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Sunday, July 22, 2012

The Founder's Dilemmas

Anticipating and Avoiding the Pitfalls That Can Sink a Startup

by Noam Wasserman

The Founder's Dilemmas is a book by Noam Wasserman that deals with the dilemma's that many start-up companies face when embarking on their ventures. It outlines a series of make-or-break decisions that founders of a start-up have to make. Noam Wasserman analyzes the fundamental trade-offs that founders are presented with such as:
. when to found a company
. who to found it with
. how to determine roles and responsibilities
. how to split equity and many more challenging.

Noam Wasserman is a professor at Harvard Business School where he teaches a class called "Founder's Dilemmas" that has become a "must-take" session for aspiring entrepreneurs. This book is the outgrowth of his research and that class.
Founder's Dilemmas is a great reference for founders of a start-up as well as early employees, investors, business persons, government officials or just the overall fan of entrepreneurs.

Saturday, April 9, 2011



EBIT = Earnings before interest and taxes. It is a financial ratio. EBIT is a measure of a firm's profitability that deliberately excludes interest and income tax expenses. The difference between EBIT and operating income is that EBIT includes non-operating income.

Due diligence

Due diligence

Due diligence is a research process that aims to provide accurate and complete information regarding the physical, financial, legal and technical attributes of an investment target.

Crossing the Chasm

Crossing the Chasm
Marketing and Selling High Tech Products to Mainstream Customers

by Geoffrey A. Moore

Crossing the Chasm is a book by Geoffrey A. Moore that deals with the challenge that many start-up companies face of overcoming the marketing gap between early adopters of a certain technology and mainstream users. Consequently, Moore offers specifics for solving this problem.

The philosophy behind Crossing the Chasm is based on the so called "Diffusion of Innovations" theory by Everett Rogers. This theory argues that there is a chasm between the early adopters of a product (the technology enthusiasts and visionaries) and the early majority of users (who are pragmatists). Moore explains that visionaries and pragmatists have very different expectations from a product. While early adopters buy things because they are cool, later groups value the functionality of the product.

This creates a "chasm". Moore attempts to explore the differences between the groups and suggest techniques to successfully cross the chasm to reach mass market. He suggests solutions such as: choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, choosing the most appropriate distribution channel and pricing. For a product to become attractive to mainstream users, it should be easy to adopt and fulfill a desperate need. One of his creative suggestions is to focus on one group of customers at a time and using each group as a base for marketing for the next group.

The distinctions Moore draws between the different target groups are largely based on the classic technology adoption lifecycle where five main users segments are recognized: innovators, early adopters, early majority, late majority and laggards. The underlying thesis is that technology is absorbed into any given community in stages corresponding to the psychological and social profiles of various segments within that market.

The Four Steps to the Epiphany

The Four Steps to the Epiphany

by Steven Gary Blank

This book is an essential read for every 21st Century entrepreneur who wants to bring a product to market or write a business plan in preparation to do so. In his book Four Steps to Epiphany Steven Blank presents a step-by-step strategy for successfully organizing sales, marketing and business development for a new product or company. The book offers great insight into the factors that make some startups successful while others go bust. It is packed with concrete examples, which make it easy for entrepreneurs to enlarge their skill sets and shape up sales, marketing and business for eventual success.

The main takeaway of Four Steps to Epiphany is that it emphasizes rapid iteration, customer feedback and testing of the assumptions that underly a newly proposed business model. Although the book lacks a linear structure, the author basically presents five key factors that he thinks are decisive for the success of a startup business.

1. Get out of the building. This is classic advice but still very true. Few startups fail for lack of technology, they almost always fail for lack of customers.

2. Each market has its own characteristics. Never take assumptions about a market for granted.

3. The product as well as the company grow and mutate over time. The book takes its name from Blank's theory about the four stages of growth that any startup goes through.

Blank has called these steps:
- Customer Discovery (when you're trying to figure out if there are any customers who might want your product)
- Customer Validation (when you make your first revenue by selling your early product)
- Customer Creation (akin to a traditional startup launch, only with strategy involved)
- Company Building (where you gear up to Cross the Chasm to find a mass market). For more about Crossing the Chasm, see the book with the same name by Geoffrey Moore.

Wednesday, November 17, 2010

Term Sheets & Valuations

Term Sheets & Valuations

Term Sheets & Valuations
A Line by Line Look at the Intricacies of Venture Capital
by Alex Wilmerding

Term Sheets & Valuations is an in-depth book about the nuts and buts of terms sheets and valuations around the venture capital process.


. What is a Term Sheet
. How to Examine a Term Sheet
. Section-by-Section View of a Term Sheet
. Valuations
. What Every Entrepreneur & Executive Needs to Know About Term Sheets
. Valuation Parameters
. US East Coast Versus West Coast Rules

The book includes an actual term sheet from a leading law firm with line by line descriptions of each clause, what can and/or should be negotiated, and other important points to pay attention to.

Fundamentals of Venture Capital

Fundamentals of Venture Capital by Joseph W. Bartlett is a practical book, describing the process of raising VC financing. The author who has 35 years of experience, goes into much detail. Venture capital, banks, investors & angels, it's all covered.

Monday, September 27, 2010

Creative Capital: Georges Doriot and the Birth of Venture Capital

In Creative Capital, Spencer Ante tells the compelling story of the enigmatic and quirky man--Georges Doriot--who created the venture capital industry. The author traces the pivotal events in Doriot's life, including his experience as a decorated brigadier general during World War II; as a maverick professor at Harvard Business School; and as the architect and founder of the first venture capital firm, American Research and Development. It artfully chronicles Doriot's business philosophy and his stewardship in startups, such as the important role he played in the formation of Digital Equipment Corporation and many other new companies that later grew to be influential and successful.

An award-winning Business Week journalist, Ante gives us a rare look at a man who overturned conventional wisdom by proving that there is big money to be made by investing in small and risky businesses. This vivid portrait of Georges Doriot reveals the rewards that come from relentlessly pursuing what-if possibilities--and offers valuable lessons for business managers and investors alike.

Wednesday, September 22, 2010

Carried interest.

The carried interest is what private equity executives, like investment managers, take from the profits of their funds after they have compensated their investors. The carried interest rate is typically 20%.