Entrepreneurship
From a Silicon Valley perspective
FLI-0226-2DM-6N
What We’ll Cover
Intro Overview + Ideation Funding Ecosystems Team Risk
About Me
Intro
How I got here
Intro
Started career building fiber optic networks around the globe:• Determine product (layout of the network) and scope (immediate and growth)• Negotiated contracts with vendors and contractors• Engaged stakeholders (public, government, vendors, employees)• Built and developed teams• Secured leases• Transitioned revenue generating organization
Took on increasingly senior operations and diverse roles – PwC, Booz Allen, Honeywell
•Started SagaciousThink, LLC in 2008 with bifurcated practice – consulting to large companies: eBay, Cisco, PG&E, Gap and working with small and medium companies expanding globally.•Adjunct at Golden Gate University and UC Berkeley Extension
Work with and mentor startups + small business – Astia, CTO, GGU
And you?
Intro
What brings you to this entrepreneurship class?What are you working on?
Intro Overview + Ideation
Entrepreneurship vs. Small Biz
Overview
Do you think there is there a difference?
Entrepreneurship vs. Small Biz
Overview
Different goals – for the entrepreneur its all about the hockey stick and the exit.
Generally always a product business, rarely service
Its all about the exit
Entrepreneurship vs. Small Biz
Overview
Reasons why people want to be a small business owner:
Be their own bossDo not want to “work for the man”Work – life balanceFamilySee a problem Passion
Characteristics of an Entrepreneur
Overview
PassionPerseveranceResourcefulOpen-minded (coachable)Sponge-likeConfidenceRisk AwareAccepts Failure
NetworkerSalespersonEthicalSelf-Aware
How do you see yourself?
Overview
Are you an entrepreneur or a small business owner?
What are your reasons for starting a business?
So you have an idea what should you do?
Overview
Be prepared to drink a lot of coffee
So you have an idea what should you do?
Overview
Get out and meet people
• Share your idea, do not keep it to yourself – don’t worry about NDAs• Action feedback, or not• Learn about your target customer: how they make their purchasing decisions and their pain points• Identify the competition – all of it and know how you will be different•Test your elevator pitch – what resonates, what doesn’t
Have a minimum viable product
Overview
Remember it’s a learning experiment
• You’re testing the market• Validating assumptions• Identify both positive and negative results (failures)• Find out why consumers made their decisions
Agile vs. waterfall
Overview
You need
Validate idea
Find team
Find Customers
Find Investorstraction
Ideas on Funding
Intro Overview + Ideation Funding
Some Alternatives
1. Bootstrapping2. Loans3. Grants4. Crowd Sourcing5. Partnerships6. Bartering
funding
What Investors Look For in a Pitch
funding
Its never just about the product
ID total addressable marketAddress channel issuesBottoms up and top down approach to financeWhat is required to build pipelinePeople, money and time to close the deal – cost of customer acquisitionThe competition – it is out there
What Investors Look For
funding
When looking at the founder
1 – Successful entrepreneurs2 – Entrepreneurs that have failed3 – Untried entrepreneurs
They pick team over product
#2
funding
FAILURE IS GOOD IN SV
Fail fast
But not all failure
funding
Celebrate and recognize the path to success is never a straight line•Issues outside of your control•Tried something new – controlled experiment
Not this•Didn’t do homework•Lacked skills•Did not practice
What Entrepreneurs Look For
1. FFF2. Angels or Syndicates of Angels3. VC
What else can they bring to the table?
Smart Money
funding
1. Connections?2. Industry expertise?3. Are they a cultural fit?4. What do their entrepreneurs think of them?5. Do they add value beyond the money?
Do due diligence on them
This is a long term relationship – like a marriage – don’t mess it up
Getting a Foot in the Door
funding
1. Don’t spam2. Leverage connections – better response
with “warm” introductions3. Know your investors – not all created
equal4. Not everyone invests in everything
Start the fundraising process early, before you need funding
Stages of Funding (US)
funding
1. Bootstrapping, FFF2. Angel3. Series A4. Series B5. LOC6. Series C…7. Mezzanine8. IPO
Stages of Funding (US)
funding
Funding Reason Riskiness
Bootstrapping, FFF
Fleshing out ideas – entrepreneur working alone or with a few partner
Before product - not too risky
Seed Supports initial market research, and build team
Beta product, some VC and angels (very risky) <$2M
Series A Some traction, optimizing product, expanding user base
Established business plan (less risky) <$15M
Series B B = build – taking business to the next level Wrapping up talented team – diminishing risk
Series C … Seeks to ramp up operating funds – operating revenue insufficient –Scaling the company, perfecting the model
Less risky – beyond VC, PE, Hedge Funds
Mezzanine Hybrid of debt/equity funding – Financers anticipated high interest rates and rapid appreciation of earnings
Later – closer to IPO (in sight)
IPO / Acquisition Exit for investors, expansion Now a mature company
Stages of Funding (US)
funding
Funding Reason Riskiness
Bootstrapping, FFF
Fleshing out ideas – entrepreneur working alone or with a few partner
Before product - not too risky
Seed Supports initial market research, and build team
Beta product, some VC and angels (very risky) <$2M
Series A Some traction, optimizing product, expanding user base
Established business plan (less risky) <$15M
Series B B = build – taking business to the next level Wrapping up talented team – diminishing risk
Series C … Seeks to ramp up operating funds – operating revenue insufficient –Scaling the company, perfecting the model
Less risky – beyond VC, PE, Hedge Funds
Mezzanine Hybrid of debt/equity funding – Financers anticipated high interest rates and rapid appreciation of earnings
Later – closer to IPO (in sight)
IPO / Acquisition Exit for investors, expansion Now a mature company
Drives Seed Funding – critical to
entrepreneur ecosystem
It’s all tied together
Intro Overview + Ideation Funding Ecosystems
It takes a lot of Stakeholders
ecosystem
Entrepreneurs
Investors
Businesses
University
But you cannot ignore
ecosystem
Entrepreneurs
Investors
Businesses
University
government
Governments help or hinder
ecosystem
InfrastructureCost of Living Infrastructure to support business (roads,
electricity, transportation)Employment laws
HiringLetting go
TaxationBankruptcyBusiness ownership rulesProperty lawsBusiness setup
World Bank: Doing Business
What Makes Silicon Valley Ecosystem Special?
