Today we had three Business Clinics followed by Workshop IV. Our first clinic was on Angel Investors. We met with Mark VanBuhler and Barry Hotchkies of the Keiretsu Forum. We started the meeting with Nate giving a short version of our business pitch to Mark and Barry to see what they think about it. We also used them to test a few different strategies we have. We talked about some other general issues. For example, they said that angel investors are looking fof 7-10x returns over 3-5 years. They also told us that some of the main attributes they are looking for in a business plan are: large market size, surveys and testimonials, advantage over competition, strong IP and being first to market. The main feedback they gave regarding our current pitch is that we need to develop the problem description.

Our second clinic was on Public Relations with Tim Cox of Zing PR. Tim told us that PR is mainly about using press releases to get a message to customers. He talked about the phases of a product purchase:

1. Awareness: What companies do I know of that make the product I want?
2. Education: Which of these companies fit with my needs?
3. Consideration: What are the reputations of these companies?
4. Purchase: How much does it cost?

Tim says that PR plays an important role in the first 3 steps using traditional media (magazines, newspapers, TV, radio, etc.) and blogs. He also said that most physical products benefit from traditional media while community based services fare better with blogs from trusted community leaders.

Our final clinic was on Strategic Marketing with Mary Kelley of Oak Grove Associates. We talked to Mary about the various market segment we were considering. She seemed to feel that the high-end Home Automation segment would be a good starting place for us because these people cared a lot about using the latest technology and didn’t care much about price. She also suggested we look at the “Lifestyles of Health and Sustainability” or LOHAS. Here are some other pointers from Mary:

• Make sure you have a complete product, e. g. installation, service, replacement parts, etc.
• Keep track of customer satisfaction using surveys
• Be very aware of regulations, privacy issues, and global competition

After the clinic, we had a food break with some time for networking (see above picture). Nate and I mostly talked together about the topics we discussed in the clinics. We also had a brief chat with one of our competitors, Darryl, from Lucid Design Group. Lucid makes some pretty cool software and services for energy monitoring. Nate and I are thinking we may want to partner with a company like Lucid sometime in the future, because they have really nice web applications for the end user experience.

The first session of the workshop was on Channels. It was presented by Mike Haines. He described channels as a method or business partner to get a product or service from you to an end user. Mike promotes ideas like “start with the end in mind” and “the seven habits of highly effective people,” which in this case are:

1. Be as clear as possible about your ultimate customer
2. What is the complete solution?
3. What are you willing to invest in a partner?
4. What are the key selection criteria for your partner?
5. How do you prepare your partner to generate revenue?
6. How do you measure sales productivity?
7. Is your team aligned?

The second session of the workshop was on grant based funding. Stewart Eckman of the Keiretsu Forum and Lifescience Angels talked about a foundation he works with called Canine Health Foundation. While his foundation is not directly related to Clean Tech, he was able to give us an idea about the general flow of grants from foundations. One of the main points was that you do not need to run a non-profit to be able to make use of these grants. You only need to fulfill the need of the non-profit for which the grant is allocated. As a key resource for finding available grants, Stewart recommended the Foundation Center. The second half of this session was about government grants and was led by Jeremy Walker of the CCTO. Jeremy highlighted 3 main government grant sources for Clean Tech:

1. Small Business Innovation Research (SBIR) - funded by the U. S. Small Business Administration
2. Small Business Technology Transfer (STTR) - funded by the U. S. Small Business Administration
3. Public Interest Energy Research (PIER) - funded by the California Energy Commission

The Phase I SBIR grants can be as much as $100k while Phase II can go up to $750k. PIER doles out $62M a year in grants up to $95k per project.

The next section was about organizing your company and was presented by Bob O’Connor. Bob compared the various forms of business entities, including sole proprietorship, general/limited partnerships, limited liability companies, and corporations. The conclusion was if you want venture capital, then C corporations are the way to go. He also discussed stock related topics such options and vesting.

The next section was about Intellectual Property and was presented by Peter Eng and George Willman of Wilson Sonsini Goodrich and Rosati. There are four basic protection tools: Copyright, Trade Secret, Trademark, and Patent (in order of rising protection and cost of implementation). A U. S. patent is valid for 20 years from the filing date. They said the two main reasons companies file patents are:

1. Secure rights and build value (offensive strategy)
2. Avoid misappropriation and infringement (defensive strategy)

Here are their top 10 tips for IP:

1. Leave the past behind - don’t use prior employer information
2. Get it in writing - use legal agreements to record who owns what
3. File before deadlines - in US you have 1 year from first public disclosure or offer for sale
4. Avoid the pitfalls of Provisional Patents - can lead to a false sense of security
5. Pursue a strategic patent program - think ahead an patent the path you plan to travel
6. Avoid joint ownership - this can cause problems down the line
7. Manage infringement risk
8. Manage risk of contamination (from use of others IP) and blocking (stopping incremental development)
9. Avoid restrictive covenants and grant backs
10. Preserve exit options in agreements

