presentacion wadhwa

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Duke University Pratt School of Engineering www.pratt.duke.edu Entrepreneurship and keys to success © 2010 Vivek Wadhwa Vivek Wadhwa Visiting Scholar, UC-Berkeley Director of Research, Center for Entrepreneurship and Research Commercialization and Exec in Residence, Pratt School of Engineering, Duke University Senior Research Associate, Harvard Law School Columnist, BusinessWeek, TechCrunch www.GlobalizationResearch.com

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Page 1: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Entrepreneurship and keys to success

© 2010 Vivek Wadhwa

Vivek Wadhwa

Visiting Scholar, UC-Berkeley

Director of Research, Center for Entrepreneurship and Research

Commercialization and Exec in Residence, Pratt School of

Engineering, Duke University

Senior Research Associate, Harvard Law School

Columnist, BusinessWeek, TechCrunch

www.GlobalizationResearch.com

Page 2: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Overview

American technology entrepreneurs: myths & realities

Backgrounds, life histories, motivations, and beliefs

Factors that provide greatest advantages/obstacles

Why more people don’t become entrepreneurs

Key’s to building a successful tech business

Importance of markets

Understanding customer needs

What is a business model and how to get this right

Building the right management team

Selling

Public relations—getting known

Failure, luck

© 2010 Vivek Wadhwa

Page 3: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Entrepreneurship Research

Based on 3 projects:

Survey of 652 CEO’s/CTO’s of 502 tech companies

Interviews with 144 Immigrant tech company founders

Detailed survey of 549+ founders of companies in 12 high-

growth industries

Common Myths:

Tech entrepreneurs: unmarried, rich, college-dropouts obsessed

with making money

Ivy-league education provides huge advantage

Venture Capital prerequisite for economic growth

© 2010

Vivek Wadhwa

Page 4: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Tech entrepreneurs: Not young

© 2010 Vivek Wadhwa

2,5%

10,5%

34,1%

37,5%

14,2%

1,2%

0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0%

60 - 69

50 - 59

40 - 49

30 - 39

20 - 29

0 - 19

Percentage of all Respondents

Fou

nd

er

Age

US Tech Founder Age at the Time of Startup Establishment

Page 5: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Married with children

24,9%

69,9%

4,5%

0,7%

Single Married Divorced/Separated Widowed

40,3%

16,4%

28,0%

11,0%

3,4%

0,9%

0 1 2 3 4 5

Average Number of Children

© 2010 Vivek Wadhwa

Marital Status

Page 6: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Entrepreneurs: Not from rich families

0,7%

36,9%

5,4%

21,8%

34,6%

0,6%

LOWER-LOWER CLASS LOWER-MIDDLE CLASS LOWER-UPPER CLASS UPPER-LOWER CLASS UPPER-MIDDLE CLASS UPPER-UPPER CLASS

© 2010 Vivek Wadhwa

Page 7: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Tech entrepreneurs: Not college

dropouts

High School Diploma or Lower, 5,9%

Bachelors, 44.0%

Masters, 31.0%

PhD, 10.0%

Associates Degree,

Certification,Some

College, 2.3%

MD, 3.8%

JD, 3.5%

Highest Completed Degree

© 2010 Vivek Wadhwa

Applied Sciences*,

9.0%

Engineering27.6%

Mathematics 1.5%

Computer Science,

Information Technology

9.0%

Business, Accounting,

Finance, 33,4%

Healthcare, 5.5%

Arts, Humanities and Social Sciences,

2.8%

Economics, 1.8%

Law, 4.2%

Other, 4.6%

Fields of Highest Degree

STEM Fields 46.5%

Page 8: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Even better educated than their parents

19,7%

24,5%

5,2%

27,8%

10,0%

5,6% 5,8% 5,8%

Father

19,3%

36,8%

10,0%

22,7%

8,3%

0,2% 1,0% 0,2%

Mother

© 2010 Vivek Wadhwa

Page 9: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Pretty smart in high school,

but drank too much in college

51,2%

23,2%

20,1%

3,7%1,4% 0,4%

Top 10% Top 30% Average Bottom 30%

Bottom 10%

N/A

High School

36,5%

29,9%

26,1%

3,1%1,6%

2,9%

Top 10% Top 30% AverageBottom 30%Bottom 10% N/A

University

© 2010 Vivek Wadhwa

Page 10: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Education counts…

not necessarily ivy-league

0

10

20

30

40

50

$0

$1

$2

$3

$4

$5

$6

$7

$8

All Startups Startups w/ an Ivy-Leauge Founder Startups w/ a High School Founder

Ave

rage

20

05

To

tal E

mp

loye

es

Ave

rage

20

05

Sal

es

(Mill

ion

s o

f U

SD)

Average 2005 Sales Average 2005 Employment

© 2010 Vivek Wadhwa

What makes the difference is higher education: not the degree or school.

