LTV Syllabus

LTV Syllabus 

Launching Technology Ventures 

Course Number 1757 

Faculty: Jeff Bussgang, Lindsay Hyde, & Christina Wallace  

Fall, Q1/2: 3 credits 

Course Syllabus 
The course materials are available online via the course platform (Canvas). 

Class date 

Case 

Guest 

MODULE 1: IDEATION & CUSTOMER VALUE PROP EXPERIMENTS 

09/06/23 

Classtivity 

None 

09/11/23 

Project SHED 

09/12/23 

Honeycomb 

09/13/23 

C16 Bio 

09/18/23 

Sober SideKick 

MODULE 2: GO TO MARKET EXPERIMENTS 

09/19/23 

Shippo 


09/26/23 

Ovia 

09/27/23 

Lightricks 

10/02/23 

AllSpice 

10/03/23 

BabbaCo 

No guest 

MODULE 3: PF EXPERIMENTS 

10/10/23 

Squire  

10/16/23 

Business Model Exercise 

Coaches 

10/17/23 

Sprout

10/23/23 

Fixie 

10/24/23 

Codecademy 

None 

MODULE 4: THE STARTUP ORGANIZATION 

10/30/23 

Bubble 

10/31/23 

Plastiq 

11/01/23 

Startup Hiring Workshop 

MODULE 5: ECOSYSTEM AND ETHICS 

11/06/23 

Khatabook 

Ravish Naresh 


11/13/23 

Everlywell 

11/14/23 

Founder Field Day 

Brandon Farwell 

MODULE 6: FINANCING AND EXITS 

11/20/23 

Mented 

KJ Miller 

11/21/23 

Chief 

11/27/23 

ReMo 

11/28/23 

Pitch Exercise 

No guest 

12/04/23 

Yahoo 

12/05/23 

Wrap 

No guest 

Jeff Bussgang teaches Section 1: 10:10 AM - 11:30 AM 
Lindsay Hyde teaches Section 2: 11:50 AM - 1:10 PM 

Christina Wallace teaches Section 3: 1:30 PM - 2:50 PM 


Background Reading:

 

Students are encouraged to review their notes from the MBA First-Year Course, "The Entrepreneurial Manager” as well as Field 2, but particularly the following Case Notes:

·             Ten Tools for Design Thinking (UV5187) 

·             The Hypothesis-Driven Entrepreneurship: The Lean Start-Up (812-095) 

·             Business Model Analysis for Entrepreneurs (812-096) 

·             Customer Discovery and Validation for Entrepreneurs (812-097) 


For students who want an accessible primer on software development processes and coding, read:

·             Paul Ford | What is Code?

 

A more detailed review of the standard methodology for software development, which is central to experimentation, Continuous Development, can be found here:

·             HBS Teaching Note | Continuous Development

 

Finally, throughout the course we will draw on Professor Bussgang's book, Entering StartUpLand, to provide context for how startups are organized and execute experiments in their search for product-market fit. We will assign various chapters throughout the semester.

 

MODULE 1: IDEATION AND CUSTOMER VALUE PROPOSITION EXPERIMENTS

 

I. CLASSTIVITY

Techstars graduate, Classtivity, has a vision for helping people stay fit by making local gyms more accessible but has struggled to achieve product-market fit. The founders are debating whether to persist with their new model, which is getting some traction, or contemplate launching a second major pivot. There is no class guest.

Readings:

·         HBS Case 817-002 | Classtivity: Payal's Pirouette

·         Chris Dixon | Founder/market fit

·         Marc Andreessen | The Pmarca Guide to Startups, part 4: The only thing that matters


Optional Readings:

·         Steve Blank | Vision vs. Hallucination: Founders & Pivots


Assignment Questions:

1.       The first business model, the search engine, failed and the team pivoted away. Why did the team make such a large mistake? Can you think of an MVP test they might have conducted that could have saved them 18-24 months of work building the search engine?

2.       Is Passport working? What is the business model?

3.    If you were Payal, would you pivot away from Passport and pursue the subscription offering? Does it have to be an either/or decision or can you stick with Passport while experimenting with the subscription offering?

4.       Evaluate Passport's unit economics and compare it with the contemplated subscription offering. Based on the data in exhibits 3, 6, and 9:

                                                               i.      How favorable are the unit economics?

                                                             ii.      How would you assess the value proposition for both the user and the studio?

