CleanTech Open Academy Day 1

July 23rd, 2010

• Academy Resources

Creating Sustainable Clean Tech Ventures

Nancy Fell
Morgan Rider
Richard (Dick) Franklin

Getting to Plan B

Randy Komisar: Partner, Kleiner Perkins

• Financial spreadsheet necessary for success but won't get us there
• Start with a problem. He often sees people walk in with a solution to no problem.
• Define problem in a crisp sentence
• Solution needs to be unique and defensible
• Analog - Antilog. Analogs - similar things that worked (Sony Walkman), Antilog - similar things that failed (Napster)
• Clean tech like efficient A/Cs not usually brought in for sake of efficiency, normally adopted for more comfort (or monetary savings)
• Leaps of Faith: If they are wrong, your business will fail
  • What are the important things I need to know about my business?
  • How do I test them cheaply and fast?
  • Identifying and understanding these 1 to 3 issues are crucial and when one is solved others will arise
• Dashboard: How to manage and share
  • Leaps of Fait
  • Hypothesis
  • Metrics
  • Results
  • Response
• Plan A people will be lost if hypothesis don't hold. Plan B can roll with it to get to a better plan.
• He invests in people that can: Take in information, course correct, have integrity with their team, work with him
• Zen Capitalism: Passion, purpose, people, potential, profit. (Article)

Business Plan Essentials

Randy Hawks: Managing Director, Claremont Creek Venturers

• Business plan is to be read and needs to be enticing - being exact, complete and boring not effective
• First, business plan is for entrepreneur, next for the VC
• Business plan are expected to evolve, to start a discussion rather than lock-in conclusion
• VCs all have ADD, will have 25 mins (if you are scintillating), will interrupt you, like a little sucking-up
• They see 1,400 business plans, have 400 first meetings, get serious with 25 or 30, will fund 4 to 6 a year. (Their firm is 3 partners, 7 investment professionals.)
• Nat's Nevers
  • Take out assumption that financials are "conservative"
  • Don't say "If we only get 2% of the market" and be careful how market size is positioned
• Products and Services
  • The more real, the more credible
  • Try to show something physical: demonstrate, photograph, mock-up, etc
• Fallacy of the "10% better mousetrap"
  • It is hard to predict consumer switching behavior with small improvements
  • Order of magnitude impact better

Leif Langersand: Clean Tech Industry Partner, Halo Fund

• Exec summary:
  • Most important section, many VCs will not read rest
  • Don't summarize the bus plan
  • Fire your biggest shots
  • Answer "What is in it for me?" for the VC
• Market analysis
  • For $3 to $5 million investment range need market size of at least $100 million (Randy: Some VC firms will do $300k to $500k)
  • Don't confuse industry size with market size
  • Summarize key points, put details into the appendix
• Management and Ownership
  • Top 3 criteria for small stage companies are: management, management and management
  • Don't be innovative in company structure and ownership: C-Corp, one class of stock
• Financials
  • Can't help you - can only hurt you. 
  • Show that you understand business and have a grasp of drivers to get to profitability
• Winning plan
  • A big opportunity
  • Credible team
  • Technology or execution differentiation
  • Identified customers
  • Go-to-market strategy
  • No red lights
• Keys to a great pitch
  • What's the problem (3 min)
  • How to solve it? (Technology and team) (3 min)
  • How big is the market (3 min)
  • Show me! (More than 5 min if they are interested)

 

Patents and Trade Secrets for Early-Stage Clean Tech Ventures

Suzanne Bell: Technology and IP, Clean Tech, Wilson Sonsini
George Willman: Technology and IP, Clean Tech, Wilson Sonsini

Finding and Understanding the Customer To Shorten Time to Market Traction

Christina Ellwood: Founder/CEO, Moreland Associates
Richard Nieset: Sales/Marketing Executive

• Market Analysis: How big is it?
• Marketing: How do I create demand?
• Market size
  • TAM: Total available market, how big the universe
    • Avoid stating percent of market we expect to get,
    • Use bottom up instead and talk about how to construct market: how many sales people, how big quota, etc
  • SAM: Served available market, how many can I reach with my sales channel
  • Target market: who will be the most likely buyers
• Market segments
  • See each other as credible references (mothers)
  • Accessible to each other
  • Needs and requirements are the same
  • Require your key differentiation
• Cardinal rule for startups:
  
  • Think big
  • Start small 
  • Move fast
• Good target customer
  • Has critical job, and current solutions don't do it
  • Negative consequences if job doesn't get done
  • Whole product gets job done
  • Can afford
  • Respected
  • Willing to tell others

 

Business Models

Steve Blank: Serial entrepreneur, Professor Stanford and CAL

• Book: "The Four Steps to the Epiphany"
• Is it build-able now? How much R? and how much D?
• How do you know it is a vision and not a hallucination?
• Your idea itself does not have value
• First-Move Advantage is usually wrong (scout in front of the stage coach comes back with arrows in him)
• Fast followers usually make the most money
• Question: Technology Risk, Market Risk, or Both?
• A business plan is a series of tested hypothesis
  • Interesting part is how you test them
  • Then how you execute them
• How big market is can be translated into "So if you succeed, do I care?" Usually $100 million
• Business plan: "A document your investors make you write that they don't read." Useful place to collect your guesses. An organizing document to gather everything you know at this point in time. No business plan survives first contact with customers
• Business model: Way to keep score after you start talking to customers and reality intrudes. 
  • A diagram that shows all the flows between your company and its customers
  • How to create and deliver value
  • On a single sheet of paper
• The startup that succeeds is the one that learns the fastest outside of the building, in other words, to get product-customer fit that fastest.
• All startups that succeed has a major pivot
• Book that shows this: Business Model Generation
• A startup is a temporary organization to find a repeatable and scalable business model so you can be a large company
• Customer Discovery: Stop selling and start listening, test your hypothesis, continuous discovery
• Customer Validation: repeatable and scalable (and profitable) business model
• Pivot: move between the previous too
• Next step: Customer Creation, Company Building
• Reduce the VC Risk: 
  • Start with your original idea
  • Tell them why it was wrong when you tested with real customers
  • Then tell them what you learned
• Cardinal rules for startups:
  • Think big
  • Start small
  • Move fast
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