Midterm Paper

Weight: 33%

The midterm paper is the first major step toward your final project. You will produce the first layout of your business model and product offering, both of which will evolve throughout the semester as you try to validate your initial hypotheses. See this for more details on what that means. For the second half of the semester, we will ask you to interact with real customers, partners, providers etc to evaluate your business model, in addition to developing your product offering.

We don't want you to write a lot. But we want you to think and research a lot. Please read the questions below, and then think hard about them in very specific terms with regard to your company/situation. We encourage you to do research thinking about your business model and your offering. Your choices here will be a major determinant of how well you satisfy some of the below criteria, and hence of your grade. A great paper will have spent a relatively small amount of time writing relative to the amount of time spent thinking and researching.

The paper should have the following qualities:

1. Crisp writing: crisp, to the point writing is very important; don't caveat too much, and don't try to be polite or complete in covering all bases
2. Quality, Creativity, Originality and Clarity of Thought: choice of company/product in light of questions asked, thinking out of the box, coming up with interesting, original solutions and ideas and non-textbook points of view, clear thinking and exposition
3. Judgment: The choice of company/offering, and especially the richness of the issues it exposes per the questions below. So please think hard about that up front: a company that exposes interesting tradeoffs will stand you in good stead
4. Realism: The realism of the company's situation and the issues you examine. All companies have challenges and opportunities, and they are usually very specific to the company itself
5. Domain knowledge in technology and business: demonstrating deep understanding of technical and business issues. You are strongly encouraged to do research on the Web to acquire this knowledge
6. Choice and exposition of tradeoffs: the section on design and technical tradeoffs will carry more weight than other sections, so we encourage you to spend more time on it -- we are looking for specific trade-offs that are important to the business/product and that don't have an obvious answer
7. Language: good writing in general
8. References: citing relevant material, including online resources you use

Part I

A. Vision

1. Why are you starting this company?
2. What change do you want to achieve in the world, or what do you want the world to look like as a result of your startup?

B. Customers and Market

1. Estimate the overall size of your target market. Use the metric you deem most appropriate - eg. number of users, dollar spent, page views etc.
2. What percentage of market share can you hope to achieve? Why? In what time frame?
3. Who are your customers? How would you segment them?
4. For each segment, what is the value proposition to them - why would they buy or use your product/service? Is your offering a pain-killer (a must-have) or a vitamin (a nice-to-have) for the customer?
5. Within the broad group of customers to which your offering is applicable, what are segments of non-customers, i.e. people who are unlikely to buy or use your offering in the near term? Why are they non-customers?

C. Competition

1. Who are your competitors? What is the basis of the competition? e.g. price, market size.
2. What are your strengths? What is your competitive advantage?
3. What are the current barriers to entry? e.g. distribution channels, high fixed costs
4. Who might your future competition be? What barriers to entry can you raise to prevent them from entering? e.g. intellectual property

D. Strategy

1. What is your product strategy? What are the characteristics of your initial product and how will they evolve over time?
2. What is your go-to-market strategy? What segment of customers are you planning to target first, and how will your customer-base evolve over time?
3. Does your product have potential for network or viral effects? If so, how do you plan to exploit this potential?

E. Product and Design

1. Who are the users of your product (may or may not be the same as the customers)? Identify the major segments.
2. For each segment, what are the primary use cases?
3. How well do existing products serve these use cases? How will your product better serve them?
4. What is your "Minimum Viable Product"? What key features/services should you build first?
5. What are the important Metrics or Key Performance Indicators that are most important for your company? How do you plan to measure them and how will they influence your future product decisions. (For more information on metrics, refer to Dave McClure's "Startup Metrics for Pirates")

F. Customer Acquisition

1. How are you going to create initial demand? What are your initial customer/user acquisition strategies? Make sure to explain for every customer archetype, if different.
2. What distribution channels would you use to get your product to customers/users?
3. What is your customer acquisition cost for each of the above approaches? For each channel, explain the channel economics.
4. Conduct a survey and/or talk to potential customers. How many people have heard of your product so far (awareness)? What percentage of them are interested in your product (interest)? What percentage of these actually thinking of buying your product (consideration)? What percentage of them actually have bought the product (purchase)? Talk to at least 20 customers for physical products and talk to at least 100 customers for virtual products.

