1. Investing in a Transformed Market May 13, 2008 E/ME 103 Caltech Lecture

2. Lessons Learned #1 – MARKET  Newcomers always face the challenge of gaining customer acceptance  Sometimes simple ideas build huge value. Don’t confuse complexity with value creation.  There is no short cut  Build credibility with a few customers but always remember that you are in the product business unless you want to be a custom product business.

3. Lessons Learned #2 – SALES  Don’t count on others to do your sales  Use all the help you can, but management does the selling and builds the customer base  Don’t hit the road too soon. Be sure that you have a value proposition.  It is easy to kill your business from the start with bad products or service.

4. Lessons Learned #3 – STANDARDS  Don’t count on emerging standards for a business proposition unless you are convinced that it will win out  Being first in the market is not always best. It is not the standard that counts but the solution to a problem that existing vendors don’t solve well

5. Lessons Learned #4 – COMPETITION  Every business will meet competition. How to maintain a competitive edge is a key strategic question

6. Lessons Learned #5 – INTELLECTUAL PROPERTY  Promoting and protecting innovations internally is key.  You usually cannot afford to buy outside technology until the business is successful. Until then you are on your own with limited capital.  Intellectual property dog fights are with us forever. Be ready to file patents and protect them. Lambs get eaten.

7. Lessons Learned #6 – MANAGEMENT and PEOPLE  A business is no better than its people  Hire the best people even if they are demanding and difficult to manage.  Teamwork cannot be overstated  Dysfunctional organizations usually fail unless very, very lucky.

8. Lessons Learned #7 – INVESTORS  Pick your investors. If there is frequent disagreement at the Board level you’ve got big problems.

9. Lessons Learned #8 – and finally, TIMING,TIMING, TIMING  Take capital when you can  Opportunities come and go fast and are not programmed. React quickly and keep your antennas up at all times  Exiting and investment is not a science. Caution is in order

10. Bubble Investing: Some Checkpoints  Assess the reality and implementation risks of the proposed technology.  Buying decisions are usually based on rational economic reasons. What are they?  How quickly will existing technologies provide the same benefits? Can they?  People, people, people. Great teams can do wonders in fast moving new markets. Others just waste money.