Page 11: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Entrepreneurs: Highly experienced

24,6%

27,6%

23,3%

14,3%

10,3%

0-5 years 6-10 years 11-15 years 16-20 years 20+ years

Approximately how many years did you work for another employer prior to starting your first business?

Page 12: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Entrepreneurship wasn’t necessarily

in the genes or pre-planned

Which Members of Your Family Started a Business Before You Did?

51,9%

38,8%

6,9%

15,2%

I was the first in my immediate

family to start a business

Father Mother Siblings

How interested were you in becoming

an entrepreneur while you were

completing your higher education?

7,2% 6,1%

34,7%

27,5%

24,5%

Not at all interested

Not very interested

Didn't think about it

Somewhat interested

Extremely interested

© 2010 Vivek Wadhwa

Page 13: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Reasons for becoming an entrepreneur

© 2010 Vivek Wadhwa

1,2

2,9

3,2

1,7

3,1

1,4

3,0

3,1

2,1

Couldn't find traditional employment

Working for someone else didn't appeal

Wanted to build wealth

Co-founder encouraged to start company

Wanted to capitalize on a business idea

Developed a technology in lab

Startup company culture appealing

Always wanted own company

Entepreneurial friend or family role model

1= Not important factor, 5 = Extremely important factor

Page 14: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Bootstrapping is the norm – not VC

© 2010 Vivek Wadhwa

10,0%

13,8%

70,0%

15,4%

10,8%

9,2%

14,6%

6,2%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0%

Other

Friends and family

Personal savings

Business partner(s)

Venture capital

Private/angel investor(s)

Bank loan(s)

Corporate investment

First business started

Page 15: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Success factors

1,3

1,7

2,2

2,5

3,0

3,2

3,2

3,3

3,3

3,8

4,0

4,1

4,4

Assistance provided by the state/region

University/alumni contacts/networks

Advice/assistance provided by company investors

Location

Personal/social networks

Your university education

Availability of financing/capital

Professional/business networks

Good fortune

Company's management team

Lessons you learned from your previous failures

Lessons you learned from your previous successes

Your prior industry/work experience

© 2010 Vivek Wadhwa

1= Not at all important, 5 = Extremely important

Page 16: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Obstacles faced by entrepreneurs

2,9

2,6

2,5

2,3

2,2

2,0

2,0

1,9

1,8

1,6

1,0 1,5 2,0 2,5 3,0

Amount of time and effort required

Lack of available capital/financing

Lack of prior experience in running a business

Concern about protecting company's intellectual …

Concern about the consequences of failure

Lack of available mentors or advisors

Lack of industry knowledge

Availability of health insurance/risk of losing …

Family or financial pressures to keep a traditional, …

Difficulty of co-founder(s) recruitment

1= Not at all a challenge, 2=Small challenge, 3=Somewhat of a challenge, 4= Big Challenge, 5=Extremely big challenge

1= Not at all a challenge, 5 = Extremely big challenge

Page 17: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

What stops others from becoming

entrepreneurs?

4,3

4,0

3,8

3,6

3,4

3,3

3,2

2,7

2,5

1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5

Willingness or lack of ability to take risks

Amount of time and effort required

Difficulties in raising capital/financing

Lack of business management skills

Knowledge about the industry and markets

Knowledge about how to start a business

Family or financial pressures to keep a traditional, steady job

Availability of health insurance/risk of losing existing coverage

Difficulties in recruiting co-founders

Page 18: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Building a business

Page 19: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Understand your market & stay focused

To build a successful company, you need a great

product. But a great product doesn't lead to success by

itself

You can have the right product for the wrong market and

fail. And you can have the right product for the right

market and still fail because no one knows you exist

You can also be on the road to success and wake up

one day to find that the market has changed and you

haven't adapted

Stay focused on marketing at every stage of your

business

Page 20: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Selecting a market

You may have a product that can solve many problems for

a broad set of customers, but you are not going to be

able to reach everyone at the same time. Some will be

more ready to buy from you than others

Key lessons:

1. Research your market and pick your niche

2. Expect that markets will constantly change

3. Expand from a position of strength

Page 21: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Understand customers needs

Lack of customer validation is biggest cause of startup

failure

Learning customer needs is more important than

revenue for a nascent startup

Revenue doesn’t build traction for a business

Needed: tested and proven products that customers

are ready to buy, and that you can sell and deliver

profitably

Page 22: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

What customers do and don’t know

Customers know:

What their problems are

What they like

What they don’t need

They don’t know:

What they need

What you can develop for them that they will really want

Your challenge:

Learn what you can build that customers will buy

Page 23: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

How to learn customer needs

Interview customers, do what they do—feel their pain

Study every product in the market space—successes

and failures—related or unrelated

Use your experience and vision to conceive solutions

Quickly build solution/prototype. Perfection/features not

important

Share with potential customers. Let customers test drive

Keep iterating until you have a product that customers

MUST have. Don’t hesitate to trash everything you’ve

built

Page 24: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Business Model: The 7 components

A business model is the nuts and bolts of how a

business generates revenue and profits

1. Reaching customers. How are you going to find

customers or have them find you?

2. Differentiating your product. What makes you better

than everyone else?

3. Pricing. What can you charge that will bring profit to

you and value to the customer?

Page 25: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

7 components of a business model

4. Selling. What is your sales process?

5. Distribution strategy. How will you deliver the goods?

6. Support. What does the customer do if your product

breaks?

7. Customer satisfaction. How are you going to turn

customers into loyal fans?

Page 26: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Management team: 8 key functions

1. Company leader. Makes final decisions on business

strategy, hiring and firing, and resource allocation.

Responsible fr business's success or failure, to motivate

the team, communicate with the outside world, build the

corporate culture, and ensure that sound ethics and

values permeate the organization. The leader doesn't

have to be the founder of the company.

2. Operations head. Manage operational details: watch

the bottom line and make sure products are delivered

on time, customers are happy, company is meeting

legal obligations.

Page 27: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

8 functions of a management team

4. Product development. Chief technology officer/head of

product development

5. Marketing. Makes customers aware that business exists

and differentiates products from competition

6. Sales. Closing deals is the most important part of any

business. Every employee must be able to sell.

7. Finance. To balance the books, pay taxes, build

financial forecasts, manage budgets, and collect

revenue

8. Legal and HR. Lawyers protect company interests;

human resource experts hire and help manage

employees

Page 28: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Selling: the single most important skill

1. Your goal is to fulfill the buyers personal needs:

Understand why people buy

Understand their need to ―win‖

Understand what they need

2. Craft your message based on customer needs

Be credible and competent: know your stuff or team up with

someone who does. Have testimonials from other customers

Be trustworthy: be honest, fair, and stay positive

3. Communicate persuasively

Talk in a way that customers understand and which fulfills their

interests and needs—not yours.

Page 29: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

What Salespeople do

Generate Sales Leads

Qualify Leads

Make Initial Contact

Meet customers

Handle Buyer Resistance

Close the Sale

Account Maintenance

Page 30: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Public Relations—getting known

Entrepreneurs believe when they achieve success,

fame will follow—Wrong

1. Build a compelling message that interests others

Create a concise statement of what the company does without jargon or

technical language. Test the message by speaking to ―normal‖ people

Create a one-page summary of what you want to say.

Create a one-line version of what you want to say.

You may want to talk about every single feature, too much detail dilutes your

message. Just highlight the few things that differentiate you.

Your products very interesting to you, but the world doesn’t care.

Others aren't interested in you, but may be interested in how your

product affects them.

Page 31: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Public Relations—getting known

2. Find the right journalists

Read dozens of online and print publications. Find who covers

your ―beat‖.

Look for local publications, trade rags, industry websites

Read blogs in your market, learn who influencers are

Follow all key players on Twitter and Facebook

3. Understand journalists

They want to be first to report on a topic.

Read other stories by the same journalists and get a feel for

what type of stories they write.

Make sure that your story is relevant to their ―beat‖.

Page 32: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Public relations—getting known

4. Start small. Everyone wants to be in national publications, you

are going to be up against stiff competition if you go after them

immediately. Instead, start local, focus on trade press

5. Customize pitch for every journalist. Write or call.

Most publications list email addresses on their Web sites and

provide phone numbers for editors.

Most journalists do respond. May not be interested in you at

first, but may include you in a future story—always looking for

fresh ideas and sources.

Use a ―news hook‖—big news story of the day or current trends

Page 33: Presentacion wadhwa

Duke University – Pratt School of Engineering – www.pratt.duke.edu

Public relations—getting known

6. Become a Trusted Source. If you do get an interview,

listen very carefully to what the journalist is interested in.

Don’t talk about yourself and your product, but what

journalist wants. Your goal is to become a trusted source

and build a relationship so you can be at the center of

future stories.

7. Be available. Journalists usually have tight deadlines

and need answers fast. If you want to get press

coverage, you will have to make yourself available within

a short time of getting a call.