ecosystem
•Investors who understand what motivates founders•Entrepreneurs managing risks •Businesses willing to try new ideas•Local government that supports entrepreneurs•Universities for smart skilled employees and a breeding ground of ideas•Generally favorable business laws•Support (BoA, BoD)•Desirable location
What government efforts work here?
ecosystem
In the Philippines?
In the US?
Investors – some tips on engaging
team
•Avoid cold intros, and don’t spam•Target your message and show them you know what they look for and why you are a good fit•Don’t send a hefty business plan by way of intro – pace yourself•Be very clear•Forget NDAs •Don’t forget your contact information
I didn’t have time to write you a short letter, so I wrote you a long one – Mark Twai
Investors – Pitch Suggestions
team
•Show them you know the market•You have traction and a trajectory – two points do not make a trend•Why you? Why your team?•Bottom up and top down approach to numbers•How much are you seeking and why?•How are you going to make money?
Intro Overview + Ideation Funding Ecosystems Team
Investors
team
•They invest in people (teams), first – product, second
Investors
team
•A successful venture capitalist invests in people first and business plans second.•In real estate, the three biggest criteria are location, location, and location. The venture capital axiom is people, people, and people.•Five major characteristics that investors look for in entrepreneurs…, in order of importance are leadership, vision, integrity, openness and dedication.
Jim Swartz, Accel Partners
Teams
team
•Emphasis on team, not one person
•Having a team shows:• Others have bought in on the idea• Traction is starting• Coalesce around a goal• Foundation for expansion in place
Teams
team
•Brutal self assessment• Strengths / weaknesses• What gives you (your teammates) flow• Fill in the gaps• Identify what resources you need when
Common Makeup of Teams
team
•Visionary – Founder/CEO•Technologist – Founder/CIO/VP Engineering•Closer – CEO, VP Sales•Operations Guru – CEO/COO/CFO•Watch Dog – CFO
Show management depth and staminaInclude experienced board and advisorsBe frank about gaps
Lessons Learned
team
•Breaking up can be hard to to – have an understanding ahead of time•The trouble with grand titles in a young team•Know when to add•Keep assessing the situation – are they right? Are you right?
Team members + Equity
team
Smart and seasoned candidates want to know –
•What is your monthly burn rate?•How much runway do you have?•Does the company have a lot of debt?•Has the company been audited?•Can you please let me know how much money I’d make from my options if the company were to sell or IPO for $100m, 200m, 300m, 400m, etc?”
So be prepared to tell them
Intro Overview + Ideation Funding Ecosystems Team Risk
Top 10 Reasons Businesses Fail
team
1. Poor management acumen2. Lack of experience3. Poor financial controls4. Weak marketing effort5. Failure to develop a strategic plan6. Uncontrolled growth7. Improper inventory control8. Poor location 9. Incorrect pricing10. Not a transformer11. Government rules and regulations
Investors + Risk
team
•Understand the different types of risks a company faces and what your investor is willing to accept, e.g. some are comfortable with product risks, others market. Understanding what risks are palatable for the investor helps you focus on the ones to work with
Risky Business
risk
•Investors who understand what motivates •Entrepreneurs managing risks •Businesses willing to try new ideas•Local government that supports entrepreneurs•Universities for smart skilled employees and a breeding ground of ideas•Supporting business and infrastructure
As an entrepreneur, are you a bigger risk taker than your peer?
Risks
risk
•Financial (currency, cash flow)•People (succession)•Legal/Regulatory (contractual)•Political (SOX)•Product (adoption)•Market (demographics)•Operational/Reputational (missed deliverables)•Environmental (earthquake, monsoon)
What is yours?
There will always be Someone that doesn’t “get it”
Last Words
Heavier than air flying machines are impossible – Lord Kelvin – President of the Royal Air Society – 1895
Everything that can be invented, has been invented – Charles Duell, Commissioner, US Office of Patents, 1899
I think there is a world market for maybe five computers – Charles Watson, Chairman, IBM 1943
We don’t like their music, we don’t like their sound, and guitar music is on the way out – Decca Recording Company on rejecting the Beatles – 1963
There is no reason anyone would want a computer in their home – Ken Olson, Founder and CEO Digital Equipment Corp, 1977
Questions or Comments
Maraming salamat
Stay in Touch
LouAnn Conner, Founder + CEO - SagaciousThink415.517.2531www.sagaciousthink.com
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