Mid-Life Startup - UCLA Anderson School of Management

285 Pages·2004·4.88 MB·English

by  Lee Cooper

Lessons from Venturing Out of the Ivory Tower

Lee Cooper

UCLA Anderson School of Management

V
NEW VENTURE PRESS
N P
SANTA MONICA, CALIFORNIA
Library of Congress Control Number: 2003116638

Cooper, Lee G. 1944–
Midlife Crisis Startup: Lessons from Venturing Out of the
Ivory Tower / Lee Cooper
p. cm.
Includes bibliographical references and index.
ISBN 0-9748554-0-5 (Hardcover)
1. New-venture initiation. 2. Entrepreneurship.
3. Technology-enabled marketing. 4. Technology transfer.
First Edition

Copyright © 2004 by Lee Cooper

All rights reserved.
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v

Table of Contents

Table of Contents.......................................................................................v
List of Figures............................................................................................vii
List of Tables............................................................................................viii
Preface.........................................................................................................ix
Acknowledgements....................................................................................xi
PART I. LOGIC IN USE...................................................................1
1. Birth of a Notion...............................................................................3
1.1 Surfin’.........................................................................................3
1.2 July 28, 2000...............................................................................5
2. Foreplay.............................................................................................13
2.1 The Conceptual Models.........................................................14
2.2 A Dynamic Framework for Strategic Marketing Planning22
2.3 Into the Turbulent Field........................................................22
3. “The Best Business Plan I Ever Read”.........................................25
3.1 Building a Team......................................................................40
3.2 Dealing with UCLA................................................................51
3.3 The First “Public” Business Plan.........................................55
3.4 The First Meeting of the Board of Directors.....................57
4. I Should Have Read Charles Ferguson.........................................61
4.1 Whitewater Canoeing.............................................................61
4.2 Return to the Real World.......................................................66
4.3 Irrational Exuberance.............................................................72
4.4 Due Diligence..........................................................................74
4.5 The Seeds of Conflict.............................................................77
4.6 The Heart of Darkness..........................................................85
4.7 All Work Is Voluntary............................................................95
5. Smart Money...................................................................................101
5.1 The Series-A Negotiations...................................................101
5.2 The Prelude to Series B........................................................105
5.3 Don’t Even Think About a Down Round........................114
5.4 Last Chance for Strategy......................................................121
5.5 D is for Doom.......................................................................129
5.6 Kiretsu Versus Portfolio......................................................136
5.7 The Tale of DVX..................................................................138
5.8 E is for Epilogue...................................................................141
PART II. RECONSTRUCTED LOGIC......................................149
6. A Linear Path..................................................................................151
6.1 Introduction to the Linear Path..........................................151
6.2 Kernel Analysis: Aligning Innovations with Markets......152
6.2.1 Finding the Kernel...........................................................157
6.2.2 Market Finding.................................................................160
6.3 The Value of the Entrepreneurial Vision..........................164
6.4 Writing a Business Plan........................................................166
6.5 Due Diligence on the Business Plan..................................189
7. Strategic Maps.................................................................................193
7.1 Strategy as Comprehensive Problem Solving...................193
7.2 Articulating the Critical Issues............................................199
7.2.1 Political Issues:..................................................................199
7.2.2 Behavioral Issues..............................................................206
7.2.3 Economic Issues...............................................................207
7.2.4 Sociological Issues............................................................209
7.2.5 Technological Issues........................................................209
7.2.6 The Key Decision.............................................................210
7.3 Mapping the Critical Issues.................................................210
7.4 Valuation................................................................................213
7.5 Plans Must Be Dynamic.......................................................213
7.6 What If?..................................................................................225
7.7 Strategic Planning Using the Four Risks...........................227
8. Meta Lessons..................................................................................237
8.1 The Legend of Quincy Thomas..........................................237
8.2 Sharing the Map....................................................................239
8.3 The University and Faculty Entrepreneurs.......................244
8.4 The Regulating Tension of Opposites...............................254
8.5 A Place to Begin and a Path to Make It Better.................258
8.6 What’s Next?.........................................................................259
References................................................................................................261
Index.........................................................................................................269
vii

List of Figures

Figure 5.1. The Mental Map of Factors Affecting SDC’s Success..121
Figure 5.2. “Bake-Off Results (Static Simulator)................................132
Figure 6.1. The Drug-Discovery Market.............................................162
Figure 6.2. PersonalClerk’s Communication with the Client Network
..........................................................................................................173
Figure 6.3. PersonalClerk Utilizes a Variety of Data Sources to
Provide Real-time Marketing Messages......................................174
Figure 6.4. Competitive Customer Analysis Technologies...............179
Figure 6.5. Organization Chart..............................................................186
Figure 6.6. Engagement Structure........................................................187
Figure 7.1. Critical Issues Map..............................................................195
Figure 7.2. Potential Competitors and Features.................................199
Figure 7.3. The Mental Map of Factors Affecting SDC’s Success..211
Figure 7.4. Prototype for a Strategic Map...........................................231
Figure 7.6. The Factors Impacting Market Risk.................................232
Figure 7.7. The Factors Impacting Human Risk................................233
Figure 7.8. Factors Impacting Capital Risk.........................................234
Figure 7.9. The Complete Strategic Map for CMSS..........................234
List of Tables

Table 6.1. Financial Forecast Detail – Planned Forecast..................184
Table 6.2. Financial Forecast Detail – Limited Forecast...................185
Table 7.1. Likelihood of States in Parent Nodes................................215
Table 7.2. Two-Way Conditional Likelihoods....................................216
Table 7.3. Three-Way Conditional Likelihoods..................................219
Table 7.4. Four-Way Conditional Likelihoods....................................220
Table 7.5. Five-Way Conditional Likelihoods.....................................220
Table 7.6. Six-Way Conditional Likelihoods.......................................223
Table 7.7. Comparative Valuations Under Different Scenarios.......226
Table 7.8. Critical Issues Facing CMSS................................................230
ix

Preface

A young scientist’s first lesson in scientific writing is to distinguish
the flow of actions that describe the record of scientific behavior
during an inquiry from the reconstruction of that record that forms
the framework for a journal article. The flow of actions is called Logic
in Use and the reorganization of that flow into the typical
Introduction, Methods, Results, and Discussion breakdown is called
Reconstructed Logic.

Part I of this book relates the flow of experiences I had mainly
between the summer of 1999 and the beginning of 2002 in
conceiving, creating, financing, and building a company to do
technology-enabled marketing – the kind of service that personalizes
the interaction of Internet users with Web merchants. Innovators,
particularly university faculty or other mid-career professionals, who
wish to move their ideas toward commercialization need to recognize
the sometimes-subtle signs of problems or pitfalls while engaged in
the incessant rush of a startup experience. But they need more than
that. And thus, I have included a second part to this book that
considers the steps in the startup process from a more detached,
reconstructed view.

The second part deals in particular with business-plan writing and
planning a business. These are not the same thing. One writes a
business plan for specific reasons to specific audiences. This is the
topic of Chapter 6. The resulting document is temporal and static.
“Cut and paste” makes it easier to come up with the next document,
but that one, too, is static. Planning a business requires a dynamic
framework that addresses simultaneously the complex set of
problems the business faces. Chapter 7 takes on that task, with a
particular focus on university-based innovation. Chapter 8
summarizes the overarching lessons and issues I believe
entrepreneurs and innovators need to consider before and during the
new-venture process.