                                                            iii.      How sensitive are the unit economics to your assumptions? For example, If you wanted a 3x LTV/CAC ratio and assumed a lower conversion than shown in exhibit 9, such as 10%, what monthly price would you need to charge assuming similar churn and class usage?

 

II. PROJECT SHED

Four Stanford Graduate School of Business (GSB) students come together in an entrepreneurship class and agree to start a company together. Although they did not yet have an idea, they were determined to pursue a process that would lead to a compelling entrepreneurial venture to pursue and build something meaningful. Our class guest will be Scott Brady, CoFounder of Project SHED.

Readings:

·         GSB Case E116A | ProjectSHED

·         Chris Dixon | The Idea Maze

·         Niklaus Gerber | A Critical Review of Design Thinking

 

Optional Readings:

·         Career Foundry | A Guide to the Most Important Ideation Techniques

·         Sudeep Srivastava | 21 Solid Ways to Validate Your MVP


Assignment Questions:

1.       Evaluate the SHED founders’ process in forming the team. What are some of the benefits and risks of their approach? What would you have done differently?

2.       Assess the search criteria defined by the SHED team. What are the “must haves” versus “nice to haves” and why? What, if anything, would you change if developing your own list?

3.       What are the pros and cons of their process for finding and selecting a business idea to pursue? How might it be improved?

4.       Is the SHED ideation model replicable? Would you consider using a similar approach yourself? Why or why not?

 

III. HONEYCOMB

Honeycomb is a mobile app designed to capture memories of beloved relatives, such as parents and grandparents. The founders are seeing early signs of product-market fit, but a surprising twist: their power users are young mothers using the app to capture baby memories rather than seniors. Should they lean into this new demographic, pivoting the product and ideal customer persona dramatically, or stick with their founding mission? Our class guests will be Honeycomb founders Amelia Lin and Nicole Wee.

 

Readings:

·         Martin Luenendonk | When and How to Pivot a Business Model

·         Noam Bardin | What is a Startup CEO's Real Job? 

Rahul Vohra  | How Superhuman Built an Engine to Find Product Market Fit 


Optional Readings:

·         Sean Ellis | Milestones to Startup Success

·         Nick Kalliagkopoulos | COHORT ANALYSIS FOR STARTUPS 101

·         Jonathan Hsu | Diligence at Social Capital Part 1: Accounting for User Growth

 

Assignment Questions:

  1. Has Honeycomb achieved product-market fit with its target user? 
  2. Should the founders pivot the model to focus on the Mama Megan user persona? What are the implications in terms of team, marketing, product, and business model of the pivot? 
  3. If you want to pivot, how would you communicate this pivot to your seed investors who are just about to wire you money? Should the founders communicate their thinking before or after closing the seed financing? 
  4. If you don’t want to pivot, what experiments would you run to determine if you have strong product-market fit with Grandma Gretchen and Social Sarah user? 

 

IV. C16 BIO

C16 Bio is a synthetic biology startup that is replacing natural palm oil, whose harvesting is an environmentally damaging process, with lab-grown palm oil. The founding team is beginning to figure out the science and now needs to turn their attention to the business model. What is the best point of entry for the product in the context of the value chain and what business model should they construct? And should they choose a market focus based on financing availability? Our class guest will be C16 CEO and founder, Shara Ticku.

Readings:

·         HBS Case 820-008 | C16 Bio

·         Abrahm Lustgarten | Palm Oil Was Supposed to Help Save the Planet. Instead It Unleashed a Catastrophe.

 

Optional Readings:

·         Amy Feldman | The Life Factory: Synthetic Organisms From This $1.4 Billion Startup Will Revolutionize Manufacturing

·         James Mitchell Crow | Life 2.0: inside the synthetic biology revolution

 

Assignment Questions:

1.       Should Shara take advantage of the market buzz/momentum for food and jump right in to that sector or do personal care first and then food later?

2.       If you think she should focus on personal care, should she:

a.       build her own brand?

b.       build a white label end product and get someone else to build the brand?

c.        work with a challenger brand?

d.       work with a large brand?

e.       why do you recommend this choice?

3.       Given your strategic choice, lay out your 12-18 month plan with respect to fundraising, hiring, experiments, and key milestones.

 

V. SOBER SIDEKICK

Sober Sidekick is an app to support addicts. The founder has successfully bootstrapped the company to $700K in annual recurring revenue but is considering a business model pivot that will temporarily take the revenue down to zero – just as he’s considering a fundraise. Our class guest will be Sober Sidekick Founder & CEO Chris Thompson.

