Transcript Starting Your Own IT Company Inshirah Bawazeer Jennie Charoenpitaks Owais Karamat

Starting Your Own IT Company
Inshirah Bawazeer
Jennie Charoenpitaks
Owais Karamat
Dave Boltz
Project Plan and
Presentation Outline
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Provide an overview of published research on
entrepreneurship focused on three areas:
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Trends in Entrepreneurship
A review of the classics … especially regarding personal
backgrounds of entrepreneurs: personality/experiences
Updating the classics based on changing demographics
and cultural factors.
Based on this research, interview three local IT
entrepreneurs to assess the applicability of the
literature … especially to the field of IT
Analyze interview results and draw conclusions
Presentation Agenda
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Entrepreneurship and Trends
Reviewing the Classics
Updating the Demographics
Interviews
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Andrew Sobey Jr.
Sanjay Kumar
Wayne Haar
Conclusions
What is Entrepreneurship?
“Entrepreneurship is a human, creative act that
builds something of value from practically
nothing. It is the pursuit of opportunity regardless
of the resources, or lack of resources, at hand. I t
requires a vision and the passion of commitment
to lead others in the pursuit of that vision. It also
requires a willingness to take calculated risks.”
Jeffrey A. Timmons, The Entrepreneurial Mind, as cited by
Lambing and Kuehl, 2000.
Entrepreneurship is flourishing
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In 1955, the Fortune Magazine’s 500 list of largest industrial
corporations captured America’s attention. Who had
unassailable positions?
 In 1955, there was one small business for every 38 persons.
 By 1965: one for every 29
 By 1975: one for every 26
 By 1985: one for every 20
 By 1994: one for every 16
1997 saw a U.S. record 884,000 new business incorporations.
What explains the growth in the number of small U.S.
businesses from 4.5 million in 1955 to 16 million in 1995?
Lambing and Kuehl explain …
Entrepreneurship, 2nd Ed. Lambing, Peggy and Charles Kuehl. 2000
Lambing and Kuehl:
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Two factors impacted the American economy:
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Competition from companies abroad increased during the
1960’s and ’70’s.
The late 1970’s began a period of deregulation.
As a result, further economic and cultural changes
occurred. The largest corporations had massive layoffs
& “downsized” as corporate survival was at stake.
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“Any company that has more people than it needs is headed
for trouble”
Fewer jobs in the post-industrial economy.
Entrepreneurship, 2nd Ed. Lambing, Peggy and Charles Kuehl. 2000
The United States is not alone
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The European Union has sought to simplify
accounting procedures and improve the business
environment for small business.
China and Russia, traditionally opposed to
capitalism, have seen small enterprises emerge as
an economic force in their new economies
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Eastern Europe has witnessed similar growth
And in the Far East, as an example, the government
of Malaysia requires commercial banks to make
funds available for small business loans.
Entrepreneurship, 2nd Ed. Lambing, Peggy and Charles Kuehl. 2000
New business success rates
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Easton and Conant note making the transition from corporate
employee to entrepreneur is not easy. Citing a study by
Cooper(1982), they note 6.3MM firms were started in 1947-54:
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23% gone in six months or less
23% more gone in one year
29% survived 4.5 year mark.
In 1977 study of 250 new high technology firms near Palo Alto,
CA … better results:
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5% failed in the first three years
24% stopped operations within seven years
29% stopped within ten years
But, 42% still existed after ten years.
Importantly, in 1983, only 3% of new firms were high tech.
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Easton, Thomas A. and Ralph W. Conant. Cutting Loose: Making the Transition from Employee to Entrepreneur
Presentation Agenda
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Entrepreneurship and Trends
Reviewing the Classics
Updating the Demographics
Interviews
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Andrew Sobey Jr.
Sanjay Kumar
Wayne Haar
Conclusions
Literature Review
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There is a significant history of research on entrepreneurship.
