1、High Tech Ventures: August 2001 A Silicon Valley Perspective,Gordon Bell Microsoft Corporation & Nanyang Ventures http:/.au/ August 2001,Summary,Weve witnessed the greatest, all time, wealth creation and destruction period. Ponzi? Conspiracy? .com era allowed any idea to get extraordinary funding, v
2、aluations, and payoff. Little technology! Silicon Valley has capital. But, VCs busy with old projects. Real technology exists and is increasing! But, I dont see a chance to “spin a yarn” like www! What counts AGAIN, are fundamentals: Team, product, marketing and execution! Lots can go wrong!,Interne
3、t Bubble Lessons,Laws of economics still apply Risk/reward at a new level Technology enablement available to all Infrastructure is means, not end Internet connectivity doesnt mean integration Big changes take 5+ years. In the long run, it will all be true! Cash is still king! Company failings is sti
4、ll growing. Peak by year end.,Winston Churchill, 1942,“Now this is not the end It is not even the beginning of the end But it is, perhaps, the end of the beginning”,BIO INTELLIGENCE AGE,TECHNOLOGY DEVELOPMENT,TIME (year),2000 BC,0,2000 AD,1900,1800,1500,CONSUMER ACCEPTANCE,AGRICULTURAL,INDUSTRIAL,BI
5、OINTELLIGENCE,INFORMATION,R. Satava 29 July 99,Outline,Situation in Silicon Valley / Bay Area 2001 August Unlike our PR, streets arent paved with gold You have to dig for it versus pick it up Now it is much harder than 2 years ago Good business for pick and shovel makers! Bell-Mason Model for a star
6、tup and the diagnosis of them the fundamentals havent changed Look at the environment that supports it and compare it with the area in Boston. Lessons for .au? Red flags and flaws what to look our for,Slowdown in the valley: Whats ahead,Mercury News 5 August 2001 Economic recovery may lag The Intern
7、et bubble burst, as painful as its been, follows a historical pattern. Although a slow recovery is predicted, experts say technology is still the key to future growth. BY DAVID A. SYLVESTER Silicon Valley, get ready for life in the slow lane. After five years of turbocharged growth, the tech-dominat
8、ed economy here is still plunging toward a bottom.,WSJ 7/27 technological gloom,Mary Meeker famous for the rise of the Internet , estimated that $727 billion has been lost by the 360+ Internet companies 12/99-07/01. Ms. Meeker adapted an aphorism from the Great Depression The “biggest risk we face,
9、is not being willing to continue to take risks.“ many venture capitalists are so busy shutting down their existing companies, or trying to arrange bailouts, that they have little time or appetite for new deals. Stewart Alsop, a general partner at NEA, made 10 or 12 investments this year, compared to
10、 50 in the same period of 2000. Instead of griping about excessive valuations demanded by start-ups, he is now steeped in the onerous contract terms that firms impose during “down rounds“.,Shutdowns & M&A 2000-present,VC Finding(t),Some statistics and sayings,Technology industry: $7.6B invested 2001
11、Q2, vs $24.8B 2000Q2. 555 Internet start-ups have closed since the beginning of 2000, 75% in the past eight months In the first half of 2001, 330 .coms shut down Consumer companies accounted for 26% of shutdowns, vs 43% last year, Business-to-business accounted for 33% of shutdowns, vs 22% last year
12、. Electronic commerce start-ups comprised 40% of closings, vs 54% in 2000; ASP shutdowns rose to 10% from 8%. In June, 53 .coms ceased business, vs. May record of 60 the biggest Ponzi scheme in the postwar era, says K. Rosen, UC-Berkeley. And we were in the center of it, right in Silicon Valley.,Cal
13、ifornia, Here I Go b2c & b2b- back to Cleveland & Boston,“New technologies always SOUND HOTthe problem is knowing whats NOT.“ -gbell,.coms NOT. Moores Law drives startups. 10X transistors/die /5 yrs. Microprocessor-based: Java, games, DSP, multiprocessors Communications: DSL, switch traffic 4x/year
14、MEMs, leading to Nanotech Communications: 4x/year traffic growth. They are all in debt! Wireless NOT. Carrier & platform limited. Crowded. Games. Industry is movie Drug discovery given the genomic map. Bio-x. Opportunities: convergence of computer with phone & with TV Energy conservation “The techno
15、logical possibilities are endless .all we have to do is sort through them.“,The Bell-Mason Diagnostic,A system for . Measuring risk Predicting course Tracking progress Improving the odds of success . of high tech, high growth, early stage ventures,The Bell-Mason Diagnostic Founding Premise,“You dont
16、 have to understand the technology to ask the right business questions.”The Bell-Mason Diagnostic provides the critical technology, product, marketing, and people expertise.,The Bell-Mason Diagnostic,Space Twelve standard dimensions characterize a venture (a chapter of High-Tech Ventures). Time Four
17、, well-defined stages of company development with 7 sub-stages of product and market development. Quantification Clear, yes/no questions (i.e. rules) encapsulate knowledge for evaluating a company. Visualization A relational graph shows company position.,12 Dimensions of Analysis,PRODUCT,MARKET,PEOP
