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E140A Session #3 Entrepreneurship, Stanford and Silicon Valley

E140A Session #3 Entrepreneurship, Stanford and Silicon Valley. Board of Directors Member. Educator @ Stanford. Founder @ Slate. Executive @. Ph.D. @. Who Is This Prof. Anyway?. 1980’s. 1990’s. At a time, long long ago. In a land, far far away ….

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E140A Session #3 Entrepreneurship, Stanford and Silicon Valley

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  1. E140A Session #3Entrepreneurship,Stanford and Silicon Valley

  2. Board of Directors Member Educator @ Stanford Founder @ Slate Executive @ Ph.D. @ Who Is This Prof. Anyway? 1980’s 1990’s

  3. At a time, long long ago ... In a land, far far away … There was a place called Silicon Valley. But why is it unique … why do start-ups work well in Silicon Valley?

  4. Agenda I. The Where? II. The How? III. Implications the Future?

  5. First, A Look at Stanford University

  6. Early Years: Fred Terman and HP • Professor Terman brought Hewlett and Packard together at Stanford • In 1939, the two decided to “make a run for it ourselves” and founded HP at a now-famous garage in downtown Palo Alto Source: John Hennessy

  7. Another Golden Age: Early 1980s • Many new technologies as radical innovations • Emergence of John Hennessy as another Terman • Very productive era ...

  8. 1990s: The Internet • Two EE students in a trailer • Use of Yahoo on and off-campus explodes • Form independent company Source: John Hennessy

  9. Stanford’s Role • Interaction with industry (via legacy just discussed) • Research funding and creativity • Silicon Valley as a nearby planting ground for ideas • Role of students as inventors, as disseminators, and as part of the workforce • Encouraging entrepreneurship …

  10. Tornado Main Street Laggards LateMajority Bowling Alley Early Majority EarlyAdopters Innovators Source: Moore (1995), Inside the Tornado Other Factors in Valley’s Success • Many lead users and early adopters to quickly learn from …

  11. More Success Factors • Talent pool • Loyalty to the technology with a unique openness • Highly skilled and highly motivated • Social networks of people • Diverse (highly multicultural) • Support infrastructure with many suppliers & outsourcing • Venture capital for both financing and team building • Entrepreneurial spirit • Role models (with confidence and paranoia) • OK to fail, learn from it, and then try again • Flat organizational structures • OK to talk/partner across company boundaries about common issues

  12. IDEAS: Product and Market Strategy Managing Growth And Change TALENT: Team and Culture CAPITAL: Cash Flow and Venture Finance Our Primary Framework for Understanding the Success of an HP, Sun, Cisco, or Yahoo! First Things First: Assess the Venture’s Vision, Internal and External Characteristics Reference: Collins and Lazier

  13. Fundamental Questions for Startups Part A: Vision What Do the Founders Wish to Achieve with the Business? What is Our Shared Vision and Goals? What Business Are We In? Where Do We Want to Go? “There is a wide range of possible economic objectives ranging from quiet, financial independence to huge, capital gains. There are also many non-economic objectives--such as creative freedom or social good--that may be important to the founders.” Reference: Steven Brandt

  14. Fundamental QuestionsPart B: Strategy Do We Have the Right Strategy? Who is Going to Buy? What Are We Selling? Why Are We Better? “Ideally, an entrepreneur has the name and address of many specific potential customers. To create such a list, he or she needs to know what is to be sold, and who has good reasons to buy.”

  15. Fundamental Questions Part C: Execution What resources are needed to build the business … given its nature, the objectives of the founders, and the targeted customers? What is the blueprint for building the business profitably? Can we adapt? Can We Do It?

  16. (1) Founding: An entrepreneur begins with a vision and shares of stock in the new venture. Value has been successfully created. Entrepreneur trades stock for ideas, money, and people • (2) Seed Stage: • Venture capitalists provide money in return for stock • Employees join via friends & associates in return for cash salary and stock options • Ideas become intellectual property which represents the initial value in the company • (4) Exit Stage: • Company files for IPO • Entrepreneur, investors, and employees can cash in stock for money • A viable public company has been created • Each party continues to build the company, retires, or starts the game again Further growth is delayed until milestones are reached and risk of failure is reduced Company balances earning cash, taking investment, and spending cash to create value (3) Growth Stage: More money, ideas, and people are obtained, but for much less stock than in the earlier stage due to lower risk Dynamics of The Silicon Valley Start-Up Game The Startup Game: A race against time to create value and reduce risk Reference: Start-Up by Jerry Kaplan

  17. 21st Century Silicon Valley:Do “Built-to-Last” Startups Matter? Source: Fast Company, Jim Collins

  18. Silicon Valley is a Great (Not Perfect) Market for Ideas, Talent, and Capital -- Implications for the Future?

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