1. Turning Ideas Into Businesses George Johnson Extranet for Security Professionals Secure Extranet Portal Services

2. Two Funerals  Government contracting business One giant ego at the helm No operating agreement as recourse for other members  Software for the education market Lack of understanding of market Confidence that technology would sell itself Smaller, but central ego figure No operating agreement as recourse for other members Undercapitalized Poor “sales pitch”

3. … and a Wedding  Internet based company Products fits a defined need Competition is forming Product is already in wide use by a solid reference community Strong cohesion of founders Solid operating agreement No ego conflicts – we all have a job to do

4. Intellectual Property  The IP is the foundation/discriminator for your business  Make sure it is locked up and protected Copyright Trademark Patent  Get a lawyer to confirm it  Get documents signed from all parties involved in development to transfer ownership  Get all employees to sign IP and NDA agreements

5. Understand Your Business  The business plan The guide Start by creating a high level document that acts as a guide for your business, don’t sweat the details, but agree on your destination  What need does it fit  Who will buy it  What will they pay for it The bible Get quantitative The “GIGO” Get real – good sources of real data, not your best guess

6. Is There a “There” There  Do you have something there Run cash flow projections Use real figures and don’t forget to pay yourself Don’t cut corners on cost projections – overestimate Your numbers are only for planning, not predictive at this stage, so don’t get depressed or excited yet  Get outside help Time for a reality check

7. Create A Business  Who are the principals Make sure you clearly identify the founders Create an operating agreement (pre nuptial agreement) – everything is negotiable  Decide on a type of business LLP Doctors, Lawyers, etc… LLC Very similar to Incorporation, but profits and losses flow to partners at the end of the year Has same personal safety umbrella as an INC More flexible on the structure and operation of the business

8. Create A Business (cont)  Decide on a type of business – everything is negotiable (cont) Incorporation (sub s, C Corp, etc…) You get double taxed, but some VC’s like this structure better because share transactions are easier Sub S allows you to write losses off on personal taxes Restrictions on converting Sub s to C More rigid – based on corporate law  Conflict resolution strategy – goes into operating agreement Make sure you have a way to settle disputes

9. Create A Business (cont)  Who will lead Don’t let ego kill your venture If you can’t all agree, then you don’t have the right team  Do you have a diverse skill set  Do you have people with experience  Do you have people with contacts

10. Align Business and Technical  Ensure that your technical staff is in alignment with the business staff  Hold regular meetings to discuss the direction of the technical development to ensure alignment  Technical must listen to marketing to ensure that customers needs are incorporated in product

11. Money  Some money is greener than other money Not all venture capitalists are equal Some will assemble a management team for you that will help ensure success Some will help you to penetrate your market much quicker Some will gut your company and leave you with pennies on the ultimate dollar

12. Money (cont)  Interview VC’s Although it is hard to get in their door, pursue several and make them compete for your idea Ask them what they bring to the table How will they fund you Most will agree on an amount of money, then provide that in increments as you meet deadlines, this can be painful

13. Money (cont)  What do VC’s want from you Most will want you to have a significant stake in the business or they won’t play Mortgage to the eyeballs Personal loans with the bank Etc…  How much of the company should they get? You only get what you negotiate Some parts of the country have friendlier terms than others Ultimately depends on where you are in the growth cycle

14. Market  Understanding the market is not enough  Market penetration is critical You must have a vehicle to get your product into the market Distribution strategy Consulting partners Access to decision makers

15. Will It Sell  The elevator explanation People have a short attention span  The sales explanation People buy what they understand Explain your new idea/product in terms of something people already know with some new features or capabilities