Valuation Part 1

The first year TI:GER course has shifted focus from customer discovery (although those interviews are still on-going, we have one on Monday with a solar panel installation start-up in the Atlanta area) to valuation.

Valuation is being taught by guest lecturer Mark Buffington who works as a venture capitalist in Atlanta. He provides great insight into how start-ups, specifically tech start-ups, are valued in the market. Since a large majority of entrepreneurial ventures require outside capital, learning how firm value is derived is important not just to VC's but to the entrepreneurs themselves.

So far, we have learned several different valuation methods: comparable transactions, revenue multiples, and discounted cash flow. We are now moving in to monte carlo simulation modeling that will allow us to assign weights and probabilities to a variety of success levels. This is particularly important when valuing start-ups because their chance for early exit is very high. Specifically in the medical device industry, the probability of achieving FDA approval and passing clinical trials must be included in any pre-approval firm.

Learning more about how firms are valued will allow us (over the next two weeks) to create a valuation for our start-up. We're at work practicing the monte carlo simulation tools this week, then it's time to assign weights to our on probability of success. I'm looking forward to really seeing how much of an impact our choices today will affect future value.

Customer Discovery Round 2

Our first year TI:GER teams are now in the middle of customer discovery interviews. This has been an incredibly interesting process and has been my favorite TI:GER experience so far. It's interesting to see ideas and concepts formed within a small group get such varied reactions when explained to the people whom would actually use our product. 

We met on Friday with Campus Services at Emory University. Both an environmental engineer and the director were on hand to answer questions from our team about sustainable design at Emory. The campus already hosts the highest number of LEED certified buildings on any campus in the nation, so our team decided they'd be a great place to start. 

What came out of our interview was that one of our more minor "customer value propositions" (aesthetic appeal) was, for Emory, a major concern. They believe current solar technology is being held back by appearance as well as costs. This finding has certainly shifted our group's focus to aesthetic design in a strong way. 

That is, at its core, what the customer discovery process is all about. We are working towards creating a prototype that is tailored to customer needs and that involves getting out of the office to talk to customers! We have several interviews left with folks further on the construction side of the industry. Emory provided some great contacts with various links in the building materials supply chain. Hopefully understanding more about this process will allow our team to target the correct channel as well as customer to get our product to market. 

TI:GER Integration with MBA program

Our TI:GER team is still hard at work interviewing potential customers and industry players. We have found some early success in reaching out to these decision makers and influencers but still have several more to go to complete our customer discovery assignment. 

For this blog post, I'd like to talk about the TI:GER program as a whole and how it fits in with the MBA program. We're about to start the 2013 recruiting season and having spent a semester and change in the program, it seemed like a good idea to reflect about the experience. 

I see the TI:GER project as an integrative complement to my other classes. Many business school classes are case-based which provide an excellent opportunity to analyze how companies addressed various subject specific challenges. The TI:GER project is different in two main ways. First, the project is entirely new. Instead of critiquing an unsuccessful plan or praising a successful idea, the project requires more imaginative thinking to create an answer when none exists. Similar to the difference between multiple choice tests and short answer, this is an alternative way of thinking and helps reinforce concepts learned in core classes. For example, we have spent time in our Marketing class critiquing other company's plans and advertisements. This information has been used fully with our TI:GER project as we generate target segments and value propositions for our product. 

Secondly, the TI:GER project reaches across subject area. Between IP law lectures, finance valuation practice, and the economics-of-cost, we are learning the basics of all facets of a start-up company. Using a single core idea and seeing how each of the concepts relate to it allow us to understand how all the pieces fit together and influence each other. Very few jobs are "finance" or "operations" and require an integrated understanding that is often hard to learn in core classes. 

So far I have really enjoyed our project, the team dynamics, and the learnings of the TI:GER class. It provides a nice complement to the more subject specific core classes in addition to the entrepreneurship content. 

Customer Interviews

At the end of the 1st semester of the TI:GER program, my team had assembled a detailed Industry Analysis of the Solar industry. This report addressed the competitive forces, the major players, and the diverse markets of the industry.

Now comes the challenge of our second semester- picking the best of these markets to target for our business model canvas. The business model canvas (http://www.businessmodelgeneration.com/canvas) will provide a framework for our go-to market strategy this semester. This requires two steps:  identify and understand potential customers for our solar cell and discover how to best reach them.

Rule No.1 of customer development is that you must get outside your building to find any worthwhile facts. For us, this means that we need to do detailed interviews with at least 10 potential customers to fully understand what the market needs and how customers would be most apt to address their pain. This is not a sales pitch, but a great opportunity to have a dialogue with potential customers (and industry experts) to gain insight into what the market views as important.

Today we had our first interview and already we're finding out about new opportunities and customer needs that we had never thought of in our group.

I'm looking forward to this process and this semester, I'll keep you posted!

