Creating Value
WHat's Value
Ask 3 people and get 3 answers.
$ equivalent of goods? Good price/performance ratio? How about brand value?
To maximize value, you need to understand how startups vs. established businesses create it
Established business vs Startup
Established Business
Optimizing operations, optimizing cash flow
Squeezing existing business models
Strong incentive against creative destruction
Product innovation: evolution, not revolution
Rigid corporate structure, culture, hierarchical decision making processes, incentives lie with efficiency
Performance measure: profitability -> short term stock price
Startups
Optimizing "unfair advantage" not cash flows
Reinventing business models 
Incentive in creative destruction
Product innovation: revolutionary, disruptive
Flat organizations, everyone incentivized in value creation
Performance measure: long term exit
Value through optimizing status quo
Value through disrupting status quo
The entrepreneur's 
most important task
opportunity
Dicothomy creates
A Startup can do things the big "evil" corporations cannot:
Disrupting substantial markets through technology
Creating benefits for consumers with no business model
Disrupting markets with revolutionary business models
Creating new markets
Skype market capitalization at exit: $2.6 billion
Twitter market cap in July 2011: $7 billion
Google market cap at IPO: $23.1 billion
Yahoo! market cap at IPO: ~$750 million
Why Startups & Why So Much?
Build a "Better mouse trap"
Facebook market cap at last money in May 2011: $82 billion
Skype market entry: 2002
International long-distance market in 2002: 175 billion minutes ~ $15 billion
Skype exit: 2005
International long-distance market in 2005: 270 billion min ~ $15 billion
Skype...
forced incumbents into price cuts of up to 50% 
achieved phenomenal market destruction for competitors
created a great option for consumers
and while at it...
created $2.6 billion less the $20 million paid in capital
value for its shareholders
Why so much: 
expectations that it will take over the long distance market
platform for hundreds of millions of people with recurring usage
strategically important for eBay to enable more transactions

Why can Skype do this? 

"Unfair advantage" called better user experience for FREE
Network effects
Footnote for Skype fiscal year 2005: 
Revenues: $60 million
Profit: $0
You can also do it
and here is the recipe!
Think of your idea from an investor's perspective:
Do you understand what your market is? 
Do you have the "unfair advantage" in a sizeable market?
Can you either destroy a large market or grow an existing or new one?
How sustainable is your competitive advantage? 
Are the market, technology and team risks manageable?
If Yes to all, then...
Ask yourself every day: how do I create value for my company today?
Get people like you to work with you/partner with you
Raise more cash than you need and be super frugal (cash is KING!!!)
Execute like a mad man: you will make mistakes but it is ok
Fight every day, you are in a war!
And you WILL create value
Think with an investor's hat on: difference between paid-in capital and exit proceeds