Equity Agreements - The University of Chicago Booth School of

The 16th Annual Edward L. Kaplan, ’71

NEWVENTURECHALLENGE NVC KICKOFF Steven N. Kaplan Faculty Director, Neubauer Family Distinguished Professor of Entrepreneurship and Finance

Ellen Rudnick Executive Director, Clinical Professor of Entrepreneurship

November 1, 2011

Agenda •

What is the NVC ?

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History

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How it works: Schedule / Entry Rules and Guidelines

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What goes into a Feasibility Summary?

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Why you should participate?

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Panel Discussion and Q & A

Edward L. Kaplan, ’71, New Venture Challenge • The New Venture Challenge is one of the premier business creation competitions

• If you have a viable business model, the NVC will: • Improve the business model substantially. • Improve the business plan substantially. • Increase the likelihood you will be funded. • Provide seed funding to winners. • Whether you start a business or not, you will learn a lot • Brings together resources from all over the entrepreneurial community • Sponsored by Ed Kaplan, ’71, founder, chairman, and CEO emeritus of Zebra Technologies

History: 1997-2011 • The NVC has helped launch more than 75 companies, which have raised over $235M in equity capital, including over $135M in the last year

Many kinds of businesses • Sarvega

• LiquidTalk

• Medspeed

• TixNix

• Companies have exited -- sold or merged -in excess of $125M

• Flyswat

• Bump

• Brightroom

• BenchPrep

• 1997 had 33 entries, in 2000, internet bubble year 105, last year we had 72 entries (plus 60+ entries combined to the Global NVC & Social NVC)

• Midway • FutureSimpe Pharmaceuticals • Quantitative Insights • Clickshift • Agile Diagnosis

• Over 100 entrepreneurs, service providers, investors, per year are involved • Cash prizes will total at least $75K in addition to free space in the ARCH New Business Incubator and free services from our sponsors

• Bobtail • Epotec

•Pretty Quick

How it works: Entry Rules and Guidelines Team Composition •

At least one currently registered student at Chicago Booth – campus or part-time.

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At least one University of Chicago student needs to be a founder / integral member of the team.

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Student cannot be a consultant.

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Student cannot be a minor player.

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10% equity.

Size of team: no minimum or maximum.

How it works: Entry Rules and Guidelines Originality of Business Ideas •

Generally idea should be original.

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Business plans for early stage ventures acceptable if:

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a Chicago Booth or University of Chicago student is a founder; or

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a University of Chicago or Chicago Booth student is in senior management team of the venture; and

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company has not already received funding from venture capitalists or other institutional investors. Outside funding from friends, family and other individual investors up to $500,000 is acceptable.

Business plans that have participated in the past as part of other university business plan competitions are not eligible unless approved by one of the NVC faculty or coaches.

How it works: Entry Rules and Guidelines Protection of Intellectual Property •

The University, sponsors, and organizers of the NVC have taken all reasonable measures to assure that all contestants retain their rights to the Business Plan and Intellectual Property.

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The protection of these rights is ultimately the responsibility of each contestant.

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Contestants are urged to mark as CONFIDENTIAL any portion of their Entries, which they consider to be proprietary, or of a sensitive nature.

How it works: Entry Rules and Guidelines Equity Agreements •

If the team wins prize money, the members will enter into an equity agreement whereby the award converts to a pro rata equity share for Chicago Booth in the new business if the company receives funding or enters into a business combination transaction.

Deadlines •

Timelines for submission of feasibility summaries (Feb. 6, 2012) and full business plans (April 27, 2012) are not flexible.

