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How to de-risk entrepreneurial ventures Including an examination of Vivint Wireless, a startup ISP (supported by a larger

company) as a case study

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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.

Who am I?

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Who are you?

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• 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?

What I plan on talking about today

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Are you:

a risk taker

or

a risk mitigator?

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A failure: Guaranteach

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Risk

Value Value

Risk

Risk 1

Development of website

1

2

Risk 2

Develop different teaching

styles users will appreciate

3

Risk 3

Develop process for cost effectively

producing videos at scale

4

Risk 4

Customers will pay for

YouTube-like quality

5

Risk 5

Customers can be acquired through

online channels, scalably

6

Risk 6

Interface will be navigable,

appeal to target customers

4

Risk 4

Customers will pay for

YouTube-like quality

6

Risk 6

Interface will be navigable, appeal to

target customers

5

Risk 5

Customers can be acquired through online channels,

scalably

1

Risk 1

Development of website

3

Risk 3

Develop

process for

cost

effectively

producing

videos at

scale

2

Risk 2

Develop

different

teaching

styles

users will

appreciate

The Wrong Way to Tackle Risk:

Addressing risk as it occurs

The Right Way to Tackle Risk:

Identifying important risks early and

addressing them first

Deal-killer 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

How you should think about risk

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Motion

Detectors

Remote

Access

Smoke

Detectors

Glass Break

Detectors Carbon

Monoxide

Detectors

Motion

Detectors

Lighting

Control

Smart

Thermostat

Automatic Door

Locks Surveillance

Video Key Fob

Small

Appliance

Control Recessed

Door

Sensors

Solar panels Wireless internet

Vivint panel

Security Energy

management

Home

automation

Solar Wireless (internet)

Vivint mobile app

What Vivint does

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$2.0 $4.5

$9.9

$15.0

$20.7

$27.3

$34.3

$42.6

1999 2006 2007 2008 2009 2010 2011 2012 2013

0

10

20

30

40

50

RMR

$ in millions

Expansion into

Canada

2006

2010

2011

Company rebrands

itself as “Vivint”

Goldman Sachs

increases credit facility

to $440 million

Goldman Sachs

provides initial credit

facility ($75 million)

2000 - 2005

Todd

Pedersen

founded APX

Alarm

Dealer for ADT,

Monitronics, Security

Networks

2012

Vivint completes

its millionth install

Blackstone acquires

Vivint for 2.1B

2009

Company

launches energy

management

offering

Company launched

Home Automation

Services

Company launched

GoControl Panel

Vivint launches a

residential solar offering

2013

Vivint is named

to Forbes “Most

Promising

Companies” list

Equity

investment by

Goldman

Sachs, Jupiter

Partners, and

Peterson

Partners

Company opens

Research &

Development and

Innovation Center

Vivint history and milestones

Vivint soft launches

residential internet

offering, using

proprietary wireless

technology

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DSL Normal

Cable

Fast Cable Other

Wireless

Vivint

Wireless

Speed 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

To grow Vivint, it needs an internet service to bundle with its solar and home automation offerings

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What must be true…? (for this to work)

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Key learning this week, by assumption

Critical assumptions

Confidence

change this

week

Overall confi-

dence 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 ### homes (network cell = # fiber

terminus, # macro hubs, ## microhubs, ### 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 ##% take rate in neighborhoods we cover • (neighborhood recently deployed) met this criteria

Network equipment give reliable, fast service (at least ##Mbps at peak, high

uptime)

• Survey returned many small issues; these should be

solvable;

Weather will have minimal impact on service • (no new learning here)

Customers will be willing to pay $##/month for our service (40-50 Mbs) • RMR remains less than ##; should get higher once

we force more control on sales team

Customers will switch • (no new learning this week)

1 in # will agree to ong-term easement on home for our equipment in

exchange for $##/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

Period from mm/dd – mm/dd/yyyy

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That sounds easy… so why don’t most people do it?

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Cognitive dissonance is uncomfortable

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How you can do better than most

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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!)

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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