In considering industry status, we'd also like to

spend some time talking about the industry structure itself.

Specifically, what we mean by structure, or the natures of the barriers to entry.

The nature of the hurdles that a new company

needs to go through, to enter that given industry.

It's also, what is involved with the competitive dynamics in that industry.

What level of capital intensity is there?

What level of advertising intensity is there?

What's the concentration of firms that are competing with that industry?

As well as, what's the average company size of your competitors?

And so by digging in and starting each of these, you get

a better sense of what's the landscape that you're going to be competing within.

So with capital intensity, we're looking at money.

We're looking at

when you're thinking about industries, and when you're thinking about business

ideas, do you need a lot of money to get started?

Or, can you get started at a much more affordable rate?

A second element to think about when you're looking

at this element of structure, is the advertising intensity.

And that if you're able to enter a market, where people are easily swayed.

Where people can be persuaded via advertising.

Then it's probably going to be better for you as the entrepreneur.

Now there are some brands, that people are in love with.

I will only drink

this company's product. I will only wear this company's shoes.

There's also a brand where people get them tattooed on them.

People know that one?

>> Pepsi. >> What?

>> You get Pepsi tattooed on you?

>> I've seen people do that. >> Really?

>> You get, like, free Pepsi for life. >> Interesting.

There's a different one I'm thinking about.

>> Harley Davidson?

>> Harley Davidson.

So you have people that are these die hard Harley Davidson motorcycle fans.

And they'll have the Harley Davidson logo tattooed on them.

Now if a customer likes you well enough to

get you tattooed on them, you have achieved something.

So in that way again, we want to recognize what role advertising plays,

and how easy is it, to try and capture them or persuade them

to you.

Now, an awful lot of retail is walk-by traffic.

You happen to be near something and you go in.

There might be some brands that are a destination.

I'm going to go to, I'm going to get in the car exclusively, to go to this store.

But that's a bit rare.

So you want to think about what role advertising

plays, and what the relative costs are for that.

Company concentration you want to think about,

as far as how many competitors are there,

and what's the typical size of them.

Again, we would rather complete

with smaller competitors, preferably fewer competitors.

But we would rather have many small, than a few big.

And in that way, completing with a

few small competitors, is more advantageous for us.

Again, it's more of a level playing field for you.

So what we see also sometimes, is

that there's trends emerging, like app development.

And so there are lots of companies that are trying

to build apps, and their apps might be a hit.

They might get them up on the app store, they might sell in great volume, and

they're going to have a lot of success, and

they're going to hit a home run with that.

Or they might build lots and lots of apps, just to have none of them really take off.

Alternatively there are companies like Artisan,

that are building tools for app developers.

Meaning that, as there are people that are building apps, if

I can bring you platforms that will help in your design.

That will help you in refining that user experience,

that's a tool for the builder of the apps.

I would argue, they are likely going to have great success as

Artisan, than the average app company.

And I think the parallel to this, or goldrush.

>> I was thinking the same thing.

>> What was the goldrush? >> That was like in 1849.

>> Okay. >> Gold was discovered in California.

>> Yep.

>> Many, many people went down there, but very few became rich.

But, the companies that made tools or jeans, like Levi-Strauss

became very rich. >> Okay, so exactly right.

So, in the gold rush, when you could go to California, and walk around and

there's gold laying on the ground, or you could sweep the ground and you'd see gold.

The thought was, well everybody should go

out there, and we're going to strike it rich.

And few people did.

I can't name one to

my knowledge, that did. But some did.

But I know Levi's.

I know Levi Strauss. What did people pan for gold in initially?

What did you wear?

>> Jeans? >> Didn't wear jeans.

[INAUDIBLE].

Not before Levis. You wore your wool pants.

>> Ooh. >> Not a pleasant thought.

Let me essentially wear a suit.

And again, watch these westerns, that are set in the early 1800s.

People are dressed pretty nice.

People are dressed in their coats, and jackets, and wool pants.

And Levi's, with their commercialization of

denim, in jeans and overalls, and such, again, kind of reinvented that industry.

And it was Levi's, and it was the people that sold shovels,

and that sold axes, and picks, that sold hotel rooms,

that operated the restaurants, that made money in the gold rush.