18、LE,FINANCE/ CONTROL,Business Plan,Marketing,Sales,CEO,Team,Board of Directors,Cash,Control,Product,Manufacturing Service/Delivery,Financeable,Technology/,Engineering,Four Stages of Growth,Seed Stage,Product Development Stage,Market Development Stage,Concept Stage,Stage 2,Stage 3,Stage 1,Stage 4,1 da
19、y to 12 months,3 to 12 months,12 to 48 months,24 to 48 months,$,$,$,Concept Seed Product Market,Context for Digital Strategy Ventures,Ventures,Bell-Mason Diagnostic Staged Evolution of Questions from roughly 1,000 for all stages!,Concept “Does the company have evidence of product possibilities, give
20、n the technology, that customers are likely to buy?” Seed “Does a simple product specification exist with features and functions that can be presented to potential users?” Product Development “Are an appropriate number of beta systems (3 for large systems, 20 for mass marketed software) operating in
21、 real user environments with users satisfied and testifying that the product exhibits unique capabilities and/or significant performance and/or performance/price benefits?”,Evolution of the “Ideal State” at Each Stage: Entrepreneurials,Business Plan,Manufacturing,Product,Development,Technology/,Engi
22、neering,Control,Fundability,Cash,Board of Directors,Team,CEO,Sales,Marketing,Stage III.,Product Development,Stage II.,Seed,Stage I.,Concept,Stage IV.,Market Development,Bottom line,The startup process can be codified and measured according to a model Deviating from “best practices” is a risk to comp
23、any and investors Theres rarely a shortcut for starting a successful venture,Context for New Ventures,How do you support them? Look at Silicon Valley versus Bostons Rte 128 Needs of area to support venture,Sonicbox Garage,Sonicbox: Establishing Internet Radio,Si Valley vs Route 128 (Hi Tech Employme
24、nt 000s) Saxenian 1994,Rte 128 and Si Valley,VCs behave as bankers VCs behave as investor/partner Finance focused Content, contacts & assistance Established industries Growth from new companies Military contract companies Large, and many startups Vertical integration (DEC) Horiz. Integration & compo
25、n. Key ideas: IC, Micro, disk! MIT few rich profs. Stanford, UC/Berkeley (Close to Washington DC) (Close to industries) Protection of IP Free flow of people & ideas Silicon failed (large cos) Silicon from the beginning Hi-tech is just another biz Hi-tech is the only biz Gen. Purpose infrast. Hi-tech
26、 focus Risk is to be avoided Risk is admired & rewarded Work to live Live to work & pay for lifestyle,Exogenous Effectors for Each Dimension,Eng, sci., tech, tech svcs, unis, other companies, consultants,Tech workforce, sub-contractors, components,Cash & financing experience, “patience“,BOD with Ind
27、ustry, market, product, engineering, financial experience,Trained pool of gen. mgrs successful “role models“,Customers, sales personnel, channels to international mkt.,Market, infrastructure for “complete“ product, partners, strategic alliances, PR, etc.,Reasonable expectations, patience,Trained per
28、sonnel to hire, area-specific consultants,Acctng, legal, financial/financing infra- structure,Capital market supply,Competitive Products, co-components,An “ideal” Venture Capitalist,Has a reasonable sized fund, but not too large Has access to friends who have plenty of funds including bankers and M&
29、A folks Has “done it” before as an operational professional Knows your industry. Customers and suppliers Consultants, potential employees Knows infrastructure: acctng, legal, recruit, PR Great company salesperson & recruiter “Youre happy to be with them in a law suit.” -Doerr Past success: knows dif
30、ference between luck & skill Smarter than you are and willing to teach you,Personal Failures when I didnt luck out,Failure to use the BMD! NO due diligenceuse 2 sec. Gut! Buying a dream or idea, NOT team|plan. A lone rangers algorithm, isnt a product or company Features, UIs just arent products, let
31、 alone company! No viable biz plan just an idea that one could exist. Gut logic just like the idea or team. CEO problems or Sociopath on the team? Team turns on each other. Wont|cant hire CEO or x. Friends: “helping” in some capacity! Flattery|need: we need you on the BOD! Do it for money w/o due di
32、ligence. Poor “money manager” post IPO,Chameleon: PC/XP & CE phone,I. Concept Stage Activities,“Inspiration and Speculation“ Average Duration: 0 - 6 months Principal Activities and Achievements: Formulation of idea for technology/product innovation. Initial field investigation to “test“ application
33、vision. Acknowledgement by 3 reputable outside sources of a product and business. First business plan (6-10 pages). First funding to go to Seed and make a proper plan.,I. Concept Stage Flaws and Flags,No clear articulation of vision or competition Faulty or non-existent business plan The vision cons
34、titutes research or hope Not a company, but a: feature, algorithm, one product event Over-reliance on new components or new suppliers or new infrastructure Lack of credible sources who support the technology/product premise No acknowledgement of competition NO team or the wrong team. (e.g. too many
