Toolkit for Evaluating a New Venture

Several entrepreneurship-related classes at Stanford refer to a simple conceptual framework developed by Professor William A. Sahlman of Harvard for planning and evaluating new ventures. In short he proposed looking at People, Opportunity, Context and Deal of a venture and analysing how they Fit with each other in this particular combination at hand. You can read all about the model from his article, Thoughts on Business Plans (on Google Books) which in turn comes from an essay collection Sahlman edited in the 90s.

What inspired me in this material was a systematic use of simple, but carefully targeted questions. I decided to extract a condensed reference of them below – still mostly Sahlman with minor revisions, but I’ve added a few more, and would be happy to keep the list living if anyone proposes more useful questions from their arsenal in comments.

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Founders’ Dilemmas, Quantified

I picked up The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup by Noam Wasserman after he spoke about it in the ETL speaker series at Stanford back in November (see my study notes of that week here). With all the regular school reading in parallel it took me 2 months and 2 vacation trips to dig through the material, but coming out on the other side it is a highly recommended read for anyone in the tech startup scene. Doesn’t matter if you’re just contemplating bootstrapping your first company or want to take a step-back look at the impact your term sheet demands as an investor can have on entrepreneurs on the receiving end.

Basically, what Noam has done is to take a whole sequence of inevitable dilemmas every founder has no way of escaping while building their startup, gone back to about 3k companies and 10k people and surveyed the hell out of them to quantify both the triggers as well as the indirect results down the road after they have made their choices on these issues so often just considered a “gut feeling thing”. Should I found a company now? Should I do it alone, with friends or strangers? What happens to my likely CEO tenure time if I take external money? What kind of side effects can different outcomes of horse trading over boards seats practically have? What are the hidden costs (and benefits) of hiring youth over experience, and vice versa?

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Weeks 18-20: Innovation Economy, Debate Blunders and Creative Computing

Stanford GSB Sloan Study Notes, Week 8-10 (18-20), Autumn quarter

Not to worry, despite of the three week scope in title this is not a monster-length post. Between a lovely wedding, an unexpected funeral and Thanksgiving break in between my focus has temporarily shifted a bit away from school as this quarter concludes. Do enjoy the little there is to share below – and as special gift to reader A.M., yes there are more videos.

Marc & Bill

A notable off campus educational highlight  last week ago was an event at A16Z where  William Janeway (being interviewed by Marc Andreessen on the photo above) discussed his book Doing Capitalism in the Innovation Economy: Markets, Speculation and the State. Combining his 40 years in venture capital with a PhD in Economics, Bill has great insights into when, how and where governments should play any role financing tech innovation and where progress should be left for markets. And as a curious subtopic – the need for an occasional bubbles in the latter case.

Covered further in this issue:

  • How to avoid small groups polarizing towards extremes in debate
    • Kõrvalmärkusena Eesti lugejaile: jah, teadus teemal Reformierakond VS Väike Grupp!
  • Centralization VS distribution of control in global organizations
  • More history of Presidential candidates screwing up in public
  • Financial ratios and common size reports in accounting
  • Effective networking tips’n’tricks exchange with Sloan classmates
  • How computing changes human bodies and the definitions of creativity
  • How big internet players have changed hardware IP value chain

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Week 17: Economists Designing Orgs, Ethos of Problem-Making and Sick Bush in Japan

Stanford GSB Sloan Study Notes, Week 7 (17), Autumn quarter

This week will go down in history as the one that finally saw the portfolio of profiles of every single Fellow of the Stanford Sloans class of 2013 hit the public interwebs. Please meet my lovely class in its diversity, internationally and otherwise.

On other news, Americans re-elected Obama for their President (aka POTUS – didn’t know that one before) on Tuesday, which in the fair state of California sounded more like a sign of relief. And I, in turn, spent far too much time on Estonian blogs, chats and Facebook threads, tracking an insane sequence of judgement lapses by some party politics leaders back home. Between these two parallel world, I could not have had a better week to start a new class, Political Communications: How Leaders Become Leaders taught by a very experienced practitioner in the field, David Demarest.

Covered in this issue:

  • Why calling taxes “revenue enhancement” works
  • Why globalization and CxO executive titles should be taken less for granted than people think
  • How the classic forms of political communications, a speech and a debate, are constructed by the best
  • How 20-30 year old experimental art tends to turn into everyday products eventually
  • Necessary evils around good old software development: intangible assets, intellectual property, patents

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Weeks 15-16: Conglomerates, Lemmings, Founders’ Dilemmas and Tax Lotteries

Stanford GSB Sloan Study Notes, Week 5-6 (15-16), Autumn quarter

This post consolidates my notes from two weeks instead of a normal one, yet will be a bit more concise than usual too, for a few reasons: I was down with flu for several days and had to miss a few classes and then the midterm exams in Financial Accounting and Organizational Behaviour changed the normal scheduling.