And then they let everybody else chase the gold, and chase the end customer.

So in that way, again, Artisan is doing something similar.

And when we look at what they're doing,

we'll take a couple minutes to watch this one.

>> In today's world, mobile apps are a part of a successful business strategy.

So let me ask you something, are you

getting the results you want from your app?

Is it driving sales, deepening engagement or increasing brand loyalty?

It should be.

And this is why you need to know about Artisan, the first

mobile experience management platform, that helps

you get the results you're looking for.

Our motto is simple.

Apps are about the experience, and they should be as

inspiring, intuitive, and engaging, as the devices they run on.

Chances are, if you aren't getting the experience

right, you aren't getting the business results you want.

This is why the app world needs Artisan.

Because without it, the ability for brands to engage with their customers,

and manage mobile experiences that actually improve

their bottom line, is quite the task.

Even making simple changes can be incredibly tedious, and time consuming.

From writing code, to compiling and recompiling your app.

To waiting on App Store approvals, and hoping users will download your updates.

It takes a lot of time and resources.

[MUSIC]

Artisan changes all of that, by putting unprecedented

control at your fingertips, on an easy to

use, online platform, that gives you near instant

insight into how your customers are using your app.

And the immediate knowledge of what's working, and what's not.

Truth is, with Artisan, you can make modifications, test different designs

and messages, create personalized experiences,

publish updates directly to your users.

And analyze your app's effectiveness, all within minutes, and all without coding.

This means, among other things, you'll be able to make informed decisions based on

facts, not hunches, which will lead to

better customer experiences and more profitable results.

That's remarkable.

So if you're looking to wow your customers

by crafting amazing mobile experiences, you're looking for Artisan.

[MUSIC]

Bottom line.

We'll help you maximize your return on mobile.

>> So you might have gotten lost in some

of the technical elements, if you're not a developer.

But it certainly sounds good.

And it certainly sounds like, as a tool for

developers, it's going to add value to what you're doing.

And so they're having some success with this, and again, it's geared much towards,

the logic of let's build a tool.

This is one of the most successful

Kickstarter campaigns, which is a crowd-funding platform.

And we'll talk about what crowdfunding is.

Where entrepreneurs went in with a design, and they set out with a

goal of raising $100,000 through pre-sales.

So not via investors, but from people that would buy the product, would pay

them for this product now.

And that would come with a promise of them sending you

the product, once it was built, a few months from now.

So with this element of pre-sales, you are paying now, typically at a discounted

price, if you're willing to wait a period of time, a few months to get your product.

So they had a goal of raising $100,000 for this.

They raised a million dollars in 28 hours.

And 10 million to date. And this launched a year ago.

Mays, May of 2012.

So we'll take a brief look at what they're doing.

>> Hi KIckstarter, my name is Eric.

This is my Smart Phone, and this is my Pebble.

Pebble is a watch that you can customize. It runs a lot of cool and useful apps.

And connects wirelessly by Bluetooth, to your iPhone or Android Smartphone.

This is our dream team.

[LAUGH]

It started with a prototype, built from cell phone parts.

That led us to our first

commercial product, the inPulse Smartwatch for Blackberry.

The number one question we received was, when will the watch work with my iPhone?

Well, we're proud to say that we can finally answer that question.

This is Pebble.

It's the only watch that works perfectly, with iPhone and Android Smartphones.

Pebble is much smaller and lighter, than anything else out there.

It has a high resolution e-paper display, that looks sharp and readable,

even outside under direct sunlight.

Pebble comes in several different colors.

Arctic white, Jet black, Cherry red, and a fourth color, that

you could vote on as a backer of the color option.

We're really excited, about how you can run apps on Pebble.

If you cycle, you can use Pebble as a bike computer.

The GPS on your phone provides accurate data, letting you

view stats like average speed, elapsed time, and distance traveled.

If you run with your Smartphone, you can use Pebble

to easily control your music, and monitor your pace and distance.

You can even see extraordinarily important messages, right on your wrist.

It's easy to install new apps on your Pebble.

Just browse the Watch App store on your phone, and click Install.

Around the house, Pebble makes it easy to

see who's calling, while your hands are full.

