Entrepreneurship

1. Entrepreneurship David Spitz / CED Innovator’s Workshop

2. Part I: Prepare

3. Dave’s Background • Started several VC-backed companies • Netsation (acquired by Nortel) • WindWire (acquired by Inphonic) • TxFS (flopped… sort of) • Software roles at IBM, Nortel • Entrepreneur in Residence at Aurora Funds • VP Business Development at ChannelAdvisor

4. The Mindset Let’s begin with “why”: • To get rich? • Follow a passion? • Scratch an itch? • Just got laid off? • To manage your own destiny? There are lots of valid reasons to become an entrepreneur, but you’d better know your reason.

5. What it Takes • Courage • Fortitude • Focus • Determination • Passion • Competitiveness • Common Sense • Strong Stomach • CONFIDENCE And these are just the genetic factors you need to get started!

6. This is Hard Stuff • It takes a lot of hard work, good timing, and luck to make a successful company. • You don’t control all these factors. • The buck stops with you. • There are many forces conspiring against you. • Learn to follow your strengths and mitigate your weaknesses. • Find a partner. • Ask for help. • It’s ok to screw up, but learn.

7. The Business • What are you doing? • Articulate it in 30 seconds. • Make it clear to the layperson. • Is it better, faster, or cheaper? • It better be. • And it better be 10x. • How do you know there’s a market? • What’s the total opportunity? • What will it take to win? • Ok, what will it really take to win?

8. Optimism • MBA students: Do you know the startup formula? 3 x (expected capital) + 3 x (expected effort) + 3 x (expected time) -------------------------------- = ¼ x (expected result)

9. Pessimism • Entrepreneurs are genetically optimistic. • Plan for it. • Take your most absurdly conservative projections and apply a factor of three on the downside. • Dream of success, plan for struggle.

10. Objectives • Ok, you have the genes. • You have the idea. • You’ve got realistic expectations. • What are your objectives? • Lifestyle business? • World domination? • Do some waterfall projections.

11. The Waterfall • Make a five-year plan with top-line revenue goals… • The walk back and figure out the drivers: • How many customers added per month? • How many employees? • Rent? Other expenses? • Do the ratios! • Revenue/Employee • Profit Margin • Market share (…) • Is your growth realistic?

12. The Waterfall • The idea is to demonstrate what you have to do each month. • Is it realistic? • Are you growing faster than any company in history? • Is your revenue/employee higher than Google? • Maybe you should be more realistic? • How does that affect your plans?

13. The Customer • It’s amazing how many people start a business without talking to a customer. • It’s not hard. • They usually want to help and validate (or invalidate). • This can save you a lot of time. • Not just “will they buy?”, but • How they buy. • What are the nuances? • Other opportunities?

14. Spouse & Family • If you are young and single • It will never be easier… just do it. • If you are not • Have a supportive spouse. • They will sacrifice for you – sacrifice for them. • Involve them… but not too much.

15. The Buck • If all goes well, you’ll make a lot of them. • But it stops with you. • Don’t expect it to be easy. • It can be tough when you’re all alone. • The world is unfriendly towards entrepreneurs. • You must be prepared for times that will test you. • Learn the difference between setback and deadend. • Trust yourself. • Act! Adapt!

16. Part II: Jump

17. The Team • Don’t do anything – don’t quit your job, don’t form a company, don’t think about Ferraris… • Until you know your respective roles. • Equal partnership? • Responsibilities? • Boundaries? • Are you going solo? • Responsibilities and boundaries had better be crystal clear.

18. The Help • Meet with a variety of lawyers, accountants, and bankers. • They’re worth the money (usually). • They’ll save you time and headaches. • Assemble a supportive cast. • Favor those who offer flexibility to entrepreneurs • Deferred payments • Support Groups • CED, etc. – network, network, network

19. The Corporation • Type of entity depends on your needs: • Consultant: sole proprietorship • Liability protection: LLC • Tax-friendly: S-Corp • Need investors: C-Corp (Delaware) • Ask your lawyer.

20. The Money • Rare is the business that grows from $0. • How will you fund early operations? • Family? Friends? Credit Cards? • Angel funding: popular source for entrepreneurs. • Venture capital: professional money, but need certain criteria • Debt: Avoid like the plague, early on.

21. The Intangible Assets • Many startups are high-tech in nature. • Primary assets are knowledge-based. • Learn the intellectual property landscape. • Up-front patent searches may seem expensive, but so to is ignorance! (Ask me, I know). • Consider protecting yourself. • File patent applications? • Worth your time and expense? • Today, patents are more important than ever: RIM, eBay, Blockbuster, … • Build a defensible position.

22. The Competition • Know your competition inside and out. • Strengths? • Weaknesses? • Begin to formulate a plan to crush them. • Be paranoid. • Fly under the radar as long as possible.

23. Do • Get cheap, short-term office space • Use a real attorney and accountant. • Be extraordinarily cheap. • Did I mention be cheap? • Focus on what matters: • Prove your product attracts customers • Build a defensible position • Create value • Act with imperfect information. • Adapt.

24. Don’t • Assume that if you build it, they will come. • Forget that the best technology rarely wins. • Equate funding with success. • Focus on perfection. • Fail to act.

25. In Closing • Entrepreneurship: One of the hardest yet most rewarding personal journeys you can take. • You can legitimately claim “I made this.” • You control your destiny. • You answer to yourself. • Be prepared for challenges you can’t imagine. • Stay true to yourself, trust your instinct. • Be scrupulously honest and ethical, and never lose your head.