Lunch Talk: Sequoia Capital's Doug Leone on Luck & Taking Risks

Sequoia Capital Managing Partner Doug Leone addresses risk taking in his Stanford GSB View From The Top talk on November 4. He also discussed the venture capital industry, what his team looks for in entrepreneurs, and more.



tags: entrepreneurship, vc, risk, management, investment

Quote of the Day: Patent as a Slingshot.

The David Co. v. Goliath, Inc. kind of competition is dependent on investment in David Co. — the small new competitor. And few men will invest in such a competitor unless they think it has a potential patent monopoly as a slingshot.

Picard v. United Aircraft. 128 F.2d 632 (1942). Court of Appeals, Second Circuit. May 28, 1942.

Lunchtalk: Building your own human capital (@Google)

The richest billionaire executive on the planet and the lowest-status minimum-wage worker have at least one thing in common when it comes to work: they both have 24 hours in the day. So what distinguishes the high-earning executive from lower-paid workers? It's the amount of capital they are able to combine with that 24 hours each day. Not just capital in the form of money and business systems, but also the amount of intangible "human capital" they bring to their work: knowledge, wisdom gained from experience, mindset, the ability to sell their vision effectively to others, and the "social capital" of their business connections. 

tags: lunchtalk, education, social, investment

Quote of the Day: Investing in Globalization.

There’s no way to invest in a world where globalization fails.

The question then becomes what are the best investments that are geared towards good globalization. Facebook is perhaps the purest expression of that I can think of.”

- Peter Thiel.  (quoted from The Facebook Effect, by David Kirkpatrick.)

tags: investment, model, business, trend, constraint, startup

Lunch Talk: (Stanford) Startup as a Learning Experience

InDinero Founder Jessica Mah discusses the realities of the startup experience, in conversation with STVP faculty member and entrepreneur Steve Blank. Sharing the early successes and missteps for her company, Mah honestly reveals the lessons she continues to learn while directing inDinero's path to success through its commitment to customers.

link

tags: startup, lunchtalk, investment

Mobile devices will become extremely successful because many industries - communications, IT, IC and hardware manufacturers, software developers and others - are investing capital, time, and effort into making them successful. Here's the latest example of how chip designers work to reduce power consumption and performance of mobile ICs.

Jan 5, 2012. VBeat -- SuVolta, a chip startup that says it can cut power consumption by 50 to 90 percent when coupled with other techniques for lowering voltage said today it has raises $17.6 million in a new round of funding.

“Power is now the biggest design constraint for electronic products,” he[Bruce McWilliams, president and chief executive at SuVolta] said. “This funding demonstrates the excitement surrounding our technology which dramatically reduces power consumption in ICs.”

Intel announced Tri-Gate earlier this year and said it will use 3D structures to pack more (FinFET) transistors into a given space, cutting power consumption by 50 percent and improving performance by 37 percent.

Two additional points from the article:
- the startup's business model is IP licensing;
- VC investment in semiconductors is down dramatically since 1999.

tags: technology, s-curve, innovation, investment, licensing, energy, mobile

Warren Buffet investment rules: business vs franchise

In his 1991 letter to shareholders - years before the web took off - Warren Buffet analyses media (newspapers, television, and magazines) and notes that it is beginning to change from franchise to business.

Let's take a quick look at the characteristics separating these two classes of enterprise.

An economic franchise arises from a product or service that:
(1) is needed or desired;
(2) is thought by its customers to have no close substitute and;
(3) is not subject to price regulation.

The existence of all three conditions will be demonstrated by a company's ability to regularly price its product or service aggressively and thereby to earn high rates of return on capital. Moreover, franchises can tolerate mis-management. Inept managers may diminish a franchise's profitability, but they cannot inflict mortal damage.

In contrast, "a business" earns exceptional profits only if it is the low-cost operator or if supply of its product or service is tight. Tightness in supply usually does not last long. With superior management, a company may maintain its status as a low-cost operator for a much longer time, but even then unceasingly faces the possibility of competitive attack. And a business, unlike a franchise, can be killed by poor management.

Technology is a "winner takes all" market. In Buffet's terms, each segment has a dominant franchise and the rest of the field is scrambling to money as businesses.

Ad-supported search - Google.
Mobile devices - Apple.
Mobile silicon - ARM, Qualcomm.
Social Networking - Facebook.
PCs - Microsoft (sw), Intel (hw).
Online retail - Amazon.
Enterprise IT services - IBM.
Enterprise data services - Oracle.

Yahoo seems to be the kind of franchise that even inept managers cannot kill. 

Anything I missed?

tags: business,model, investment, technology

12/28/27 Reuters:

Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N) is starting a bond insurer that would help state and local governments lower their borrowing costs, and is likely to lure business from established rivals struggling with credit market turmoil.

Buffett, often called the world's greatest investor, is known for taking large business and investment risks.

He has said, for example, that Berkshire is willing to suffer a $6 billion insurance loss on a single storm. The company was able to boost premiums following Hurricane Katrina after weaker rivals reduced underwriting risk.

Buffet's risk profile fits the one of a risk-taker, while in reality his larger-than-life bets decrease risks because they enable him to shape the situation. He always buys control, not risk. He times his purchases so that his ability to control the developments in the industry is at a maximum. For example, now everybody is out of cash and he can come in and define his new rules for the game.