Description
In this such a detailed description relating to alta ventures igniting innovation brian cummings.
ALTA VENTURES
IGNITINGINNOVATION
Brian Cummings
[email protected]
JAN 2014
We all have an idea!
But what’s most important?
Technology
Funding
Team
The Entrepreneur- Ready..
Fire… Aim!
Eventually Entrepreneurs get it
right! Don’t they?
Source: Small Business Trends Published 2008. Data from Bureau of Census
Why Do Most Startups Fail?
Why is this acceptable?
Is There a Repeatable Process of
Success?
“Most successful entrepreneurs I’ve met have
no idea about the reasons for their success. My
success was a mystery to me then, and only a
little less so now.”
- Bob Metcalfe, 3Com-Inventor of Ethernet
Why Do Startups Fail?
People?
? Product?
? Market? ? Money?
I haven’t met a startup
team that wasn’t working hard…
Doing good things…
? Building alpha & beta versions of their products
? Writing marketing materials
? Hiring sale teams
? Business development deals
? Talking with analysts
? Talking with customers
? Building prototypes
? Etc…
Working hard to… Cross the
Chasm
CONFIDENTIAL COPYRIGHTED
TRAINING MATERIALS: DO NOT
Nail It
Scale It
Innovators Early Adopters Early Majority Late Majority Laggards
The Big
Scary
Chasm
Few Startups Ever Get to the
Mainstream Customer, they Fail Much Earlier in
the Process
Most new products and businesses don’t fail in the market scaling exercise,
but in pre-chasm stages in the…
10
The Early Phase
Black Hole
Most entrepreneurs
are mis-prioritizing their activities
Entrepreneurs are doing good things, but
not doing them in the right order. More
than 80% of the time entrepreneurs are
ignoring customer demand the right
product mix until after they have started
to scale their business.
* Harvard Business Review: Beating the Odds When you Launch a New Venture by Clark G. Gilbert and Matthew J. Eyring
*
Bad engineering kills
companies. (limited core competency)
However, Startup failure is more common because customers won’t
buy the solution. NOT because the engineers can’t build it
CEO
VP Marketing CTO VP Sales
Dir Product Mktg Marcomm Mgr PR Dir Sales West Dir Sales Central Dir Sales East
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Product Manager
Product Manager
VP Development
Engineer
Engineer
Engineer
CFO
Hiring too many employees
before nailing their business model
Observation: The more employees you hire
before nailing it, the longer it takes to nail it.
70% of Startups Fail for
this reason:
Building products before you nail the pain
Writing marketing materials before you nail the solution
Hires sales teams before you know how to sell
Spending money before you understand the business model
Scaling to Fast
What do successful
Startups Look Like?
Great Startups Have Great
Entrepreneurial DNA
Passionate entrepreneurs
that want to improve the
world
Anxious to satisfy
the customer
Deep technical core
competency
X Factor
Not necessarily
experienced
Nail it
Then
Scale It
Observation: Small Teams are the Right Size to
innovate, learn and adjust. (Lean, Mean, innovation
machine.)
Product
(Frame it/define it)
Sales & Marketing
(Position & Sell it)
Technology
(build it)
What causes Disruption?
The Picture is
pretty bleak
gentlemen, the
Earth’s climate is
changing, the
mammals are
taking over and
we have a brain
the size of a
walnut
Few understand what is innovation
INVENTION INSIGHT
Science
Industry
Two Categories of Innovation:
1) Disruptive & 2) Incremental
?Incremental
? Better, Faster, Cheaper
? Sustaining, Iterative
?Disruptive (Brave New World)
? Factor or order of magnitude improvement
? Opens new markets or destroys old markets
? Disruptive, Architectural
Evan Williams on Disruption
Characteristics
? Old Problem
? Large base
? Antiquated systems and hierarchy
? Steeped in tradition
Health care
? If it’s complex - Simplify
? Use technology to take out steps
Only two sides???? Where do you stand?
Businesses Disrupt
Research Gate
Quirky
Ask Patents – crowdsourcing for prior art
? Took down Microsoft patent in 15 min.
? Google is a partner
Google Patents – just launched prior art search
Rocket Lawyer - $48 million – (google)
Plain Site
40% of Fortune 500 companies will not exist in 11 years
Disruptions in Anesthesiology
Robotics
? Sedasys
Remote monitoring
Service
? One M.D. to Five practitioners
Non-chemical sedation
Analytics
Personalized options – puts patient in control
Private equity – consolidation of small networks
Disruption vs Incremental
Improvements
Complicated, expensive products and services are eventually
converted into simpler, affordable ones
95% of all products are incremental improvements
5% Disruptive
? A Market doesn’t exist
Praised California for enabling “highly trained nurses to
substitute for anesthesiologists
Observation: Few entrepreneurs & companies
understand their core competency. Know
Thyself!
