ENGINEERING

THE HIGH TECH

START UP
 ENGINEERING
THE HIGH TECH
START UP
Applied Knowledge

Volume II

CORY R.A. HALLAM AND

WILLIAM FLANNERY

MOMENTUM PRESS, LLC, NEW YORK

Engineering the High Tech Start Up: Applied Knowledge, Volume II

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 Abstract

Technological entrepreneurship has been a key driver of economic growth

in developed countries, and will play an ­increasingly important role in
developing countries. Successful entrepreneurial efforts will be dependent
not so much upon the abilities of the engineer or skilled technical entre-
preneur to solve a technical problem, but upon the startup team’s ability
to traverse the myriad of problems they face in commercialization efforts.
This two-volume set has been written primarily for engineers, tech-
nicians and scientists who are contemplating the unknown but attractive
world of technological entrepreneurship, a key driver of economic growth
in developed countries and critical in stimulating growth in developing
countries. The purpose is to prepare these professionals as members of
teams focusing on commercializing new technology-based products.
The material has also been used to introduce engineering students to the
­processes involved in technological entrepreneurship.
Volume I provides a background of fundamentals and theory to pre-
pare the reader for the venture launch. Topics include the entrepreneurial
process, the venture team, developing and marketing high tech products,
and launching the new venture. Volume II goes into detail in critical areas
such as intellectual property protection, legal forms of organization, finan-
cial projections, and business plan preparation and delivery. The primary
emphasis is focused on creating lean and agile organizations capable of
recognizing opportunities, quickly developing introductory products for
small test markets to better define the opportunities, and using the results
of those test markets to arrive at a product with wide acceptance capable
of driving growth.

KEYWORDS

commercialization process, enrepreneurial process, e­ ntrepreurship, high

tech startups, marketing high tech products, new product development,
starting new ventures
 Contents

List of Figures ix
List of Tables xi
1 Recognizing Opportunities and Testing the Concept 1
1.1 Sources of Discontinuity and Dissatisfaction 1
1.2  Quantifying the Opportunity 5
1.3  Testing the Concept 7
1.4  Green Light for Opportunity 10
2  Creating Your Business Model Canvas 13
2.1  Value Proposition 13
2.2  Customer Segments 16
2.3 Channels 19
2.4  Customer Relationships 23
2.5  Revenue Streams 27
2.6  Key Activities 31
2.7  Key Resources 32
2.8  Key Partnerships 34
2.9  Cost Structure 35
2.10 The Missing 10th Block: Cash Flow and Profit 35
2.11 Summary35
3 Identifying and Protecting Intellectual Property 37
3.1 Copyright 37
3.2 Trademarks 40
3.3  Trade Secrets 42
3.4 Patents 44
viii  •   Contents

3.5  Managing Intellectual Property 60

3.6  Who Is an Inventor? 63
4 Entrepreneurial Finance: How to be a Gracious Liar 67
4.1  The Process 68
4.2  Accounting Basics 74
4.3  Key Financial Statements 75
4.4 Building Your Financial Statements at the Start 84
4.5 Returns 99
4.6 Summary 100
5  Creating a Legal Entity 103
5.1 Consulting, Building, Selling, Raising Cash, Nonprofit? 103
5.2  Which State to Choose 111
5.3 Top Legal Documents You Need to Start a Company 113
5.4 Corporate Board Versus Advisory Board 116
5.5  Top Mistakes to Avoid 117
6  Creating the Business Plan, Slide Deck, and Pitch 119
6.1 Introduction 119
6.2  Establishing Credibility 120
6.3  Identifying and Mediating Risks 121
6.4  The Information Portfolio 127
6.5 Summary 134
Appendix A: Key Terms 137
Appendix B: Sample Pitch Deck 141
References 149
About the Authors 151
Index 153
 List of Figures

