Over the past five days I have been to Techpoint’s Entrepreneur Bootcamp, Rose-Hulman’s Homecoming, and Mark Hill’s Informatics Class with Bill Godfrey. Each of these had their own entrepreneurial twist. The Bootcamp was obviously centered on entrepreneurship, even better for me it was focused on starting up and decision making. At Rose Hulman’s Homecoming, I bumped into my close friend Chad Conway who is hosting the Inaugural Rose Startup this October. And myself and 20 other Fellows picked Bill Godfrey’s mind for an hour and a half in a private session hosted by our own director Mark Hill.
I will start with a few lessons from Bootcamp, however, before I get there allow me to set the stage. I had never been to one of these or anything like it. The Bootcamp was a full day’s work starting at 7:30 a.m.. and wrapping up around 5 p.m.. Personally, I think talking about starting a business and venturing out on one’s own is one of the more difficult things I have encountered physiologically. There are countless ways for it to go astray, and the pressure/nerves that go along with such an endeavor can be an inhibitor to launch. But, there was absolutely no pressure at this event; the environment was structured yet relaxed. One of my favorite takeaways was from Michael Langellier. Mike discussed before giving out any equity or really starting down the path, figure out how to split up the “Equity Pie.” He also said make sure not to give too much up and protect from getting technical lock up where a lot of equity has been giving to someone for little work and they walk away.
My next big takeaway was don’t necessarily start by working toward a business plan that is extensive and takes many hours to draft. Instead start with a one page Concept Overview. If that is gaining traction work on a 10 page Venture Profile. If the Venture Profile is being well received then spend the time, energy, and money to write the full 20-50 pages of a Business Plan. I am already putting this to practice and finding it easier to gather my thoughts in a Concept Overview instead of attempting to tackle the burden of a Business Plan without a proven concept.
Subsequently, several panelists spoke on prototyping versus a minimum viable product (MVP). In the world of launching a product today that is in the tens of thousands of dollars, it was pleasing to be assured that a functional prototype is sufficient to raise capital. Lastly hearing about the Indiana 21 Fund from Ryan Pfenniger of Elevate Venture was awesome. Techpoint’s Bootcamp was extremely beneficial as well as inspiring. I would highly recommend it to anyone interested in starting a venture soon or in the near future.
At Rose’s Homecoming, I spoke to Chad Conway about Rose’s Startup registration which is open to both students and non-students. It is on Rose’s campus on Saturday, October 27th from 10 a.m. to 5 p.m. October 13th is the last day to sign up and the cost is $20 for non-students. It is going to be focused on the initial startup process and bringing in a full cast of high potential and season vets to inspire. If you are interested and not from Rose that is no problem at all. The registration is open to all.
Bill Godfrey Informatics Class hosted by Mark Hill
Naturally, I saved the best for last. I saw a lot of myself and echoes of my aspirations when hearing Bill Godfrey speak. Bill was a Mechanical Engineering undergraduate who wanted more and was willing to take a risk. He then went to business school and found passion in the software business between his first and second year while enrolled at Notre Dame. One of the best things from this class has been the consistent message of entrepreneurship isn’t flashy and is a lot of hard work and late nights. More importantly, the character of the individual(s) involved often mean success or failure of a new venture. One of Bill’s key messages to us was “Good things happen to those who persevere.”
Additionally, a few of my favorite things he mentioned were don’t measure income in two-three year chunks, shoot for five years and if possible stretch that out to 10 years. Also, when looking for an initial product manager, find a dictator; however, be cautious because this doesn’t scale well. He also cautioned us to raise funds appropriately when growing and utilize every dollar as effectively as possible. If the money is available, it will be spent. To conclude, even though Aprimo was truly novel, Bill advised us to not shy away from competition. Early competition can help plant the seed and bring the market to its potential. It is costly and time consuming to educate the consumer on a new industry. The value of the service and delivery method are often what separates success from failure.
Lastly, Mark covered a Capitalization Table and how equity/stock options are figured. Mark cautioned us when negotiating to first ask if the company has a stock or equity option. Later when the time is appropriate (likely months before year end reviews or later on in the interview process) ask if there are options available and if you can be included. After negotiating options in your compensation package, there are several things to consider and utilizing the Cap Table is essential.
- Determine the Striking Price
- How many $1.00 outstanding shares are there
- What is the vesting schedule (typically 25%/year)
- What is the Longevity, which are in place for tax considerations (typically 10 years)
Mark ran us through the following example. The company is currently valued at $50M and there are 50,000,000 shares available. The striking price is $1.00 (the lower the striking price the better). You receive 10,000 stock options. After 4 years you are fully vested and the company is valued at $100M. How much money do you make when you execute your stock option into shares? You only make the difference between the ending value ($100M) and starting value when you joined ($50M). Therefore, when the options are executed after four years they are worth $10,000. Also note that during this time options do not receive dividends. When evaluating job offers or considering future employment, make sure to fully understand the value of options before accepting the offer and always always always be negotiating for more.