What is Honda’s Core
Competency?
Honda’s Core Competency: Engines
The Roots of the startup failure are
traced back to the Traditional Product
Development Model
Based on the Waterfall Product Development Model
Identify
product
opportunity
Create
product
specs
Build alpha
product
Test
product,
build beta
product
Sell product
to
customers
The Broken Model
Product Development Model Based on
? Execution Not Research
Entrepreneur
has a idea
Discuss with
/ raise money
from friends,
family and
fools
Find a
location,
develop the
product
Perfect the
product and
add features
for broad
appeal
Sell the
product
“Escalation of
Commitment”
Stage
“American Idol”
Stage
“Midnight
Genius” Stage
“Feature Lock-
in” Stage
Russian
Roulette
“Sales Pipeline
Problem” Stage
Once you have an an idea…
* Best selling author and entrepreneur Seth
Godin pictured above
Ask yourself: Is our idea based on yours
or your team’s core competency?
* Rob Ryan’s Sunflower Model –
Entrepreneur America
*
What about the customer?
“Who is the customer is the wrong unit of measurement.”*
Not just the customer, but the context of how your product fits the job the
customer is trying to accomplish.
What is the pain the customer has and how are you solving that pain?
* Clayton Christensen
* Everything has a job
Pain Pays
“Any big problem is a big opportunity… No one will pay you
to solve a non-problem.”
– Vinod Khosla (Kleiner Perkins)
Shark Bite VS. Mosquito Bite
Why Focus on a Monetizable Pain?
As a startup you have…
? No reputation
? No brand
? No track record
? No money
?
Building your business on a monetizable pain will exponentially increase
your odds of success
Q: How to Fix a Broken Model?
A: Put the customer up front in the
process
Entrepreneur
has a idea
(based on core
competency)
Identify
Monetizeable
Customer Pain
Identify
Minimum
Feature Set (of
the customer)
Nail the
Product…
Begin with
the Customer!
(customer
centric
approach)
Deliver breakthrough customer centric
innovation.
The Entrepreneur’s &
Customer’s Role
Entrepreneurs innovate
Customers validate
NISI Fundamentals
1. Get into the Field
2. Change or Fail Fast
3. Brutal Intellectual Honesty
4. Keep it Simple
5. Start Small
Development of a Business Model
built against current understanding of the “design space”
Assumption
Assumption
Fundamental #1: Get Into the Field
(customer centric)
“Get the hell outside the building!” –Steve Blank
heck
2. Change or Fail Fast
“Successful startups are the ones who have enough money left over to
try their 2
nd
idea.”
– Clayton Christensen
Rapidly test assumptions
Iterate swiftly
Change direction or try a new idea
3. Brutal Intellectual Honesty
“The issue I set the most store by is whether
entrepreneurs are honest with themselves.”
– Arthur Rock
Your role isn’t to be right,
your role is to discover truth!
Entrepreneurial kryptonite
? Unwilling to see information that
does not confirm their perspective
? Reusing ideas where they may no longer be appropriate
? Confusing overconfidence with determination
4. Keep It Simple
?Modern market creates complexity
?As human beings we are happier with simplicity
?Applies in business
? Jam experiment
? Camera sales
? Vanguard
?Goal: Start by identifying the Minimum
Feature Set and then create the Minimum
Viable Product (MVP)
?Example: Classtop
YHOO: $18.37 Billion Market Cap on $1.3 Billion in
Quarterly Sales
CONFIDENTIAL: ALL MATERIAL TRADEMARKED AND
COPYRIGHTED
GOOG: $205 Billion Market Cap on $10.6 Billion in
Quarterly Sales
CONFIDENTIAL: ALL MATERIAL TRADEMARKED AND
COPYRIGHTED
Keep It Simple – Less Is More.
Chinese Menu
Technologies are Complex
Products are Simple
5. Start Small
Average venture-backed startup is 15-20 people
? Selling but not clear exactly what
Big teams create problems
? Communication problem
? Political problem
Small teams are better for market discovery
? Need 2-3 people to run Nail and Scale It
? Internal commitment to keep each other honest
? Too few will be subject to bias of interpretation
You’ve nailed it… Now what?
1. Prototype
2. Funding
3. Growth – Incubators / Accelerators
4. Exits
2012:
1409
Accelerators are tempting
Accelerators
2005:
1
Accelerator Bubble
Are we creating the Walking
Dead?