The final session of the night was a panel on Starting Up a Venture “Cleanly” moderated by Susan Gladwin of the CCTO. Susan said she had trouble finding clean high tech companies to join the panel, but felt the philosophy was similar across the range of businesses. The panel consisted of:

• Lewis Buchner - CEO of EcoTimber
• Jeff Mendelsohn - CEO of New Leaf Paper
• Larry Bain - Founder of Let’s Be Frank

All of these companies were founded with sustainability at the core. The discussion revolved around the constant trade-offs between the environment and cost. There was also a discussion about how it is not possible to be perfect in today’s market, but you can be at the leading edge of what’s viable for your industry. The hope is that you will pull your industry along the sustainability path while continuing to innovate on sustainable practices.

It was a long day. There won’t be a workshop next week. The final workshop is on September 11 and will focus on the Investor Pitch. Nate and I still have alot of work to do over the next few weeks.

Today was the 3rd workshop of the CCTO summer series. From 11 AM to 5 PM there were Business Clinics scheduled, but Nate and I did not have any scheduled. We met in Palo Alto in the afternoon, then went to the Wilson Sonsini office to meet with our mentor, Ed. With Ed we discussed our latest business strategy and started working on our value proposition. We were having such a good meeting, we ended up not even attending the workshop. I guess I’ll have to read up on financial planning on my own.

The second workshop of the CCTO Summer Workshop Series was all about marketing. Once again the workshop was at WSGR. Some food was provided starting at 6 PM with the session starting around 6:30. A welcome presentation was given by the CCTO co-chair, Marc Gottschalk, who works at WSGR. Dave Weinerth of PARC was up next. He introduced the format for the rest of the evening, then introduced the first presenters.

The first workshop session of the evening was called “Finding & Understanding the Customer”, presented by Christina Allen and Jim Stoneham of Tangibility. Tangibility is a self-proclaimed “start-up team in a box” which helps companies with strategic and tactical marketing. They are also one of the sponsors contributing to the CCTO prize package. Christina and Jim are the co-founders of Tangibility. At the outset of the presentation, they highly recommended a marketing book called “Positioning: The Battle for Your Mind” by Ries and Trout. They touched a bit on how there is very limited space in the consumer’s brain for product associations, so your challenge is to place your products in the proper way to create or displace some space. They also talked a bit about the typical product adoption graph and the “chasm” between the early adopters and the pragmatists. This area is the subject of the book “Crossing the Chasm” by Geoffrey Moore. Some of their key points to crossing the chasm include:

• Focus on a specific niche
• Market a whole product
• Move from product-based values to market-based values
• Focus on positioning - how to get in the customers mind
• Spend time talking to skeptics, not believers

One tool they really pushed is rapid prototyping. This could be as simple as showing story boards or mock-ups to your customers or running beta programs. This gives you a lot of feedback on what customers like and don’t like about your product. The idea is to “fail early and often” so you have a rock-solid product when it really counts. One of the tools for know what customers want is simple searching for your product and adding the key word: wishlist. Finally, relating to position, there are 3 approaches:

1. Functional - solve a problem for or provide a benefit to the customer (Ex: Compact Florescent Lights)
2. Symbolic - improve customer’s self-image, give them a sense of belonging (Ex: Toyota Prius)
3. Experiential -provide sensory or cognitive stimulation (Ex: entertainment appliance for hospital patients)

A the close of their presentation, Jim suggested creating a fist-pass positioning statement using the following template:

For [target_market], product or company is/has [uniqe_differentiator], unlike [competitor] who has [competitor’s_unique_differentiator]

Example: For driving enthusiasts who care about the environment, Tesla offers a no-excuses high-performance electric car - unlike Toyota who offers only family sedans.

After a short break, we started the second session of the night. This session was set up as a panel with the topic being Public Relations. The panel included:

• Dave Weinerth - PARC (moderator)
• Melody Haller - Antenna Group (a CCTO prize sponsor)
• Joanna Rustin - Rustin Communications
• Jeremy Walker - KiteShip, 2006 CCTO Transportation Winner

Each of the panelists gave a short presentation on why public relations and marketing communications is so important to a start-up. There were a lot of pointers on when and how a start up should do PR. Some of the topics included costs for marcom, blogging as a form of PR, and how to market “green” technology. It was a very interesting panel, but we’re still more focused on the strategic marketing aspects of Aptility.

