MBAs creating their First Startup (Advice)

MBA to StartupFounder & CEO

Bryan StarbuckFounder/CEO of Stealth Mode startupFormer Founder/CEO of TalentSpring (Acquired in 2010)

Linkedin.com/in/bryanstarbuckabout.me/bryanstarbuck

Focus for CEO/Founder Skills are for the first 24 months of the company

http://Linkedin.com/in/bryanstarbuck

http://Linkedin.com/in/bryanstarbuck

http://about.me/bryanstarbuck

http://about.me/bryanstarbuck

Before Startup Your Company

BLOG: bryanstarbuck.typepad.com

My BackgroundMy Personal Background:

Computer Science degreeFirst 5 years of my career – focusing on mastering Software EngineeringSecond 5 years: Focusing on getting good at managing teamsThird 5 years: Building a startup from beginning to endMicrosoft for first 10 years. Shipped ~15 product versions

Managed up to 3 teams. Was a manager of managersI don’t have an MBA degree, but…

I read a stack of books of the MBA curriculum when at Microsoft to help my educationI spent a SIGNIFICANT amount of time doing entrepreneurial planning during my 10 years at Microsoft

Lessons from my First Startup


What I did WELL with Startup #1Did I DID do well:

Wrote FULL business plans before startup the companyDid FULL Due Diligence on the idea to make sure it was worthy “Taking the big leap”I threw away ~15 business ideas after finding problems in due diligence, until I found the one to create Startup Idea #1

I recommend this to everyoneIn hindsight, the business model was solidI focused on a business model that had strong valid economics to monetizeSelected RoR Open Source as my platformI am a closer (Needed to raise capital, hire, close sales, etc.)Master the ability to raise capitalKeep spending VERY LOW


What I did WELL with Startup #1Continued…

Did I DID do well:Talked to a TON of target customers pre-launch2-month Dev ship cycles (after launch)I talked a LOT to startup people. Learning beyond BigCo/MBA/Theory was absolutely criticalWorked in one of the big startup markets (Bay Area, Seattle, NYC, etc.)Focused on METRICS an ANALYTICAL analysis when managing executives during growthThe Strategy (and strategic analysis guiding everything) was VERY STRONG (saving us many times)Built a great board of directorsClosed the acquisition


Learning PAINS during Startup #1

Mistakes MADE: (and then Corrected)Should have done MORE and STRUCTURED validation talking to customersStarted with a non-Microsoft co-founder (since I also didn’t have startup experience)I wasn’t great at designing web product UI. (My strength had been at Desktop App UI design)I should not have worked at Microsoft 10 years. I should have worked there 4 years.I should have worked at a Startup before creating my own

Once the Venture was Going


Painful when Running the CompanyWhat I would change, if I know then what I know now:

I didn’t know the “Newest Cutting Edge Marketing”It would have saved us ~8 months to 12 months and possibly our one pivot

Focus on a deliberate company cultureLearned how to filter executivesMany small things during Sales-Learning-CurveGreat advances in UI design neededPatents are often not needed in startupsDon’t start a company when a huge recession will start when launching and ready to start selling

Don’t sell recruiting (hiring) services when companies stop hiring, lay off and have massive unemployment

Advice for MBA Entrepreneurs


Advice to MBAs looking at Startups (1 of 10)

Startups are probably the MOST FUN and REWARDING career (for the right kind of person)

Being a TOP PERFORMER is required to join a startup

Having the same Job Title for more than 4 years can be a problem

Only applicable to top performers

This frequently happens at big companies

A startup can enable greatly accelerating your career

ALL top performers can move to “VP of XXXX” by being aggressive, moving companies, spending 70% of your career at sub-200 person companies and keeping a startup aggressiveness



A great career should probably look like this:

BigCo 2 years

Startup Employee 3 years

Medium-Co (100 to 200 employees) as a “Director” for 2 years

If starting this with an MBA at age 26, reaching “VP of XXX” for a 20 to 60 person company by age 36 to 39.

