Transcript Entrepreneurship

Entrepreneurship
David Spitz / CED Innovator’s Workshop
Part I: Prepare
Dave’s Background
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Started several VC-backed companies
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Netsation (acquired by Nortel)
WindWire (acquired by Inphonic)
TxFS (flopped… sort of)
Software roles at IBM, Nortel
Entrepreneur in Residence at Aurora Funds
VP Business Development at
ChannelAdvisor
The Mindset
Let’s begin with “why”:
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To get rich?
Follow a passion?
Scratch an itch?
Just got laid off?
To manage your own destiny?
There are lots of valid reasons to become an
entrepreneur, but you’d better know your
reason.
What it Takes
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Courage
Fortitude
Focus
Determination
Passion
Competitiveness
Common Sense
Strong Stomach
CONFIDENCE
And these are just
the genetic factors
you need to get
started!
This is Hard Stuff
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It takes a lot of hard work, good timing,
and luck to make a successful company.
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You don’t control all these factors.
The buck stops with you.
There are many forces conspiring against you.
Learn to follow your strengths and mitigate
your weaknesses.
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Find a partner.
Ask for help.
It’s ok to screw up, but learn.
The Business
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What are you doing?
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Is it better, faster, or cheaper?
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Articulate it in 30 seconds.
Make it clear to the layperson.
It better be.
And it better be 10x.
How do you know there’s a market?
What’s the total opportunity?
What will it take to win?
Ok, what will it really take to win?
Optimism
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MBA students: Do you know the startup
formula?
3 x (expected capital)
+ 3 x (expected effort)
+ 3 x (expected time)
-------------------------------= ¼ x (expected result)
Pessimism
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Entrepreneurs are genetically optimistic.
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Plan for it.
Take your most absurdly conservative
projections and apply a factor of three on the
downside.
Dream of success, plan for struggle.
Objectives
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Ok, you have the genes.
You have the idea.
You’ve got realistic expectations.
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What are your objectives?
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Lifestyle business?
World domination?
Do some waterfall projections.
The Waterfall
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Make a five-year plan with top-line revenue
goals…
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The walk back and figure out the drivers:
How many customers added per month?
How many employees?
Rent? Other expenses?
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Do the ratios!
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Revenue/Employee
Profit Margin
Market share (…)
Is your growth realistic?
The Waterfall
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The idea is to demonstrate what you have
to do each month.
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Is it realistic?
Are you growing faster than any company in
history?
Is your revenue/employee higher than Google?
Maybe you should be more realistic?
How does that affect your plans?
The Customer
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It’s amazing how many people start a
business without talking to a customer.
It’s not hard.
They usually want to help and validate (or
invalidate).
This can save you a lot of time.
Not just “will they buy?”, but
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How they buy.
What are the nuances?
Other opportunities?
Spouse & Family
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If you are young and single
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It will never be easier… just do it.
If you are not
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Have a supportive spouse.
They will sacrifice for you – sacrifice for them.
Involve them… but not too much.
The Buck
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If all goes well, you’ll make a lot of them.
But it stops with you.
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Don’t expect it to be easy.
It can be tough when you’re all alone.
The world is unfriendly towards entrepreneurs.
You must be prepared for times that will test
you.
Learn the difference between setback and
deadend.
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Trust yourself.
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Act! Adapt!
Part II: Jump
The Team
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Don’t do anything – don’t quit your job,
don’t form a company, don’t think about
Ferraris…
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Until you know your respective roles.
Equal partnership?
Responsibilities?
Boundaries?
Are you going solo?
Responsibilities and boundaries had better
be crystal clear.
The Help
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Meet with a variety of lawyers,
accountants, and bankers.
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Assemble a supportive cast.
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They’re worth the money (usually).
They’ll save you time and headaches.
Favor those who offer flexibility to
entrepreneurs
Deferred payments
Support Groups
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CED, etc. – network, network, network
The Corporation
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Type of entity depends on your needs:
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Consultant: sole proprietorship
Liability protection: LLC
Tax-friendly: S-Corp
Need investors: C-Corp (Delaware)
Ask your lawyer.
The Money
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Rare is the business that grows from $0.
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How will you fund early operations?
Family? Friends? Credit Cards?
Angel funding: popular source for
entrepreneurs.
Venture capital: professional money, but need
certain criteria
Debt: Avoid like the plague, early on.
The Intangible Assets
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Many startups are high-tech in nature.
Primary assets are knowledge-based.
Learn the intellectual property landscape.
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Consider protecting yourself.
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Up-front patent searches may seem expensive,
but so to is ignorance! (Ask me, I know).
File patent applications?
Worth your time and expense?
Today, patents are more important than
ever: RIM, eBay, Blockbuster, …
Build a defensible position.
The Competition
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Know your competition inside and out.
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Strengths?
Weaknesses?
Begin to formulate a plan to crush them.
Be paranoid.
Fly under the radar as long as possible.
Do
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Get cheap, short-term office space
Use a real attorney and accountant.
Be extraordinarily cheap.
Did I mention be cheap?
Focus on what matters:
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Prove your product attracts customers
Build a defensible position
Create value
Act with imperfect information.
Adapt.
Don’t
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Assume that if you build it, they will come.
Forget that the best technology rarely wins.
Equate funding with success.
Focus on perfection.
Fail to act.
In Closing
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Entrepreneurship: One of the hardest yet
most rewarding personal journeys you can
take.
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You can legitimately claim “I made this.”
You control your destiny.
You answer to yourself.
Be prepared for challenges you can’t imagine.
Stay true to yourself, trust your instinct.
Be scrupulously honest and ethical, and
never lose your head.