Entrepreneur:Entrepreneur:How to Launch Your How to Launch Your

IdeaIdeaPresented by: Paul N. BernalPresented by: Paul N. BernalHuman Capital InternationalHuman Capital International

Entrepreneur’s Idea Entrepreneur’s Idea EventEvent

May , 2010

BioBio

Paul N. Bernal Manager The Boeing Company Founder Human Capital International Phone: 206-544-2815 Email: pnbernal@hotmail.com http://mitsloan.mit.edu/execed/cp/bernal.php Paul has been an associated with business development and strategy for Boeing initiatives since January 2004. He brings a wide-ranging background to his role, with expertise in financial analysis, operations, and marketing. Paul assesses Boeing’s developmental projects and products for market viability. He coaches and mentors project leaders, and guides them through the business development lifecycle, helping them transform their ideas into sound business proposals. He helps them prepare market analyses, opportunity assessments, and business plans for preparing their ideas for implementation. Prior to returning to Boeing, Paul served as a global account manager for Microsoft’s World Wide Operations Division. He managed both domestic and international client relationships with marketing, product groups, planning and prioritization process for targeted lines of business. He also rationalized new initiatives through business case analysis, supply chain management, audits, cost reduction initiatives and resource allocation. He coordinated marketing, operations, and supplier campaigns. Paul has been a principal in three startups, responsible for strategic planning, private stock equity placement, filings with regulatory agencies, sales & marketing, and operations.

Previously, Paul was at Boeing from 1989 to 2000. He began his career in Industrial Engineering, served as a Market Research/decision Support Analyst, Operations/Factory Manager, and finally as Program Manager for the Fabrication Division, responsible for the management of the work transfer process for internal and external suppliers overseeing business case analysis, supply chain management, audits, and resource allocation.

Paul has a Bachelor of Science degree from Central Washington University, Masters in Business Administration with emphasis on Marketing/Management from Seattle University, and Executive Leadership Certification from the Sloan School at MIT.

Paul is a 3rd Degree Black Belt in Tai-Kwon Do and enjoys spending time with his wife and daughter at their place on the Columbia River.

Agenda Agenda Entrepreneur vs IntrapreneurEntrepreneur vs Intrapreneur• Intrapreneur’s 10 CommandmentsIntrapreneur’s 10 Commandments

How to Build Your Value PropositionHow to Build Your Value Proposition• Concept StatementConcept Statement• Market OpportunityMarket Opportunity• Product or Service DescriptionProduct or Service Description• Program StrategyProgram Strategy• Competitive AdvantageCompetitive Advantage• TechnologyTechnology• Intellectual PropertyIntellectual Property• Project TimingProject Timing• FinancialsFinancials• TeamTeam

Resources for the EntrepreneurResources for the Entrepreneur

Intrapreneuring vs Intrapreneuring vs EntrepreneuringEntrepreneuring

• Entrepreneur Entrepreneur – Innovative, self starter, runs their – Innovative, self starter, runs their own businessown business

• Intrapreneur Intrapreneur – Innovative, self starter, works in – Innovative, self starter, works in corporate environmentcorporate environment

• Culture Shock: Culture Shock: – Corporations, Small Co.’s & StartupsCorporations, Small Co.’s & Startups

• Skill Set RequirementsSkill Set Requirements• CultureCulture• Risk vs. RewardsRisk vs. Rewards

• EEntrepreneur/Intrapreneurntrepreneur/Intrapreneur– Outside vs. Inside the Corporate BoxOutside vs. Inside the Corporate Box– Creating the Future vs. Pre-defined FutureCreating the Future vs. Pre-defined Future– Risk Taker vs. EvangelistRisk Taker vs. Evangelist– Cure vs. VirusCure vs. Virus