Or as a startup CEO of a funded company

Staying at BigCo 4+ years builds a fear of making changes like this



Creating Pitch Decks, Business Plans and being in Entrepreneurship competitions in the MBA program can be very helpful

MBA programs are GREAT at:

Learning finance

General knowledge of building a mature company

Marketing fundamentals (Great theory and historic tactics)

Writing a Pitch Deck, Business Plan and competing in a competition on those ideas



MBA Programs have you learn AFTER graduating:

Cutting edge new Startup Marketing

Startups need a more automated, mass scale, LOWER COST of Acquisition and using new channels that didn’t exist 2 years ago

“Balancing” areas of a company when managing a company or product unit

Product building (but can easily be learned building product elsewhere)



BigCo can make employees RISK ADVERSE

Happens at year #4 and beyond

There is NO RISK in joining a startup right after college. If you have to leave it, it won’t cause a huge problem

People can build a dependence on requiring a $120k to $200k household income

Moving to a different company every 3 years can start to appear scary (when it shouldn’t, if that is the right career decision)

MBA Programs tell you how to build an Organization

In a startup, you do most of those jobs for the first few years



Don’t fall into the trap of multiple MBA founders

Internet startups almost always SHOULD look like this:

1 Founder to be CEO (can have MBA)

3 Co-founder or employees are all Software Engineering types

This is the first team of 4 FTE

Multiple MBA founders magnifies blind spots

Be careful of the company using the Microsoft tech stack (.net). Ensure you know why 90% of valley startups don’t use it, before making an informed decision on your startup



Channel Strategy:

Internet B2C Channel strategy is VERY NEW

Old Generation #1 Channels: Wholesale, Retailers, Shelf-Space

Old Generation #2 Channels: OEMs, VAR Resellers

New Internet Channels: Absolutely nothing like the above

New Channels for B2C Companies:

Some companies generate lots of traffic and are hard to monetize. Some monetize well but can’t get traffic. You should partner with your opposite

Affiliate deals



New Channels for B2C Companies: (Continued)

Acquire traffic from a partner company

Thinking strategically shows traffic flows behave like channels: SEO, SEM, CPA, etc.

Facebook: Via Apps, API to create posts, etc.

Viral: Facebook, Linked-In, etc.

Much more…

STRATEGIC NOTE on CHANNELS: Think of micro-channels and then assess each for either: a) Marketing to, or b) using Channel techniques against. All internet traffic is a micro-channel or originates from one, so start strategic analysis there.



Be careful of Out-sourcing Software Engineering:

It fails for startups 95% of the time

It fails even more often for MBAs who aren’t Software Engineers or Program Managers

For almost all startups and investors: Out-sourcing results in failing and is unfixable

Validation from Customers

This is absolutely critical. Far more critical than non-startup people realize

Read the LEAN STARTUPS book. It is an absolute must read. This is the BIGGEST mistake first time entrepreneurs can make



Seriously consider cycling between: BigCo ($1 billion+ revenue), MediumCo (100 to 300 employees), and in a Startup

Each will remove a blind spot

Each enables advancing career wise vs. learning from people who master in deep discipline

BONUS: The earn-out period after an acquisition is a great time to learn from BigCo or MediumCo

Startups are Incredibly FUN

I absolutely RECOMMEND it for all highly driven employees


Microsoft Founders of Startups (Acquired, IPOed, or Significant revenue):Jonathan Sposato @ Picnik: ACQUIREDDan Shapiro @ SparkBuy.com (Shell) ACQUIREDMike Matthew @ All Stars Directory ACQUIREDTA McCann @ Gist.com (Exchange) ACQUIREDJoe Giordano @ PayScaleRich Barton @ Zillow & Expedia IPOedMike Slade @ Starwave ACQUIREDKevin Merritt @ SocrataJordan Schwartz @ Pathable (MSN)Bill Bryant @ Qpass, Visio, Mixxer, etc.Hadi Partovi @ Tellme Networks & iLike ACQUIREDAlex Castro @ Delve Networks (Shell) ACQUIREDRob Glaser @ Real Networks IPOedGabe Newell @ ValveAlex St. John @ WildTangentBryan Starbuck @ TalentSpring (Shell) ACQUIRED

Rev, Acquisition or Market Cap

Amount:

Many

Ex-Microsoftee Founded Startups

IPOed 5Companies

3Companies

$1+ billion:

$100+ million: 6Companies

$30+ million:

Numbers are often confidential. Some information came from people in the companies listed


Anatomy of a Startup CEO

Classic Marketing

Product Building(Design, Software Engineering, etc.)

Corporate Finance

General Great Company Building

Ideas

School Level writing Business Plans, Pitch

Decks

Cutting Edge Startup Marketing

CEO Balancing managing the company

Startup Disruptive Ideation:Business models, break through marketing, etc.

Strategic Analysis to ensuring creating an idea for a startup

Direct Learn in MBA Program Often learned after MBA Program

The END

Next Steps:

Create your company and have a BLAST

Join the “MicrosoftStartup Learning” mailing list

Join here: http://groups.google.com/group/Knowledge-Startup-to-Microsoft

Bryan Starbuck’s Blog: bryanstarbuck.typepad.com

http://groups.google.com/group/Knowledge-Startup-to-Microsoft



http://bryanstarbuck.typepad.com/

MBAs creating their First Startup (Advice)

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