Innovation Casino book summary

How can medium-sized and large enterprises grow their digital ecosystems? In December 2020, I published Innovation Casino, a book that proposes a new type of corporate venture capital fund to promote digital ecosystem innovation. Here, you can find a chapter-by-chapter summary of the book.

Innovation Casino, a book about innovation funding

What’s in it for me? Beat the odds by diversifying your bets on innovation.

The book, Innovation Casino, uses its self-titled metaphor to describe the odds of generating financial returns from innovation so you can beat them. For decades, vertically integrated firms have made high-stakes bets on innovation. However, in the innovation casino, it is the players who bet big. Players think they will beat the odds, but few do. By taking a fresh look at your odds, you can retool your approach to win more frequently just as the house does in a casino.

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Interview highlights from ‘How your digital ecosystem can increase corporate innovation success by 10X’

Diagram showing a vertically integrated company with core and non-core offerings under one roof going to a digital ecosystem where the company focuses on its core assets and third parties build everything else.
Diagram showing a vertically integrated company with core and non-core offerings under one roof going to a digital ecosystem where the company focuses on its core assets and third parties build everything else. A better way to do corporate venture capital.

In August, I was fortunate to be interviewed by Omar Valdez-de-Leon of Latitude 55° Consulting in Copenhagen about a better way to do corporate venture capital by aligning with corporate innovation strategy and digital ecosystem goals. Omar is a known practitioner of digital transformation, having advised companies such as Ericsson, CGI, Honeywell, Cemex, Bosch, Vodaffone, Bell Canada, and more. He is an authority on digital ecosystems, authoring papers about how to develop digital ecosystems, organizing for digital, and the Digital Maturity Model.

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Review of Sam Altman’s Personal Term Sheet

Jennifer Rohleder reviews Sam Altman's personal term sheet for startup investing

How founder-friendly is it?

I managed a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. Of the six documents, Sam Altman’s personal term sheet is the most compatible with Founder Friendly Standard. See for yourself by viewing our infographic where you can drill down and compare the term sheets.

Comparison of Sam Altman’s personal term sheet with Founder Friendly Standard

Review written by Jennifer Rohleder, Principal of J. Rohleder Law, on July 25, 2019.

Below, you’ll see how Sam Altman’s Personal Term Sheet compares to Founder Friendly Standard. I wrote this review to help startup founders critically evaluate the issues in term sheet templates.

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Review of Y Combinator Safes

Ryan Juliano attorney review of YC Safe Notes

How founder-friendly are they?

I orchestrated a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. Y Combinator Safes are silent on a number of important issues. See for yourself by viewing our infographic where you can drill down and compare the term sheets.

Many founders don’t realize how much of a company they’re giving away with YC Safes

Review written by Ryan Juliano, Vice President, Head of Platform, and Attorney at Howell Legal on June 6, 2019.

The below review of the Y Combinator (YC) Safes compares them to the Founder Friendly Standard. Y Combinator publishes four variants of post-money Safes:

  1. Valuation Cap, no Discount
  2. Discount, no Valuation Cap
  3. Valuation Cap and Discount
  4. MFN, no Valuation Cap, no Discount

When I refer to YC Safes, I’m talking about all four variants. The only difference between the Safes in this comparison occurs in Section 1.5 below on the topic of anti-dilution.

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Review of 500 Startups KISS Notes

Zev Safran: Comparison of 500 Startups KISS Notes to Founder Friendly Standard

How founder-friendly are they?

I organized a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. 500 Startups KISS Notes are silent on a number of important issues. See for yourself by viewing our infographic where you can drill down and compare the term sheets.

Review written by Zev Safran of Safran Law on June 25, 2019.

500 Startups KISS Notes are investment templates meant to enable early stage startups to raise money without a lengthy negotiation of legal terms. I reviewed both variants of 500 Startups KISS Notes to write this comparison to Founder Friendly Standard.