INTRAPRENEUR’S TEN INTRAPRENEUR’S TEN COMMANDMENTSCOMMANDMENTS

1.1. Come to work each day willing to be firedCome to work each day willing to be fired2.2. Circumvent any orders aimed at stopping your Circumvent any orders aimed at stopping your

dreamdream3.3. Do any job needed to make your project work, Do any job needed to make your project work,

regardless of your job descriptionregardless of your job description4.4. Find people to help youFind people to help you5.5. Follow your intuition about people you choose, and Follow your intuition about people you choose, and

work only with the bestwork only with the best6.6. Work underground as long as you can, publicity Work underground as long as you can, publicity

triggers the corporate immune mechanismtriggers the corporate immune mechanism7.7. Never bet on a race unless you are running in itNever bet on a race unless you are running in it8.8. Remember it is easier to ask forgiveness than for Remember it is easier to ask forgiveness than for

permissionpermission9.9. Be true to your goals, but be realistic about the Be true to your goals, but be realistic about the

ways you achieve themways you achieve them10.10. Honor your sponsorsHonor your sponsors Source: Gifford Pinchot, Intrapreneuring, Harper &

Row, 1985

Business ConceptBusiness Concept• Elevator PitchElevator Pitch

– What is the pain being solved by your conceptWhat is the pain being solved by your concept– What product/service are you introducingWhat product/service are you introducing– How does it alleviate the pain How does it alleviate the pain

•Higher QualityHigher Quality•CheaperCheaper•FeaturesFeatures•BenefitsBenefits

Market OpportunityMarket Opportunity

• Market AssessmentMarket Assessment (Use graphs)(Use graphs)

– Global Market SizeGlobal Market Size– Market differentiationMarket differentiation– Potential Market CapturePotential Market Capture

• Where does/can your business competeWhere does/can your business compete

• What market share/size can you What market share/size can you capture in dollarscapture in dollars

• What is the competitive landscapeWhat is the competitive landscape

• Discriminators over competitorsDiscriminators over competitors

Product or Service Product or Service DescriptionDescription

• Describe specifically and precisely Describe specifically and precisely what your product/service iswhat your product/service is

• Describe specifically who the customer Describe specifically who the customer is for this product or serviceis for this product or service

• Estimate what a customer might be Estimate what a customer might be willing to pay for the product/service willing to pay for the product/service offeringoffering

Program StrategyProgram Strategy– Strategies to enter marketStrategies to enter market

– What is your product entry planWhat is your product entry plan

– How will you make moneyHow will you make money

– Business StrategyBusiness Strategy•Value chain strategyValue chain strategy•Rollout strategyRollout strategy•RoadmapsRoadmaps

Competitive Advantage – Competitive Advantage – Why You?Why You?

• Why can your business do this Why can your business do this better than any of its competitors?better than any of its competitors?– Who is the competitionWho is the competition– What do they offer and why are we betterWhat do they offer and why are we better

• What unique capability will be What unique capability will be used to bring idea to market?used to bring idea to market?

• What business relationships will What business relationships will be used to bring this product or be used to bring this product or service to market?service to market?

Technology/Product Technology/Product DevelopmentDevelopment

• Technology DevelopmentTechnology Development – Prototype DevelopmentPrototype Development– Demonstrations Demonstrations

• Performance test (Verification of requirements) Performance test (Verification of requirements) • Functional tests (verification of functions)Functional tests (verification of functions)• Manufacturing or production tests (price point Manufacturing or production tests (price point

verification)verification)

• Product/Service Product/Service – Engineering Requirements and DesignEngineering Requirements and Design– Performance AnalysisPerformance Analysis– Product Plan/design (# of, types, features, size, …)Product Plan/design (# of, types, features, size, …)– Sample Product/AssemblySample Product/Assembly

• Operations ConceptOperations Concept – FacilitiesFacilities– Operational PlanOperational Plan– Rollout- Startup Rollout- Startup

Intellectual Property (IP)Intellectual Property (IP)• List any Patents, Trademarks, or copyrights which form the List any Patents, Trademarks, or copyrights which form the

Basis of the Opportunity. Basis of the Opportunity. • Include rights, strength and weakness in IP. Include rights, strength and weakness in IP. • Discuss any like or external patents, rights which would impact Discuss any like or external patents, rights which would impact

on this business?on this business?• What IP is needed to get concept to Market?What IP is needed to get concept to Market?

