february 2017 entrepreneur talk at ateneo de manila university

Entrepreneurship

From a Silicon Valley perspective

FLI-0226-2DM-6N

What We’ll Cover

Intro Overview + Ideation Funding Ecosystems Team Risk

About Me

Intro

How I got here

Intro

Started career building fiber optic networks around the globe:• Determine product (layout of the network) and scope (immediate and growth)• Negotiated contracts with vendors and contractors• Engaged stakeholders (public, government, vendors, employees)• Built and developed teams• Secured leases• Transitioned revenue generating organization

Took on increasingly senior operations and diverse roles – PwC, Booz Allen, Honeywell

•Started SagaciousThink, LLC in 2008 with bifurcated practice – consulting to large companies: eBay, Cisco, PG&E, Gap and working with small and medium companies expanding globally.•Adjunct at Golden Gate University and UC Berkeley Extension

Work with and mentor startups + small business – Astia, CTO, GGU

And you?

Intro

What brings you to this entrepreneurship class?What are you working on?

Intro Overview + Ideation

Entrepreneurship vs. Small Biz

Overview

Do you think there is there a difference?

Entrepreneurship vs. Small Biz

Overview

Different goals – for the entrepreneur its all about the hockey stick and the exit.

Generally always a product business, rarely service

Its all about the exit

Entrepreneurship vs. Small Biz

Overview

Reasons why people want to be a small business owner:

Be their own bossDo not want to “work for the man”Work – life balanceFamilySee a problem Passion

Characteristics of an Entrepreneur

Overview

PassionPerseveranceResourcefulOpen-minded (coachable)Sponge-likeConfidenceRisk AwareAccepts Failure

NetworkerSalespersonEthicalSelf-Aware

How do you see yourself?

Overview

Are you an entrepreneur or a small business owner?

What are your reasons for starting a business?

So you have an idea what should you do?

Overview

Be prepared to drink a lot of coffee

So you have an idea what should you do?

Overview

Get out and meet people

• Share your idea, do not keep it to yourself – don’t worry about NDAs• Action feedback, or not• Learn about your target customer: how they make their purchasing decisions and their pain points• Identify the competition – all of it and know how you will be different•Test your elevator pitch – what resonates, what doesn’t

Have a minimum viable product

Overview

Remember it’s a learning experiment

• You’re testing the market• Validating assumptions• Identify both positive and negative results (failures)• Find out why consumers made their decisions

Agile vs. waterfall

Overview

You need

Validate idea

Find team

Find Customers

Find Investorstraction

Ideas on Funding

Intro Overview + Ideation Funding

Some Alternatives

1. Bootstrapping2. Loans3. Grants4. Crowd Sourcing5. Partnerships6. Bartering

funding

What Investors Look For in a Pitch

funding

Its never just about the product

ID total addressable marketAddress channel issuesBottoms up and top down approach to financeWhat is required to build pipelinePeople, money and time to close the deal – cost of customer acquisitionThe competition – it is out there

What Investors Look For

funding

When looking at the founder

1 – Successful entrepreneurs2 – Entrepreneurs that have failed3 – Untried entrepreneurs

They pick team over product

#2

funding

FAILURE IS GOOD IN SV

Fail fast

But not all failure

funding

Celebrate and recognize the path to success is never a straight line•Issues outside of your control•Tried something new – controlled experiment

Not this•Didn’t do homework•Lacked skills•Did not practice

What Entrepreneurs Look For

1. FFF2. Angels or Syndicates of Angels3. VC

What else can they bring to the table?

Smart Money

funding

1. Connections?2. Industry expertise?3. Are they a cultural fit?4. What do their entrepreneurs think of them?5. Do they add value beyond the money?

Do due diligence on them

This is a long term relationship – like a marriage – don’t mess it up

Getting a Foot in the Door

funding

1. Don’t spam2. Leverage connections – better response

with “warm” introductions3. Know your investors – not all created

equal4. Not everyone invests in everything

Start the fundraising process early, before you need funding

Stages of Funding (US)

funding

1. Bootstrapping, FFF2. Angel3. Series A4. Series B5. LOC6. Series C…7. Mezzanine8. IPO

Stages of Funding (US)

funding

Funding Reason Riskiness

Bootstrapping, FFF

Fleshing out ideas – entrepreneur working alone or with a few partner

Before product - not too risky

Seed Supports initial market research, and build team

Beta product, some VC and angels (very risky) <$2M

Series A Some traction, optimizing product, expanding user base

Established business plan (less risky) <$15M

Series B B = build – taking business to the next level Wrapping up talented team – diminishing risk

Series C … Seeks to ramp up operating funds – operating revenue insufficient –Scaling the company, perfecting the model

Less risky – beyond VC, PE, Hedge Funds

Mezzanine Hybrid of debt/equity funding – Financers anticipated high interest rates and rapid appreciation of earnings

Later – closer to IPO (in sight)

IPO / Acquisition Exit for investors, expansion Now a mature company

Stages of Funding (US)

funding

Funding Reason Riskiness

Bootstrapping, FFF

Fleshing out ideas – entrepreneur working alone or with a few partner

Before product - not too risky

Seed Supports initial market research, and build team

Beta product, some VC and angels (very risky) <$2M

Series A Some traction, optimizing product, expanding user base

Established business plan (less risky) <$15M

Series B B = build – taking business to the next level Wrapping up talented team – diminishing risk