 

Readings:

·         HBS Case | SoberSidekick

·         Brian Balfour | Product Market Fit

·         Semil Shah | Startup Risk and Fear


Optional Readings:

·         First Round Review | How Superhuman Built an Engine to Find Product-Market Fit

·         Lenny Rachitsky| What Is a Good Activation Rate?

·         Sequoia | Selecting the Right User Metric

 

Assignment Questions:

1.       Who is SoberSidekick’s customer? Should a startup have only one “true North” customer?

2.       Should Chris take his revenue to zero and focus his business model on insurance payors?

3.       In your judgment, what milestones does Chris need to achieve to raise a seed financing? Who would be the right capital partner for him and why?

4.       What kind of business should Chris try to build and what special obligations does he have, if any, given the nature of the business and his customer?

 

MODULE 2: GO TO MARKET EXPERIMENTS

 

VI. SHIPPO

Shippo is an SF-based startup trying to revolutionize e-commerce shipping and fulfillment. The company is struggling to decide the best go to market approach: API-based or application-based. Which path will position the company best for success and why? There will be no guest.


Readings:

·         HBS Case 817-065 | Shippo

·         Scott Raney | Services as Code: Selling through vs. Selling to Developers


Optional Readings:

·         Lenny Pruss | Party Like It's 1849: The Developer Tools Gold Rush


Assignment Questions:

1.       How would you assess the Shippo founding team’s founder-market fit?

2.       How do you interpret the volume figures in exhibit 7 and the churn numbers in exhibit 8? Does the app strategy appear to be working? What are the app strategy’s unit economics as compared to the API strategy? To answer this question, calculate LTV and CAC for each strategy.

3.       What should Behrens Wu do: continue to focus on the app, pivot to the API, or try to do both?

4.       For each go to market strategy, what changes – if any – would you make to the sales and product organizations?

 

 

VII. OVIA

Ovia is a mobile and online platform to help women and families manage fertility, pregnancy and early parenting. The company faces an enviable dilemma: a huge channel partner is at the table with a possible “make the company” deal. Should the founders leap at the opportunity or pursue a riskier, yet potentially more lucrative go to market approach? Our class guest will be Ovia Chief Product Officer and Co-Founder Gina Nebesar.

Readings:

·         HBS Case 818-004 | Ovia

·         Ovia Health | Case Exhibits (Excel File)

·         Mark Suster | The Fallacy of Channels: Startups Beware


Optional Readings:

·         Jeff Bussgang | Entering StartUpLand Chapter 3: The Business Development Manager

·         Ben T. Smith IV | Managing the Startup-Big Company Relationships


Assignment Questions:

1.       Review the various business model experiments (paywall, native advertising, benefits plans). What are the pros and cons of each, factoring in the market data provided in exhibits 2, 7, and 8? Why do you think it took the team so long to find an attractive business model? 

2.       Review the cohort charts in Exhibits 6a and 6b. What insights can you derive from them?

3.       What choice should the Ovia team make: 

a.       go direct or work with the channel partner?

b.       To help you frame the decision, calculate the total available market (TAM) for both options and then run a summary analysis of the unit economics to build up an employer sales force.

c.        Assume: (i) $250K of base and bonus compensation for each sales rep who achieves their quota; (ii) 60% overhead per rep in travel, benefits, management and marketing support, and (iii) a quota target of $1.2M/year.

 

 

VIII. LIGHTRICKS

Without any outside capital or assistance, the Lightricks team has successfully bootstrapped their flagship app, Facetune, into a bestseller on the Apple app store. How did they do it and what comes next in terms of pricing strategy, product roadmap and financing? Our class guest is Daniel Cohen, general partner at Viola Ventures and the company's lead investor.

Readings:

·         HBS Case 817-051 |Lightricks

·         Jeff Bussgang | Entering StartUpLand Chapter 4: Marketing

·         Fred Wilson | Marketing

·         Ryan Matzner | How To Determine the Right Price for your App

Sarah Tavel | The Hierarchy of Engagement


Optional Readings:

·         Shane Schick | Vision Mobile: "App Poverty Line" represents 60% of all developers

·         Murray Newlands | What Factors Indicate Your App Will be Successful

·         Growth Studies | Whatsapp


Assignment Questions:

1.    What do you think of the founders’ early decisions (e.g., paid vs. free, bootstrapping)? Do you agree with them or would you have made different decisions? Reflect on the ways in which the company has bucked conventional wisdom in their decisions vs. "startup 101." Why? Has it worked? 