Figure 1.1. Technology push and pull. 2

Figure 1.2. The potential role of pattern recognition in opportunity
­recognition (adapted from Baron 2006). 4
Figure 1.3. The psychology of new product adoption (adapted from
Gourville 2006). 6
Figure 1.4. Vidacare EZ-IO intra-osseous access system. 7
Figure 1.5. Four-step process (adapted from Blank 2013). 9
Figure 1.6. Green light for opportunity (adapted from Byers
et al. 2011). 10
Figure 2.1. Business model canvas (adapted from Osterwalder
et al. 2010). 14
Figure 2.2. Typical distribution channels used in selected
­business groups.  20
Figure 2.3. Sales channels and roles in purchase process
(adapted from O
­ sterwalder and Pigneur 2010). 21
Figure 2.4. Channels typically available to the technology-based
new venture. 22
Figure 3.1. Examples of trademarks. 40
Figure 3.2. Examples of service marks. 41
Figure 3.3. Foreign patent process: International and national
phase (from World Intellectual Property Organization,
WIPO). 49
Figure 3.4.  Sample United States patent main page with INID codes. 52
Figure 3.5. Typical types of drawings. 54
Figure 3.6. The Coca Cola bottle showing claim s­ tatement. 56
Figure 3.7. Hass Avocado claim statement. 57
x  •   List of Figures

Figure 4.1. Typical projections for new startup. 70

Figure 4.2. Risk and return (adapted from Dorf and Byers
2005, p. 156). 71
Figure 4.3. Burn and earn charts. 73
Figure 4.4. Basic financial yardstick. 75
Figure 4.5. Determinants of revenue. 76
Figure 4.6. Elements of costs. 78
Figure 5.1. Entity choices. 104
Figure 5.2. Limited partnership components. 106
Figure 5.3. C-Corp versus LLC comparisons. 109
Figure 5.4. Delaware formation fees and costs (August 2016). 113
Figure 6.1. Credibility cycle (adapted from Birley 2002). 121
 List of Tables

Table 1.1.  Types of discontinuity and resulting opportunity 3

Table 1.2.  Key questions the entrepreneur must answer 6
Table 2.1.  Sources of customer value (adapted from
Byers et al. 2011) 15
Table 2.2.  Categories of customer relationships (adapted from
­Osterwalder et al. 2010) 24
Table 2.3.   Pricing mechanisms 30
Table 3.1.  Time estimates for steps in patent process 58
Table 4.1.  Three-year top line estimates for hypothetical company 77
Table 4.2a.  Income statement Year 1 79
Table 4.2b. Projected three-year Income Statement for hypothetical
company80
Table 4.3a.  First-year cash flow estimates (Net 30 delay in receipts) 81
Table 4.3b. First-year cash flow estimates (Net 30 delay in receipts)
with cash infusion 82
Table 4.4.   Balance sheet for hypothetical company 84
Table 4.5.  Income statement-original estimate for h­ ypothetical
company88
Table 4.6.  Income statement-revised estimate for hypothetical
company90
Table 4.7a.  Cash flow-original estimate 91
Table 4.7b.  Cash flow-modified estimate 92
Table 4.8a.  Production schedule for Year 2 94
Table 4.8b.  Production schedule-end of year summaries 95
Table 4.9a.  Sales and revenue projections Year 2 96
Table 4.9b.  Sales and revenue projections 97
xii  •   List of Tables

Table 4.10.  Cash flow—modified estimate plus cash infusion 97

Table 4.11.  Balance sheets 98
Table 4.12.  Shareholder returns 101
Table 5.1.  Taxation comparison of different entities
(adapted from Walker 2017) 112
Table 6.1.  Business plan elements (adapted from Byers et al.
2011)128
Table 6.2.   Outline of presentation—Slide deck and pitch  132
 CHAPTER 1

Recognizing Opportunities
and Testing the Concept

At the heart of entrepreneurship, opportunity is the key word. Many people

think of opportunity in different ways, but what is clear is that entrepre-
neurs are highly skilled at recognizing opportunities. In fact, entrepre-
neurs have an innate ability to recognize opportunities, assess them, and
act on them (or chose not to). Simplistically, four questions are inherently
involved: Is there a problem? How big is it? Is it worth pursuing? Am I
capable of pursuing it? In this chapter, we look at the skills and processes
needed to hone your skills at recognizing opportunity.