When I refer to 500 Startups KISS Notes, I’m talking about both variants.

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Review of Y Combinator Series A Term Sheet Template

Six attorneys compare popular investment agreements side-by-side to Founder Friendly Standard

How founder-friendly is it?

I conducted a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. The Y Combinator (“YC”) Series A Term Sheet Template was not the most founder-friendly nor was it the least. See for yourself by viewing our infographic where you can drill down and compare the term sheets.

Y Combinator Term Sheet - Comparison to Founder Friendly Standard.
Click each box in the interactive version for analysis.

Founders who want to be their own bosses shouldn’t use the YC Series A Term Sheet Template

Review written by K. Adam Bloom, Startup and Entertainment Attorney, on September 7, 2019.

To write this comparison, I used the Founder Friendly Standard to grade the Y Combinator Series A Term Sheet Template.

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Review of NVCA Model Legal Documents

Keith Strahan - Attorney comparison of NVCA Model Legal Docs to Founder Friendly Standard

How founder-friendly are they?

I led a study in 2019 where attorneys reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. The NVCA Model Legal Documents were the least compatible with the Founder Friendly Standard. See for yourself by viewing our infographic where you can drill down and compare the term sheets.

Review written by Keith Strahan, Managing Partner at Fulton Strahan Law Group, on Oct 14, 2019.

NVCA Model Legal Documents can be very time-consuming and expensive to negotiate and document. They include 18 agreements. To write this answer, my associate, Josh Mathews, and I reviewed the following six documents:

  1. NVCA Voting Agreement
  2. NVCA Term Sheet
  3. NVCA Stock Purchase Agreement
  4. NVCA Right of First Refusal and Co-Sale Agreement
  5. NVCA Investor Rights Agreement
  6. NVCA Certificate of Incorporation

To write this review, we started with each issue in the Founder Friendly Standard and compared it to the NVCA Model Legal Docs.

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Review of Gust Series Seed Term Sheet

Jennifer Rohleder's review of Gust Series Seed Term Sheet

How founder-friendly is it?

I led a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. The Gust Series Seed Term Sheet was one of the least compatible with the Founder Friendly Standard. See for yourself by viewing our infographic where you can drill down and compare the term sheets.

Gust Series Seed Term Sheet does not guarantee founders any control of their companies

Review written by Jennifer Rohleder, Principal of J. Rohleder Law, on July 25, 2019.

If you can muster the patience to build what John W Mullins calls a customer-funded business, you can reject the terms of the Gust Series Seed Term Sheet that you don’t like. (Always consult with an attorney when negotiating a term sheet.)

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What is an Ecosystem Innovation Fund (EIF)?

Diagram showing an ecosystem innovation fund (EIF) branching off from non-core innovation. The overall diagram shows the pieces of a corporate innovation strategy.

An ecosystem innovation fund, or “EIF,” is a seed fund for startups. EIFs are a hybrid of corporate venture capital and the US government’s Small Business Innovation Research grant program, or “SBIR.” EIFs combine the best from both models to create a new vehicle for large companies to invest in innovation in their digital ecosystems.

Diagram showing an ecosystem innovation fund (EIF) branching off from non-core innovation. The overall diagram shows the pieces of a corporate innovation strategy.
Figure 1. Where does an ecosystem innovation fund (EIF) fit within your corporate innovation strategy?
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Should a startup founder agree to a non-compete?

Jennifer Rohleder's review of Gust Series Seed Term Sheet

Hell no. Are you kidding me?

Non-competes can advance the interests of investors to the detriment of entrepreneurs. That is why Founder Friendly Standard section 2.5 limits non-competes to the period of a founder’s work for the company, making it possible for a founder to earn a living in his/her industry after he/she leaves.

In 2019, I led a study where attorneys compared popular term sheets to Founder Friendly Standard. The below videos were produced during the study and originally posted on Quora. Other noteworthy outputs from the study include this infographic comparison and this attorney roundtable discussion.

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