2.    Do you agree with Fred Wilson's statement that "marketing is for companies with sucky products?" Should Lightricks have focused on free acquisition early on?

3.    Look at Exhibits 6a, 6b, 6c, 7a, and 7b. What pattern can you discern regarding their pricing, install cost, and install volume? How are they so profitable given their revenue is $3.99 (which is $2.80 net of Apple’s 30% take rate) as compared to a cost per install of $2-3?

4.    Should the Lightricks founding team take the VC term sheet? Why or why not? In either case, what should their action plan be from here?

 

IX. ALLSPICE

AllSpice is a SaaS platform to help hardware developers collaborate during their product development processes (aka “Github/Gitlab for hardware”). The company closed its seed round and launched its product just before a severe market correction in early 2022. The founders need to decide how fast to ramp their burn rate in light of their early success, despite the turmoil in the capital markets, as well as their go to market approach. Our class guests will be AllSpice cofounders Valentina Ratner & Kyle Dumont.

Readings:

·         HBS Case 823-022 | AllSpice

·         Blake Bartlett | What is Product-Led Growth?

·         Neeraj Agarwal | Triple Triple Double Double


Optional Readings:

·         Jeff Bussgang | Entering StartUpLand Chapter 6: Sales

·         Jonathan Hsu | Diligence at Social Capital Part 2: Accounting for Revenue Growth


Assignment Questions:

1.    If you were Valentina, would you ramp your burn rate? Why or why not?

2.    What go to market approach should AllSpice pursue? Examine their goals for the Series A (exhibit 7b) under each of the three scenarios. Which scenarios seems more attractive to investors? Which scenario is the better approach to build a long-term, sustainable and valuable business? Are these two goals in synch in your opinion?

3.    Neeraj Agarwal’s blog post shares a commonly understand conventional wisdom for SaaS company growth. Assume AllSpice’s goal for the Series A is to raise $10m on $30m pre (i.e., $40m post). If an investor’s goal is to achieve a 10x on this investment (i.e., a $400m valuation), when do you think AllSpice will grow into that valuation? Assume the company’s valuation would be at a 10x revenue multiple and assume the company follows whatever growth path you think appropriate from their YE 2023 goals. Does that seem realistic? Does that multi-year pro forma affect your thinking on burn rate and go to market?

 

 

X. BABBACO

Having just raised a Series B financing, the founder of BabbaCo is faced with a tough decision: should she "step on the gas" and scale the customer base or continue to focus on fine-tuning the product and business model. The case describes the various marketing channels employed by the BabbaCo team (Search, Email, Social Media, Deal Sites, Affiliates, etc.) including the strategy and effectiveness for each. 

Readings:

·         HBS Case 813-107 | BabbaCo

·         Spreadsheet | BabbaCo Exhibit 5 & 6

·         Jeff Bussgang | Your LTV Math is Wrong


Optional Readings:

·         Jeff Bussgang | Entering StartUpLand Chapter 4: Marketing

·         Andrew Chen | There's only a few ways to scale user growth, and here's the list


Assignment Questions:

1.       Looking at exhibits 5 and 6, analyze the results from each of the various customer acquisition channels and develop a dashboard evaluating the effectiveness of each channel. Are there additional customer acquisition strategies or tests that Jessica should attempt?

2.       Has the company achieved product market fit? Is now the right time to scale? If not, why not? If so, what areas would you invest more heavily in?

3.       Discuss and come up with additional approaches Jessica should use to refine the product and content offering to build a successful company in the long-term. What tests would you run to validate these approaches?

4.       If you were Jessica, what plan would you present at the upcoming board meeting?

 

MODULE 3: PF EXPERIMENTS

 

XI. SQUIRE

Squire is a vertical SaaS start-up for barbershops. The company has struggled to convince investors that its market size is large enough to be “venture-scalable” and just as the founders feel like they’re getting traction, COVID-19 hits and their end users are forced to shut down. Should the founders adjust their business model to meet the needs of their customers or the feedback from their investors? Our class guest will be founder and CEO Songe LaRon

Readings:

·         HBS Case 821-073 | A Close Shave at Squire

·         Spreadsheet | Squire Exhibits 11, 12, and 13

·         SimilarWeb | Market Sizing

·         Mike Vernal| The Market Curve

 

Optional Readings:

·         A16Z | Fintech Scales Vertical Saas

 

Assignment Questions:

1.       Why are the founders getting push back from investors on total available market (TAM) size? Is it justified? What is your math with respect to the TAM/SAM/SOM for Squire?