1.1 SOURCES OF DISCONTINUITY AND

DISSATISFACTION
1.1.1  DISCONTINUITY AND DISSATISFACTION

Perhaps the hardest thing for an engineer to understand is that a beautiful

piece of technology they have spent countless hours developing and test-
ing, proving out exemplar performance and reliability, may be of no inter-
est to anyone but themselves. This is a case of technology push, where a
new technology or capability is developed, and the inventor looks for an
application or user. This is reminiscent of the first Apple computer, where
Steve Jobs and Steve Wosniak shopped around their new invention with-
out a clear demand from customers saying “we need a personal computer.”
Conversely, technology pull refers to the size of a known opportunity (or
problem) attracting technology development to meet the need (Figure 1.1).
The biotech industry fits this description well. Many cancer drugs are in
development with billions of dollars invested because the demand for a
solution to the problem (of specific cancers) is quantified, the lack of a
2  •   ENGINEERING THE HIGH TECH START UP

Push

Technological Market need

innovation

Pull

Figure 1.1.  Technology push and pull.

solution is death, and the market is phenomenally huge in terms of dollars

(billions). Genentech worldwide sales of Avastin, used to treat metastatic
colon or rectal cancer in combination with a chemotherapy regimen, have
totaled over $40 billion since U.S. Food and Drug Administration (FDA)
approval and launch on the market in 2004.
Technology push or pull can be successful, with the basic question
changing in each case. In the case of technology push you are saying “here
are the functions and features of my technology, now who has a need for
these functions and features,” whereas for technology pull you are defin-
ing a need and seeking the technology with features that meet the need.
In some cases the technology pull will drive specific research and devel-
opment programs to initiate the creation of a new technology to meet the
need. Interestingly, had Apple followed traditional corporate marketing
logic at the time, they would have killed the project due to a complete
lack of market (i.e., no known customer, therefore no demand, hence no
product to develop and sell), versus their technology push of creating the
market and the demand by introducing new functionality. Regardless of
you choosing a path to push or pull technology, understanding sources of
discontinuity and dissatisfaction in the market are paramount to recogniz-
ing opportunities.
For entrepreneurs, discontinuity refers to a break or disruption in the
norm or pattern of behavior. These disruptions or changes offer a win-
dow of opportunity, as they change how things are currently done. These
opportunities can be categorized by societal, technological, and/or market
discontinuities (Table 1.1).

1.1.2  RECOGNIZING OPPORTUNITIES

Perhaps the greatest tool the entrepreneur can have is an ability to tune
into dissatisfaction. This is an ability to recognize quickly that someone
 Recognizing Opportunities and Testing the Concept  •  3

Table 1.1.  Types of discontinuity and resulting opportunity

Discontinuity/disruption   Opportunity
Population Elder care for U.S. baby
­demographics boomers
Educational Online university, self-paced
­paradigms asynchronous learning
Societal
Food sourcing for increasing
Sustainment
population
Government
E-cigarettes
­regulations
Photoelectric effect (leading to
New knowledge
solar panels)
Technological Innovations Solar panels
Disruptive Digital imaging (replacing
­technologies film)
Physical in new market, virtual
Location
in new markets
Market
Access Supply chain integration
Deregulation Free trade agreements

is expressing an opinion that may potentially be a market need. Whether

it is in person, in print, or media, the successful entrepreneurial mind is
constantly, even subconsciously, alert to phrases such as:

• I don’t like this

• This bugs me
• I wish I had…
• I hate…
• Wouldn’t it be nice if…
• This failed
• This doesn’t work

Recognizing these and then pursuing them with inquiry about “why?”
can lead to identifying potential customers and markets for new products.
Six key factors affect your ability to recognize opportunities, including
prior knowledge, social capital, your personality, environmental con-
ditions, your alertness, and your desire to perform a systematic search.
Building your own entrepreneurial radar is a key activity you should
undertake. Figure 1.2 shows a general model proposed for understanding
4  •   ENGINEERING THE HIGH TECH START UP

Patterns that suggest new

Possible founding products, services, etc.
of new ventures BUSINESS
OPPORTUNITIES

Knowledge; Experience
Events, changes, trends in the
Alertness
external world

 Changes in technology Cognitive

Perceived, Frameworks Perceived patterns
 Changes in market
interpreted (Prototypes, in these events,
 Trends in demographics through trends, changes
exemplars,
 Changes in government, policies and etc.)
regulations
Search
 Other events, changes, trends in
relevant business-related variables

Patterns that do not suggest

new products, services, etc.

