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Engineering Entrepreneurship

Ron Lasser, Ph.D.EN 0062 Class #610-20-06

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Housekeeping!

Please email with:EN62_YourName_CaseName

Please name your ppt file:EN62_YourName_CaseName

Please put your name on the slide in the ppt fileFancy backgrounds/layouts not required!

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What is GWV's target customer and target market?

Developing a “killer” app for mobile business professionalsPotential excitement to revive the wireless Internet services marketplace

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Stages of Venture Development

Stage 1

Pre-Start Up

Stage 2

Start Up

Stage 3

Growth

Stage 4

Mature

Stage 5

Innovationor

Decline

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The TA Life Cycle Landscape

Early Market – great excitementThe Chasm – great despairThe Bowling Alley – niche based adoptionThe Tornado – mass-market adoptionMain Street – after market developmentEnd of Life – obsolescence and retirement

Early Market

The Chasm

The Tornado

Main Street

End of Life

The Bowling

Alley

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Global Wireless Ventures

Timeframe: November, 2002

Context: wireless internet services in the doldrums

World-wide recessionUncertainty about future in wake of 9/11 attacks in the United States

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Global Wireless VenturesFounders

Bjourn Magnusson – PhD Royal Institute of Technology, Kista, SwedenTheresa Byers – MS,BS in CS StanfordKai Leung Ping – BS in EE National University Singapore Three friends and colleaguesAll had learned JapaneseWorked together at NTT DoCoMo in Japan since 1998Helped to create phenomenally successful market for wireless services in JapanDesired to be at forefront of wireless internet service market

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Global Wireless Ventures

What they did…Learned a lot by 2001Decided to launch new companyWorked nights & weekends to develop a prototype of a new wireless application for business professionals

It was to be the “killer app”Demonstrated prototype to a small set of VCs who were leaders at funding wireless Internet ventures

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Global Wireless VenturesReceived multiple term sheets

A term sheet is the contract against which a VC will provide funding and states what the VC will receive in return for the money provided

VCs were located globallyStockholm/Kista in SwedenSingaporeSilicon Valley, in California in the US

VCs were convinced of enormous potentialVCs offered “Smart money” with one catch: the world HQ of GWV had to be in the home region of the VC whose term sheet was selected

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What is “Smart Money”Capital provided by VC with conditions attached that impact a new venture in a positive wayDeals generally prefer top-tier investors, and these investors may, in turn, have a position in the market with access to better deals and a larger set of feasible investmentsIf top-tier investors are unable, or unwilling, to serve all deals, there will be sorting in the marketWith sorting, the top-tier investors match with the best deals, the second-tier investors match with the second-best deals, and so forthCapital constraints or other constraints may limit the number of deals an investor can fund.

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Overview of Wireless Industry – 2002

Wireless industry large and complexSubscribers had nearly quadrupled from 200M in 1997 to 770M in 2001Many players – from start-ups to multinationalsMarket was divided up into five segments to facilitate understanding

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Overview of Wireless Industry – 2002Market Segments

Wireless Component Providers —for baseband, RF, chipsets

Texas Instruments and QualcommNetwork Equipment Suppliers —physical infrastructure

Nokia, Motorola, LucentEnd-terminal Manufacturers —laptops, mobile phone, PDAs, automotive telematics (GPS), wireless appliancesCarriers — mobile service providers

E.g., ATT, Sprint, Verizon, Cingular in US

Wireless Software Providers —organized by segment

Carrier-focusedEnterprise-focusedConsumer-focused (Newest)

WirelessComponentProviders

NetworkEquipment

Manufacturers

EndTerminal

Manufacturers

Carriers

Consumers Enterprises

WirelessSoftwareProviders

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Wireless Clusters – 2002

Many hotbedsTokyo (Japan)Kista (Sweden)Helsinki (Finland)

Partly due to:Dominance of wireless giants such as Ericsson, Nokia, and NTT DoCoMoPresence of sophisticated usersHigh penetration rates of wireless technologies in these regions

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Wireless Clusters – 2002Other clusters – mostly integrated with IT cluster

Silicon Valley (USA)Tel Aviv (Israel)

Important regionsSingaporeHong KongTaiwan

Both should high penetrationEarly adopters of new technologies

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Mobile Subscriber PenetrationBy Region

Note: Asia Pacific had lowest penetration rates, but highest in absolute numbers because of populations in Japan, Taiwan, Korea, and Singapore

9.3

12.4

19.0

80.1

22.3

59.8

2004

8.4

11.5

17.1

78.3

20.2

55.9

2003

9.37.56.35.1Middle East Africa

2880.910.59.17.0Asia Pacific

14.411.48.3Eastern Europe

379.075.671.162.8Western Europe

18.015.612.7South America

309.651.046.237.4North America

PopulationIn

Millions

200220012000Percent Mobile Subscriber Penetration by Region

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Wireless Cluster OrganizationConsumer vs. Enterprise

Consumer-orientedAsia and EuropeDeep penetration of mobile phonesAsia: “almost every teenager has a mobile phone” due to “coolness factor”: number of electronic gadgets ownedAsia & Europe: commuter using public transportation and made “dead time”usefulUS: mobile in cars less convenient

Enterprise-orientedUS: IT departments implemented enterprise-wise software leaving end-user out of purchasing cycle

