Building a business Michalis Faloutsos Prof of Comp
Building a business Michalis Faloutsos Prof. of Comp. Sci. , UCR Co-founder of programize. com - active Co-founder of stopthehacker. com – acquired 2013 M. Faloutsos © 1
The startup myth The brilliant idea The funding frenzy The lucrative exit M. Faloutsos © 2
Debunking the myths n It takes work, skills, discipline, time n You need thick skin n n You will fail, be stressed, be disappointed 80% of startups fail M. Faloutsos © 3
Should you consider it? n Most people think of $$ n But: n There are easier more reliable ways to make $ n n How much do you really need to be happy? Most startups fail, can you handle failure? M. Faloutsos © 4
Rethink the reason “to make meaning”, G. Kawasaki, investor n “to have impact”, O. Tsatalos, ezhome n “I have a problem with authority”, n S. Xanthos, ezhome n “to build something”, M. Faloutsos © 5
How do you go about it? n A few different ways to think about it M. Faloutsos © 6
Things you will hear Start with a great problem/idea n Form a team n Take care of legal and business issues n Make a prototype n Get traction, visibility, customers n Raise money at the right time n Persist, insist, but be flexible n M. Faloutsos © 7
A complementary view… It is a mindset and a skill set n You need to study and practice n M. Faloutsos © 8
Explore entrepreneurship and see if it is for you Read some books, blogs, articles n Join clubs, hang out with people n n n Participate in activities n n Cross Campus Entre. at UCR Hackathons, Business competitions Take classes, workshops, seminars n n I-Corps at UCR: intense customer discovery Lectures M. Faloutsos © 9
Some practical tips M. Faloutsos © 10
The most critical components Identify a real problem/need n Build a great team n Execute: n n drive a clear, but adjustable plan M. Faloutsos © 11
Part 1: Coming up with an idea More of an art than a science n A problem you or people you know face n Socio-economic trends and changes n Technological trends n Policy changes n Brainstorming with friends M. Faloutsos © 12
Vetting the idea: Customer discovery Lean Startup, Eric Reis n Four Steps to Epiphany, Steve Blank n M. Faloutsos © 13
Testing the idea with the Minimum Viable Product (MVP) You need to go to the customer n You need to show them something n n n This is the MVP is not necessarily a prototype n The drone-based farm-monitoring n Drone prototype vs excel spreadsheet M. Faloutsos © 14
Part 2: Building the right team n You need diverse talents and skills n n n Engineering Sales and Marketing Presentation Leadership Execution and organizational YOU NEED TO NETWORK n YOU NEED TO BE OPEN-MINDED n M. Faloutsos © 15
Part 2: Building the right team n You need diverse talents and skills n n n Engineering Sales and Marketing Presentation Leadership Execution and organizational YOU NEED TO NETWORK n YOU NEED TO BE OPEN-MINDED n M. Faloutsos © 16
Some practical aspects M. Faloutsos © 17
Communicating your idea n You have to be able to explain it n n n At multiple levels of detail For different audiences If you can’t, it is not clear in your mind M. Faloutsos © 18
1. Communicating: NABC A business idea in its bare minimal n The NABC “test”: n n n Need: what is the problem you solve Approach: your solution Benefit: what the customer gains (time, $, ease, …) Competition: what are the alternatives to you? n Note: status quo is a big competitor! M. Faloutsos © 19
2. Communicating: The elevator pitch n A one minute overview: n n n n what your company does what is the problem you solve why is this an important problem – market size what is your novel approach what is the competition what is the status and progress of the company who is the team and why they will deliver M. Faloutsos © 20
3. Communicating: Lean Canvas your company blueprint n Lean M. Faloutsos © 21
4. Communicating: The investor pitch n The most critical summary of your business n n The only thing they care about: n n The “presentable” version of your Lean Canvas You can make money Three key messages to convey n n n This is a real problem and market You have a novel solution You are a team that can execute M. Faloutsos © 22