15,000
17,000
19,000
21,000
23,000
25,000
27,000
29,000
31,000
2007 2008 2009 2010 2011 2012
Number of Angel Seed Deals
Access to Capital has never been easier
29% Increase
200
250
300
350
400
450
500
550
600
2007 2008 2009 2010 2011 2012
Number of VC Seed Deals
48% Decrease
MoneyTree Annual Report, PricewaterhouseCoopers, 2013; Angel Market Analysis
Report, University of New Hampshire Center for Venture Research, 2013
67
CHALLENGES
THE TRADITIONAL VC MODEL IS BROKEN
“ … Today, exits are happening much earlier than
before; most exits are in the under $30-million
valuation range. These exits are often
completed when companies are only two or
three years from startup and without VCs ever
investing a dollar.” - Dr. Basil Peters
68
We have too much money in too few hands; funds
are getting too big. We need smaller funds that have
the flexibility and track record to take risks and don’t
shy away from technologies that take longer to bear
fruit such as with energy, medical, ag, etc.
- Fred Wilson
THE TRADITIONAL VC MODEL IS BROKEN
Mergerstat database shows the median
price of private company acquisitions is
under $25 million, when price is disclosed
69
Funding your company
• Friends, Fools & Family
• Angels
• Venture
• Federal Funding
• Local economic development programs
• Leveraged capital
• Corporate partners
• Venture Philanthropy
• Competitions
– X-Prize
There is a reason we’re called
Vulture Capital
The power of VC’s doing seed
Seed investors
are in trouble
72
The early stage benefit
THE TRADITIONAL VC MODEL IS BROKEN
The Sweet Spot
for Smart Capital
73
Phase II b
Probability of Success = Ps
Ps = (Pat*Qt) * (Pam*Qm) * (Pai*Qi)
Pa = passion, Q = quality, t = technology, m = managers, I = investors
The Value of IP
IP increases exit value in Startups by + 35%
Even bad IP increases an exit value
Value in working with companies
? Increased positive outcomes in every aspect of a researchers productivity
? Federal funding
? Private funding
? Companies started
? Patents
1. Kauffman Foundation: IP & VC 2011
The Opportunity
• Of all indicators measured “network-bridging
ties” and “trusted bridging” created the most
influential determinant of high quality transfer of
knowledge and IP to stakeholders
• Small trusted networks lead to powerful
outcomes
Source: Rutgers and Kauffman studies
How will you Disrupt?
ALTA VENTURES
IGNITINGINNOVATION
Brian Cummings
[email protected]
JAN 2014
Top US Healthcare Pain Points
What are the biggest pain points affecting the US Healthcare System?
Crisis #1 Out of Control
Healthcare Costs
Medicare, Medicaid, and Other
Federal Spending as % GDP, 2011
Projection
Source:CBOLong-TermBudgetOutlook,June2011
Medicare spending projections
consistently increase over time
Source:CongressionalBudgetOffice
Total US Healthcare 16% of GDP
growing to 20% by 2017
?Current figures estimate that
spending on health care in the
U.S. is about 16% of its GDP. In
2007, an estimated $2.26
trillion was spent on health
care in the United States, or
$7,439 per capita. Health care
costs are rising faster than
wages or inflation, and the
health share of GDP is
expected to continue its
upward trend, reaching 19.5%
of GDP by 2017.
83
Crisis #2 – Grey Hair Tsunami
US Baby Boomers
?Seventy-
six million
American
children
were born
between
1945 and
1964
?In 2013,
these people
are between
the ages of
49 and 68
Baby Boomers 25% Population
86
1/4
th
of Population. Today baby boomers make up one-fourth of the
entire population.
Turning 65. 10,000 are turning 65 every day. By 2030, the entire Baby
Boomer generation will have turned 65,
Living Longer. Because medical advances are now allowing Americans
to live longer, 5.8 million of those seniors are projected to be older than
85
Americans age 65 and older currently account for:
? 26 percent of physician office visits
? 35 percent of hospital stays
? 34 percent of prescriptions
? 38 percent of emergency medical responses
? 90 percent of nursing home use
Source:http://thinkprogress.org/health/2013/05/29/2072011/baby-boomers-looming-health-crisis/?mobile=nc
?AARP Statistics:
?Can’t Afford Medical Care -21%. With regards to
Baby Boomers’ ability to afford their Medical
Care in 2009, 21% surveyed stated they were
“not very or not at all confident” and 23% stated
they were “somewhat confident.”