2.       Are the company’s unit economics attractive? In answering this question, calculate LTV and CAC based on the data from the exhibits. What assumptions do you need to believe for the company to have an attractive business? 

3.       What should the founders do at the end of the case in terms of pricing (i.e., waive SaaS subscription fees?) and staffing (i.e., initiate a layoff?)? 

 

XII. BUSINESS MODEL EXERCISE

In this exercise, teams of three or four students will analyze one team member’s proposed business model for a new venture with the goal of refining the model and specifying MVP tests for key hypotheses. 

 

Readings:

 

In this exercise, your job is not only to evaluate your classmate’s planned experiments (i.e., process quality) but also their overall business model (i.e., idea quality). The assigned reading will help prime your thinking on the latter.

 

XIII. SPROUT

Manilla-based Sprout is a leader in SaaS in the Philippines, an attractive but small market. The founders are set to expand beyond their initial application and initial market segment but are unsure of which direction to pursue – and which is more financeable. Our class guest will be Sprout co-founder Alex Gentry.

 

Readings:

·         HBS Case xxx-xxx| Sprout

·         Kyle Poyar | International Growth Is No Longer Optional for SaaS Companies


Optional Readings

·         Bessemer | Six Product Strategies to Catalyze Your Second Act

 

Assignment Questions:

1.       What should the founders do:  double down in the Philippines or expand throughout SE Asia? If you think they should double down in the Philippines, does that mean you disagree with OpenView’s Kyle Poyar? If you think they should expand throughout SE Asia, how do you think they can reconcile this with their “true north” of impacting lives in the Philippines?

2.       For whatever decision you recommend, create the first page of the pitch deck to investors using no more than four bullet points. Then, create the first page of the “all hands” company meeting to announce the new direction.

3.       Should the team pursue international or local investors? Does their expansion path dictate their investor profile?

 

XIV. FIXIE

SF-based Fixie was founded by a technical team with the vision of making generative AI useful in the enterprise. The company is off to a fast start and the market is white hot – perhaps too hot. Just as Fixie’s vision crystallizes and on the eve of launching their initial product, ChatGPT announces the creation of a competing platform. Now what? Will this startup be a casualty of the generative AI wave or can it nimbly position itself to be a winner? Our class guest will be Fixie founder Matt Welsh.

 

Readings:

·         HBS Case xxx-xxx| Fixie

·         Fred Wilson | Team and Strategy


Optional Readings

·         McKinsey | The Economic Potential of Generative AI


Assignment Questions:

1.       How should Welsh and team respond to the news that ChatGPT is building essentially what they are planning to launch?

2.       What are some of the team’s key hypotheses? What experiments should they run to test these key hypotheses in the light of the news?

3.       When and how would you communicate to your prospective series A investors?


XV. CODECADEMY

NYC-based Codecademy has seen tremendous growth and user adoption since its launch. The company is now contemplating its next move--whether to continue to drive adoption or begin to run monetization experiments. There is no guest for this class.


Readings:

·         HBS Case 814-106 | Codecademy

·         Andrew Chen | Why it's smart for consumer startups to grow first and make money later

·         First Round | It’s Price Before Product. Period.


Optional Readings

·         The Pros and Cons of Different Business Models in Edtech


Assignment Questions:

1.       Union Square's Andy Weissman warns against pursuing monetization strategies too soon. Do you agree with this? When is the right time to pursue monetization strategies and how do you know when the time has come?

2.       Is it time for Codecademy to pursue monetization efforts?

3.       If so, which one should they choose and why?

4.       What experiments should Codecademy run next to test out monetization strategies? Or is it time to focus on, and scale up, one particular model?


MODULE 4: THE STARTUP ORGANIZATION

 

XVI. BUBBLE

Bubble is a low-code tool for entrepreneurs to rapidly build their web-based applications founded by two entrepreneurs who have elected to bootstrap the company and not raise any capital. Six years in to their company-building journey and the company had achieved over $1 million in revenue and profitability. Just as they seem to be achieving product-market fit, the founders faced the hard question as to whether to raise their first round of outside capital and how to spend the money. Our class guest is Bubble co-founder Emmanuel Straschnov.