4. Communicating: The investor pitch structure 0. Cover slide 1. Overview 2. The problem 3. The solution 4. Biz model and market 5. Competitive advantage 6. Competition 7. 8. 9. 10. 11. 12. Go to market and size Current status - traction Management Team Financials The ask: how much $ Summary From Barringer’s book Sample Business Plan Presentation With some modifications M. Faloutsos © 23
Avoid the typical pitch errors Explain what is the problem n Explain what you sell n Explain who is the customer n Avoid drowning strengths in details n Don’t be naively optimistic n M. Faloutsos © 24
Presentation tips Understand your audience n Practice the talk n n You should not have to read the slides Make it conversational and personal n Use (safe) humor n Don’t be defensive, but exude confidence n Take notes when they give feedback n M. Faloutsos © 25
Pitching n Pitching is a science and an art n n Everybody can do a good pitch Few people can be exceptional Practice, observe, listen, adapt n There are rules, but some flexibility is ok n M. Faloutsos © 26
Some resources n n Kawasaki chapter 3 Understanding investors – common mistakes: n n http: //www. forbes. com/sites/allbusiness/2014/08/20/2 8 -common-mistakes-startups-make-when-pitching-toinvestors/#7141 ea 615 ba 3 Other pitch template ideas: n http: //nextviewventures. com/blog/free-startup-pitchdecks-template/ n http: //goo. gl/IZOs. Di M. Faloutsos © 27
Things you will hear You need money n You need advice (so, ask) n You need to write things down (paper) n You should expect conflict (prepare for it) n If it sounds too good to be true, it is not n You need to reach out and network n Be careful who you hire/partner n M. Faloutsos © 28
Lesser known truths Investors invest in people/teams n Investors can’t predict the future either n Investors can also be morons n Partners, investors can be crooks n Successful entrepreneurs are not brilliant n M. Faloutsos © 29
Some resources n Read n n “The Art of the Start” by Kawasaki “The four steps to epiphany”, S. Blank “The Power of Now”, by E. Tolle There are great resources on the web n n Y Combinator series on youtube Online Lectures on every topic M. Faloutsos © 30
UCR is becoming entrepreneurial Student club: Cross Campus Entre. n Creat’R Lab: innovation space (Winter’ 17) n EPI Center: entre. center at UCR n n Kick of Oct 26 th Advisors within UCR n Courses and workshops n n n ICorps: idea vetting workshop (Oct 22’ 16) CSE 190 Entre. in Computing, Winter 2017 M. Faloutsos © 31
Great advice from J. Nazar Find why you want to do this n Stick to the problem, not the solution n Act with urgency n Jason Nazar, entrepreneur docstock. com bought by Intuit ~ $50 M https: //www. linkedin. com/in/jasonnazar M. Faloutsos © 32
So, what now? n Explore the idea of startups n n Leverage resources, events, courses Network with people Be honest: find what matters to you n Don’t take life too seriously n Get excited about whatever you do n © Jaal LLC M. Faloutsos © 33
Thank you “You’ve got to get obsessed and stay obsessed. You have to keep passing the open windows. ” J. Irving, Hotel New Hampshire M. Faloutsos © 34
Website Protection stopthehacker. com “making the internet safer one website at a time”™ © Jaal LLC M. Faloutsos © 35
“I can’t reach your site” [your website name goes here] © Jaal LLC www. stopthehacker. com M. Faloutsos © 36
The idea: in three sentences… The problem: 70 -90% vulnerable - 6, 000 blacklisted/day The projection: just like anti-virus in ‘ 99 #of blacklisted sites doubled in 08 -09 The proposition: e-reputation protection for three © Jaal LLC www. stopthehacker. com M. Faloutsos © /mo 37
The problem: How web-based crime works User visits n Good sites become distributors of malware © Jaal LLC www. stopthehacker. com M. Faloutsos © 38
Our proposition: website healthcare n. Let us worry about your site: Prevent: assess vulnerabilities Detect: monitor site continuously Recover: identify/remove malicious code n. Software © Jaal LLC as a Service: outside the firewall www. stopthehacker. com M. Faloutsos © 39
