Weeks 28-29: Bootstrapping, Europe(?!), Options & Private Equity Operators

Stanford GSB Sloan Study Notes, Weeks 8-9 (28-29), Winter quarter

So there: it takes about 28 weeks in Stanford to finally have someone mention Europe in any other context than a semi-joke about Greek macro environment in the short term. And these two weeks suddenly opened the floodgates: there was the first European company case this far, we spent some time on the (quite miserable) comparative venture financing stats between the continents and – most importantly – the rotationally geography-themed Sloan TGIF parties finally turned to the European night (affectionately dubbed as the “Estonia & the Rest of Europe” evening). Relieved with a sigh with my Swedish, Dutch, German, Swiss, French, Italian etc classmates: we have not entirely disappeared from the world map as seen from the West Coast yet, and will keep working on that threat.

Partially supported by the annual Stanford Entrepreneurship Week, the last weeks were super-exciting for the flow of external speakers – there is a separate post summarising those you should not miss. And we did do the Final View presentations of the LOWKeynotes program, including your’s truly’s 9 minutes on how hard it has been to adjust to somewhat surprisingly lacking digital living infrastructure here, coming from Estonia – videos for which will be online in 1-2 weeks. Stay tuned.

Covered in this issue:

  • Bootstrapping, venture debt and swimming against the tide in Europe
  • Exit planning and IPOs in venture deals
  • Thinking like a limited partner, structuring PE deals, operational turnarounds and the visible future of Private Equity
  • Derivatives and options – both financial and real
  • Academic research on VC compensation and incentives
  • Guests from: The Foundry, Avik Ventures, AngelList, Astia, Makena Capital, TPG, TSG Consumer Partners, Sierra Ventures, YouTube, Trulia, OpenLane, Fayez Sarofim, Accel, Meritech Venture Partners…

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Extracurricular Fireworks: Friendster, Prezi, Rovio, Bonobos + O’Reilly & Doerr

With the end-of-quarter groupwork frenzy I am behind on posting the academic lecture notes – hope to get to that this weekend. But meanwhile, as the flow of new thoughts from extracurricular guest visitors in just last seven days has been mind-blowing I’ll post them for your enjoyment.

See further for tips, startup plugs, book recommendations and videos from:

  • Jonathan Abrams (founder of Friendster, Socializr, Nuzzel, Founders Den)
  • Peter Halacsy, Peter Arvai (co-founders of Prezi, Hungary)
  • Peter Vesterbacka (Mighty Eagle, Rovio)
  • Andy Dunn (CEO and co-founder, Bonobos)
  • Tim O’Reilly (O’Reilly Media, O’Reilly Alphatech Ventures)
  • John Doerr (Kleiner Perkins Caufield & Buyers)

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Week 24: Medical Devices, Space Tourism and Russian E-Commerce

Stanford GSB Sloan Study Notes, Week 4 (24), Winter quarter

Steve Jurvetson

The relative (& temporary, I’m sure) breather on reading volume this week left some much awaited time to deal with things out of the classroom: we’ve gotten over the home stretch in our core marketing course with some brand audits and presentations, on Tesla Model S. And it was even more fun to work with my MBA-mixed study groups for venture financing and business planning.

My highlight of the week was doubling the Estonian population on campus when Steve came to join our Sloan class for an evening lecture and smaller breakfast to discuss the most inspiring trends he sees as an investor (no separate notes – but see notes from the Science panel at the Intersection Event for a hint on his direction).

And I even got out of campus for a bit: to a fun chat between Eric Ries and Marc Andreessen at A16Z office on the Lean Startup movement and diversity issues in the valley. Highland Capital Partners threw a GSB mixer at the legendary Old Pro. I was also lucky to have two different insightful conversations with a physicist (one turned VC, the other a space entrepreneur, as it is customary here) in one week, on maximising impact. I am grateful for weeks like this.

Covered in this issue:

  • State of Space Tourism in 2013
  • Risk & Return – was it sensible for Airbus to build the A380?
  • Structuring financing deals and more terms sheets
  • Building an eCommerce firm in Russia
  • Writing a business plan and pitching to VC partner meeting
  • Advanced body language tips to presenters
  • More guests & speakers from Virgin Galactic, XCOR Aerospace, Mohr Davidov Ventures, Wikimart, DeRemate, Wealthfront, Exploramed, Bare Escentuals…

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The Intersection Event 2013

Entrepreneurship panel @ The Intersection

Spent an inspiring day at The Intersection Event at Googleplex. Full agenda is here and my notes from the sessions below.

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Week 22: IRR, Fishbones, Term Sheets & Angels

Stanford GSB Sloan Study Notes, Week 2 (22), Winter quarter

Fishbone

I think we’re getting back in the rhythm here. Continuous flow of external guest speakers and occasional valuation models to be built are bringing more variety to just swallowing hundreds of pages of cases. I did drop my across-the-street strategy class to get back to 19 units and thanks to that even made it to a few BBLs and a GSB High Tech Club company visit to Box. There is a long weekend coming up. Life is good.

Covered in this issue:

  • Finance: NPV and IRR, including pitfalls
  • Entrepreneurial finance: unit economics in business models and real options
  • Angel & VC finance (and a E-Club BBL): life of an angel investor
  • Negotiating Term Sheets, especially on valuation
  • Marketing and Mastery of Communications: more stories, including analysing viral videos & TED talks
  • Guests: Sand Hill Angels, Tory Burch, Pattie Sellers, James Buckhouse, Gil Penchina, Jeff Erickson

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Week 21: Finance, Ventures, Stories and Space

Stanford GSB Sloan Study Notes, Week 1 (21), Winter quarter

The pace of the new year has been just mindblowing, and not just compared to the Christmas break down time but to almost any of the school weeks from previous quarters. I guess this is what happens when you can almost fully customize your class schedule. And you want to get out of GSB to “across the street” schools for a bit. And you get accepted to this year’s LOWKeynotes speaker series, with dozens of hours scheduled for prep-work and coaching before the big stage. And…

I’m saying “almost in control,” because I have had close to no time to spend with family, sleep over 6 hours or socialize these last five days. And I do intend to do those things this quarter too. Exhausted, happy, but realizing this kickoff pace will not be quite sustainable as is. Let’s see what next week brings with its reading volume and booting up several project groups.

Covered in this issue:

  • Finance basics: free cash flow, annuities, perpetuities & NPV calculations
  • Business planning: financial business modelling, life time value of customers, Dropbox freemium example
  • Venture Capital: industry history and sizing, how VCs think, how they move money and get paid
  • Marketing: stories, stories, stories – creating and delivering them (videos)
  • Strategy: Grabber-Holder model explaining disruptive tech innovation via ultimate nothingness from Taosim and Yin-Yang cycle
  • Space entrepreneurship: an inspiring event on synthetic life with the Student Space Flight club
  • Guest speakers throughout the week: Vinod KhoslaNancy DuarteCraig Hanson and John Cumbers

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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 »