Readings:

·         HBS Case | Bubble

·         Ryan Smith| Why Every Startup Should Bootstrap

·         Sramana Mitra | Bootstrapping to Exit


Optional Readings:

·         Eric Paley | Venture Capital is a Hell of a Drug


Assignment Questions:

1.       Do you think the founding team made a mistake to bootstrap for six years versus raising capital to hire a team and fuel their growth?

2.       If you were the Bubble founders, would you take capital now?

3.       If so, who would you hire and why?

 

XVII. PLASTIQ

The founders of a venture-backed startup need to figure out their go-to-market strategy and the right profile for their first key sales hires. Should they develop partnerships with channels that would provide leverage or build out a direct sales force? And should the sales team be led by an experienced senior sales executive or a scrappy mid-level sales manager? Our class guest is Dan Choi, Co-Founder of Plastiq.

Readings:

·         HBS Case 813-125 | Plastiq

·         Mark Leslie and Charles A. Holloway | The Sales Learning Curve

·         Joe Kraus | How to Hire the Right Salesperson

 

Optional Readings:

·         Brendon Cassidy | The Benefits of Hiring a Stretch VP of Sales (and the Risks)

·         Bill Gurley | The Dangerous Seduction of the LTV Formula


Assignment Questions:

 

1.    DO THE LTV/CAC NUMBERS (using your best guess on the key inputs based on the company’s business model) for each channel choice. What go-to-market strategy should the founders choose? What are the tests they can conduct to help validate their go-to-market decision?

2.    Who should Plastiq hire to become VP of Sales and why?

3.    We have seen many startups struggle with the initial hiring decision, particularly with go to market resources –- e.g., BabbaCo and their first head of marketing. What rules of thumb should a founder follow for hiring a first head of marketing? Are they different for a first head of sales?

 

 

XVIII. STARTUP HIRING WORKSHOP

In today’s class, we will conduct an exercise focused on startup hiring. We have touched on some of these themes with many cases (e.g., Plastiq and Bubble most recently) and will use this class session to deconstruct the nuts and bolts of how to source, interview, and close candidates. Our class guest with be Geoff Smart, founder of ghSMART, a 200-person consulting firm that focuses on hiring. Geoff has been kind enough to purchase copies of his book WHOLinks to an external site. for everyone in the class. There is no case to prepare.

In preparation, please read the articles below (each of them is quite short).


Readings:

·         Fred Wilson | Team and Strategy

Optional Readings:

·         Harj Taggar | Convincing Engineers to Join Your Team

 

 

MODULE 5: ECOSYSTEM AND ETHICS

 

XIX. KHATABOOK

India-based Khatabook is a digital ledger app for small businesses to record financial transactions and accept payments online. The company’s product-led growth strategy has yielded promising results in the face of strong competition. But with zero revenue and sky high expectations, the founding team is faced with a series of dilemmas regarding where to focus next. Our class guest will be Khatabook founder/CEO Ravish Naresh.

Readings:

·         HBS Case | Khatabook

·         Jeff Bussgang | Entering StartUpLand-Chapter 5: The Growth Manager

 

Optional Readings:

·         Tom Byers | Finding Our Values: A New Era of Entrepreneurship Education


Assignment Questions:

 

1.    What should Naresh do at the end of the case:  focus on growth/top of the funnel, usage/bottom of the funnel, or monetization?

2.    What is your assessment of Khatabook’s decisions to date with respect to monetization timing?

3.    If you think it’s time for monetization, what monetization experiments should Naresh run?

4.    Do you agree with the Ravish’s choices to date more generally? How would you compare his actions and approach in building Khatabook to other entrepreneurs we have studied far?


XXI. EVERLYWELL

Everlywell is an at-home lab test startup achieving strong growth in a competitive market. In March 2020, the COVID-19 pandemic begins to sweep through the United States and the company is faced with both the challenge and opportunity to step in and develop at-home coronavirus tests despite concerns from regulators and the risk of distraction from their core strategy. Our class guest is founder and CEO Julia Cheek.