– What is needed to buy, develop, or license for success?What is needed to buy, develop, or license for success?

• NDAsNDAs• Patent StatusPatent Status

– IssuesIssues

• IP IssueIP Issue– ResolutionResolution

• IP AcquisitionIP Acquisition– PlanPlan– StatuesStatues

• IP ManifestIP Manifest– Detail list of ALL IPDetail list of ALL IP

• DisclosuresDisclosures• Trade SecretsTrade Secrets• PatentsPatents

Business Timeline Business Timeline • How long until the technology is mature and the prototype How long until the technology is mature and the prototype

fully developed?fully developed?

• Business Plan and Model DevelopedBusiness Plan and Model Developed– Who is the 1Who is the 1stst customer? customer?– When will they buy?When will they buy?– When will Boeing realize 1When will Boeing realize 1stst dollar received? dollar received?– Business Readiness RoadMapBusiness Readiness RoadMap

• How will the Business progress alongside the technology advancements?How will the Business progress alongside the technology advancements?

• When will the product or service be ready for market?When will the product or service be ready for market?

• What are the risks to this timeline?What are the risks to this timeline?

Financial ModelFinancial Model• Financial/Cost Analysis/ModelFinancial/Cost Analysis/Model

– Revenue modelRevenue model– Cost modelCost model

• Financial ReturnsFinancial Returns

• Investment requirementsInvestment requirements

Financial HurdlesFinancial Hurdles

• "What questions are you likely to be asked...""What questions are you likely to be asked..."

– What problem will you solve?What problem will you solve?– Who currently has the problem?Who currently has the problem?– How will you solve it?How will you solve it?– How big is the market potential?How big is the market potential?– What is your distinct advantage?What is your distinct advantage?– How does the competitive landscape look?How does the competitive landscape look?– What are the financial implications?What are the financial implications?– How much capital will you need to develop the solution (and the How much capital will you need to develop the solution (and the

company supporting it)?company supporting it)?– What kinds of volumes and margins are reasonable to expect?What kinds of volumes and margins are reasonable to expect?– What are you team’s qualifications? How strong and proven is What are you team’s qualifications? How strong and proven is

Management?Management?

Funding SourcesFunding Sources• Funding SourcesFunding Sources

– Friends, Family, and AngelsFriends, Family, and Angels (Private-Party Agreement) (Private-Party Agreement)• Investment secured through private partyInvestment secured through private party

– BanksBanks (Secured short to medium-term loans) (Secured short to medium-term loans)• Secure short to medium-term loansSecure short to medium-term loans• What they financeWhat they finance

– Working CapitalWorking Capital– EquityEquity– Lines of CreditLines of Credit

• What they look forWhat they look for– Personal Guarantees/backers (i.e. Boeing/Innovator)Personal Guarantees/backers (i.e. Boeing/Innovator)– Accounts ReceivableAccounts Receivable– Plant & PropertyPlant & Property

– Commercial Finance CompaniesCommercial Finance Companies (Asset-based lenders, aggressive (Asset-based lenders, aggressive banks)banks)

• Vendor contract is secured and “proof of concept” (either prototype or Vendor contract is secured and “proof of concept” (either prototype or demo) contract could be financeddemo) contract could be financed

• What are they? Assets based lenders, more aggressive than banksWhat are they? Assets based lenders, more aggressive than banks• How do they differ from banks? Quicker processing, higher ratesHow do they differ from banks? Quicker processing, higher rates• What do they finance? Receivables (they buy your invoices), sometimes What do they finance? Receivables (they buy your invoices), sometimes

inventoryinventory

Funding Sources Cont…Funding Sources Cont…

– Corporate Venture FundsCorporate Venture Funds• The proposal must fit within their core competency and corporate The proposal must fit within their core competency and corporate

strategic objectivesstrategic objectives• Tend to be risk adverseTend to be risk adverse• May seek to own the IPMay seek to own the IP• Probable exit strategy: acquisitionProbable exit strategy: acquisition• Will seek to control processWill seek to control process