G. Revenue and Pricing

1. How do you make money, and from whom? What are the major revenue streams?
2. How are you going to price your product? What is the pricing strategy for each revenue stream and why? Value pricing, volume pricing, negotiated pricing, auctions, freemium, leasing etc.
3. How much are customers currently paying for alternatives or substitutes to your product?
4. Which approach are you planning to take: a "user growth first" approach or a "revenue first" approach, or a "quick path to profitability" approach? Why?
5. Draw the payment flow diagram (see an example here)

H. Costs

1. What is your key sources of fixed cost?
2. What are your key sources of variable cost?
3. What are the biggest drivers of cost in your business model? How can you reduce them in the future?
4. If your costs are primarily fixed, in what timeframe can you reach breakeven? If your costs are primarily variable, what is your operating profit margin?

I. Raising Money

1. Do you need to raise money? If so, how much do you plan to raise and in what timeframe, and why? What do you plan to use it for?
2. What kind of investor do you plan to raise from, if any and why would you choose this over other forms of funding? e.g. Angel, VC, Incubators
3. Have you been in touch with any potential investors? If so, describe your conversation. If not, how do you plan to get in touch with them and pitch?

Part II

Answer the next questions assuming the role of CTO

A. Product Design and Development:

1. When designing and developing new products and/or services, what are the most important technical decisions you would take into account early on versus later on? What are the steps that you consider important in taking an idea from design to implementation? Please make sure to communicate the high level principles, while talking about the specific examples from your company.

2. Differentiation, in terms of technology and product capabilities, technical barriers to entry (if any) in the specific market that the company is operating in. If there aren't any real technical barriers, clearly state that.

3. What are the next three top development priorities in the product area, and why. Explain in some depth, and again in the specific context of your business and offering.

B. Product and/or Technical Trade-offs:

A description of three major technical design decisions (technology or product related) that will need to be made by the company in the near future. For each, state the major options and their pros and cons, and then state your proposed option and explain why you plan to choose it and what the risks with it are. Explain in some depth, and again in the specific context of your business and offering. You need to be specific enough and give sufficient technical and business related details, and yet keep your target audience (non technical board of directors) in mind.

C. Strategic Trade-offs:

A description of three major strategic trade-offs or decisions that you made or will need to make in the near future. For each, state the the major options and their pros and cons, and then state your proposed option and explain why you plan to choose it and what the risks with it are. For example, you can talk about decisions related to your target customers, business model, monetization strategy, customer acquisition strategy or strategic partnerships.

What to Submit

One submission per group.

Midterm Paper:

1. PDF format only
2. Include everyone's full name and NetIDs
3. Use the following file name format: Lastname_Firstname_FileDescription.pdf
4. No more than 14 pages (excluding cover page)
5. Use a font size of at least 11
6. Use one of the following fonts: Arial, Times New Roman or Calibri
7. Use at least 1 inch margin on every side
8. Paper may be either single or double spaced

When to Submit

Submit by 5:00pm on Wednesday March 15

Note: You will not get any credit for late submissions. We will grant extensions only in the case of illness (with a doctor's note) or extraordinary circumstances. Extracurricular activities and heavy workloads in other classes don't count as "extraordinary", no matter how unexpected or important or time-consuming. Please let us know ahead of time if illness or an extraordinary circumstance will cause you to submit a writeup or paper late, then you should discuss the matter with your instructor as soon as possible.

Where to Submit

Have one team member submit the project via Blackboard.

Optional

Apart from the paper, you may find it helpful fill out a business model canvas in order for you and us to keep track of the evolution of your business model. If you do, we reccomend using Alexander Osterwalder’s business model canvas as our layout. It can be downloaded here. For explanation of the canvas, it is strongly recommended to watch Steve Blank's Udacity lectures. They are available here. We don't' mean to endorse one philosophy over another, but this canvas is useful for our purposes. You may also want to take a look at the books Business Model Generation by Alexander Osterwalder and The Startup Owner's Manual by Steve Blank. Most importantly, talk to us about the details, show us your prototype, and ask us questions. We are available to you and want to help you create a great artifact.

Many of the questions above are closely related to how you would be filling your canvas, and are structured in a way to guide you through the process.

NOTE: Although buisness canvas is optional for the midterm, it may be a part of the requirements for the final paper. It may be worthwhile to start thinking about this now.

Helpful Resources

• Should My Startup Pay to Advertise
• The Business Model Canvas by Alexander Osterwalder
• Pricing Worksheet
• Startup Equity Calculator
• United States Patents
• United States PTO Trademark Electronic Search System