Figure 1.2.  The potential role of pattern recognition in opportunity recognition

(adapted from Baron 2006).

the opportunity identification process. For successful entrepreneurs this

may happen subconsciously as part of their persona, whereas new entre-
preneurs may have to consciously think about which of these actions they
are taking. Recognizing the opportunity and its timing can be critical for a
successful venture launch.
For the entrepreneur, one person’s problems are the others’ opportu-
nities. Problems can be defined as simplistic (one answer to a problem),
deterministic (one formula produces one answer), random (different
answers exist and can be identified), and indeterminate (many different
answers are possible). Developing a disruptive or radical innovation typ-
ically requires solving problems whose complexity results in either ran-
dom or indeterminate problems. Solving these types of problems requires
creative thinking, scanning the environment for ideas and information,
finding ways to process ideas and information, synthesizing ideas and
information into potential solutions, and evaluating and selecting the
appropriate solutions. To start the process categorizing your opportuni-
ties is important. Dorf and Byer (2004) suggest trying to categorize your
opportunity area as one of the following:

1. Increasing value of product or service (performance, quality).

2. New applications of existing means or technologies (magnetic strip
readers for hotel doors).
3. Creating mass markets (3-D printers for home use).
4. Customization for individuals (build to spec computers using com-
mon parts, car options).
5. Increase reach (insurance companies using web portals in addition
to versus physical sales force).
 Recognizing Opportunities and Testing the Concept  •  5

6. Manage the supply chain (Toyota, Dell, Wal-Mart).

7. Convergence of change (digital assistant, camera, media player,
phone all combined into one device; cable/fiber providers bundling
phone, Internet, TV, and home security).
8. Process innovation (integrated shipping and logistics with UPS,
Fed-Ex, and so on, enabling companies to have efficient supply
chains without owning the delivery resources).
9. Increasing the scale of the firm (partnering with a large distribu-
tor, which enables greater sales supports investing in more process
technology that reduces unit cost).

1.2  QUANTIFYING THE OPPORTUNITY

As you start identifying opportunities, you need to understand the psy-

chology of potential customers and why it is important to quantify your
opportunity. Figure 1.3 shows the relationship between your new product
and a customer’s wants. Looking at existing markets with existing prod-
ucts, customers are typically satisfied with their current product and view
moving to a new product from an unproven company as a risk. Entrepre-
neurs on the other hand are typically in love with their ideas and overvalue
them. This creates a disconnect or gap between customers and entrepre-
neurs, and suggests a need to show a significant improvement in perfor-
mance or cost in order to displace current customers. Keeping this in mind
will help you focus on the value proposition for the idea you are working
on, and answer the first basic question for your venture:

Why is a customer going to pay substantially more for the good

or service you are providing than it will cost you to produce?

The entrepreneurial process requires pursuing many, many ques-

tions. In quantifying the opportunity, three areas of questions need to be
answered related to your customers, the market size, and your competitive
advantage, as shown in Table 1.2. If you cannot answer these questions,
you will find it tough to move ahead convincing others of your venture,
especially investors. The following customer category focuses on estab-
lishing a minimal understanding of the opportunity from the customer’s
perspective. Your hope is to identify a significant pain, with few alterna-
tives, but remembering that all customers have the default alternative of
not spending their money. The market size category is to help you get
your arms around the opportunity size. If there is the potential to generate
6  •   ENGINEERING THE HIGH TECH START UP

The 9X effect

A customer takes on a huge risk Every entrepreneur’s “baby”

in displacing a known solution is beautiful in his eyes—often
with a new and unproven blinding him to the possibility
product/technology from a not of alternate solutions
very well established company

Consumers are usually: Entrepreneurs are often:

 Skeptical about a new

product’s performance
Consumers 3x3 Entrepreneurs
 Convinced the innovation
overweight the works
incumbent overweight the
 Unable to see the need for it  Likely to see the need for the
product’s new product’s
benefits by a product
 Satisfied with the existing benefits by a
product factor of three factor of three
 Dissatisfied with the existing
 Quick to see what they already 9 substitute
own as the status quo
 Set on viewing the innovation
as the benchmark

Figure 1.3.  The psychology of new product adoption (adapted from Gourville
2006).

