M3-S4 - Session notes

Module overview:

• • The hazards of technologist with cash:
  • Some cause of unexpected cash flow issues in tech ventures
  • The art of frugality
  • Benefits of bootstrapping
  • Principles of bootstrapping
  • Cash-based strategic decisions

Causes of Company X problems

• Too much money will give technologist the wrong focus
• Took a long to time to industrialize designs and to get products to the market
• Made some poor IP investments that had to be written of
• Bad projects should have been killed sooner
• Over-estimated the value of the technology on its own

Deprivation or strategic philosophy?

• Gave example of verisign:
  • \$200K,- profit
  • \$100M,- of venture capital
  • \$512M of public offering

Analogy: http://www.businessinsider.com/what-sunk-veoh-and-joost-too-much-cash-too-soon-2009-7

The strategic benefits of bootstrapping:

• Forces strategic focus:
  • Highlights tough choices
  • Less likely to take on too much
• Promotes discipline & care
  • Less likely to burn resources on developing something nobody wants
  • It can encourage creative use of resources
• Raises returns to all stakeholders
• Encourages true entrepreneurship

Principles of bootstrapping:

• Be realistic about how limited your resources really are
• Operate in experimentation mode (potential deal killers)
• Focus on doing the few important things well
• Try to delay or avoid activities that have a distant revenue prospects
• Bring revenue prospects as far forward as possible
  • Finish one product first (do not bet on multiple products)
• Where you can't earn any income off what you are doing, ask yourself whether it is still worth doing and if so for how long
• Seek to draw down the future value you may create for suppliers
• Share out your risk
• Negotiate everything