Important Dates Fall Quarter 11/1/11 11/19/11

Winter Quarter 01/05/12 02/06/12 02/23/12 02/27/12

Spring Quarter 03/26/12 04/27/12 05/18/12 05/24/12

NVC Kickoff, followed by networking event NVC Gleacher Center Saturday Kickoff

Workshop – How to Write a Feasibility Summary Harper Center, Classroom C-25, 6-8 pm Phase I feasibility summaries due at 10 am to Harper Center, Suite 207 Announce teams that will advance to Phase II Orientation Session for Phase II teams Harper Center, Classroom C-25, 6-8 pm

BUS 34104 Developing a New Venture course begins Full business plans due at 10 am to Harper Center, Suite 207 Announce teams that will advance to Phase III Finals Finals at Harper Center, Classroom C-25

NVC Timeline First round: Feasibility Summaries • Due February 6 • Maximum of 8 pages • Notified Feb. 23

Second Round: Develop full Business Plan • • • • • •

In conjunction with Bus. 34104 taught by Kaplan and Rudnick Classroom coaches Deutsch, Darragh, Rosenberg, Henikoff First session Feb. 27; class formally begins Mar. 26 Teams present plans in class twice to entrepreneurs and VCs Feedback is brutal but incredibly helpful Course is a lab course, not a lecture course. Provides an environment and resources to develop and greatly improve your business ideas. • Highly-rated class and process

Final Round: 8+ teams present to judges on May 24

NVC Timeline Second Round: Develop Full Business Plan •

In conjunction with Bus. 34104 taught by Kaplan and Rudnick. • Classroom coaches Deutsch, Darragh, Rosenberg, Henikoff.

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First session Feb. 27; class formally begins Mar. 26.

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Teams present plans in class twice to entrepreneurs and VCs. • Feedback is brutal but incredibly helpful.

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Course is a lab course, not a lecture course. • Provides an environment and resources to develop and greatly improve your business ideas. • You drive, we help. We do not hold your hand.

Global NVC •

This will be the 5th year of the Global NVC

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EXP and AXP students and alumni take online classes

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US Executive MBA students may participate in traditional NVC

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On a different timeline --- began this month

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Finals in Chicago in March

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Winner of this competition may advance to the NVC finals on May 24, 2011 2011 Global NVC winner Playence advanced to the NVC Finals

Social NVC Second year for the Social New Venture Challenge What is a Social Venture? – Sacrifice some profit for social impact – Less than 10x returns – Community development, education, orphan drugs, global health & poverty alleviation, environmental SNVC Kick-off/Big Problems-Big Ideas: November 9 5:00 pm Harris School – Feasibility summaries due: February 6 – Announce Phase II teams: February 23 – New Social Ventures class: begins Tuesday, March 27, 2012

What Goes Into a Feasibility Summary? •

What is the business opportunity? –

What problem is it solving?

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Who is the customer?

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How large is the market for this product?

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Who are the other competitors or competing technologies?

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How will you make money?

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What is your strategy?

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Who is your team?

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Why will this succeed?

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Be concise. Use simple language.

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Feasibility Summary workshop on January 5th will discuss in more detail

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Sample summaries on NVC website

Why Should You Participate? • NVC and course give you time to focus. •

NVC and course will improve plans a great deal.

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Access to judges and resources. • Judges provide contacts / funding.

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Idea will not be stolen. • Most plans / ideas seen by many qualified eyes. • If it is easy to steal, it is not worth doing anyway.

• Has never been a problem. •

You will learn a huge amount about how to evaluate and start a business.

NVC Website www.chicagonvc.com Key dates, deadlines, and events for the 201112 New Venture Challenge

Join online team building site where people can post ideas and team openings • Link to sample business plans, NVC class workshops, sample equity agreement

Find official rules and regulations, sample feasibility summaries

Check here for the latest news on current & former NVC Companies

NVC LinkedIn Group: Ideas Marketplace Linkd.in/NVCideas

Get feedback on a new business idea

Find team members for your NVC Entry!

Share your resume & expertise to let other students find you!