Table 1.2.  Key questions the entrepreneur must answer

Customer Market size Competitive advantage
1. Who is 1. What is the scope 1. Are we a better product
our target of the target at the same price?
customer? market (geography,
demographics)
2. What is their 2. How many potential 2. Are we a similar product
name? customers are there? at a lower price?
3. What is their 3. What percentage 3. Do we meet the needs of
pain? wants our product? an underserved market
segment?
4. How painful 4. What percentage of 4. Can we protect our
is it? customer will buy position with intellectual
our product? property, long-term
contracts, branding, etc.?
5. What 5. What percentage 5. Can we sustain our
alternatives of buyers can we competitive value?
do they have? capture?

$100M in sales a year then it’s a good opportunity. If the total market size
is $100 a year, you are going to do a lot better looking elsewhere. This
category will also force you to start understanding the difference between
potential customers in your market, and those who would actually pay for
it. The latter group is much smaller than the first. Finally, the competitive
 Recognizing Opportunities and Testing the Concept  •  7

advantage category is there to force you to consider how you will keep
other companies away from your customers.

1.3 TESTING THE CONCEPT

1.3.1  CONCEPT SUMMARY

The first step in testing your concept is to come up with a concept sum-
mary. Think of this as a mini-story that describes the reason you are inter-
ested in starting this venture. The story can be outlined in three steps,
namely:

1. setting the stage

2. introducing dramatic conflict, and
3. reaching a resolution.

To set the stage, you are trying to describe the current situation and the
relevant stakeholders. The conflict is introduced in a dramatic manner via an
incident, challenge, or opportunity that suggests any number of stakehold-
ers who are suffering pain or can achieve greater satisfaction. Finally, you
propose a clear and concise plan for dealing with this conflict, and present
an action plan for moving your solution forward. The following example
follows the process as experienced by a biomedical company startup.
Vidacare was a company that developed the EZ-IO system (­ Figure 1.4)
for intra-osseous access to the circulatory system. This company was

Components

EZ–IO power driver

NeedleVISE

EZ–stabilizer

EZ–IO needle sets EZ–connect

Figure 1.4.  Vidacare EZ-IO intra-osseous access system.

8  •   ENGINEERING THE HIGH TECH START UP

founded by an ER doctor (Larry Miller, MD) who realized that there were
severe problems with getting an intra-venous (IV) into patients, especially
in non-hospital settings. Furthermore, for traumatic injuries arising in
vehicular crashes, industrial accidents, military conflicts, and so on, a par-
adox arises in treating patients—the more they need an IV to stabilize their
condition, the harder it is to get one established. This is because the body
goes into shock and the peripheral venous system collapses to pool the
blood around the main organs of the body. The EZ-IO device that Vidacare
developed was designed to go into the bone and access the venous system
directly through a non-collapsible vein. Vidacare was a success story in
treating patients and later for being sold to Teleflex for nearly $300M. The
concept summary for this company provides a great example to look at
when structuring your own venture. In the following, we use information
from Dr. Miller’s presentation to craft the concept summary.

1.3.1.1  Set the Stage

Each year, emergency responders attempt to stabilize millions of patients

by inserting an IV.

1.3.1.2  Introduce the Conflict

For nearly 5 million patients in the United States it is impossible to start

an IV, and for another 7 million it is difficult and time-consuming. This
delay in treatment can result in medical complications or loss of life.
Paramedics, physicians, and nurses refer to this as a nightmare scenario
where the more a patient needs the IV, the harder it is to find a vein due to
the body going into shock.

1.3.1.3  Resolve the Problem

The EZ-IO is a hand-held device that safely inserts an IV port into

a non-collapsible vein in the bone of the patient in under 10 seconds,
enabling an IV to be safely administered every time.
In this example we have briefly and succinctly told the story through
the three stages. While not all examples are this simple, your objective
is to translate your concept summary into this format and begin the pro-
cess of testing it with potential customers. The story should also help you
clarify the focus of the venture you are undertaking, and make sense to
potential customers, partners, users, and investors alike. At the end of your
 Recognizing Opportunities and Testing the Concept  •  9

concept summary, your audience should be wanting to know more about

you, your product, and your venture.