Series C … Seeks to ramp up operating funds – operating revenue insufficient –Scaling the company, perfecting the model

Less risky – beyond VC, PE, Hedge Funds

Mezzanine Hybrid of debt/equity funding – Financers anticipated high interest rates and rapid appreciation of earnings

Later – closer to IPO (in sight)

IPO / Acquisition Exit for investors, expansion Now a mature company

Drives Seed Funding – critical to

entrepreneur ecosystem

It’s all tied together

Intro Overview + Ideation Funding Ecosystems

It takes a lot of Stakeholders

ecosystem

Entrepreneurs

Investors

Businesses

University

But you cannot ignore

ecosystem

Entrepreneurs

Investors

Businesses

University

government

Governments help or hinder

ecosystem

InfrastructureCost of Living Infrastructure to support business (roads,

electricity, transportation)Employment laws

HiringLetting go

TaxationBankruptcyBusiness ownership rulesProperty lawsBusiness setup

World Bank: Doing Business

What Makes Silicon Valley Ecosystem Special?

ecosystem

•Investors who understand what motivates founders•Entrepreneurs managing risks •Businesses willing to try new ideas•Local government that supports entrepreneurs•Universities for smart skilled employees and a breeding ground of ideas•Generally favorable business laws•Support (BoA, BoD)•Desirable location

What government efforts work here?

ecosystem

In the Philippines?

In the US?

Investors – some tips on engaging

team

•Avoid cold intros, and don’t spam•Target your message and show them you know what they look for and why you are a good fit•Don’t send a hefty business plan by way of intro – pace yourself•Be very clear•Forget NDAs •Don’t forget your contact information

I didn’t have time to write you a short letter, so I wrote you a long one – Mark Twai

Investors – Pitch Suggestions

team

•Show them you know the market•You have traction and a trajectory – two points do not make a trend•Why you? Why your team?•Bottom up and top down approach to numbers•How much are you seeking and why?•How are you going to make money?

Intro Overview + Ideation Funding Ecosystems Team

Investors

team

•They invest in people (teams), first – product, second

Investors

team

•A successful venture capitalist invests in people first and business plans second.•In real estate, the three biggest criteria are location, location, and location. The venture capital axiom is people, people, and people.•Five major characteristics that investors look for in entrepreneurs…, in order of importance are leadership, vision, integrity, openness and dedication.

Jim Swartz, Accel Partners

Teams

team

•Emphasis on team, not one person

•Having a team shows:• Others have bought in on the idea• Traction is starting• Coalesce around a goal• Foundation for expansion in place

Teams

team

•Brutal self assessment• Strengths / weaknesses• What gives you (your teammates) flow• Fill in the gaps• Identify what resources you need when

Common Makeup of Teams

team

•Visionary – Founder/CEO•Technologist – Founder/CIO/VP Engineering•Closer – CEO, VP Sales•Operations Guru – CEO/COO/CFO•Watch Dog – CFO

Show management depth and staminaInclude experienced board and advisorsBe frank about gaps

Lessons Learned

team

•Breaking up can be hard to to – have an understanding ahead of time•The trouble with grand titles in a young team•Know when to add•Keep assessing the situation – are they right? Are you right?

Team members + Equity

team

Smart and seasoned candidates want to know –

•What is your monthly burn rate?•How much runway do you have?•Does the company have a lot of debt?•Has the company been audited?•Can you please let me know how much money I’d make from my options if the company were to sell or IPO for $100m, 200m, 300m, 400m, etc?”

So be prepared to tell them

Intro Overview + Ideation Funding Ecosystems Team Risk

Top 10 Reasons Businesses Fail

team

1. Poor management acumen2. Lack of experience3. Poor financial controls4. Weak marketing effort5. Failure to develop a strategic plan6. Uncontrolled growth7. Improper inventory control8. Poor location 9. Incorrect pricing10. Not a transformer11. Government rules and regulations

Investors + Risk

team

•Understand the different types of risks a company faces and what your investor is willing to accept, e.g. some are comfortable with product risks, others market. Understanding what risks are palatable for the investor helps you focus on the ones to work with

Risky Business

risk

•Investors who understand what motivates •Entrepreneurs managing risks •Businesses willing to try new ideas•Local government that supports entrepreneurs•Universities for smart skilled employees and a breeding ground of ideas•Supporting business and infrastructure

As an entrepreneur, are you a bigger risk taker than your peer?

Risks

risk

•Financial (currency, cash flow)•People (succession)•Legal/Regulatory (contractual)•Political (SOX)•Product (adoption)•Market (demographics)•Operational/Reputational (missed deliverables)•Environmental (earthquake, monsoon)

What is yours?

There will always be Someone that doesn’t “get it”

Last Words

Heavier than air flying machines are impossible – Lord Kelvin – President of the Royal Air Society – 1895

Everything that can be invented, has been invented – Charles Duell, Commissioner, US Office of Patents, 1899

I think there is a world market for maybe five computers – Charles Watson, Chairman, IBM 1943

We don’t like their music, we don’t like their sound, and guitar music is on the way out – Decca Recording Company on rejecting the Beatles – 1963

There is no reason anyone would want a computer in their home – Ken Olson, Founder and CEO Digital Equipment Corp, 1977

Questions or Comments

Maraming salamat

Stay in Touch

LouAnn Conner, Founder + CEO - SagaciousThink415.517.2531www.sagaciousthink.com