?Can’t afford Medicine – 17%. Seventeen Percent
are cutting back on taking or filling their
prescriptions based on affordability
88
US Baby Boomer Population
Rank State # of Baby Boomers
1 California 8,992,331
2 Texas 5,665,790
3 New York 5,110,668
4 Florida 4,652,377
5 Pennsylvania 3,421,875
Rank Region # of Baby Boomers
1 South 28,060,126
2 Midwest 17,569,066
3 West 17,421,670
4 Northeast 14,929,434
Baby Boomers Not The
Healthiest Generation
Pre-Boomer Boomer
Excellent health status 32% 13%
Use a walking assist device 3.3% 6.9%
Limited in work 10.1% 13.8%
Functional limitation 8.8% 13.5%
Obese 29% 39%
Regular exercise 50% 35%
Moderate drinking 37% 67%
Hypertension 36% 43%
Hypercholesterolemia 34% 74%
Diabetes 12% 16%
Cancer 10% 11%
JAMA Internal Medicine February 4
th
, 2013
Rising costs, increasing
population, decreasing health
1% of Americans account for 22% of healthcare costs. Average annual cost per patient = $90,000
5% of Americans account for 50% of healthcare costs. Average annual cost per patient = $36,000
In 2012 Americans spent an estimated $2.7 trillion on healthcare.
Source:Forbes, USA Today
Ripe for Disruption
?1% of Americans account for 22% of healthcare costs.
?Average annual cost per patient = $90,000
?5% of Americans account for 50% of healthcare costs.
?Average annual cost per patient = $36,000
?In 2012 Americans spent an estimated $2.7 trillion on
healthcare.
Source:Forbes, USA Today
Pain: Crisis #3 – Doctor
Shortage
Shortage of Doctors
At current graduation and training rates, the nation will
face a shortage of as many as 150,000 doctors in the
next 15 years.
Source: The Wall Street Journal
Pain Crisis #4: Accountability Problem
This is What Happens When the Patient….
? Doesn’t directly pay for services
? Isn’t involved in the feedback loop
? No direct connection between actions and consequences
Solution must include Patients
participating in the Feedback loop
When things are measured they improve
The more they are measured, the more they improve
Army DMI – Define, Measure & Improve Process
Innovations in Healthcare
US Innovation Example: Walmart Increasing Access to
millions of Americans
?Walmart has opened 130 trial clinics in their stores.
?These clinics provide walk-in service seven days a week.
No appointments are necessary.
?All of fees for treatment are clearly posted.
?150 million Americans visit a Walmart every week,
spending about 50 minutes on average.
?There are over 8,500 Walmart locations.
Source:http://www.californiahealthline.org/road-to-reform/2013/wal-mart-could-transform-health-care-but-does-it-want-to, Wikipedia
Innovation: Digital Health Investment
- 2013 $849M invested in 90 different digital health companies,
up 12% from 2012
- 25% more deal volume from 2012
- Medical device funding has dropped (-29% from 2012)
- BioTech investments have dropped (-2% from 2012)
Source:Rock Health
New Digital Health Investments by State:
Ohio #5
Source:Rock Health
$273.20
$67.50
$65.50
$41.70
$36.40
$34.80
$21.00
$10.90
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
CA NY MA CO OH DC IL TX
# of Deals 31 7 8 3 3 3 3 3
Total # of Deals nationwide: 94
Figures in USD Million, 2013
Remote Patient Monitoring
? iRythym, Watermark Medical
Analytics & Big Data
? FlatIron Health, Health Catalyst, Treato
Electronic Health Records
? Axion Health, CareCloud, DocuTAP, Doximity
Wellness
? Keas, Linkwell, Audax Health
Personal Health Tools & Tracking (Quantified Self)
? PatientsLikeMe, HealthTell, Basis
Source:Rock Health
Emerging Themes of Digital Health
Investments
New Funding Sources: Digital Health &
Crowdfunding
?Thirty-eight digital health campaigns raised over $4.5M across
Indiegogo, Kickstarter, Medstartr and Fundable so far in 2013
Source:Rock Health
Success Story
Humedica is the clinical intelligence company that powers health
care providers and life sciences organizations to make better-
informed, more confident decisions by transforming
unconnected data from multiple sources into real-world insights
$30Million in Series A Funding - Oct 2009
$23Million in Series B Funding – Oct 2011
$10Million in Series C Funding – Apr 2012
$279Million+ Acquisition by United Health Care – Jan 2013
Record VC Investment in
Overall Healthcare IT
Source: Mercom Capital Group 2013
Q1 2013 Set Records for # of Deals and Total Investment in Healthcare IT
ALTA VENTURES
IGNITINGINNOVATION
Brian Cummings
[email protected]
JAN 2014
doc_168977835.pdf
In this such a detailed description relating to alta ventures igniting innovation brian cummings.