1.3.2  CUSTOMER DISCOVERY

The customer discovery process is about testing your concept summary

with potential customers, stakeholders, and beneficiaries. In the Vidacare
example, the paying customer may be the ambulance company, the stake-
holder is the emergency medical technician who will use the device,
and the beneficiary is the patient who will be treated. As you begin your
­customer discovery process, you are trying to test hypotheses about your
business that will help you build your business model. Many entrepre-
neurs advocate for Steve Blank’s four-step process of stating your busi-
ness hypotheses, testing them with customers, users, and stakeholders,
modifying your concept summary to incorporate these results, and verify-
ing these changes with other customers (Figure 1.5). Differences in needs
may indicate multiple market segments wishing for different features,
pricing, and/or services.
The customer discovery process never really ends, as you will contin-
uously want to understand and learn what your customers want. However,
you need to put a stake in the ground and go for version 1.0 of your p­ roduct
at some point; otherwise you will be indefinitely collecting ­customer
information and never generating revenue. A successful ­customer discov-
ery process should enable you to clearly define the customer problem (and
quantify the pain!), improve your value proposition, create a customer
requirements document, define your product plan, project an initial sales
revenue plan, and draft an overall business plan.
Interviews, meetings, calls, and surveys, are all good ways to work
on your customer discovery. For first timers, the more face-to-face time

State your
hypothesis

Test problem
Verify
hypothesis

Test product
concept

Figure 1.5.  Four-step process (adapted from Blank 2013).

10  •   ENGINEERING THE HIGH TECH START UP

you have with your potential customers, the more details you will learn
about their needs. Often times, they end up asking more questions than
you have answers, resulting in you revisiting your value proposition
and concept summary. Make sure your business hypotheses are well
formulated and that you track all of your customer discovery meetings
(date, location, time, contact name and info, demographics, location,
­purchasing power, perceived need, willingness to try prototypes, interest
in purchasing, etc.). This information should be kept on file, and sum-
marized in your business plan. It provides the evidence of why and how
you are going to provide your customer value. A call report or meeting
summary should be created with all pertinent information that you can
refer back to at a later time.

1.4 GREEN LIGHT FOR OPPORTUNITY

Having established some basic foundations for your product, the need,
the market size, the value proposition, and some detailed feedback from
your customer discovery process, the question is will you move forward.
In other words, is there a green light for opportunity? While you may go
through the rest of the book in more detail and spend numerous hours
refining hypotheses and testing ideas, you want to keep the following four
things in mind. Successful ventures happen when the characteristics of the
entrepreneurial team, the context of the opportunity, the characteristics
of the opportunity and solution, and the ability to amass resources align
(­Figure 1.6). Success is dependent on these, and venture derailment is
prone to happen when any one of them suddenly vanishes, such as when

Characteristics of entrepreneurial teams

Characteristics of the context
• Positive attitudes toward independence,
achievement, and innovation • Timeliness
• Acceptance of risk and demanding work • Favorable industry condition
effort • Future conditions appear favorable
• Capabilities matching the need of the
venture
• Willing to make the commitment required
• Passionate about the opportunities
Characteristics of the opportunity

• Novelty of the product

Resources
• Capable of securing access to the human,
financial, and physical resources required
by the opportunity
• Potential for sustainable long-term
success
• Potential for good return on investment
• Good risk-versus-reward balance
• Customers are known and responsive

Figure 1.6.  Green light for opportunity (adapted from Byers et al. 2011).
Recognizing Opportunities and Testing the Concept  •  11

you thought you had raised enough money, but sales are delayed six
months for product development reasons, and you find yourself out of
financial resources. Your job is to make sure all four categories support
your venture, and monitor and stay ahead of changes in any of them. This
last task is where most entrepreneurs start to feel that wonderful human
trait of stress.

PRACTICE

EXERCISE 1.1  KEY QUESTIONS TO TEST THE CONCEPT

Testing your concept involves answering many questions. Using the ques-
tions outlined in Table 1.2, create your own version of this table with the
answers you can get. Cite the source for all of the answers, whether they
are from a publication, media outlet, interview, industry study, and so on.
For those you cannot answer yet, try to hypothesize where and how you
could get the information to answer the questions.