Also, the first session of the latest addition in our core timetable, STRAMGT 259: Generative Leadership by Dan Klein yesterday was too… experiential to take any notes, really. Basically, we did three hours of improv theatre. It was a lot of fun, but instead of getting into the theory here – get the book: Improv Wisdom: Don’t Prepare, Just Show Up by Patricia Madson. And say “yes” more to whatever life throws at you, go with the flow and see what happens.

For additional entertainment, here is an experiment shared by my classmate Marc who is lucky to take a Behavioral & Experimental Economics class by freshly Nobel-prized Al Roth: primatologist Frans de Waal showing how even monkeys reject unequal pay (see especially from 2nd minute).

And now on to the regular programming. Covered in this issue:

  • Why people suck at predicting when they finish a task
  • How overdiversification, and especially uncontrolled aquisitions lead to dysfunctional conglomerates
  • Lemmings following lemmings, but not sheep
  • Predicting future divorces
  • Research from surveying 10,000 founders that quantifies the impact of common “gut decisions” like picking investors or sharing stock between co-founders
  • Guest speakers explaining how they’ve used creative incentive schemes to get more out of porn site classification crowdsourcing and VAT payments in China
  • The impact of investment lags on IP value creation in startups and established companies
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Week 13: Gangnam Style, Fired CEOs and Motivating People

Stanford GSB Sloan Study Notes, Week 3, Autumn quarter

The highlight of this week was of course the Friday our Sloan class owned the GSB courtyard with our little dance act. It took weeks of preparation, late nights and sweaty trainings for many to make Project Chai happen. It would have been too easy to be and remain sceptical of the entire venture from start, given how YouTube is overflowing with Gangnam style flash mobs, but the sensation of the entire class an many of our partners going through this was just amazing. (Mind you, this is not a high school, but perceptionally quite high competition and serious workload business school we’re talking about). Thank you, Herbert, Hans, Cherie, Tracee, Jonathan, Gitanjali and everyone else for pulling people through this.

(As a side remark, keeping this video online is a terrible experience – Youtube is blocking some mobile viewers, Vimeo did a full takedown for a while of our mobile friendly version of this video… We’re trying to talk directly to music rights owners now, but how on Earth are flash mob videos usually distributed?)

On academic side, covered in this issue:

  • Why not drink Diet Coke in Las Vegas?
  • How some penny-pinching retail operations can grow bigger (and more profitable) than most countries.
  • How to fire a CEO.
  • How GAAP accounting discretion in used and abused in public company financial reporting.
  • How charisma can be broken into components and trained.
  • Why reward people with stuff as opposed to money?
  • Why would you still want to correlate the size of codebase to the value of software IP, despite of obvious pitfalls?

And here on to the full notes: Read the rest of this entry »


Week 12: Discounting the Future, SEC Investigations and Visiting Founders

Stanford GSB Sloan Study Notes, Week 2, Autumn quarter

Covered in this issue:

  • Rational decision making. Why and by how much discount the future?
  • In search for a strategic fit – those sweet moments when stars actually align for a while. Resulting competitive advantage that holds due to the complexity of interdependencies. Cases: CapitalOne (data driven mass-personalisation) and Lincoln Electric (super productive manufacturing).
  • Real-Life Ethics: Guest Michael Marks on being bullied by huge OEMs while Flextronics CEO. And should a SEC-inestigated company throw an innocent CFO over board to settle? Role of the board in backing the CEO.
  • Guest selling their story: Smule co-founders Jeff Smith & Ge Wang. Andrew Mason of Groupon.
  • Peer-organized public company valuation training.
  • Analysis of a persuasive argument: 1 man turning 11 jurors around in the 12 Angry Men movie. The case of Silicon Valley’s most effective networker.
  • Cash flow reporting. And intangible assets, especially software.

And here on to the full notes: Read the rest of this entry »


Week 11: Instant Gratification, In and Out of Orgs and Biases

Stanford GSB Sloan Study Notes, Week 1, Autumn quarter

The gearshift to the fall quarter was quite a big one. Going from 13 to 19 units (full schedule here) means days starting at 8am and running straight to 5pm two days a week, leaving slightly more time for prep reading and writing on others. We have been assigned to new study groups (mostly for Strategy, where we need to pick a company and country none of us are familiar with and devise the plans for their entry to that market) and generally get to hang much less with other Sloans due to differing elective schedules.

Pardon for the longest notes yet below. I guess I should become more selective as the courseload goes up? Or maybe not, if the filter remains “write down interesting stuff and aha moments only”… If there is any comfort – there are videos, again.

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