The conclusions of a major study carried out by Collins and
Moore at MSU in 1964 (cited in Liles, 1974) did not portray
entrepreneurs in the most positive light:
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“ … we have been having difficulty deciding whether the entrepreneur
is essentially a “ reject “ of our organizational society who, instead of
becoming a hobo, criminal, or college professor, makes his adjustment
by starting his own business; or whether he is a man who is positively
attracted to succeed in it. We have, perhaps without intention,
regarded him as a reject.”
“The men who travel the entrepreneurial way are, taken on balance,
not remarkably likeable people.”
Collins Orvis F. and David G. Moore with Darab B. Unwalla. The Enterprising Man
Literature Review
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However, Liles also cites smaller-sample
studies at Harvard and MIT that yielded a
different view:
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“Entrepreneurs were not found to be failures”
“founders had experienced a generally higher
than average level of success in their previous
employment”
“Several had achieved outstanding levels of
achievement”
Literature Review
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Using the same data as Collins and Moore, Norman Smith
(1967) hypothesized 2 types of entrepreneurs:
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Type I: the Craftsman-Entrepreneur. Blue collar, task
oriented and valued the practical. Successful at one job and
then moved on. Didn’t like big companies but didn’t identify
w/unions.
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Type II: Opportunistic-Entrepreneur. More often than not
came from a middle class background and often had a father
who was a small businessman. Typically, academically
successful. Often a social leader. Career demonstrated not
only technical abilities but capacity for competent
administration. Key: unlike Type I, Type II’s are adaptable.
Smith, Norman R. The Entrepreneur and His Firm: The Relationship Between Type of Man and Type of Company
Literature Review
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Dennis Kimbro (1996) argues that a successful
entrepreneur must have:
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mission (being able to take charge)
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vision ( the ability to inspire others to action)
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passion (an intense commitment and determined
perseverance)
Kimbro, Dennis P. “Mission, Vision and Passion in the Entrepreneur” from Smilor and
Sexton.
Literature Review
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Beyond these three most important characteristics, Kimbro
asserts successful entrepreneurs must also have:
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a desire for independence
a sense of purpose (including the ability to set challenging yet clear
goals and attain them)
tolerance for uncertainty
perseverance
self-esteem
salesmanship
self-discipline
Finally, Kimbro notes “successful entrepreneurs are ready
to just plain work hard”.
Kimbro, Dennis P. “Mission, Vision and Passion in the Entrepreneur” from Smilor and Sexton.
Literature Review
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Peter Drucker states “Entrepreneurship, then, is a behavior
rather than a personality trait”. “I have seen people of the
most diverse personalities and temperaments perform well in
entrepreneurial challenges. To be sure, people who need
certainty are unlikely to make good entrepreneurs”.
There are, however, four requirements cited by Drucker to
entrepreneurial success (ibid. 189):
1.
2.
3.
4.
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A focus on the market. “You are creating customers”
Financial foresight (esp. cash flow/planning capital needs)
Building a top management team before necessary.
Finding a role for the founder as the business matures.
He notes however a difference between starting a small
business and entrepreneurship.
Drucker, Peter F. Innovation and Entrepreneurship: Practice and Principles. 1985.
Literature Review
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Liles concludes there are three types of small firms:
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“high potential venture”. It is the intention of these firms to
grow rapidly in sales and profits and eventually become a
large corporation.
“attractive small company”. Less intent on developing to
the point where there would be a public market for its
stock or appeal to venture capitalists. Rather, these firms
are started to provide a good salary for the owners, often
with a variety of perquisites including country club
memberships, a company car and travel.
“marginal firms”. The vast majority of small businesses
incl. dry cleaners or repair shops are included here.
Liles, Patrick R. New Business Ventures and the Entrepreneur
Literature Review
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Backgrounds, experiences and motivations aside, Liles
(1974, 11-12) also discusses “precipitating events” …
specific conditions that appear as major influences on
decisions to start a new venture:
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Job dissatisfaction: built up over time, reflecting budget cuts,
no promotion or disappointing salary increases, denied staff.