EXERCISE 1.2 IS THERE A GREEN LIGHT FOR

OPPORTUNITY

Using the four quadrants from Figure 1.6, list all of the information that
you currently know that will help you decide if this is a green light for
opportunity.
 Index
A missing 10th block, 35
accounting, 74–75
accrual accounting, 74–75, 89
acquisition
customer relationships, 23
IP, 61
advertising, revenue streams, 29
agreements
operating, 113
shareholder, 115
articles of incorporation, 114
Articles of Incorporation act,
109–110
auctions, revenue streams, 29
automated service, 24–25
B channels, 19
back of the envelope, 68, 84–85
balance sheet, 83–84, 95, 97–98
Berne Convention, 38
BMC. See Business Model Canvas
board of advisors (BOA), 116
board of directors (BOD), 117
break even point (BEP), 99
burn and earn charts, 72–74
business licenses, lacking, 117
business metrics, 126–127
Business Model Canvas (BMC)
activities, 31–32
channels, 19–22
cost structure, 35
customer relationships, 23–27
customer segments, 16–19
partnerships, 34–35
resources, 32–34
revenue streams, 27–31
value proposition, 13–16
business models, 125
business plan, 119, 127–128
bylaws, 114
C
capability extension, 34–35
cash flow, 89–95
cash flow positive (CFP), 73
cash flow statement, 78, 80–82
Certified Professional Accountant
(CPA), 117
communication, 19
distribution, 19–20
for new venture, 21–22
sales, 20–21
claims, patent, 55–58
Coca Cola
claim statement, 56
trade secrets, 42
co-creation, 25
commercialization process, 131
communication channels, 19
communities, 25
company
capital and insurance, 117–118
maintaining, 116
competitor analysis, 123
154  •  Index
context, information portfolio, 130
copyright, 37–38
duration of, 38
enforcement of, 39
registration of, 38–40
corporate veil, piercing, 118
corporation (C-Corp), 109–111,
112
cost, elements of, 76, 78
cost of goods sold (COGS), 75, 76,
78–80
cost structure, BMC, 35
credibility, 120–121
currency, maintaining, 117
customer demand/need, 124
customer discovery process, 9–10
customer relationship management
(CRM) systems, 25–27
customer relationships, BMC,
23–27
customer segments, BMC, 16–19
customer value, BMC, 15–16
D sales forecasts and income
data, revenue streams, 29
dedicate personal assistance, 24
Delaware formation fees and costs,
113
design patents, 46
discontinuity and dissatisfaction,
1–2
categorizing, 4–5
customer discovery process,
9–10
entrepreneurial process, 5–7
green light for opportunity,
10–11
new product adoption, 5–6
pattern recognition, 3–4
types, 3
Vidacare EZ-IO system, 7–9
distribution channels, 19–20
“doing business as” (DBA), 104
Dorf chart, 70–71
drawings, patent, 51–55
due diligence, information
portfolio, 134
E
earnings before income tax
(EBIT), 78
elevator pitch, information
portfolio, 131
employee contracts/offer letters,
115
enforcing IP, 61–63
entrepreneurial process, 68–70
accounting, 74–75
back of the envelope, 84–85
balance sheet, 83–84, 95, 97–98
burn and earn charts, 72–74
cash flow, 89–95
cash flow statement, 78, 80–82
income statement, 76, 78–80
investors, 71–72
Pseudo realty, 85–86
returns, 98–100, 101
risk and return, 70–71
projections, 86–89
sales projections, 75–76, 77
executive summary, information
portfolio, 131–132
expected value (EV) calculation,
69
EZ-IO system. See Vidacare
EZ-IO system
F
financial accounting, 74
financial resources, 32–33
financial services, revenue
streams, 30
freemium, revenue streams, 30
G
generally accepted accounting
principles (GAAP), 74
general-purpose financial
statements, 74