Companies to leverage employee use of mobile via:

Supply chain managementCustomer relationship softwareEnterprise resource planning

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Wireless Cluster OrganizationTelecommunications vs. Computing

Telecommunications-oriented

Sweden-Finland –highly innovative

TC Giants Ericsson and Nokia –Innovations to match their needs

Computing-orientedSilicon Valley –highly innovative

Small clusters of microelectronics and IT centers focusing on computation needs

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Wireless Cluster OrganizationInnovation Speed vs. Adoption

SpeedJapan and Scandinavia – deep and broad innovation at high ratesSilicon Valley – much innovation and investmentSingapore/Hong Kong – lack of innovation centers due to scarcity of wireless experts and innovators

AdoptionJapan and Scandinavia – extensive deployment Singapore/Hong Kong – most aggressive adoption including latest cell phones and access pointsSilicon Valley –deployment lacking thus slow in adoption rates due scarcity of spectrum and fragmented carriers

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Wireless Cluster OrganizationSpeed of Wireless Innovation & Speed of Adoption

Silicon ValleyInnovations were rapidDeployments were slow or lackingLow penetration rates

Singapore & Hong Kong (& Japan)Innovations were lackingAggressive deploymentHigh penetration rates

Sweden and FinlandHigh innovation ratesHigh levels of deploymentModerate penetration rates

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Cluster Comparison (1)

Silicon Valley Singapore & Hong Kong(& Japan) Sweden & Finland

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Cluster Comparison (2)

Government

Law Firms

Research UniversitiesLarge CorporationsOther ClustersVenture Capital

SiliconValley

Singapore &Hong Kong(& Japan)

Sweden& Finland

ProvidersCustomersSoftware Suppliers

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+

+

+

+

+

+=

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=

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Cluster Comparison (3)

Government

Law Firms

Research UniversitiesLarge CorporationsOther ClustersVenture Capital

SiliconValley

Singapore &Hong Kong(& Japan)

Sweden& Finland

ProvidersCustomersSoftware Suppliers

++

+

+

+

+

+

+=

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=

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Decision Time – Early 2002

Magnuson, Byers, and Ping had reviewed information gather from:

Web researchEntrepreneursVCsIndustry professionals

Challenge: Select best location for their worldwide HQ

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Not So Fast…Decision Included:

Personal factorsStatus and ageFamily locations and connectionsQuality of life and lifestyle

VCs fascinated by opportunity, technology, and business planNeeds of Company

Company lifecycle and costs of doing businessCompany identity projected to customers and partnersInnovation centers and technological support resourcesCompetitive influencesFinancial incentives of local governmentUntapped markets in of China and India

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So what did they do?

Magnusson, Byers, and Ping picked…

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And the winner is…

Silicon Valley

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And the outcome is…

The company failed

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Why?

What were they offering? A “killer” app for mobile business professionalsWhere are their customers?

Silicon Valley Singapore Sweden

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QuestionsWhat factors should Global Wireless Ventures consider in comparing the entrepreneurial contexts in Sweden, Singapore, and Silicon Valley?Conduct research about Kista, Sweden; Singapore; and Silicon Valley using libraries and the Internet. Based upon this research, what are the assets, liabilities, and risks in the context of each region?What assets (besides smart money) are most critical for a start-up like Global Wireless Ventures?What institutions are likely to help gain access to those assets in each region?

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AnswersWhat factors should Global Wireless Ventures consider in comparing the entrepreneurial contexts in Sweden, Singapore, and Silicon Valley?Accessible to customers and the problem that they want solvedHigh numbers of customers who value the solutionAbility to deliver their “killer app” to the customers (end-user) Singapore & Hong Kong

(& Japan)

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AnswersConduct research about Kista, Sweden; Singapore; and Silicon Valley using libraries and the Internet. Based upon this research, what are the assets, liabilities, and risks in the context of each region?

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Answers

What assets (besides smart money) are most critical for a start-up like Global Wireless Ventures?Defensible IP and customersThey seem to have the first due to the wherewithal of the VCsBut the second…hmm…I can’t find them

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Answers

What institutions are likely to help gain access to those assets in each region?Most like the providers, i.e., the carriers who actually deliver the products and services to the customersThe carriers interface directly to the customer and the markets

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My One Slide for GWVWhat factors should Global Wireless Ventures consider in comparing the entrepreneurial contexts in Sweden, Singapore, and Silicon Valley?

Accessible to customers and the problem that they want solvedHigh numbers of customers who value the solutionAbility to deliver their “killer app” to the customers (end-user)

Conduct research about Kista, Sweden; Singapore; and Silicon Valley using libraries and the Internet. Based upon this research, what are the assets, liabilities, and risks in the context of each region?

Looking at each region, customers in Asia and growth opportunities due to population and current usage is an significant assetKista and Silicon Valley do not appear to have customers or infrastructure to facilitate growth, recession is real negative

What assets (besides smart money) are most critical for a start-up like Global Wireless Ventures?

Defensible IP and customersThey seem to have the first due to the wherewithal of the VCsBut the second…hmm…I can’t find them – not the carriers or end users in recession mode US

What institutions are likely to help gain access to those assets in each region?Most like the providers, i.e., the carriers who actually deliver the products and services to the customersThe carriers interface directly to the customer and the markets