– Venture CapitalVenture Capital• Will negotiate valuationWill negotiate valuation• May seek to significantly control IP equityMay seek to significantly control IP equity• Will institute/demand fiscal disciplines and milestonesWill institute/demand fiscal disciplines and milestones• Will want to syndicate the riskWill want to syndicate the risk• VC may have very stringent requirements for speedy profitability and VC may have very stringent requirements for speedy profitability and

very rapid growth (Minimum zero to $20M in 4-5 years)very rapid growth (Minimum zero to $20M in 4-5 years)• Top management team requiredTop management team required• Large Market Potential ($50-$100M plus revenues) Vertical market Large Market Potential ($50-$100M plus revenues) Vertical market

integrationintegration• Tough Due-diligenceTough Due-diligence

TeamTeam

• Who are the key team members that Who are the key team members that will make this project successful?will make this project successful?– Include a brief bio with relevant Include a brief bio with relevant

experience and a description of roles and experience and a description of roles and responsibilitiesresponsibilities

– Angels. Banks, and Venture Capitalist Angels. Banks, and Venture Capitalist Investors are more interested in the Investors are more interested in the Team than they are in the ConceptTeam than they are in the Concept• Invest in “A” Team with “B-” Concept over a Invest in “A” Team with “B-” Concept over a

“A” Concept with a “B-” Team“A” Concept with a “B-” Team

ResourcesResources

– Resource Book ListResource Book List

– Resource Web SitesResource Web Sites

– Angel Resources Angel Resources

– Business Plan ChecklistBusiness Plan Checklist

Resource BooksResource BooksA sample list of learning materials on starting a business:A sample list of learning materials on starting a business:

• The Art of The Start –The Art of The Start – Guy KawasakiGuy Kawasaki

• The time-tested, battle-hardened guide to starting anythingThe time-tested, battle-hardened guide to starting anything

• Smartups –Smartups – Rob RyanRob Ryan

• Lessons from Rob Ryan's Entrepreneur America Boot Camp for Start-UpsLessons from Rob Ryan's Entrepreneur America Boot Camp for Start-Ups

• Intrapreneuring in Action –Intrapreneuring in Action – Gifford PinchotGifford Pinchot

• Gifford Pinchot introduced one of the most liberating concepts to emerge Gifford Pinchot introduced one of the most liberating concepts to emerge

in business, a way empower employees to create new products, services or in business, a way empower employees to create new products, services or

processes in a fraction of the normal time and cost.processes in a fraction of the normal time and cost.

• Crossing the Chasm –Crossing the Chasm – Geoffrey MooreGeoffrey Moore

• Here is the bestselling guide that created a new game plan for marketing Here is the bestselling guide that created a new game plan for marketing

in high-tech industries. in high-tech industries. Crossing the ChasmCrossing the Chasm has become the bible for has become the bible for

bringing cutting-edge products to progressively larger markets.bringing cutting-edge products to progressively larger markets.

Resource Books Cont...Resource Books Cont...• Business Plans for Dummies –Business Plans for Dummies – Paul Tiffany Paul Tiffany

• A reference guide to find quick and easy solutions to creating dynamic business A reference guide to find quick and easy solutions to creating dynamic business

plansplans

• The Entrepreneur’s Guide to Business Law –The Entrepreneur’s Guide to Business Law – Constance Bagley Constance Bagley

• Provides a masterful treatment of the legal issues associated with starting a Provides a masterful treatment of the legal issues associated with starting a

business. It walks the entrepreneur through the choice of business entity, business. It walks the entrepreneur through the choice of business entity,

structuring the ownership among the founders, raising money, forming an structuring the ownership among the founders, raising money, forming an

effective board of directors, and going public.effective board of directors, and going public.

• Fueling Innovation –Fueling Innovation – Courtney Price Courtney Price

• A reference guide to walking an entrepreneur through critical steps of an A reference guide to walking an entrepreneur through critical steps of an

opportunity assessment and market validation.opportunity assessment and market validation.