Key: new job vs. start-up
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“the last straw”: “one of a series of disappointing incidents”
Identifying a new venture opportunity
Encouragement and support: “A wife’s reaction to the idea of
starting a company is usually a major influence”
Presentation Agenda
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Entrepreneurship and Trends
Reviewing the Classics
Updating the Classics: Changing
Demographics and Cultural Factors
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Age
Gender
Ethnic Background
Interviews
Conclusions
Age
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The popular press has widely reported on the
successes of young, high tech entrepreneurs like
Michael Dell, Steven Jobs and Bill Gates.
On the other hand, group two noted that Wal-Mart
was founded by Sam Walton in 1962
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22 years after he graduated from the University of
Missouri.
It would appear entrepreneurial opportunity exists
at different stages of human life cycle …
Self-confidence increases with age
But changes in financial and
personal conditions are important
Types of Female Entrepreneurs
(Goffee and Scase, 1985)
Attachment to
Entrepreneurial
Ideals
High
Attachment to
Gender Roles
Conventional
HIGH
LOW
Low
Attachment to
Gender Roles
Innovative
Often married. Guest
house, restaurants and
catering, nursing or
secretarial services.
“Unmarried with few
friends”. P.R.
advertising, market
research, publishing
Domestic
Radical
Biz is secondary but
provides limited
autonomy. Arts/crafts,
beauty care.
Seeking to overcome
subordination. Diverse
areas of enterprise.
Female Entrepreneurship
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Throughout the 1980’s and early 1990’s the
number of businesses owned by women grew by
50%. By 1996, the 8 million businesses owned by
women employed 35% more people than all the
Fortune 500 do worldwide.
Motivating factors include desire for more challenge
and dissatisfaction with corporate life, including
downsizing, but also
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“Glass Ceiling” issues: low pay, limited advancement
Seeking balance between work and family responsibilities
Entrepreneurship, 2nd Ed. Lambing, Peggy and Charles Kuehl. 2000
Female Entrepreneurship
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Start-up funds for women averaged $15,000
compared to $36,000 for men.
One explanation: women tend to start service
businesses that often require less capital.
However, many believe, women do not have
equal access to capital when they need it,
possibly related to networking / previous
business connections.
Entrepreneurship, 2nd Ed. Lambing, Peggy and Charles Kuehl. 2000
Asian-American Entrepreneurs
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Asian-Americans have been very successful as
entrepreneurs in the United States.
Like women this has reflected frustrations of trying to
climb the corporate ladder.
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David Lee, CEO, Qume Corp: “People believe … Asians make
good engineers, not good managers”.
By 1990, Asian-Americans headed 300 of 800 hightech firms in the Silicon Valley.
Korean-Americans have the highest businessownership rate (1/10) of any ethnic or racial group in
America. This compares to 1/15 for non-minorities.
Entrepreneurship, 2nd Ed. Lambing, Peggy and Charles Kuehl. 2000
Presentation Agenda
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Entrepreneurship and Trends
Reviewing the Classics
Updating the Demographics
Interviews
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Andrew Sobey Jr.
Sanjay Kumar
Wayne Haar
Conclusions
The Interviews
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Andrew Sobey Jr., Founder and President,
S
& S Systems Consultants, Inc.
Fenton,
MO
Sanjay Kumar, Professional experience included
participation in .com start-up effort in Fremont
CA (1999). Currently employed as computer
network specialist in St. Louis, MO.
Wayne Haar, President and CEO,
Interlock Resources Inc.
Clayton, MO
S & S Systems Consultants
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Founded in 1990 as a provider of computer
programming services. Since inception, services
have expanded to include training, EDI and
process mapping.
While initially founded with four employees,
current business activity is centered around
Founder and President: Andrew Sobey Jr.
Andrew Sobey: background
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Native of Sharon, PA. Son of postal worker. As a child, every
morning from his bedroom window, overlooking the Westinghouse plant, Sobey saw the 8,000 people walk into work.
Holds Master’s degree in Computing Science
Employed for 17 years at Westinghouse, including 10 as IS
manager.
Job dissatisfaction increased after experiencing several years
of no raises/cuts.
