Entrepreneurship 101 - Value add to existing items

Since the last year, Stanford has been sponsoring Entrepreneurship week contest of being creative and “adding value to existing items.”

And, the drum roll please; this year’s secret item to add value to is: Rubber Band.

value_add_rubber_band

The 2008 Innovation Tournament is open to teams of Stanford students, as well as students around the world. Teams can be of any size. Your challenge is to create as much value as possible using rubber bands. You can use as many as you want, of any size, shape, or color. Value can be measured on any scale you choose. Remember, value comes from actually implementing your ideas and delivering results. To be successful, challenge assumptions, seize opportunities, be creative, and Make it Happen!

Last year, the secret item was Post-it Notes. And some of the entries were creative and business worthy.

braille_note

My favorite entries from the last year were: Braille Note - A Braille Navigation System for Sight Impaired; selling ads on the Post-it was obvious, most sustainable and probably fundable idea; and selling the preemptive prize of the event on Ebay was gimmicky, but a cool thought.

You can see the complete list of winners for 2007 here.

Here are my ideas for the rubber band:

High tech ideas:

  • Rubber band with a ring tone built in. There is already a strip of paper available that can be made to hum any tune. Use the rubber band instead to create a ring tone. Perfect for a packaging for a ring tone card or for birthday card.
  • A rubber band rocket launcher. It might be possible to launch less than 2 lb rocket with rubber band canon. Do it right and win this competition and the Lunar X prize at the same time! :-)
  • Rubber band to monitor the temperature of your computer system. This should be easy to implement. If the temperature goes up, the band becomes softer and stretches more.
  • Use rubberbands to generate energy while you are walking. Essentially, it stores a part of the energy when you are walking and then delivers it back when you need it.

Low Tech Idea:

  • Make a rubber band music video (either as a story to existing number or create music using rubber bands.)
  • If done right, rubber bands can be used as a filteration device. Additionally, they can be self cleaning. After using a bundle of rubber bands as a filter, stretch and release the bundle to auto clean.
  • Rubber band with writable sleeves (ready for ads or customization) would be too obvious, but I think it will work. Printable friendship bands are all around so that doesn’t count.
  • Make crossed rubber bands. I find that to secure something, I need to use two to four rubber bands and attach them in two different directions. A pre-arranged rubbers cluster might be helpful. Also, I hate those metal twist ties on bags. I end up using rubber bands to secure those bags any way. A custom designed rubber band suited to tie bags would be nice. Or, make adjustable rubber bands. When I want to use rubber band, they are never of the right size and don’t provide the right amount of force.

So what can you do with a rubber band? You have a less than a week to come up with an idea, implement it and document it.

rubberband_world

Leave a comment if you can think of any other ways to add value to a rubber band.



Success factors of early stage venture investing

image What are the factors that determine the success of Angel investing?  In the most comprehensive study of Angel investors, Robert Wiltbank and Warren Boerker have looked at the portfolios and exits of 539  Angel led investments, in a three year study conducted through the Angel Capital Education Foundation and the Kaufman foundation (study is here Returns to Angel Investors in Groups).  They gathered data from several prominent angel networks including the Tech Coast Angels in Southern California.  Their analysis provides interesting insights into the factors that determine success in early-stage venture investing.

First, the numbers: the average ROI on investments of individual investors who are part of angel networks is 27% on average, with 2.6x return in 3.5 years.  The returns are concentrated in a small number of investments with only 7% yielding more than 10x.

 

1.  Due diligence: the amount of due diligence conducted on an investment is a direct predictor of success.  It is clear from the study that a higher number of hours of due diligence relate to greater returns on the investment.  This confirms that the large number of hours that angel networks spend in due diligence, per deal, is indeed time well spent.

2. Expertise: The experience of the angel investor in the industry that they invest in is also correlated with the success of the deal.  The strength of large angel networks lies in the depth and breadth of the expertise of its members.  This finding regarding the correlation of investor experience with returns indicates that in angel networks, investments are best led by (or actively supported by) members who have specific domain expertise in the area.

 

3. Follow-up: Hands-on investors had a higher success rate than those who were less involved with their portfolio companies.  This finding certainly makes sense, as companies that are closely mentored and receive the benefits of the investor’s experience, are more likely to succeed.

 

image The study covers investors in major angel networks.  Individual Angels are not included in the study.  It is not clear how the performance of individual Angels would compare with the results of this study.  One can only guess that single investors would not invest the tens to hundreds of hours of due diligence typically conducted on investments in angel networks.  On the other hand, angel investors with very strong know-how in a particular domain might perform very well if they invest within their own area of expertise.  Individual Angels tend to invest in companies and people that they are familiar with, so they might have more insight into the strengths and expertise of the entrepreneur. 

The issue of an investor keeping in close touch with the companies that they invest in, is a big one.  The standard recommendation is that an angel investor build up a portfolio 20 to 25 investments, so that they are properly diversified. For an individual investor (or even one within a network) the job of tracking that many companies can be very time consuming indeed.

And then there is the issue of what is "suitable diversification" in a venture portfolio. If we use the results of this study - that only 7% of investments are in the category of "make-the-fund" transactions that return more than 10x, it implies that in a portfolio containing the recommended 25 investments, 1.75 on average, will generate high returns.  With an error of 0.75 on the average number of investments needed, there is a 67% (1 sigma) probability that the investor get between one to two big hits under their belt. 