Articles and resources

Resources: Find an Idea Passion • Problem • Pain Point Events

Technologies

Websites

• SeedCon Conference &

• Ideation Sessions

• LinkedIn Website

• Argonne

• Built in Chicago

• Innovation Workshops:

• Entrepreneurship

Fast Pitch: Nov 17, 18 • Industry Meet-ups: Fall, Winter • EVC Startup Factory events: All Year

 Big Ideas, Big

Problems - Nov 9  Neil Kane - Nov 15

@UChicago.edu

Resources: Find an Idea Passion • Problem • Pain Point Events

Technologies

Websites

• SeedCon Conference &

• Ideation Sessions

• LinkedIn Website

• Argonne

• Built in Chicago

• Innovation Workshops:

• Entrepreneurship

Fast Pitch: Nov 17, 18 • Industry Meet-ups: Fall, Winter • EVC Startup Factory events: All Year

 Big Ideas, Big

Problems - Nov 9  Neil Kane - Nov 15

@UChicago.edu

Resources: Build a Team

Capability (Being Able)

Credibility (Believability)

Complementary Skills Your team has the skills and ability to execute

Passion for Idea Having a shared interest in solving a problem or creating an opportunity

Know-how Your team has a perceived expertise/intelligence in the area (e.g. advisors, Corporate Lab etc.)

Resources: Vet an Idea

1 Risk 1

Risk

Development of a website

Risk 3

2

Inventory and consignment

Risk 2 Creation of warehousing capabilities

A pathdependent risk

3

Risk 4 Customer demand

A deal-killer risk

4

Risk 5 Operating

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Risk 6 Product Mix

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Time *Gilbert, Eyring. “Beating the Odds when You Launch a New Venture

Resources: Vet an Idea *Test these key risks first Risk 4

4

Risk

Customer demand

Risk 6

6

Product Mix

1 Risk 1 Development of a website

Risk 3 Risk 2

Inventory and consignment

2

Creation of warehousing capabilities

3

Time *Gilbert, Eyring. “Beating the Odds when You Launch a New Venture

Resources: MVP Tools Tools for Testing Behavior and Preference: Survey Cold Call Interviews Focus Group A/B Testing Prototyping Video Sketches Landing Page Website Analytics Outsource Crowdsource

3D Prototyping • Google Sketch Ups • IIT Idea Shop • Inventables UI Sketches • Balsamiq • Ai, Ps, Id • PowerPoint • Paper/Post-its Websites • ThemeForest.net • Wordpress • Launchrock.com Outsource & Crowdsource • ODesk • Mechanical Turk • Crowdspring

Survey • MailChimp • Google Forms • Survey Monkey Analytics • Ad Words • Facebook Ads • Google Web Optimizer (A/B Testing) Developer Shops • Doejo • Dashfire • Adalyze • Sphereinc And many more…

People NVC Faculty and Coaches

Social NVC Faculty and Coach

Steven N. Kaplan

Robert H. Gertner

Neubauer Family Distinguished Professor of Entrepreneurship and Finance, Faculty Director, Polsky Center for Entrepreneurship

Ellen A. Rudnick Clinical Professor of Entrepreneurship, Executive Director, Polsky Center for Entrepreneurship

Troy Henikoff Serial entrepreneur, cofounder and director of Excelerate Labs, cofounder of Sure Payroll

Bob Rosenberg Associate VP Public Affairs Communication, Chicago Booth Adjunct Professor

Waverly Deutsch Clinical Professor of Entrepreneurship

Joel F. Gemunder Professor of Strategy and Finance

Linda Darragh Clinical Professor of Entrepreneurship, Director of Entrepreneurship Programs, Polsky Center for Entrepreneurship

Global NVC Faculty Kathleen Fitzgerald Director of Academic Support, Executive MBA Programs, Adjunct Assistant Professor

NVC Kickoff Panelists Troy Henikoff NVC coach, serial entrepreneur, co-founder of Excelerate Labs and Sure Payroll

Nirav Batavia, Owl Invest NVC Finalist, 2011

Anu Jayaraman, Agile Diagnosis NVC 1st place winner, 2011

Coco Meers, Pretty Quick NVC 3rd place winner, 2011

Alex Pendenko, Swingbite NVC 3rd place winner, 2011

The 16th Annual Edward L. Kaplan, ’71

NEWVENTURECHALLENGE

Networking Session

Winter Garden