Precipitating events: un-reimbursed mileage expense on
Easter … and division close down. (during 1990 recession …
he was age 40)
Spouse supportive of entrepreneurial start-up
S & S Systems Consultants:
getting started
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As part of “close down benefits” learned pro-forma planning,
proposal writing.
From Westinghouse: 15 years of IT experience, some
contacts and ‘commitment to customer service’.
First four years were “scary”. Getting finances to hire four
people put “life savings on the line”. Start-up included coldcalling but ex-Westinghouse employees were important.
Realized his business was established when he needed a car
and knew he could buy it. And, when he started saying “No”
to some potential projects.
Personal note: Heightened spirituality because “when I
needed the phone to ring, it did.”
S & S Systems clients include:
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Bausch and Lomb Surgical, St. Louis, MO and
Clearwater, FL
Sunbeam Corporation, Chicago,IL
Westinghouse Electric, St. Louis, MO and
Asheville, NC
A variety of smaller businesses with job sites
that included Alamo, TN, Athens, GA,
Pittsburgh, PA, Muncie, IN, S. Boston, VA,
Fayetteville, NC, Greenwich, CT, and St. Louis.
Maintaining/growing the business
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Large personal satisfaction in job variety:
mainframe COBOL, FORTRAN, RPG, SQL, EDI, MS
Access and Crystal Reporting, ORACLE.
Planning is very short term oriented.
Paid by the hour. Company grows by increasing
rates. Last month sent out five invoices (i.e. 5
different current customers incl. small
manufacturing, CPA firm, church).
Vs. ideal: one major customer w/30-40 hrs/week.
Lots of travel. Ex. six month – one year project in
Chicago. There: M-Th.
Sobey’s lessons learned
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If you think you worked hard at a company,
“you ain’t seen nothing yet”.
Be focused.
It’s difficult to stay abreast of changes in
technology … VB4, VB5, VB6, VBNet.
Be a team player to get call-back’s … stay out
of office politics and recognize the need to do
some work without charging for it … to build
good relations.
A Silicon Valley start-up …
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This story begins in 1999. The .com boom is in full swing.
Two IT professionals who room together in Fremont seek to
participate in the boom by linking local “angel investors” with
others who have “many ideas” … many of whom are
consultants or IT professionals in their native India. All parties
were anxious to capitalize on the market boom and dreamed
of a “high potential venture”
Key investors agree to fund development of:
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a prototype model … to demonstrate the viability of the
concept. Today, www.keen.com developed by others at
approx. same time is similar in concept.
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a B2C website … to generate revenues from day 1. Into
Indian music? Try: www.saregama.com
Sanjay Kumar, and his friend Ravi, are on their way …
Technical Issues
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Investors signed a one year agreement to have Exodus host
their servers.
A prototype website (w/ expert advice on astrology and
programming) would be able to handle 100 users at a time …
higher levels of funding would be needed to develop a site
capable of handling hundreds of thousands of users.
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Their plan: seek capital from investment banking community
Focused on utilizing JAVA and LINUX, developers planned to
use free software as much as possible. Additionally, as much
development as possible would take place in India.
Programming strategy: develop websites reusing as much code
as possible.
Living on the edge …
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Sanjay and Ravi wore “multiple hats” … technical
specialists, project managers, lead programmers.
14-16 hrs/day … a labor of love with people they
enjoyed.
The venture, then nicknamed “The Pundit Junction”,
culminated in a presentation to investment bankers
where break-even analyses, profit forecasts, and
technical specifications were presented.
Shortly thereafter the dot.com market went bust and
the investment bankers never called back.
Sanjay Kumar’s Background
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Technical undergraduate degree from an Indian university.
Expertise: Networking technology.
More than background however, the 1999 culture of young
adult IT professionals in the Silicon Valley was key.
 Sanjay was correct in his assessment he could always get a
job in IT if the start-up failed … minimal career risk. Didn’t
realize however, that job would be in St. Louis, Missouri.
Start-up effort required developing different skills (quickly) in
order to communicate with investors and manage the project’s
overseas development. No MBA? Try www.fedex.com
Lessons Learned
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Clearly, this start-up activity was late-inthe-game
“You must enjoy what you do”
No regrets.