green light for opportunity, 10–11
gross income, 78
growth, customer relationships, 23
H
Hass Avocado claim statement, 57
high tech startups, 121–122
human resources, 33
I choices, 103–104
improved economics, 34
income statements, 76, 78–80,
89–90
incomplete competitor analysis,
123
incomplete marketing plan, 124
inexperienced entrepreneurs, 126
information portfolio, 127
business plan, 127–128
context, 130
due diligence, 134
elevator pitch, 131
executive summary, 131–132
opportunities, 129–130
people, 128–129
presentation, 132–134
risks and rewards, 130
INID codes, 52–53
intellectual property
copyright, 37–40
enforcing, 61–63
inventor, 63–64
licensing, 60
patent (see patent)
selling, 60–61
trademark, 40–42
trade secrets, 42–44
intellectual property assignment
agreements, 114
intellectual resources, 33
intermediaries, revenue streams, 29
internal rate of return (IRR), 100
international patent, 48–50
International Trade Commission
(ITC), 62
Index  •   155
inventor, intellectual property,
63–64
investors, entrepreneurial finance,
71–72
L
legal entity
BOA, 116
BOD, 117
corporation (C-Corp), 109–111,
112
Delaware formation fees and
costs, 113
documents, 113–116
LLC, 107–109
mistakes, 117–118
partnership, 105–107
sole proprietorship, 104–105
taxation comparison, 112
licensing
IP, 60
revenue streams, 29
limited liability company (LLC),
107–109
M
management risks, 125
managerial accounting, 74
managing actuals, 68
market assumptions, 123–124
market discontinuity and
dissatisfaction, 3
marketing plan, 124
market risks, 122–123
metrics. See business metrics
missing 10th block, BMC, 35
multiple, 99
N
national phase, PCT, 49–50
net income, 78
net present value (NPV), 99–100
new product adoption, 5–6
new product development, 87
156  •  Index
new technology, 122
new ventures, 14, 20
business plan, 127–128
channels for, 21–22
credibility, 120–121
elevator pitch, 131
milestones for, 68
partnership, 34
risks and rewards, 130
nondisclosure agreements (NDAs),
43–44, 114–115
nonobviousness test, 44–45
novelty test, 45
O research, IP, 61
operating income, 78
opportunities, information
portfolio, 129–130
opportunity recognition, 2–5
P returns, 99–100, 101
partnering, 22
partnership, legal entity, 105–107
patent, 44
claims, 55–58
drawings, 51–55
form of, 51
international patent and PCT,
48–50
primary types of, 45–48
provisional patent applications,
48
statutory requirements for, 44–45
timeline, 58–59
Patent Cooperation Treaty (PCT),
48–50
patent pending, 47–48
pattern recognition, 3–4
payback period (PBP), 73–74
people, information portfolio,
128–129
personal assistance, 24
physical resources, 33–34
plant patents, 46–47
portfolio. See information
portfolio
presentation, information portfolio,
132–134
pricing mechanisms, 30–31
production schedule, 93–95
provisional patent applications, 48
Pseudo realty, 68, 85–86
Q
quantifying, opportunity, 5–7
R
reissued patent, 47
resources, 32. See also specific
resources
retention, customer relationships,
23
return on investment (ROI), 99
revenue
determinants of, 75–76
and profit drivers, 126
revenue streams, 27–31
risk and return, 70–71
risk reduction, 34
risks and rewards, information
portfolio, 130
S
sales channels, 20–21
sales forecasts and income
projections, 86–89
sales projections, 75–76, 77
sales schedule, 95, 96, 97
sample patent and INID codes,
52–53
segmentation, customer, 16–19
self-service, 24
selling IP, 60–61
Semiconductor Chip Protection
Act (SCPA), 38
service marks, 40–41

shareholder agreements, 115
shareholder returns, 98–100,
101
slide deck and pitch, 132–134
societal discontinuity and
dissatisfaction, 3
sole proprietorship, 104–105
subscriptions and rentals, revenue
streams, 29
T U.S. Patent and Trademark Office
taxation comparison, legal entity,
112
technological discontinuity and
dissatisfaction, 3
technological risks, 121–122
technology push and pull, 1–2
timeframe, patent, 58–59
time to market, 122
trademark, 40–42
Trade-Related Aspects of
Intellectual Property Rights
(TRIPS) Agreement, 43
trade secrets, 42–44
Index  •   157
traditional sales of goods and
services, revenue streams,
28–29
U
uncertainties and risks, 125–126
Universal Copyright Convention
(UCC), 38
unlimited liability, fallacy of, 117
UPS, partnerships, 34–35
(USPTO), 46
utility patents, 45–46
utility/usefulness, 44–45
V
value-added resellers (VARs), 21
value proposition, 13–16, 124
Vidacare EZ-IO system, 7–9
vision and purpose, 125
W
World Intellectual Property
Organization (WIPO), 63