Business Studies for Computer Scientists, or "How to Start and Run a Company" A course of 12 lectures Jack Lang
Introduction History of Lab and spin-offs – The Cambridge Phenomenon Programming only a small part of success
Outline Synopsis 1. So you've got an idea. . . 2. Money and Tools for it's management 3. Legal aspects, contracts and copyright 4. People: How to organise a team 5. Project planning and management 6. Quality, maintenance and documentation 7. Marketing and Selling 8. Growth and Exit routes In addition to the above, four Guest Lectures will be organised
Reading list The High-tech Entrepreneur's Handbook Jack Lang Paperback - 224 pages (2 November, 2001) FT. COM; ISBN: 0273656155
Reading list Brooks F. : The Mythical Man Month ISBN 0201006502 Addison-Wesley Geoffrey A Moore Crossing the Chasm ISBN 0 -8870 -519 -9 Harper Business 1991/5 Inside the Tornado ISBN 1 -900961 -58 -X Capstone 1998 (The Gorilla Game) Everett M Rogers; Diffusion of Innovation, 4 th Edition Free Press, New York 1995 ISBN 0 -02 -926671 Eric S Raymond: The Cathedral and the Bazaar ISBN 1 -56592 -724 -9 O’Reilly 1999 Townsend, R. : Up The Organisation ISBN 0340149868 Hodder Fawcett 1971 2 nd Edition: Further Up the Organisation, now sadly out of print, Its all Cobblers! Michael Carter ISBN 1 -85252 -469 -3 Jeff Cox, Howard Stevens (2001 ) Selling the Wheel: Choosing the Best Way to Sell for You and Your Company Pocket Books ISBN: 0671033107
Reading list 2 Dyson J. R. : Accounting for Non-Accounting Students ISBN 027360435 X Pitman 3 rd ed 1994 Microsoft Project Microsoft Excel Paul Manser and Simon Walker: Startups: Law and Business Handbook Butterworth Tolley; TJG ISBN 0 -754 -51509 -5 Buckle: Managing Software Projects ISBN 0354040677 Macmillan
Reading List 3 Drucker P. F: Innovation and Entrepeneurship ISBN 033294652 Pan Weinberg, G. M. : The Psychology of Computer Programming ISBN 0442292643 Van Nostrand William D Bygrave, Editor The Portable MBA in Entrepreneurship ISBN 0 -471 -16078 -4 John Wiley 2 nd edition 1997 Guidelines for Directors ISBN 090093980 X Institute of Directors The Cambridge Phenomenon ISBN 095102020 Segal Quince and Partners
Reading List 4 Nokes: Startup. com FT/Prentice Hall ISBN 0 -273 -65091 -2 Wall. Street. com Andrew D Klein (founder of Wit Capital); Henry Holt ISBN 0 -8050 -5758 -7 1998 Everett M Rogers; Diffusion of Innovation, 4 th Edition Free Press, New York 1995 ISBN 0 -02 -926671 Paul A Samuelson, William D Nordhaus Economics 16 th Edition Mc. Graw Hill ISBN 0 -07 -115542 -2 Klein, A. D. (1998) Wallstreet. com: fat cat investing at the click of a mouse. New York: Henry Holt Hal Varian, Carl Shapiro(1998) Intermediate Microeconomics: A Modern Approach W. W. Norton & Company Ltd Information Rules: A Strategic Guide to the Network Economy (Harvard Business School Press) ISO 9000: 2000 available from http: //bsonline. techindex. co. uk, as is BS 7799 -2: 1999 Information security management.
1. So you've got an idea. . . Introduction Why are you doing it? What is it? defining the product or service; types of company Who needs it? an introduction to market analysis How? Writing the business plan Futures: some emerging areas for new computer businesses
One of you will become a Billionaire l Most will be millionaires – And need to be – Pension issue • Say household income of £ 50 K @ 4% -> £ 1. 25 M • Inflation for 40 year @ 3% -> x 3 -> £ 3. 75 M • House, etc say £ 250 K -> 750 K • Total l £ 4. 5 M You won’t save £ 4. 5 M from a salary – Trading – Starting an Enterprise
Why? Why now? • Because I can: available time and resource • Just graduated, or made redundant and nothing else to do • Brilliant idea or market opportunity Why me? – Barriers to market entry • What have you got to make it through? – Expertise, resource, relationships – Barriers to competition • What stops others doing the same thing – IPR, network effect, niche – Unique advantages Know yourself – Know your motivation so you can motivate others • What counts as success?
Never a better time to start than NOW l Money – Cambridge Angels, Cambridge Capital…. l Support – CEC, St Johns, Cambridge Enterprise…. l Infrastructure – Banks, lawyers, accountants – Office space l People – Cambridge Network, mentors… l Government – EIS Tax relief, SMART Awards, SFLGS…. – Princes Trust l Society attitude – OK to lose, • “Better to have loved and lost than never loved at all” l “Dare to Begin” (Horace) – Nothing will be attempted if all possible objections must be overcome (Samuel Johnson)
Why are you doing it? l Wealth generation – You need £ 5 M by the time you retire, for a modest lifestyle l l Better toys Make a difference – Social consequences • Generation of employment • Death of the nation state l Fun or profit? – Lifestyle or high growth? • Funding • Eventual size?