Pitch Off Competiton

The 2012 Pitch Off Competition pitted the 2nd Year TI:GER students against Dr. Ku's class with three minute pitches. There were two preliminary rounds, with 4 finalists being selected to pitch once again. This was a great experience to watch these teams boil their innovations down to a tight explanation of what they were doing, what the market was for their product, and how they were going to sell their idea. As a first year student, it's always great to look at where we will be taking our solar cell over the next year and trying to make sure our focus is always on commercialization. I took video of the four finalists (Go Now , BluMetric , ANG , LymphaTech) and congrats to two TI:GER teams for placing 1st and 2nd! Apologies for the low lighting, but the powerpoint presentations and the audio are well worth watching.

My TI:GER team has been hard at work on an Industry Analysis report on the photovolatic industry to close out the semester. Look for a post on that tomorrow!

IP Law and Business Plan Competition

In the second half of October, our TI:GER class has started to focus more on intellectual property and patent law. Our weekly classes have been held at Emory with great guest lecturers that are able to tailor these legal concepts to an audience with a wide range of backgrounds. While I don't think law school is for me, it has been very interesting to get an insight into the patent process and how it relates to innovation. For instance, there are strict rules surrounding the timing of public disclosure or display of an invention and filing for a patent. This will be very important for out team as we seek outside help on our project because it limits what we can share about our product in the absense of a non-disclosure agreement. I'll also need to watch what I say in this blog- luckily most of the disclosure related to our project is of a highly technical nature and I wouldn't understand it enough to describe it accurately.

We are also conducting a prior art search for our product. This involves finding references (usually previous patents or academic papers, but other sources are included) to materials or processes related to our product. A solid understand of what is and is not novel about our idea will determine what the claims of our eventual patent can be. We would obviously like for our patent to be as general as possible because that would force more companies operating in a similar space to pay licensing fees for use of our patent. We are also generating a list of patents that we will need to license use of to produce our product as well. The interdependency of patents in manufacturing has been a very interesting concept to learn academically and I'm excited about applying it to our project in particular.

Our TI:GER team has also been debating participation in the Georgia Tech BPC. This annual competition compares start-up business models that groups of GT students have created. These models can either be a purely academic exercise, or as a precursor to actually creating a start-up venture. While the competition isn't until next semester, there is an outstanding lecture series on alternating Tuesday nights that help walk teams through the process of upgrading an idea to a business. While we cover a lot of this material in TI:GER, these lectures are presented by Venture Lab and provide a slightly different perspective than the TI:GER lectures (focusing less on the legal and technical challenges). My main take away from the lecture this week was the importance of customer identification and need. Much more research has been done for our TI:GER project on the solution (PhD) than the problem. In response, we're planning on getting out in the field and doing customer and market research in the coming weeks to understand the extent and the responses to mobile power generation. I'm looking forward to understanding more of this complex issue and tailoring our solution to meet a generic need.

Berry College Ropes Course

This Saturday (10/6/2012) the first year TI:GER students headed to north Georgia to participate in a team building ropes course at Berry College. This was an excellent opportunity for us to get away from campus/the classroom and get to know our team mates in a unique environment. The staff at Berry College is very versed in running team building and development programs using a blend of both "on the ground" activities as well as at heights up to 70 feet in the air. When we first arrived at Berry, we started with lunch. This allowed us to socialize with the class and with the facilitators that would be helping us out throughout the day. We were assigned bucket "lockers" that also doubled as our seats for the day.

 After lunch we moved into large group activities. We played a few games to get our energy level up (squirrels vs dogs and a few other variations of extreme tag) and help get us loosened up for the more serious team building activities coming up. Following these events, and some basic introductions, we moved into our groups. As we were focused on team building throughout the day, these groups were based on our TI:GER teams. Below is a great shot of my team getting ready to crush some communication exercises!

 

These communication exercises involved one group (PhD, JD, or MBA) of team members to view a model of a statue (hula hoops and nerf balls) and communicate the design to another group. The second group would only hear the design and then communicate it to the third group who would have to recreate the statue. It was like a giant game of "technical" telephone and really showed some places where our communication as a team was strong and some areas where it needed improvement. After allowing one groupDue to a personal fear of heights, this was my favorite activity of the day! 

After we finished the communication activities, we moved over to the low ropes course. Low ropes allow practice in team work and provide safety training. One member of the team would climb on an element (usually a tight rope or a series of tire swings) while the others served as spotters to make sure the up-member would be safe. This provided good practice for serving on the belay line later that afternoon.

Finally our day culminated with a climbing tower. This large structure had 3 different ways to ascend and we were (again) divided into teams to attempt to scale the tower. Two team members would go up on the tower at a time while the other three would control the belay cables that prevented falls or serious injury. This type of exercise truly builds trust and strengthens teams. You learn to appreciate the people that were making sure you didn't fall 70 feet!

In the end, it was a great day of team building and a lot of fun as well. In the week after Berry College, I can feel the difference in closeness among the teams. I can't wait to get started on the legal-focused classes the next few weeks at Emory and work on developing our product elevator pitch!