35、new tricks for old dogs?) No risk assessment Over financing without going to Seed (planning) Stage,II. Seed Stage Activities,“Exploration and Resolution“ Average Duration: 3 - 12 months Exploration key technologies to prove feasibility Product Specification and Products Requirements First product de
36、vel. schedule made with team Exploration and refinement of key market assumptions and positions, models, applications, and channels Preliminary Customer/Application Profiles built Full, formal business plan Funding for Product Development,II. Seed Stage Flags and Flaws,Insufficient technology feasib
37、ility (product may be research); or it may not be unique or differentiated; or it may be one shot No clear product specification (and no predictability on scheduling and real resources required) No “design for manufacturability“ or “delivery/support”? Engineering and Marketing both have a great prod
38、uct vision - but theyre contradictory No Product Requirements Document or Lack of Market Vision Untested market assumptions and models No written Customer/Application Profiles and loose definition of market segments,II. Seed Stage Flags and Flaws-2,Insufficient model of the lead-time to sale by segm
39、ent and channel Miss-perceptions re: competition and advantage Flawed team: lack of credentials and no clear solution to attract the right talent and fill voids “Penny-wise, pound-foolish“- delaying expenditures for critical resources Business plan is a fund-raising document, not a dynamic control d
40、ocument - i.e. the top line is unrealistic; sales forecast is just a hockey stick The Board is just founders and VCs Company misses Seed milestones,III. Product Development “Construction“,Average Duration: 12 to 48 months (avg. 24) Principal Activities and Achievements: Engineering team is hired and
41、 product is built, according to specification. Development goes through four phases: a)hire the team, specify the product in detail and plan the project and all support processes b)test the specification and simulate its operation, building operational prototypes c) integrate and alpha test under op
42、erational conditions d) beta test in the field at customer sites.,III. Product Development-2 “Construction“,Engineering and Marketing iteratively refine FFBs and product positioning according to Customer/Applications Profiles and requirements. By end Beta, delivery organization and process, includin
43、g manufacturing is completely formed. Marketing works iteratively, closely with Engineering throughout this stage. Marketings programs are in place at end Alpha and beginning to be implemented in Beta. (Note: Beta is the last opportunity to test under a shield of privacy and confidentiality.) Additi
44、onal funds are often raised to finance market entry and calibration, based on Beta progress. III ends with product introduction.,III. Product Development Red Flags and Fatal Flaws,Technology-to-product translation simply didnt work as planned (too low, too high, too elegant) Company needs new tools
45、to develop the product - couldnt invent or obtain given current plan. Company reliant on other vendors for product performance. No product architect. Schedules/milestones are constantly missed; funds used faster than forecast. Product isnt Beta Tested. Systems integration problems. Manufacturing can
46、t produce product for target cost.,III. Product Development Red Flags and Fatal Flaws-2,Business Plan isnt updated, and reflects unrealistic break-even point. Key customers arent identified per segment. Pricing and availability are still in flux. Strategic partner candidates not interested. Product
47、is introduced before it exists. Sales is on too early; marketing is on too late. Marketing is vision-less and has no written plan. Marketing has no Market Segment Development Schedule. Sales and/or channel strategy is mismatched to product. Team is at war, and theres no consensus.,IVa. Calibrate the
48、 Market “Commercialization“,Average Duration: 3 to 9 months (avg. 6 months) Principal Activities and Achievements: Every line of business plan is now operable and tuned for determining profitability. Every departments operations and plans are tested. Engineering responds to field problems and joins
49、in team sales. Modifications to product, enhancements, next releases, new products are handled by Phase Review product planning process.,IVa. Calibrate the Market-2 “Commercialization“,Manufacturing is fully staffed and delivering product on schedule at the correct cost, quality and volume commitmen
50、ts. Marketing and Sales drive the company. Marketing validates/recalibrates its Market Segment Development Schedule, positioning, unique selling propositions per segment, sales gestation times. Sales hones its prospecting and pre-qualification filters, and tunes its forecasts. Making sales is the top priority of the company (meeting 3 and 6 month forecasts). Financing for IVb Market Expansion is often undertaken.,