High Profit vs High Growth l l High Profit Lifestyle l l – Restaurant/shop l l P&L Organic Growth – 20 years l Debt finance High Growth Sell the Company – Chain of Restaurants/shops l l Balance Sheet Investment – Exit route – 5 years l Equity
If you are not in business for fun or profit, what are you doing there?
What is it? Technology driven / market pull Product or service Specialist or mass-market Lifestyle or High-growth? Mass Market FMCG Car Game Volume Battleship Bespoke Consultancy Low Movie Cost of entry High
How? Writing the business plan l l l Business plan describes what you want to do BVCA Handbook KISS: Keep It Simple and Stupid! Write for the target audience Business Plan Competitions – Cambridge £ 1 k and Cambridge £ 30 K – Cambridge University Entrepreneurs Society (CUE) • www. cue. org. uk
Investment Criteria l l l Global sustainable under-served market need Strong management team Defensible technological advantage Believable Plans 60% IRR
Market Need l l Largest risk factor: everything else is process or resource Who needs it? • Why? – What are they doing now? – How much is it worth to them? • How is it sold, or advertised? – Routes to market – Alliances – Branding – Under served need • Competition • What other solutions? – Sustainable or one-shot wonder? – Growing market • Global potential
Who needs it? FAB: Features Advantages Benefits – Feature: • This program runs really quickly – Advantages: • Less waiting time • Uses less resources – Benefits: • Less frustration • You can get more done • Cheaper to run USPs: Unique Selling Points Market Research
Defensible technological advantage l IPR – Patent – Copyright – Trademark l Defensible technological leadership – against well-funded competition – Niche Market share
Strong management team l You can’t do it all by yourself – “Small” project >10 person-year – Team building – 1: 3: 10 rule l l Alliances Recruit experience – Financial Director – Sales & Marketing l Training & experience – Merchant bank/Management Consultancy – MBA
Senior Team US UK Chair CEO Managing Director CFO Finance Director Technical Director Production Director Marketing Director Sales Director CTO COO VP Marketing VP Sales Senior figure; Old wise head Experience and contacts; Major dispute resolution; part-time Finding money; Investor relations; Style setting; Keeping the peace Accounts etc. Office management; Administration, Legals, Quality control Inventing new things; development Running the factory and distribution Deciding what and how to sell; pricing Marcoms; Market information Selling; CRM;
Believable Plans l l l Business Plan Development Plan Marketing plan – Adverts, mail shots, web-sites l Sales Plans – Distribution, Direct Sales l l Quality Plans Financial Projections – Budget • 60% IRR – Pay back financing in third year – Cash flow
Writing the Business Plan Executive Summary and funding requirement 1. Concept 2. The Market 3. 1 Global market size and need 3. 2 Sustainability 3. 3 Competition 3. 4 Marketing plans 4. The Team 4. 1 CEO 4. 2 CTO 4. 3 CFO 4. 4 VP Sales and Marketing
Writing the Plan - 2 5. The technology and its IPR 6. Summary of plans 6. 1 Development plans 6. 1. 1 Methodology 6. 1. 2 Milestones 6. 2 Marketing 6. 3 Sales and distribution 6. 4 Quality and industry standards 7. Financials
Writing the Plan - 3 Appendices: Financial model Key staff Letters of support Correspondence re IPR Full development plan Full marketing and sales plan Examples and brochures
Futures: some emerging areas for new computer businesses l l l Pace of change: Factor of 2 every 2 years About 10 years from Lab to mass product We can predict the near future (10 years) – – Futures: Processor performance Comms: 100, 000 bandwidth cost reduction Multi media and moving pix; digital TV; 3 -D models 100 Ghz, 100 Gbyte, photo realistic moving graphics, video mail, 100 Mb/sec WAN, world-wide knowledge base, – Home networks; – Wifi / WLAN – ubiquitous access
The Trillion Dollar Market l l l Effect of electronic commerce Customer pull, not advertising push Merging of computing, entertainment, communications – Games now gross more than films
Internet Commerce l Works for – Established Brands – Specialist goods l 60% of accesses are to adult content – – l Driven factor: Hidden agendas Communities of interest Mostly male - men look at porn, women shop Wide age range Don’t believe the hype – Most internet ventures not profitable unless adjunct to existing business – Advertising model (mostly) doesn’t work – Micro payments don’t work
Predictions l Microsoft/Intel will remain dominant – Other chip manufacturers will continue to struggle – UNIX will remain specialist – Java will be increasingly minority interest l Internet/ WWW will dominate – AOL, Compuserve, E-world, Microsoft Network will become internet service suppliers l Differentiation – “Lean forward” or 3 -foot experience • Private • e. g PC, phone, PDA, – “Lean back” or 10 -foot experience • Public • Internet TV • Passive Couch mouse; server pushed experience
More Predictions l Game machines will become PC based – – l Continue to lead low-cost graphics technology Networked VR X-box -> “Home Station” Video-on-demand specialist market only – Hotels, airplanes, BUT Internet TV widespread l No new major applications – But see. NET
Watch Points - a personal list l l Internet and Digital TV Freenet (http: //freenet. sourceforge. net/) Intelligent agents (e. g EPG) PDA’s/ Cell phones - what personal systems we will all be carrying? – WAP – GPRS, 3 G l Voice recognition – Wristwatch systems l Embedded and So. Ho systems – Luxury cars now have more compute power on-board than the moon lander – Home networks
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