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An Entrepreneurial Journey _________________

An Entrepreneurial Journey _________________. Edward W. Scott, Jr. Brevard Workforce Biz Launch Rockledge Career Center June 13, 2012 Rev. 1.0. The Legend of How Microsoft Became “King Kong”. IBM quest for PC operating system (1980) Bill Gates business venture (BASIC)

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An Entrepreneurial Journey _________________

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  1. An Entrepreneurial Journey_________________ Edward W. Scott, Jr. Brevard Workforce Biz Launch Rockledge Career Center June 13, 2012 Rev. 1.0

  2. The Legend of How Microsoft Became “King Kong” • IBM quest for PC operating system (1980) • Bill Gates business venture (BASIC) • Digital Research drops the ball (Gary Kildall and the CP/M operating system) • Microsoft buys QDOS for deployment on Intel 8086 chips (only $50,000) • Gates becomes the richest man on earth and Microsoft becomes ubiquitous

  3. Personal History • Michigan State University • B.A. in Communication Arts • M.A. in Political Science • Oxford University • PPE (Philosophy, Politics and Economics) • 17 years in U.S. Federal Government • I had no business training before leaving government to enter the high-tech world.

  4. “Startups” in Government • Department of Justice Personnel System (JUNIPER) • Immigration and Naturalization Service Planning Group • Department of Justice Briefing Center • DARPA, Rand • Department of Transportation Integrated Office System • Unix, Minicomputers, Mail, Calendars, Database, Word Processing MORAL: Government can be a “test bed” for technology innovation.

  5. OfficePower • “Fools Rush In” • You don’t know what you don’t know. • OfficePower—Highly integrated, multifunction Unix software (Word Processing, Calendars, Database) • “Bought out” (rescued) in four months by Computer Consoles, Inc. (CCI) • I was completely unprepared for world of business, but my vision remained.

  6. What Did I NOT Know? • Basic accounting principles • Income statement, balance sheet • Concept of capitalization • How stock works, how stock market works, how stock options work • Revenue vs. Profit • Marketing vs. Sales • Almost everything at the core of business

  7. CCI—A Limited Success • A basic business education “on the firing line” • PC killed OfficePower (minicomputer-based) • Apple II (VisiCalc) • IBM PC (WP) MORAL: You can get too far ahead of the market.

  8. A Move to the “Valley” • Silicon Valley: A unique world • Recruited to DEST Corporation • DEST vision of paperless office • Way too early for market or technology • Very poorly capitalized • Personal computers replaced word processing centers • Hard-headed CEO MORAL: You can get too far ahead of the market AND the technology.

  9. Sun Microsystems • Joined Sun when it was “privately held” • Co-founded Sun Federal “startup” • My federal procurement background • Icebreakers • Jet Aircraft • Helicopters • Sun Federal was a huge success!

  10. Paradox of Sun’s Success • 3 “kids” started Sun (27 years old) • No unique technology or “barriers to entry” • Why did they “win”? • Hired “pros” • “Culture of success”— Scott McNealy • “Meat eating” sales force • Market timing was perfect—Luck? MORAL: It’s NOT principally about product or technology. (Sun vs. Apollo)

  11. Pyramid Technology • Fault tolerant, multi-processing UNIX systems • Great concept, great vision, great technology • Horrible execution—systems totally unreliable • Failed at the principal value proposition they said they were bringing to the market MORAL: You need to deliver what you say you will deliver.

  12. Huge Once and Now Out of Computer Business • NCR • Sperry/UNIVAC • Honeywell • Wang • Tandem • Burroughs • Prime • Data General • [DEC (bought by Compaq)]

  13. BEA Systems • Stupid name, great company • Condo startup • Founders all from Sun Microsystems • Rigorous planning process/document • Corporate Value Statement • A truly unique Silicon Valley story • See Harvard Business Case Study (2003) and Stanford Business Case Study (2003)

  14. BEA—An Improbable Megawinner • TUXEDO: 1983 Software Technology • Source code licensed to many players • The romancing of Warburg Pincus • $50 million in one initial round! • Founders share 11% - 5/3/3 • Warburg “Cashed In” in 2005: $6.63 billion • Return Multiple: 121X—(IRR 224%)

  15. BEA – “Missed” Its Goals

  16. Ed Scott’s Startup Value Hierarchy • Market • Team • Capital • Distribution Strategy and Capacity • Product/Idea

  17. How Do I Get Rich? Part 1 Grab Lightning • Be first, run fast • Examples: eBay, StubHub, Facebook, Twitter • Sometimes being first is not enough: WordPerfect, VisiCalc, Lotus 1-2-3, MySpace, Yahoo!, AOL

  18. How Do I Get Rich?Part 2 Invent “Fire” • Proprietary Technology, Patents, Tricks • Examples: IBM, Pixar, Apple, Google, DEC

  19. How Do I Get Rich? Part 3 Be the “King of Execution” • BEA • Logitech

  20. Fundamental Questions • Who wants it? • Why can your team win? • Who are the threats? • What is the “go-to-market” strategy? • Today’s central idea seems to be the “Field of Dreams” model, i.e. “Build it and they will come” • Facebook and Twitter VS. Apple App Store • Nothing happens until somebody sells something!

  21. Structured Business Planning • Why write a plan? • Essential tool to raising money • How do I go about it? • What’s in it?

  22. A Final Word • It is NOT easy! but. . . • Building a winning company is immensely satisfying • And. . .you might get filthy rich!

  23. For copies of the slides, please contact Eric Wind at: EWind@TheEndeavorGroup.com

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