Business Studies for Business Studies for Computer Scientists,Computer Scientists,

or or"How to Start and Run a "How to Start and Run a

Company" Company"

A course of 12 lectures

Jack Lang

IntroductionIntroduction

History of Lab and spin-offs – The Cambridge Phenomenon

Programming only a small part of success

Outline SynopsisOutline 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 listReading list

The High-tech Entrepreneur's Handbook  Jack Lang

Paperback - 224 pages (2 November, 2001)

FT.COM; ISBN: 0273656155

Reading listReading listBrooks F. : The Mythical Man Month

ISBN 0201006502 Addison-Wesley

Geoffrey A MooreCrossing the Chasm

ISBN 0-8870-519-9 Harper Business 1991/5Inside the Tornado

ISBN 1-900961-58-X Capstone 1998(The Gorilla Game)

Everett M Rogers; Diffusion of Innovation, 4th Edition Free Press, New York 1995 ISBN 0-

02-926671

Eric S Raymond: The Cathedral and the BazaarISBN 1-56592-724-9 O’Reilly 1999

Townsend, R. : Up The OrganisationISBN 0340149868 Hodder Fawcett 19712nd 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

CompanyPocket Books ISBN: 0671033107

Reading list 2Reading list 2

Dyson J.R. : Accounting for Non-Accounting Students

ISBN 027360435X Pitman 3rd ed 1994

Microsoft ProjectMicrosoft 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 3Reading List 3

Drucker P.F: Innovation and EntrepeneurshipISBN 033294652 Pan

Weinberg, G.M.:The Psychology of Computer Programming ISBN 0442292643 Van Nostrand

William D Bygrave, EditorThe Portable MBA in EntrepreneurshipISBN 0-471-16078-4 John Wiley 2nd edition 1997

Guidelines for DirectorsISBN 090093980XInstitute of Directors

The Cambridge PhenomenonISBN 095102020 Segal Quince and Partners

Reading List 4Reading List 4Nokes: Startup.com FT/Prentice Hall ISBN 0-273-65091-

2 WallStreet.com Andrew D Klein (founder of Wit Capital);

Henry Holt ISBN 0-8050-5758-7 1998Everett M Rogers; Diffusion of Innovation, 4th Edition

Free Press, New York 1995 ISBN 0-02-926671 Paul A Samuelson, William D Nordhaus Economics 16th

Edition McGraw Hill ISBN 0-07-115542-2Klein, 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.

1.1. So you've got an So you've got an idea...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 One of you will become a BillionaireBillionaire

Most will be millionaires– And need to be

– Pension issue

• Say household income of £50K @ 4% -> £1.25M• Inflation for 40 year @ 3% -> x 3 ->

£3.75M• House, etc say £250K -> 750K

• Total£4.5M

You won’t save £4.5M from a salary– Trading– Starting an Enterprise

Why?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 Never a better time to start than NOWstart than NOW

Money– Cambridge Angels, Cambridge Capital….

Support– CEC, St Johns, Cambridge Enterprise….

Infrastructure– Banks, lawyers, accountants– Office space

People– Cambridge Network, mentors…

Government– EIS Tax relief, SMART Awards, SFLGS….– Princes Trust

Society attitude– OK to lose,

• “Better to have loved and lost than never loved at all”

“Dare to Begin” (Horace)– Nothing will be attempted if all possible objections must be overcome

(Samuel Johnson)

Why are you doing it?Why are you doing it? Wealth generation

– You need £5M by the time you retire, for a modest lifestyle

Better toys Make a difference

– Social consequences• Generation of employment• Death of the nation state

Fun or profit?– Lifestyle or high growth?

• Funding• Eventual size?

If you are not in business for fun or If you are not in business for fun or profitprofit, what are you doing there?, what are you doing there?

What is it? What is it? Technology driven / market pull

Product or service

Specialist or mass-market

Lifestyle or High-growth?

Mass Market

Bespoke

Volume

Low High

Consultancy

Cost of entry

Game

Battleship

FMCG

Movie

Car

How? Writing the business How? Writing the business planplan

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 £1k and Cambridge £30K– Cambridge University Entrepreneurs Society

(CUE)• www.cue.org.uk

Investment CriteriaInvestment Criteria

Global sustainable under-served market need

Strong management team Defensible technological advantage Believable Plans 60% IRR

Market NeedMarket Need 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? 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 PointsMarket Research

Defensible technological Defensible technological advantageadvantage

IPR– Patent– Copyright– Trademark

Defensible technological leadership– against well-funded competition– Niche Market share

Strong management teamStrong management team

You can’t do it all by yourself– “Small” project >10 person-year– Team building– 1:3:10 rule

Alliances Recruit experience

– Financial Director– Sales & Marketing

Training & experience– M erchant bank/Management Consultancy – MBA

Senior TeamSenior TeamUS UK

Chair Chair Senior figure; Old wise head

Experience and contacts; Major dispute resolution; part-time

CEO Managing Director

Finding money; Investor relations; Style setting; Keeping the peace

CFO Finance Director

Accounts etc. Office management; Administration, Legals, Quality control

CTO Technical Director

Inventing new things; development

COO Production Director

Running the factory and distribution

VP Marketing

Marketing Director

Deciding what and how to sell; pricing Marcoms; Market information

VP Sales Sales Director

Selling; CRM;

Believable PlansBelievable Plans

Business Plan Development Plan Marketing plan

– Adverts, mail shots, web-sites

Sales Plans– Distribution, Direct Sales

Quality Plans Financial Projections

– Budget • 60% IRR

– Pay back financing in third year

– Cash flow

Writing the Business PlanWriting the Business Plan Executive Summary and funding requirement1. Concept 2. The Market 3.1  Global market size and need

3.2  Sustainability3.3  Competition3.4  Marketing plans

4. The Team4.1  CEO4.2  CTO4.3  CFO4.4  VP Sales and Marketing

 

Writing the Plan - 2Writing 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 - 3Writing 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 Futures: some emerging areas for new computer areas for new computer

businessesbusinesses 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, 100Gbyte, photo realistic moving graphics,

video mail, 100Mb/sec WAN, world-wide knowledge base,

– Home networks; – Wifi / WLAN – ubiquitous access

The Trillion Dollar MarketThe Trillion Dollar Market

Effect of electronic commerce Customer pull, not advertising push Merging of computing, entertainment,

communications– Games now gross more than films

Internet CommerceInternet Commerce

Works for– Established Brands– Specialist goods

60% of accesses are to adult content– 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

PredictionsPredictions

Microsoft/Intel will remain dominant– Other chip manufacturers will continue to struggle– UNIX will remain specialist– Java will be increasingly minority interest

Internet/ WWW will dominate– AOL,Compuserve, E-world, Microsoft Network will

become internet service suppliers 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 PredictionsMore Predictions

Game machines will become PC based– 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

No new major applications– But see .NET

Watch Points - a personal Watch Points - a personal listlist

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, 3G

Voice recognition– Wristwatch systems

Embedded and SoHo systems– Luxury cars now have more compute power on-board

than the moon lander– Home networks