Readings:

·         HBS Case | Everlywell

·         Claudine Gartenberg and George Serafeim | 181 Top CEOs Have Realized Companies Need a Purpose Beyond Profit

·         Natasha Singer | Lawmakers Question Start-Ups on At-home Kits for Coronavirus Testing

·         Milton Friedman | A Friedman doctrine‐- The Social Responsibility Of Business Is to Increase Its Profits


Optional Readings:

·         Atlantic | US Coronavirus Testing Could Fail Again


Assignment Questions:

1.       Did Cheek do the right thing to pursue the coronavirus test from a shareholder perspective?

2.       What experiments could the company have run to reduce regulatory risk?

3.       Given the FDA news, what should Cheek do now?

 

XXII. FOUNDER FIELD DAY

Born out of Harvard Business School, Rothenberg Ventures is off to a fast and promising start. Founded by Stanford and HBS alumnus, Mike Rothenberg, the firm aspires to be a disruptive force in the staid venture capital industry. Does the firm’s fall from grace represent an individual anomaly or something more systemic and insidious about StartUpLand? Our class guest will be former Rothenberg Ventures partner Brandon FarwellNote that at the time the case was written, the focus was on Fran Hauser’s decision. NOTE: you can skim that portion of the case (i.e., pages 9-11) and instead focus more on the elements consistent with the assignment questions below (i.e., pages 1-8).

Readings:

·         HBS Case 815-101 | Founder Field Day

·         The Rise and Fall of a Virtual Gatsby

·         The SEC Has Charged Mike Rothenberg For Fraud

·         The Ugly, Unethical Underside of Silicon Valley


Assignment Questions:

  1. What accounts for RV’s initial success as a new VC entrant at the time of the case? Why might Brandon Farwell find it an appealing firm to work for?
  2. After reading the assigned articles that came out after the case, why do you think things went so wrong at the firm? If you were an LP on the firm’s advisory committee, what might you have done differently?
  3. If you were Brandon Farwell and discovered issues with Mike’s behavior 6-12 months before the TechCrunch articles came out, what should you do? What might you have done differently going into the partnership with Mike?


MODULE 6: FINANCING AND EXITS

 

XXIII. MENTED

 

Mented is an ecommerce cosmetics companies founded by two Black women focused on women of color. The founders believe they have uncovered a large unmet need within the beauty industry and have developed enough conviction as a result of their consumer value proposition and go to market experiments to quit their jobs and pursue financing to launch the venture. What should their financing strategy be based on their business model, financial forecasts, and the systemic biases that persist in the venture capital industry? Our class guest will be co-founder KJ Miller.

Readings:

·         HBS Case 318-093 | Mented

·         Spreadsheet | Mented cap table exercise

·         Dimira Teneva | Beauty Brands Ecommerce Benchmarks


Optional Readings:

·         Geoff Ralston | A Guide to Seed Fundraising

·         Lee Hower | What Milestones Are Needed to Raise a Series A

·         James Norman | A VC’s Guide to Investing in Black Founders


Assignment Questions:

 

1.    Is Mented’s business an attractive one? How would you assess the market opportunity and business model?

2.    What should Johnson and Miller do with their financing strategy? How much money should they raise and how aggressive should their projections be?

3.    What are the tactical steps Johnson and Miller should embark on to test the fundraising market and best position Mented for success?

4.    DO THE CAP TABLE MATH:  using the Excel file on Canvas, "Mented cap table exercise", model out what KJ and Amanda's ownership would look like post series A (i.e., after the pre-seed, seed, and series A rounds) assuming they are able to follow the "20% rule" (i.e., they sell 20% of the business) in each of the three rounds. Note: assume there is a 10% option pool for other employees post series A.Now assume they must sell 33% of the business in each of the three rounds -- what is their resulting ownership?

 

XXIV. CHIEF

Chief is a private network for female executives. The company has gotten early positive indications of product-market fit post-launch but the founders are unsure how aggressively to expand the service. Should they abandon lean principles and blitzscale? Our class guest will be co-founder Carolyn Childers.

Readings: (Students can skim the two Chief Role cases but read the Scaling at Chief case thoroughly)

·         HBS Case 920-021 | Scaling at Chief

·         Tim Sullivan | Blitzscaling

·         Manas J. Saloi |Premature Scaling Will Kill Your Startup


Optional Readings:

·         Ben Horowitz | The Case for the Fat startup

·         Fred Wilson | Being Fat is Not Healthy

·         HBS Case 920-019 | Chief: Role for Carolyn Childers

·         HBS Case 920-020 | Chief: Role for Lindsay Kaplan


Assignment Questions:

1.       Does Chief represent an attractive business model (i.e., should it be worth 10x revenue or 2x revenue)? Why?

2.       Has Chief achieved product-market fit (PMF)? What more would you like to see to have high conviction on PMF if you were Childers and Kaplan?