In addition to the Summer Workshop Series and pairing teams with mentors, the CCTO group also set up some business clinics. The business clinics are meant to give the CCTO finalists one-on-one time with various corporate specialists such as lawyers, accountants, and marketing specialists. All of the specialists are volunteers, and many of them are from large Bay Area firms such as Wilson Sonsini and Ernst & Young. The clinic was held at Wilson Sonsini in the same location as the workshops. Nate and I had three session on August 9 and we also met with our mentor, Ed, while we were at the Wilson Sonsini offices.

Our fist Business Clinic session was with a financial specialist, Margie Bell, from Accretive Solutions. Margie answered a lot of questions we had regarding setting up our corporation from a financial perspective. For example, she recommended we create a pool of equity and split it among the founders. We can include a pool set aside for early employees, but don’t bother with leaving something for investors. The investors would likely want to shape how their share looks anyway. We talked about basic accounting ideas, and Margie strongly recommends doing your books right from the beginning using QuickBooks and perhaps a professional accountant. The theory being it is less expensive to do it right than it is to fix incorrectly done books later. The first things we need to do are incorporate, open a bank account and get a federal ID number. She also gave us some pointed on Venture Capital valuations, employee costs, and tax issues (such as R&D tax credits).

After our financial session, we met up wit our mentor, Ed. Since our fist meeting he has had a chance to read our executive summary, so we talked about that a bit. He thinks our main focus in the short term needs to be on improving our value proposition. Nate and I had come to a similar conclusion ourselves, and had already started down a path of a new business model. Ed also gave us some tools for helping with planning: one for market segmentation and the other for benefit/detriment analysis (to help determine our value proposition. His stance is that once we have a good set of benefits our value should really jump out at us.

For our second clinic session we met with Robin Tucker, a corporate lawyer from WSGR. We talked with her a little about intellectual property issues, but she deferred some of our questions to a patent attorney. We spent most of our session talking about the incorporation process. Firms like WSGR have packages for start-ups that include setting up the corporation, setting up stock, and providing a basic set of common legal agreements. This package can be pretty common, although some firms will work with deferred payments or for equity.

Our final clinic session was with Jeff Schox, a patent attorney. We talked to Jeff a bit our the process of licensing patents from UC Berkeley relating to Nate’s research there. He also introduced us to the concept of provisional patents, which allow you to hold you place on a patent for up to 12 months by filing a much simpler disclosure of invention. It’s a much cheaper and easier application to file, and when you later file a full patent, you can reference the date from any related provisional patents you have filed. This could come in handy.

It was a pretty full day, and probably the most productive of all the CCTO sessions so far (aside from the Technology Matching Event, which is where I met Nate to begin with). Now we have a better idea of all the daunting tasks we have ahead of us.

Yesterday was the first of the CCTO’s summer workshop series. The event was hosted by Wilson, Sonsini, Goodrich & Rosati (WSGR), one of the top legal firms in Silicon Valley. The event started at 5 PM with a reception for all the finalists. This event was also an opportunity to meet the mentors assigned to each team by the CCTO as well as representatives from various angel investment groups. Our mentor, Ed Harley, also happens to be an angel investor with the Keiretsu Forum. As a starting point, Ed gave us a copy of a series of 3 articles he wrote as an open letter to software entrepreneurs called “How Software Entrepreneurs can be Successful Presenters to Investors” [Microsoft Word document]. It’s a very informative article about what an Angel Investor expects from a business pitch. He is very knowledgeable about what it takes to get funding, so I think he will be very beneficial to our business plan and pitch development.

At 6:45 PM, we started the workshop. The first part of the workshop was Business Plan Essentials presented by Dave Weinerth, the Director of Business Development at PARC. Dave had also presented at the Executive Summary Workshop back in June, so some of the information was similar. He covered the main sections of the business plan as well as some of the criteria for the CCTO submission. For example, the business plan can be no more than 20 pages with up to 5 pages of appendices. He also went over some useful processes intended to help gather and formulate the data needed to generate the plan. Some of the sections will be covered in more detail at later workshops.

After a short break, we resumed the workshop with a presentation on Sustainability Metrics by George Basile, PhD. George had also presented at the Executive Summary Workshop but went into a lot more detail this time. He provided a lot of tools to analyze various aspects of a business with respect to sustainability. The main point was to consider a more expanded system with regard to the product life cycle. Rather than the typical supplier-company-customer chain, he also showed how we need to consider the biosphere (atmosphere, environment, etc.), lithosphere (such as the elements like oil we remove from the earth) and the community (other people affected by our company). He pointed us to some books as well, such as Natural Capitalism, The Natural Step, and Cradle to Cradle. It is going to be very interesting to see how sustainable we will be able to make Aptility.

By 9 PM we were all pretty well burned out. It looks like Nate and I have a lot of work to do on the business plan, especially in the sustainability area.