Website healthcare is a new type of service n Complementary and distinct addition to: n n Website protection © Jaal LLC www. stopthehacker. com M. Faloutsos © firewall antispam antivirus web-access filtering 40
Competitive advantage USPTO 12/689, 986 expertise NSF awards Orrick Herrington & Sutcliffe © Jaal LLC www. stopthehacker. com M. Faloutsos © scalability 41
The heart of the matter USPTO 12/689, 986 Apart from javascript detecting malware in *pdf, *swf, *exe, *rtf files n. Decision n Logic: AI algorithms, continuous learning Not relying on simple database lookups © Jaal LLC www. stopthehacker. com M. Faloutsos © 42
The landscape of competition n. Security n n giants: Mc. Afee: not focused, expensive ($900/y) Symantec/Kaspersky: no monitoring n. Enterprise-oriented: n n Qualys: not automated, expensive ($1995/y) Finjan: more focused on web-filtering n. Start-ups: © Jaal LLC no preventive services www. stopthehacker. com M. Faloutsos © 43
Market and strategy: Two channels, one approach webhosters managed services IT auditors (standards) © Jaal LLC Direct online www. stopthehacker. com M. Faloutsos © Customers helped define services twice. . . 44
Partners and customers n. Web-hosting and IT outsourcing Acorn Technology Corp. (100 sites) n Three webhosters in Mexico, Italy, Spain n. Local Gov/Mil: n City of Riverside: www. riversideca. gov n n. Individual resellers: 4 key people Happy site owners: n n props-n-frocks. co. uk clockspot. net © Jaal LLC www. stopthehacker. com M. Faloutsos © 45
What we need to grow hire © Jaal LLC partner www. stopthehacker. com M. Faloutsos © raise n 46
The Team n n n n Co-founders Anirban Banerjee: Ph. D UCR, security expert, wellknown in security community. Michalis Faloutsos: Prof. at UC Riverside, net-works and security, 100+ articles, $6 M in grants. Two senior engineers: A. Woss, C. Read (MS). Advisor: Ed Setzer, investor/consultant. Unofficially: Brian Nugent, Bill Unrue. Legal counsel: Glen Van Ligten, orrick. com. © Jaal LLC www. stopthehacker. com M. Faloutsos © 47
History - Milestones n. Formed company in May 2008 n. Received $100 K from NSF, Jan 2009 n. Received $500 K from NSF, Jan 2010 n. Raised $59 K friends and family, Oct 2009 © Jaal LLC www. stopthehacker. com M. Faloutsos © 48
Future Milestones n. Recruit an executive in summer 2010 n. Raise $1 M by end of 2010 n NSF will match with 500 K n. Establish © Jaal LLC 8 partnerships by Dec 2010 www. stopthehacker. com M. Faloutsos © 49
Financial Projections # sites webhosted direct hosts Prsnl Revenue ($) Profit ($) Salaries ($) 2010 1, 440 1, 200 240 6 5 $339, 030 -$444, 058 $465, 720 2011 23, 460 22, 650 810 72 15 $5, 637, 060 $1, 531, 122 $1, 194, 863 2012 98, 528 95, 420 3, 109 126 27 $20, 776, 644 $8, 621, 550 $2, 034, 264 2013 254, 543 247, 022 7, 521 192 41 $51, 564, 982 $24, 332, 833 $3, 021, 921 2014 514, 496 500, 712 13, 783 270 47 $103, 226, 490 $51, 801, 918 $3, 648, 308 Sales driven - Underestimating operational cost of a large business © Jaal LLC www. stopthehacker. com M. Faloutsos © 50
“Making the Internet safer one website at a time” The problem is real. Our technology is designed to scale. We can make a difference. © Jaal LLC www. stopthehacker. com M. Faloutsos © 51
The story of Anirban Banerjee Ph. D UCR 2008 n Funded Stop. The. Hacker 2008 n n n Banerjee – Faloutsos Raised $800 K in 2011 Acquired in 2013 Funded Onion. ID in 2015 n n Raised $1. 5 M in 2015 Going strong… M. Faloutsos © 52
My story 1999 Ph. D U of Toronto n 1999 -now: Prof at UCR n n n 2008 co-founded Stop. The. Hacker n n 150 papers, 17 K citations, >$12 M funding Acquired in 2013 2014 co-founder Programize n 40 people within two years 53 M. Faloutsos ©
The purpose of this talk Should you consider a startup? n Provide some fundamental ideas n n n Coming up with an idea Getting started Avoiding usual pitfalls Introduce resources at UCR M. Faloutsos © 54
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