You can also control most Smartphone music apps like, iTunes,

Spotify, Pandora, Google Music and more, right from your wrist.

[MUSIC].

These apps are just the start.

For the more adventurous, we're launching an open

SDK, so anyone can build apps for Pebble.

These apps can receive data, and transmit data to the internet.

Pebble has a built in accelerometer, a vibrating

motor, powerful microprocessor, bluetooth, and a beautiful e-paper display.

The battery keeps Pebble running for over seven days.

So that's Pebble.

We finished the design, and we're just about to start production.

But we need help, to get Pebble onto your wrist.

We hope you'll join us.

Thanks. >>

[CROSSTALK]

>> So what they've done, and the nature of this, and with these platforms like

Kick Starter, you can buy this for $100. >> That's it?

>> Whoa. >> I'm getting one of those.

>> Is it out yet? >> Yeah.

>> And, you get one watch for a 100 bucks,

and they plan to retail it for 150, in exchange

for you giving them the money now.

And again, waiting from March until September,

so waiting about six months for it.

You get a $50 discount.

What they've also done, is had a couple of other options.

And with this one, it looks like they sold that, and

then they may have added some more later. And they

sold 40,000 watches, at this $115 price point.

And so they have all these different levels, of what type you

can buy, and how many you can buy, and how many colors.

And if you would like,

[CROSSTALK].

>> A 100.

>> A 100 of them, they will sell you a 100 of them, in a mix of colors.

Who would need 100 watches?

[CROSSTALK]

>> A distributor.

>> A distributor or a retailer, that wants

to put this in their store and sell them.

So in that way, watches been around a long time, I'm

not familiar with too many watches that do what this one does.

Fundamentally, it's extending the display

of your iPhone to your watch, or your wrist.

So it doesn't necessarily have every

feature and function, embedded in the watch.

it just adds a second screen, to use the software

and the features that you already have on your phone.

So pretty novel, pretty interesting, as evidenced

by the success they've had with it.

But again, they've recognized that the world probably doesn't

need another watch company, that runs like normal watches do.

But there's an opportunity

to do something different.

And there's not anybody in the market to my knowledge, that does exactly this.

There's Nike that does some stuff.

There are others that do some stuff, but again a pretty novel offering.

>> How do they get like your messages on this, on the actual watch?

>> I can't answer the technical questions of it

but they figured out a way to do it.

Yup?

>> so this was the funding period, was only

a month, and they made $10 million?

>> The funding period, they opened it in March.

I'm sorry.

May 17th is when it opened, and it looks like they stopped taking sales.

actually let me back up.

It looks like it started April 11th, and so they hit their goal that day.

So they hit that $100,000 goal that day.

But they continued with it, and it ran until, mid May.

And they did 10 million in sales, during

that window, as I understand what they have here.

>> Well, how does Kickstarter make money off of this?

>> Kickstarter makes a percent.

So I think it's about 6%. >>

[INAUDIBLE]

>> So in that way, they make a percentage of sales.

>> $600,000.

>> And when we look at this crowdfunding market.

So now we're kind of going beyond that specific product, and we're looking at the

broader crowdfunding industry. We see that, based on this chart, there

are an increasing, and rapidly increasing rate of growth of models

like this, where some people are buying product.

Meaning that I'm going to prepay for product.

There are other people that are doing equity.

I'm buying into a company, based on a website.

And I'm putting in couple of hundred dollars, couple of thousand dollars.

There are lending platforms.

There are donation-based platforms.

There are microloan and microlending platforms.

So there's a lot of things going on, in this crowdfunding space.

And people buy in on it, because they either like the product, they

want to buy it, they believe in it, they want to put some money in.

Get the product at a discount.

Probably be the first person they know that has that product.

But they're going to have to wait a little while.

And again that's where, in some fashion, these tangible

pieces come in, where you're not investing in Pebble.

You're not lending money to Pebble.

You're buying their product, with Kickstarter in the campaign that they ran.

And so in that way again, we see a lot of things emerging.

And we see the industry changing quite a bit,

just in a couple of years, of what's this dynamic.

But what we also want to recognize, is that when you go through, and you think

about this. There are companies

that are building software, for people that want to start crowdfunding

websites. So let me state it a different way.

