Published on March 2, 2014
How to de-risk entrepreneurial ventures Including an examination of Vivint Wireless, a startup ISP (supported by a larger company) as a case study Presented at Lounge47.in on 1st March 2014 Copyright @ Mr. Luke Langford 1
Are you: a risk taker or a risk mitigator? 2
Who am I? Luke Langford is the Chief Operating Officer of Vivint Wireless and the Director of Strategy for Vivint. He joined Vivint just after the Blackstone acquisition of Vivint closed at the end of 2012 with the mandate to put an innovation process in place and identify new billion dollar business opportunities. In 2013 he piloted Vivint’s entry into the internet service provider business and has been leading Vivint Wireless since. Prior to joining Vivint, Luke worked at Zynga doing product management and Innosight – Professor Clayton Christensen’s consulting firm – helping Fortune 100 companies identify and pilot growth businesses. He has a BA in Chemistry from Harvard, where he graduated in 2007 with advanced standing. He also holds an MBA from Harvard Business School, where he graduated in 2012 as a Baker Scholar. 3
Who are you? 4
What I plan on talking about today • Risk and entrepreneurship • A model for categorizing risk • How to track and test risks • How Vivint is doing this with our Wireless ISP division • How I failed to do this in a previous entrepreneurial venture and why many entrepreneurs do this poorly • What else is on your minds? 5
Are you: a risk taker or a risk mitigator? 6
A failure: Guaranteach 7
Guaranteach failed because of poor risk management! (this dashboard is NOT a risk mitigation tool!) 8
How you should think about risk The Wrong Way to Tackle Risk: The Right Way to Tackle Risk: Addressing risk as it occurs Identifying important risks early and addressing them first Risk 1 Development of website 1 Risk 2 Develop different teaching styles users will appreciate 2 Value Risk 4 Customers will pay for 4 YouTube-like quality Value Risk 6 Risk 3 Interface will be navigable, appeal to Develop process for cost effectively target customers producing videos at scale 3 6 Risk 4 Risk 5 Customers will pay for Customers can be acquired through online 4 YouTube-like quality channels, scalably Risk 5 Risk 1 5 Customers can be acquired through Development of website 5 online channels, scalably 1 Risk 6 Deal-killer risk Interface will be navigable, 3 6 appeal to target customers Risk Risk Path-dependent risk Source: “Beating the Odds When You Launch a New Venture” by Matthew J. Eyring and Clark G. Gilbert, Harvard Business Review, May 2010 Risk 3 Develop process for cost effectively producing videos at scale 2 Risk 2 Develop different teaching styles users will appreciate 9
Don’t use traditional dash boards to track progress and convince your investors to do the same! 10
What Vivint does Solar panels Wireless internet Motion Detectors Glass Break Detectors Carbon Monoxide Detectors Smoke Detectors Remote Access Lighting Control Motion Detectors Vivint panel Smart Thermostat Automatic Door Locks Surveillance Video Small Appliance Control Recessed Door Sensors Key Fob Vivint mobile app Security Energy management Home automation Solar Wireless (internet) 11
Vivint history and milestones 2012 2013 2011 2010 2009 2000 - 2005 2006 Dealer for ADT, Monitronics, Security Networks Blackstone acquires Vivint for 2.1B Equity investment by Goldman Sachs, Jupiter Partners, and Peterson Partners Company launched GoControl Panel Company rebrands itself as “Vivint” Vivint completes its millionth install Goldman Sachs increases credit facility to $440 million Goldman Sachs provides initial credit facility ($75 million) Company launches energy management offering 40 Vivint is named to Forbes “Most Promising Companies” list Company launched Home Automation Services RMR $ in millions 50 Vivint launches a residential solar offering $42.6 $34.3 Expansion into Canada 30 $27.3 Vivint soft launches residential internet offering, using proprietary wireless technology $20.7 20 10 Company opens Research & Development and Innovation Center $15.0 Todd Pedersen founded APX Alarm $9.9 $2.0 $4.5 0 1999 2006 2007 2008 2009 2010 2011 2012 2013 12
To grow Vivint, it needs an internet service to bundle with its solar and home automation offerings DSL Normal Cable Fast Cable Other Wireless Vivint Wireless 1.5 – 40 Mbps 20-50 Mbps 100+ Mbps 5-15 Mbps 50 Mbps Price per month $30 $40-60* $105+ $40-50 $55 Slowing at peak times? Less Lots Lots Lots Less Speed 13
How Vivint deploys wireless networks to deliver customer speeds of 50 mbps+ “Fiber Terminus” (on buildings or towers) “Macrohub” (on customer’s home) “Microhub” (on customer’s home) ~300 mbps+ capacity (24, 39, 70 ghz) ~150 mbps+ capacity (5 ghz) Up to 5 miles ~ 1/3 mile Range: up to 1000 ft 40-70 Mbps connections Customers (5 ghz) Unique technology plus a unique go to market strategy (feet on street to identify, close, and install neighborhood level hubs) allows this to happen 14
What must be true…? (for this to work) 15
Period from 05/14 – 05/27/2013 Key learning this week, by assumption Critical assumptions Confidence change this week Overall confidence Learned this week Cost to serve customer is less than $##.##month (incl. data, support, maintenance of network, depreciation of equip, etc) • Routers have been source of customer disconnects, will re-examine whether we want to install them so often Customer creation cost averages: $### or lower • (no near learning this week) One network cell can cover at least 960 homes (network cell = 1 fiber terminus, 4 macro hubs, 40 microhubs, 240 customers) • We have met several vendors of GIS software who believe they can help us automate validation of this assumption on large scale We can achieve a 25% take rate in neighborhoods we cover • WJ2 take rate likely to exceed this after free trial; WJ1 may not Network equipment give reliable, fast service (at least 20Mbps at peak, high uptime) • Survey returned many small issues; these should be solvable; internet works in Todd P’s network without disconnects… Weather will have minimal impact on service • (no new learning here) Customers will be willing to pay $50/month for our service (40-50 Mbs) • RMR remains less than 50; should get higher once we get electronic contracts (~1-2 weeks) and force more control on sales team Customers will switch even though we don’t (currently) have a triple-play bundle (yet) • (no new learning this week) 1 in 5 will agree to long-term (10 yr) easement on home for our equipment in exchange for $20/month off • This continues to be relatively easy, though it can be time consuming (takes a few days for people to think about it Competition will not be able to lower prices enough to convince consumers to stop switching • (no new learning this week) We can work with municipalities and utilities and other scaling partners to get rights for equipment to be placed in appropriate locations, and do so timely • Met an additional utility that has a telecom division to host sites like our fiber terminii and macrohubs 16 (PG&E in CA and OR)
Vivint Wireless Dashboard – 05/27/2013 17
That sounds easy… so why don’t most people do it? 18
Cognitive dissonance is uncomfortable 19
How you can do better than most 20
Test early, test often. (the number of network engineers Vivint Wireless had for the first six months after we had paying customers) (this was too long, but better to have done it this way than to have waited six months to test until we had a network engineer!) 21
Don’t spend too much time on your model After a certain point, your model only gets better because of what you learn in the real world. So: limit your excel time 22
Define how you will measure your tests & risks before you do the testing 23
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