• The Innovator’s Dilemma –The Innovator’s Dilemma – Clayton Christensen Clayton Christensen

• Presents a set of rules for capitalizing on the phenomenon of disruptive Presents a set of rules for capitalizing on the phenomenon of disruptive

innovation.innovation.

Web LinksWeb LinksBusiness EducationBusiness Education

– Main web page for the University of WashingtonMain web page for the University of Washington• http://www.washington.edu/http://www.washington.edu/

Funding ResourcesFunding Resources– Directory of venture capital firms and more than 3,000 VC tradeshows.Directory of venture capital firms and more than 3,000 VC tradeshows.

• http://http://www.vfinance.comwww.vfinance.com//

– Garage.com is a venture capital investment bank that provides funding services for Garage.com is a venture capital investment bank that provides funding services for high technology and life sciences startups.high technology and life sciences startups.

• http://http://www.garage.comwww.garage.com//– Small Business AdministrationSmall Business Administration

• http://http://www.sbaonline.sba.govwww.sbaonline.sba.gov//– Emerging TechnologiesEmerging Technologies

• http://http://www.emergingtech.orgwww.emergingtech.org

Competitor ResearchCompetitor Research– In-depth information about specific companies. Information about Sales Leads, In-depth information about specific companies. Information about Sales Leads,

Direct Mail Advertising, Telemarketing, Qualifying Prospects, Making Credit Direct Mail Advertising, Telemarketing, Qualifying Prospects, Making Credit Decisions, Locating suppliers, and Research. Decisions, Locating suppliers, and Research.

• http://http://www.dnb.comwww.dnb.com/us//us/

– Short company profiles - Some of the information is free. Short company profiles - Some of the information is free. • http://http://www.hoovers.comwww.hoovers.com/free//free/

– Company websites and Security and Exchange Commission (SEC) filings for public Company websites and Security and Exchange Commission (SEC) filings for public companies companies

• http://www.sec.gov/edgar/searchedgar/companysearch.htmlhttp://www.sec.gov/edgar/searchedgar/companysearch.html

Angel ResourcesAngel Resources

A sampling of local Angel Groups:A sampling of local Angel Groups:

Business Plan ChecklistBusiness Plan ChecklistDirections: Using your Business Plan as working papers which document your assumptions, create a written narrative (20 pages maximum) of the opportunity. All supporting documentation should appear in the appendix. Follow the checklist below to ensure that you address all key points and observe recommended section lengths. This Business Plan Summary will be main document used to select new opportunities to move forward to. Executive Summary (1 page)

□ Opportunity overview explaining why it is compelling in the customer’s eyes. (Prepare in letter form)

Hint: Update the Executive Summary section of the Business Opportunity Review to complete this summary.

Business Model (1 page)

□ Describe the perspective Business Model and explain why it was selected. □ Highlight key drivers of the Business Model. Example: Sales Driven, Product

Driven, Licensing Driven, etc. □ Outline the Achilles heals unique to the business model. □ Outline the sales cycle and customer capture costs. □ Present recommended business structure. □ Indicate how funding will be used to address the unique aspects of the Business

Model. Hint: Update the Business Model section of the Business Opportunity Review to complete this summary.

Management and Organization (3 pages)

□ Summarize Management Team expertise and expertise (include resumes in appendix).

□ Summarize board members, advisory boards, and outside advisors. □ Highlight compensation and ownership. □ Summarize contracts, agreements, and buy/sell agreement (include full documents

in the appendix). Hint: Check common mistakes to avoid in the Management and Organization section. Put proposed organizational chart in appendix. Use the Innovation Team section of the Business Opportunity Review to complete this section.

Product/Service Plan (3 pages) □ Highlight purpose and what customer pain the product/service solves. □ Explain how the product/service is different and essential for customers to

function. □ Emphasize the unique features and originality of the technology. □ Discuss the stage of development and explain how the customer prototype was

developed. □ Define the government approvals, liability, shelf life, etc. of the product/service.

Explain the intellectual property rights and ownership of the product/service. Would these be barriers to entry or can the product/service be re-engineered by