ALTA VENTURES
IGNITINGINNOVATION
Brian Cummings
[email protected]
JAN 2014
We all have an idea!
But what’s most important?
Technology
Funding
Team
The Entrepreneur- Ready..
Fire… Aim!
Eventually Entrepreneurs get it
right! Don’t they?
Source: Small Business Trends Published 2008. Data from Bureau of Census
Why Do Most Startups Fail?
Why is this acceptable?
Is There a Repeatable Process of
Success?
“Most successful entrepreneurs I’ve met have
no idea about the reasons for their success. My
success was a mystery to me then, and only a
little less so now.”
- Bob Metcalfe, 3Com-Inventor of Ethernet
Why Do Startups Fail?
People?
? Product?
? Market? ? Money?
I haven’t met a startup
team that wasn’t working hard…
Doing good things…
? Building alpha & beta versions of their products
? Writing marketing materials
? Hiring sale teams
? Business development deals
? Talking with analysts
? Talking with customers
? Building prototypes
? Etc…
Working hard to… Cross the
Chasm
CONFIDENTIAL COPYRIGHTED
TRAINING MATERIALS: DO NOT
Nail It
Scale It
Innovators Early Adopters Early Majority Late Majority Laggards
The Big
Scary
Chasm
Few Startups Ever Get to the
Mainstream Customer, they Fail Much Earlier in
the Process
Most new products and businesses don’t fail in the market scaling exercise,
but in pre-chasm stages in the…
10
The Early Phase
Black Hole
Most entrepreneurs
are mis-prioritizing their activities
Entrepreneurs are doing good things, but
not doing them in the right order. More
than 80% of the time entrepreneurs are
ignoring customer demand the right
product mix until after they have started
to scale their business.
* Harvard Business Review: Beating the Odds When you Launch a New Venture by Clark G. Gilbert and Matthew J. Eyring
*
Bad engineering kills
companies. (limited core competency)
However, Startup failure is more common because customers won’t
buy the solution. NOT because the engineers can’t build it
CEO
VP Marketing CTO VP Sales
Dir Product Mktg Marcomm Mgr PR Dir Sales West Dir Sales Central Dir Sales East
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Product Manager
Product Manager
VP Development
Engineer
Engineer
Engineer
CFO
Hiring too many employees
before nailing their business model
Observation: The more employees you hire
before nailing it, the longer it takes to nail it.
70% of Startups Fail for
this reason:
Building products before you nail the pain
Writing marketing materials before you nail the solution
Hires sales teams before you know how to sell
Spending money before you understand the business model
Scaling to Fast
What do successful
Startups Look Like?
Great Startups Have Great
Entrepreneurial DNA
Passionate entrepreneurs
that want to improve the
world
Anxious to satisfy
the customer
Deep technical core
competency
X Factor
Not necessarily
experienced
Nail it
Then
Scale It
Observation: Small Teams are the Right Size to
innovate, learn and adjust. (Lean, Mean, innovation
machine.)
Product
(Frame it/define it)
Sales & Marketing
(Position & Sell it)
Technology
(build it)
What causes Disruption?
The Picture is
pretty bleak
gentlemen, the
Earth’s climate is
changing, the
mammals are
taking over and
we have a brain
the size of a
walnut
Few understand what is innovation
INVENTION INSIGHT
Science
Industry
Two Categories of Innovation:
1) Disruptive & 2) Incremental
?Incremental
? Better, Faster, Cheaper
? Sustaining, Iterative
?Disruptive (Brave New World)
? Factor or order of magnitude improvement
? Opens new markets or destroys old markets
? Disruptive, Architectural
Evan Williams on Disruption
Characteristics
? Old Problem
? Large base
? Antiquated systems and hierarchy
? Steeped in tradition
Health care
? If it’s complex - Simplify
? Use technology to take out steps
Only two sides???? Where do you stand?
Businesses Disrupt
Research Gate
Quirky
Ask Patents – crowdsourcing for prior art
? Took down Microsoft patent in 15 min.
? Google is a partner
Google Patents – just launched prior art search
Rocket Lawyer - $48 million – (google)
Plain Site
40% of Fortune 500 companies will not exist in 11 years
Disruptions in Anesthesiology
Robotics
? Sedasys
Remote monitoring
Service
? One M.D. to Five practitioners
Non-chemical sedation
Analytics
Personalized options – puts patient in control
Private equity – consolidation of small networks
Disruption vs Incremental
Improvements
Complicated, expensive products and services are eventually
converted into simpler, affordable ones
95% of all products are incremental improvements
5% Disruptive
? A Market doesn’t exist
Praised California for enabling “highly trained nurses to
substitute for anesthesiologists
Observation: Few entrepreneurs & companies
understand their core competency. Know
Thyself!