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Principal business is staff augmentation in MIS
functions for clients in St. Louis region. Their 50-80
consultants respond to a broad range of client
needs:
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Web Development
Help line / network support
Systems development in Visual Basic, C++
People Soft
Founded in 1989, Wayne Haar was originally an
outside investor. He bought out 1 of 2 primary
owners in late 1996.
Interlock Resources
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Today, management team involves three primary
owners:
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Wayne Haar: focused on finance and administration
One technical partner, focused on client development
One partner focused on human resource issues.
Company experienced strong growth in 1997, 1998,
1999 attributable in part to Y2K ‘remediation’.
Listed #2 in the St. Louis’ “FAST 50” high growth
technology firms in 1999. Revenues were $5.9MM.
(St. Louis Commerce Magazine Sept. 2000, St. Louis Business Journal 9/25/2000)
Interlock Resources’ Clients
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U.S. Government
Anheuser-Busch
BJC Health System
Enterprise Rent A Car
Maritz
Mastercard
Monsanto
Source: www.interlockresources.com and St. Louis Commerce Magazine (Sept. 2000)
Wayne Haar, background:
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Son of h.s. educated, Union Electric worker
Bachelor’s and MBA from Washington U.
19 years of experience of planning and analysis
experience in retail sector: Edison Bros., Venture.
Reported being not happy working for others. Less
motivating environment for those with strong drive.
In mid-1980’s, Haar/others investigated business
opportunities, incl. fast food. “None made sense”.
Precipitating event: problems of Venture led to
downsizing in 1995. In response, he worked out of his
home on Interlock business.
Interlock Resources: getting started
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Never dreamed of being a big corporation.
Objective: One of strongest staff augmentation
firms in the region with upside potential to either:
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Replicate in other geographic areas or,
Sell firm to others. He has previously received offers.
Personal issue: contributing factor to divorce ?
Key business start-up issue: cash. Working capital
to pay consultants for first sixty days. Sources:
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Family / friends
Personally put up stock certificates etc. as collateral
SBA-supported loan
Interlock Resources: growing the business
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Biggest surprise: The business is more reactive
than expected. “No loyalty in this business”:
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Clients are unpredictable
Consultants see themselves as “hired guns” identifying
with IT profession, not the firm.
Planning focus is “a few months at a time”
By late 1998, company was “really cruising”, Haar
recognized “we had built something that was going
to last”.
Presentation Agenda
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Entrepreneurship and Trends
Reviewing the Classics
Updating the Demographics
Interviews
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Andrew Sobey Jr.
Sanjay Kumar
Wayne Haar
Conclusions
Interview Summary
Attribute
Haar
Precipitating
Event
Downsizing
Sobey
Kumar
Downsizing
Silicon Valley
Culture
Type of
startup
Attractive small
Co.
Attractive Small
Co.
High Potential
Venture
New Business
Success
Sideline
Close to Failing
Failed
Significant
Previous
Employment
Corporate Manager Corporate IT
manager
IT Professional
Interview Summary
Attribute
Haar
Sobey
Kumar
Academic
Success
MBA
MS in Computer
Science
Tech BS
Key Motivators
Mission,
Independence,
Financial
foresight
Passion,
determined
perseverance,
focus on the
market, creating
customers
Vision, Purpose,
Self-esteem
Personal Issues
Lack of family,
Support
Spouse Support,
Spirituality
Strong Social
Ties
Key Conclusions
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The stories of the entrepreneurs interviewed are intertwined
with their personal circumstances … mid-career downsizing or
early career cultural factors … played a major role.
Re:background the notion entrepreneurs are ‘rejects’ is a clear
misconception.
Getting started showed many consistencies: hard work, the
importance of financing working capital and the requirement of
needing to fill many roles.
Issues in growing the business were very dependent on the
new venture’s objectives: maintaining sole proprietor, being
attractive small company or developing a high potential
(greatest risk/reward potential)
Universally, however, none of our interviewed entrepreneurs
regrets their decision.