EntrepreneurshipDavid Spitz / CED Innovator’s Workshop

Part I: Prepare

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

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.

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!

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.

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?

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)

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.

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.

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?

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?

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?

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.

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!

Part II: Jump

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.

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

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.

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.

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.

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.

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.

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.

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.