What is Honda’s Core
Competency?
Honda’s Core Competency: Engines
The Roots of the startup failure are
traced back to the Traditional Product
Development Model
Based on the Waterfall Product Development Model
Identify
product
opportunity
Create
product
specs
Build alpha
product
Test
product,
build beta
product
Sell product
to
customers
The Broken Model
Product Development Model Based on
? Execution Not Research
Entrepreneur
has a idea
Discuss with
/ raise money
from friends,
family and
fools
Find a
location,
develop the
product
Perfect the
product and
add features
for broad
appeal
Sell the
product
“Escalation of
Commitment”
Stage
“American Idol”
Stage
“Midnight
Genius” Stage
“Feature Lock-
in” Stage
Russian
Roulette
“Sales Pipeline
Problem” Stage
Once you have an an idea…
* Best selling author and entrepreneur Seth
Godin pictured above
Ask yourself: Is our idea based on yours
or your team’s core competency?
* Rob Ryan’s Sunflower Model –
Entrepreneur America
*
What about the customer?
“Who is the customer is the wrong unit of measurement.”*
Not just the customer, but the context of how your product fits the job the
customer is trying to accomplish.
What is the pain the customer has and how are you solving that pain?
* Clayton Christensen
* Everything has a job
Pain Pays
“Any big problem is a big opportunity… No one will pay you
to solve a non-problem.”
– Vinod Khosla (Kleiner Perkins)
Shark Bite VS. Mosquito Bite
Why Focus on a Monetizable Pain?
As a startup you have…
? No reputation
? No brand
? No track record
? No money
?
Building your business on a monetizable pain will exponentially increase
your odds of success
Q: How to Fix a Broken Model?
A: Put the customer up front in the
process
Entrepreneur
has a idea
(based on core
competency)
Identify
Monetizeable
Customer Pain
Identify
Minimum
Feature Set (of
the customer)
Nail the
Product…
Begin with
the Customer!
(customer
centric
approach)
Deliver breakthrough customer centric
innovation.
The Entrepreneur’s &
Customer’s Role
Entrepreneurs innovate
Customers validate
NISI Fundamentals
1. Get into the Field
2. Change or Fail Fast
3. Brutal Intellectual Honesty
4. Keep it Simple
5. Start Small
Development of a Business Model
built against current understanding of the “design space”
Assumption
Assumption
Fundamental #1: Get Into the Field
(customer centric)
“Get the hell outside the building!” –Steve Blank
heck
2. Change or Fail Fast
“Successful startups are the ones who have enough money left over to
try their 2
nd
idea.”
– Clayton Christensen
Rapidly test assumptions
Iterate swiftly
Change direction or try a new idea
3. Brutal Intellectual Honesty
“The issue I set the most store by is whether
entrepreneurs are honest with themselves.”
– Arthur Rock
Your role isn’t to be right,
your role is to discover truth!
Entrepreneurial kryptonite
? Unwilling to see information that
does not confirm their perspective
? Reusing ideas where they may no longer be appropriate
? Confusing overconfidence with determination
4. Keep It Simple
?Modern market creates complexity
?As human beings we are happier with simplicity
?Applies in business
? Jam experiment
? Camera sales
? Vanguard
?Goal: Start by identifying the Minimum
Feature Set and then create the Minimum
Viable Product (MVP)
?Example: Classtop
YHOO: $18.37 Billion Market Cap on $1.3 Billion in
Quarterly Sales
CONFIDENTIAL: ALL MATERIAL TRADEMARKED AND
COPYRIGHTED
GOOG: $205 Billion Market Cap on $10.6 Billion in
Quarterly Sales
CONFIDENTIAL: ALL MATERIAL TRADEMARKED AND
COPYRIGHTED
Keep It Simple – Less Is More.
Chinese Menu
Technologies are Complex
Products are Simple
5. Start Small
Average venture-backed startup is 15-20 people
? Selling but not clear exactly what
Big teams create problems
? Communication problem
? Political problem
Small teams are better for market discovery
? Need 2-3 people to run Nail and Scale It
? Internal commitment to keep each other honest
? Too few will be subject to bias of interpretation
You’ve nailed it… Now what?
1. Prototype
2. Funding
3. Growth – Incubators / Accelerators
4. Exits
2012:
1409
Accelerators are tempting
Accelerators
2005:
1
Accelerator Bubble
Are we creating the Walking
Dead?