The last piece of analysis assumes a normal curve for venture investments. But but of course we know that there is nothing "normal" about venture investing, and that the highly interesting phenomena really lie in tails of the distribution!

 



Leverage: Ending gift card clutter!

leverage virtual wallet logo Do you have some gift cards from the holidays taking up space in your wallet? Wouldn’t it be nice to exchange those Gap cards for Nordstrom?

Leverage, an Irvine based start up affords its users an opportunity to purchase and track cards from hundreds of national retailers in one place. Unlike other gift card sites, Leverage’s business model is unique. Rather than paying extra for the privilege of purchasing a card, consumers collect interest on card balances on account. At a time when most cards go unredeemed and sites charge a premium to buy gift cards online, Leverage’s free approach is refreshing and makes a great deal of sense for gift card holders. Moreover, since cards are tracked electronically all in one spot, it helps in cases where a physical card is lost, gift card balances need to be checked, and it removes the need to hunt for all that plastic (especially when shopping online).

Once registered, unwanted gift cards can then be swapped with other users in the Leverage community. Members get full value in the exchange and Leverage does not charge a fee for the service - all of the other places you can swap or sell a card do charge fees.

The Leverage "virtual wallet" goes further in tracking loyalty programs such as frequent flier programs of major airlines, hotel stays, rental cars, etc. At a glance, a member can determine loyalty point totals from various programs rather than having to log on to each airline/hotel site separately, remember usernames and passwords, etc. How many of us can attest to losing frequent flier miles to expiration? Tracking loyalty points on Leverage provides full visibility and increases the chance that they will actually be redeemed for awards.

leverage virtual wallet

Additionally, Leverage offers consumers a way to receive specific, targeted offers and coupons. Leverage will anonymously combine the information gained from activity on the site with profile, gift card, and loyalty program information to “pull” offers to you from retailers and manufacturers. Such messages would only be delivered to members when they are in the mood for them rather than interrupting you with email (in other words, you see you pulled offers only when you log into your Leverage account). The Leverage user would essentially decide what messages they’d rather hear about; for example a 30% off in-store coupon at Borders, or a sale announcement at the exact online apparel store that they are holding a $50 gift card to in their Leverage wallet.

Additionally, with their Transparent-Targeting mechanism, Leverage provides members with the exact targeting rationales from the retailer for each offer that gets pulled. For instance, a communication from a retailer might be target you and let you know that "you received this offer because you’re a 25-40 year old female, holding at least $48 worth of our gift cards and you indicated an interest in fashion". This is all done anonymously and members would also be able to exercise full control by "dialing up or down the volume" to get more or less messaging from the retailer or the specific category.

This control and feedback, unprecedented in the industry, enables a member to anonymously ask for relevant information and for retailers to target their messages to a motivated consumer.

All in all, Leverage offers a unique approach to a sticky problem; that of purchasing and keeping track of gift cards and loyalty programs. It offers retailers targeting messaging and consumers with an ability to control what they want to see and hear about.

Contributed by Rabinder Sekhon, Sekhon Advisors

Technorati Tags: leverage,virtual wallet,gift cards


Robert Scoble and the secret Microsoft killer product

We know that Microsoft is going to unveil a revolutionary product. We think it is coming out March 3rd. We don’t know what it is. We know a lot about what it isn’t.

The hoopla started when Scobleizer Robert Scoble broke the story that he was shown a Microsoft product which was so moving that it made him cry.

Microsoft researchers make me cry

It’s not often that I see software that really changes my world. It’s even rarer that I see software that I know will change the world my sons live in. I can count those times pretty easily. The first time I saw an Apple II in 1977. When Richard Cameron showed me Apple’s Hypercard. And something called Photoshop, all in his West Valley Community College classroom. Later when I saw Marc Andreessen’s Netscape running the WWW.

I think we have all been there. Seen an invention that you knew was going to change the world.

So it was when I saw the first web browser. It was Mosaic (the mother of all browsers), beautiful, even in its first version. I tried to tell others what I had beheld. "It had graphics, hot links that you click on to go to yet another page, you book mark things you like….". But it was like speaking a language no one understood. If all you had encountered were Bitnet, Decnet and ATDT (remember?) there is no way you would have the vocabulary to understand how revolutionary the first graphic web browser experience is.

So I understand Robert Scoble, and his need to write about what he had seen, even if he cannot divulge the details yet.

Techcrunch has spent some time speculating about what this is. Scoble has replied on his blog with what the new product isn’t - ie everything that Techcrunch is speculating about. According to Robert it is not operating systems, productivity apps, data centers or databases, video game consoles. And no, it is not the touch table top pc either. What is seems to be is a clever, small application that two (presumably very smart) people built.

So then Valleywag gets into the fray. They scold Scoble for starting hype about a product before he is released from an embargo regarding divulging information!

From Valleywag: Unsolicited advice, Robby: If you have an embargoed piece of information, don’t talk about it until you can talk about it. You’re not building buzz, you’re killing it in advance by sending people’s imaginations soaring in the wrong directions

Excuse me! There is no great product that has needed buzz before it was released, to be successful (think Facebook, Google, Ebay). Nor has any product been killed simply by hype.

image For those who are pointing to the Segue as a prime example of high expectations generated due to too much buzz, lets just be honest. The product did not get killed because of buzz. It faded away because it looked dorky! Steve Jobs thought so, and a focus group of a few teenagers would have come to the same conclusion if the designers had let anyone have a peek at the product while it was being built!

Meanwhile - yay for Microsoft! We are all ready for them to totally wow us with their next app!



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