3.       The two assigned readings represent different approaches to startup scaling – or do they? What should Childers and Kaplan do with respect to their scaling decision: how aggressive should they be and how much money should they attempt to raise?

4.       The case notes on page 5 that Chief’s seed round was $3m and led by two early-stage VC firms. The case doesn’t disclose that the two lead partners on the deal from each firm are men. How should that effect the founders’ thinking on who it should raise money from in the upcoming Series A round, if at all?

 

XXV. REMO

ReMo is a climate tech startup with a vision for transforming renewable project development. The company's model is capital intensive, with little technical innovation but significant business model innovation. The founders have a clear vision for their business model, but are struggling with what their first experiment -- an ammonia production plant -- should look like in terms of scale. And, most importantly, they are struggling with the financing path to realize it. Our class guests will be co-founders Bhargavi ChevvaLinks to an external site. and Scott RackeyLinks to an external site.. 

Readings: 

Optional Readings: 

Assignment Questions:


  1. In The Engine's "Blueprint for Tough Tech Entrepreneurs", there is a venn diagram outlining a series of four risks. Characterize the ReMo business model in the context of how you would rank it across each of these four risks:  high, medium, or low.
  2. Take a look at Exhibit 3, which lays out the project economics by plant size. Based on these figures, what size plant should they plan to build as their first experiment? Which investors should they make this pitch to -- VC firms or project financing capital providers? 
  3. From an investment standpoint, are the increased risks associated with ReMo justified by an increased reward if the company gets it right? How much will ReMo be worth at scale and why? 

 

XXVI. PITCH EXERCISE


The startup pitch exercise will be an opportunity to learn about how to pitch your startup and then watch four of your classmates put the learnings in action. Our class guests will be Simon Rothman (Greylock) and Janet Kraus (serial entrepreneur and former HBS Senior Lecturer). There is no case to prepare for the session. Instead, please read the two assigned readings below and come ready to both support and critique your classmates.

Readings:

·         Background Note | Raising Startup Capital

·         Jeff Bussgang | Mastering the VC Game Chapter 1

Optional:

·         Watch this video of Jeff Bussgang (on 1.2x speed, it will take ~ 16 minutes) or skim the transcript (~ 8-10 minutes) for a tutorial on how to effectively pitch your startup.

 

XXVII. YAHOO

NY-based Stamped is running out of time and money. This case explores both sides of an acquisition-hire ("acqui-hire") as the Stamped founders evaluate an opportunity to join up with Yahoo! Our class guest will be co-founder Bart Stein.


Readings:

·         HBS Case 814-051 | Yahoo! Both Sides of the Stamped Deal

·         Scott Orn | What Does Your Startup Need to Know about Acqui-hires?

·         Mark Suster | The Corrosive Downside of Acquihires


Optional Readings:

·         Sarah Lacy | The Acquihire Scourge: Whatever Happened to Failure in Silicon Valley?

·         Sarah Needelman | Startups Get Snapped Up For Their Talent

·         Fred Wilson | M&A Issues: The Integration Plan


Assignment Questions:

1.       Evaluate Yahoo’s M&A “acquihire” strategy and corporate development organization at the time of the Stamped acquisition opportunity and describe what direction the corporate development group needs to take to contribute to the Yahoo turnaround.

2.       Should Jackie embark on the Stamped acquisition? What should be her main considerations in evaluating the decision?

3.       Should Robby and Bart accept the Yahoo offer? What should be their main considerations in evaluating the decision?

4.       If you were Scott Friend of Bain Capital, how would you evaluate the Yahoo offer?

 

XXVIII. WRAP

This final class is dedicated to reviewing and discussing the concepts learned during this course as well as stepping back and sharing a few observations about an entrepreneurial life. 

Readings:

·         Clayton Christensen | How will you measure your life?

·         Jeff Bussgang | Entering StartUpLand Chapter 8: Search Process


Optional Readings: 

·         Jessica Bruder (Inc.) | The Psychological Price of Entrepreneurship

·         Tom Eisenmann | What MBAs Should Know About Startup Jobs

·         David Ongchoco | What This 6-Time Entrepreneur Really Thinks About Building a Startup


Assignment Questions:

1.       Please complete the Feedback Poll on LTV Cases & Sessions.

2.       Please bring your laptop to class to complete the HBS Course Evaluation.

 

 

 

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