15,000
17,000
19,000
21,000
23,000
25,000
27,000
29,000
31,000
2007 2008 2009 2010 2011 2012
Number of Angel Seed Deals
Access to Capital has never been easier
29% Increase
200
250
300
350
400
450
500
550
600
2007 2008 2009 2010 2011 2012
Number of VC Seed Deals
48% Decrease
MoneyTree Annual Report, PricewaterhouseCoopers, 2013; Angel Market Analysis
Report, University of New Hampshire Center for Venture Research, 2013
67
CHALLENGES
THE TRADITIONAL VC MODEL IS BROKEN
“ … Today, exits are happening much earlier than
before; most exits are in the under $30-million
valuation range. These exits are often
completed when companies are only two or
three years from startup and without VCs ever
investing a dollar.” - Dr. Basil Peters
68
We have too much money in too few hands; funds
are getting too big. We need smaller funds that have
the flexibility and track record to take risks and don’t
shy away from technologies that take longer to bear
fruit such as with energy, medical, ag, etc.
- Fred Wilson
THE TRADITIONAL VC MODEL IS BROKEN
Mergerstat database shows the median
price of private company acquisitions is
under $25 million, when price is disclosed
69
Funding your company
• Friends, Fools & Family
• Angels
• Venture
• Federal Funding
• Local economic development programs
• Leveraged capital
• Corporate partners
• Venture Philanthropy
• Competitions
– X-Prize
There is a reason we’re called
Vulture Capital
The power of VC’s doing seed
Seed investors
are in trouble
72
The early stage benefit
THE TRADITIONAL VC MODEL IS BROKEN
The Sweet Spot
for Smart Capital
73
Phase II b
Probability of Success = Ps
Ps = (Pat*Qt) * (Pam*Qm) * (Pai*Qi)
Pa = passion, Q = quality, t = technology, m = managers, I = investors
The Value of IP
IP increases exit value in Startups by + 35%
Even bad IP increases an exit value
Value in working with companies
? Increased positive outcomes in every aspect of a researchers productivity
? Federal funding
? Private funding
? Companies started
? Patents
1. Kauffman Foundation: IP & VC 2011
The Opportunity
• Of all indicators measured “network-bridging
ties” and “trusted bridging” created the most
influential determinant of high quality transfer of
knowledge and IP to stakeholders
• Small trusted networks lead to powerful
outcomes
Source: Rutgers and Kauffman studies
How will you Disrupt?
ALTA VENTURES
IGNITINGINNOVATION
Brian Cummings
[email protected]
JAN 2014
Top US Healthcare Pain Points
What are the biggest pain points affecting the US Healthcare System?
Crisis #1 Out of Control
Healthcare Costs
Medicare, Medicaid, and Other
Federal Spending as % GDP, 2011
Projection
Source:CBOLong-TermBudgetOutlook,June2011
Medicare spending projections
consistently increase over time
Source:CongressionalBudgetOffice
Total US Healthcare 16% of GDP
growing to 20% by 2017
?Current figures estimate that
spending on health care in the
U.S. is about 16% of its GDP. In
2007, an estimated $2.26
trillion was spent on health
care in the United States, or
$7,439 per capita. Health care
costs are rising faster than
wages or inflation, and the
health share of GDP is
expected to continue its
upward trend, reaching 19.5%
of GDP by 2017.
83
Crisis #2 – Grey Hair Tsunami
US Baby Boomers
?Seventy-
six million
American
children
were born
between
1945 and
1964
?In 2013,
these people
are between
the ages of
49 and 68
Baby Boomers 25% Population
86
1/4
th
of Population. Today baby boomers make up one-fourth of the
entire population.
Turning 65. 10,000 are turning 65 every day. By 2030, the entire Baby
Boomer generation will have turned 65,
Living Longer. Because medical advances are now allowing Americans
to live longer, 5.8 million of those seniors are projected to be older than
85
Americans age 65 and older currently account for:
? 26 percent of physician office visits
? 35 percent of hospital stays
? 34 percent of prescriptions
? 38 percent of emergency medical responses
? 90 percent of nursing home use
Source:http://thinkprogress.org/health/2013/05/29/2072011/baby-boomers-looming-health-crisis/?mobile=nc
?AARP Statistics:
?Can’t Afford Medical Care -21%. With regards to
Baby Boomers’ ability to afford their Medical
Care in 2009, 21% surveyed stated they were
“not very or not at all confident” and 23% stated
they were “somewhat confident.”