So there is Kickstarter, which is a company where you

and I, if we have a product idea, or we

want to make a movie, or we want to write a

comic book, or whatever it is that we want to do.

We can go to Kickstarter. We can post our project, and

try and get people to buy via pre-sales, or just contribute money to it.

Different than Kickstarter, there are other platforms out there, that try and

match entrepreneurs, with people that are prospective buyers or donators.

This company has what's called a white lib-, white label solution.

Which is kind of a template of features and functions that you

can use, if you want to start a crowdfunding site, for a

specific purpose or audience.

And an example of one of their customers, is the

University of Vermont, and that's their platform that they've highlighted here.

What do you think the University of Vermont

is doing with a crowdfunded solution like this?

How are they using in the Launcht product?

>> So that other students can fund their fellow students.

>> They very likely may be trying to market something to the student community.

Whereby, student entrepreneurs can sell to other students,

and do it in this kind of pre-sales fashion.

Where you have an idea, you need some money to make the idea happen.

People want the product.

But they can't buy it until it's made,

which you can't do until you have the money.

So it gets to be a chicken and egg problem historically.

But here this is a novel way of solving

it, where people are going to pay you first, you'll use that to make it.

And then you'll give them what it is they bought, with a bit of a time delay.

>> let's say the watch company, I forget the name.

>> Yep.

>> they only got, or Pebble, they only got like, let's say 10 sales or something.

>> Yep.

>> Does the money go back

[COUGH]

to the people that put it in if they?

>> Yes, so a lot of these crowdfunding platforms, and again if you

are the builder of a platform, you can decide what the rules are.

But typically, if you tell me you need $100,000 to make your product,

and you raise $99,000, then your product is unfunded, you get no money.

And all that money goes back to the people that pledged the money, initially.

So in that

way again, if it's going to cost you $500 to buy an airline

ticket to get somewhere, and you only have $499, you can't get there.

So that's the same logic they use.

And you tell them what you think it's going to cost.

And you either raise it, or you don't. And it's an all or nothing, solution.

But what we see here, again with these

crowdfunding platforms, is they are emerging and emerging rapidly,

and again a novel space.

Kickstarter is big, and there are another one or two that are big.

But they're a little bit non-specific.

What's the problem with putting your ideas up for sale, before you have the product?

>> Someone will steal it. >> Someone may steal it.

And there are some companies that report that happening.

And there are some individuals, and, or companies, that report

to search Kickstarter for good ideas, that they want to copy.

So is that good, or bad for Kickstarter? >>

[CROSSTALK]

>> Pretty bad, if people think that, well I may put something

up, but it's probable, that somebody might be able to copy my idea.

And if they have some money, get it to market before I can.

What's the advantage of doing something, that's going to be University of

Vermont centric, by those students, for

those students, in a contained environment.

Yep?

>> People probably won't take your idea, but you'll know who they are.

>> It might be a little bit more of a controlled environment.

It might be more of a trustworthy environment.

The likelihood that other students are going to have a

ton of money, and a ton of existing relationships,

that they're going to be able to execute on that

idea well, and quick and before you, is low.

And so in that way, again, there are other advantages to making it local.

What else is interesting, about having something that's a

very local model, from being able to raise funding?

What happens when your school does a fundraiser?

Who gives you money? >> People.

>> People that live near you, or that are otherwise affiliated with the school.

So in that way too, by having something

that's kind of a local, or a specialized platform,

you may be able to more effectively raise money,

and again it's more of a trusted type environment.

So in summary, when we think broadly about

industries, it really comes down to two fundamental questions.

Is the industry

at the right stage?

Is the life cycle right for you to enter as a start-up?

Or if you are entering something that maybe is a bit too mature, what are

you going to do to be sustainably competitive, against

bigger firms that are already within that space?

The second piece is understanding structure.

And it's understanding what types of structures are favorable to startups.

And it's rare that you're going to find

the perfect industry, that's favorable by all measures.

But it gives

you some sense of the things to consider, the things that to beware of.

As also the things that you're going to have to compete

within, and what to expect as you enter an industry.

Industry structure

Developing Innovative Ideas for New Companies: The First Step in Entrepreneurship

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