequency of use trumps level of pain)  Think Big. You are not thinking big enough if you are not putting someone out of business  Emotion drives WOM. If there is no emotional engagement with your product, there is no word of mouth. (must meet or trigger a basic human need- Need to feel loved, feel important, food, shelter, clothing, need for variety, entertainment, need to create)  Good enough MVP. The enemy of good enough is perfect. In a can vs can't scenario, good enough wins. (MVP ok) 10 Rules for Consumer Apps
  102. 102. 102 1. Policies. Continue positive investment friendly government policies 2. Ecosystem Development. Support Entrepreneur ecosystems to accelerate the development of innovation, entrepreneurship and investment capacity 3. Think Globally. Help entrepreneurs think globally. 4. Liquidity. Increase Liquidity options for companies 5. Trust. Increase Trust to Increase Foreign Direct Investment

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