?Can’t afford Medicine – 17%. Seventeen Percent
are cutting back on taking or filling their
prescriptions based on affordability
88
US Baby Boomer Population
Rank State # of Baby Boomers
1 California 8,992,331
2 Texas 5,665,790
3 New York 5,110,668
4 Florida 4,652,377
5 Pennsylvania 3,421,875
Rank Region # of Baby Boomers
1 South 28,060,126
2 Midwest 17,569,066
3 West 17,421,670
4 Northeast 14,929,434
Baby Boomers Not The
Healthiest Generation
Pre-Boomer Boomer
Excellent health status 32% 13%
Use a walking assist device 3.3% 6.9%
Limited in work 10.1% 13.8%
Functional limitation 8.8% 13.5%
Obese 29% 39%
Regular exercise 50% 35%
Moderate drinking 37% 67%
Hypertension 36% 43%
Hypercholesterolemia 34% 74%
Diabetes 12% 16%
Cancer 10% 11%
JAMA Internal Medicine February 4
th
, 2013
Rising costs, increasing
population, decreasing health
1% of Americans account for 22% of healthcare costs. Average annual cost per patient = $90,000
5% of Americans account for 50% of healthcare costs. Average annual cost per patient = $36,000
In 2012 Americans spent an estimated $2.7 trillion on healthcare.
Source:Forbes, USA Today
Ripe for Disruption
?1% of Americans account for 22% of healthcare costs.
?Average annual cost per patient = $90,000
?5% of Americans account for 50% of healthcare costs.
?Average annual cost per patient = $36,000
?In 2012 Americans spent an estimated $2.7 trillion on
healthcare.
Source:Forbes, USA Today
Pain: Crisis #3 – Doctor
Shortage
Shortage of Doctors
At current graduation and training rates, the nation will
face a shortage of as many as 150,000 doctors in the
next 15 years.
Source: The Wall Street Journal
Pain Crisis #4: Accountability Problem
This is What Happens When the Patient….
? Doesn’t directly pay for services
? Isn’t involved in the feedback loop
? No direct connection between actions and consequences
Solution must include Patients
participating in the Feedback loop
When things are measured they improve
The more they are measured, the more they improve
Army DMI – Define, Measure & Improve Process
Innovations in Healthcare
US Innovation Example: Walmart Increasing Access to
millions of Americans
?Walmart has opened 130 trial clinics in their stores.
?These clinics provide walk-in service seven days a week.
No appointments are necessary.
?All of fees for treatment are clearly posted.
?150 million Americans visit a Walmart every week,
spending about 50 minutes on average.
?There are over 8,500 Walmart locations.
Source:http://www.californiahealthline.org/road-to-reform/2013/wal-mart-could-transform-health-care-but-does-it-want-to, Wikipedia
Innovation: Digital Health Investment
- 2013 $849M invested in 90 different digital health companies,
up 12% from 2012
- 25% more deal volume from 2012
- Medical device funding has dropped (-29% from 2012)
- BioTech investments have dropped (-2% from 2012)
Source:Rock Health
New Digital Health Investments by State:
Ohio #5
Source:Rock Health
$273.20
$67.50
$65.50
$41.70
$36.40
$34.80
$21.00
$10.90
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
CA NY MA CO OH DC IL TX
# of Deals 31 7 8 3 3 3 3 3
Total # of Deals nationwide: 94
Figures in USD Million, 2013
Remote Patient Monitoring
? iRythym, Watermark Medical
Analytics & Big Data
? FlatIron Health, Health Catalyst, Treato
Electronic Health Records
? Axion Health, CareCloud, DocuTAP, Doximity
Wellness
? Keas, Linkwell, Audax Health
Personal Health Tools & Tracking (Quantified Self)
? PatientsLikeMe, HealthTell, Basis
Source:Rock Health
Emerging Themes of Digital Health
Investments
New Funding Sources: Digital Health &
Crowdfunding
?Thirty-eight digital health campaigns raised over $4.5M across
Indiegogo, Kickstarter, Medstartr and Fundable so far in 2013
Source:Rock Health
Success Story
Humedica is the clinical intelligence company that powers health
care providers and life sciences organizations to make better-
informed, more confident decisions by transforming
unconnected data from multiple sources into real-world insights
$30Million in Series A Funding - Oct 2009
$23Million in Series B Funding – Oct 2011
$10Million in Series C Funding – Apr 2012
$279Million+ Acquisition by United Health Care – Jan 2013
Record VC Investment in
Overall Healthcare IT
Source: Mercom Capital Group 2013
Q1 2013 Set Records for # of Deals and Total Investment in Healthcare IT
ALTA VENTURES
IGNITINGINNOVATION
Brian Cummings
[email protected]
JAN 2014
doc_168977835.pdf