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New Venture Ideation
Transforming Innovative Ideas Into Companies
Howard Lee MorganDirector, idealab
Partner, First Round Capital
January 28, 2009
IdealabHistory
idealab! Methods
Expansion & ContractionSV, NY, Boston, London
Companies
Entrepreneurial Marketing Framework
Examples
Agenda
HLM History
I’m a lapsed academic
CCNY ’65, Cornell Ph.D. ’68
Professor at Cornell, Caltech, HBS
Penn (Wharton and Moore)
Machine #50 on the net (1973)
36 years of email
Arca Group – 1989 to present
Started in 1996 by Bill Gross - I was lead investor
New form of corporation to capture opportunity
Move from idea forward
Factor out common problems – infrastructure
Space – silicon valley, startup in garage
Focus on ideas, product feature/function and time to market
Idealab History
Basic Concept
Start the idea, own 100%
For outside ideas, keep significant stake
Dilute for management, add other investors
Work to create 100, 100 person companiesversus one 10,000 person company
Keep incentives localDo more ideas than companies
Idealab Methodology
Idea creation
Idea prototyping
Idea filtration
Realizing Individual Potential
Leverage Assets and Resources
Idea Creation
Attract the brightest minds
Reward creative thinking
Look for passion about ideas
Regular brainstorming
Monthly meetings
Weekly calls
Topical reviews
Trend analysis
Idea spreadsheet
Brainstorming
Build quick prototype
Metrics metrics metrics
Sense and respond
Repeat
Idea Prototyping
Exec summary – 1 page tops
Market size
Time to develop and market
New Venture Group Analysis
Summary business plan
Viability of the business model
Recruiting talent
Raising Money
Defensibility and sustained advantage
Idea Filtration
Work with quality people
Let them have an impact
Give them significant equity ownership
Listen and interact with them
Realizing Individual Potential
Provide centralized services
Combine buying power
Network to share knowledge
Force introductions, not deals
Believe in the free market
Leverage Assets and Resources
Opened in Pasadena 1996, new open layout
High energy space
Not enough conference rooms
College dorm effect
Synergy
Physical Layout
Offices and incubateesPasadena – both an idealab! and The idealab!,
also corporate HQApteraDWPowerEvolution RoboticsEnergy Innovations, eSolarSnap.comX1
OtherPartsearch (NYC)Newbury Networks (Boston)Airwave (San Mateo)
Brainstorming areasSocial networking, 3D printing Energy independence
Open Office Layout
How we differ from VCs
Bacon and eggs –commitment/involvement
idealab! committed, VC involved
VC model is great – ICP adds those benefits
ICP now Clearstone – about $500MM under mgmt
Entrepreneurial Marketing Framework
3 product lines, 5 markets – product/service, stock, company
Customers (+$$)
Users (-$$)
Investors (+$$)
Recruits (-$$)
Strategic Partners (+/-$$)
Morgan/Lodish 3 by 5 approachProducts Shares Image
Customers(+$$)
Sell Benefits and value
Stability of company
Users (-$$)Ease of use/benefits
Investors (+$$)
Growth and earnings potential
Enhance value
Personnel (-$$)
Work in hot product area
Value of options
Why work there
Strategic Partners (+/-$$)
Add to their offerings
Gain investment
Increase credibility
Venture Involvements
Cylink Corporation (SFNT)Franklin Electronic PubMyPoints.com (now UA)Infonautics (now Tucows)Viewpoint Corp.Segue SoftwareTickets.com Unitronix CorpeMachinesInternetBrands.comUnited OnlineEvolution RoboticseTrue, Inc. (RIP)Metaphor SolutionsFirst Round CapitalDel.icio.us (YHOO)
Bikini.com (RIP)Infogate (AOL)idealab!New.net Overture Services (Yahoo)Half.com (eBay)Partsearch TechnologiesEnergy InnovationsPayTrust (Metavante)PeoplelinkPlanalyticsCommission Junction (VCLK)Traffic.comTrakusUtility.com (RIP)
“Having just the vision’s no solution, everything depends on execution” – Stephen Sondheim
Shorten time to market
Listen to the customers (sense and respond)
Leverage our network
Remain committed to excellence
Transform Innovative Ideas Into Winning Companies
