small talks chuck
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Presentation on success factors for technology based startups given by a doctoral student at MIT Sloan for graduate students in departments touching on nanotech.TRANSCRIPT
Chuck Eesley
http://www.mit.edu/~eesley
Success Factors for Technology-Based Entrepreneurs
Entrepreneurship Club July 17th, 2007Small Talks July 18th, 2007
Innovation = Invention + Commercialization
• MIT 2 inventions/day, 4 patents/week, 20 start-ups/year, but only a fraction survive, grow, get acquired, or IPO
• Entrepreneurial success is not about heroism or luck, there is a formula!
• Want to move towards a more specific formula than:
Great tech. + big market + great people = success
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Ph.D. Student at the MIT Sloan School of ManagementWhile a student at MIT • Analyst at Lux Capital – recruited senior scientists and identified Scientific
Advisory Board for Genocea Biosciences; worked on deal flow; building database of area material/life sciences serial entrepreneurs.
• Carlyle Group – due diligence• Acting CEO for Learning Friends, software start-up, finalist in Hong Kong
University of Science and Technology International Business Plan Competition• Mentor - materials science start-up Hydrophen, an MIT Enterprise Forum ICE
finalist in 2006; Altagenix and Hemetrics (semifinalists) in the MIT 100K
• NeuroCog Trials, Inc. consulting - Pfizer, Johnson & Johnson, and GlaxoSmithKline on clinical trials for schizophrenia
• While an undergraduate, in 2002 first prize ($50,000) in the Duke Startup Challenge - Sun Dance Genetics, Forbes Small Business top 14 startups in 2003
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Success Factors for Tech.-Based Start-ups:
• Bigger founding teams
• Prior founding experience
• Work experience / social network
• Connections to VCs, personal savings
• Patents
• Persistence
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Cox (1972) Hazard Rate RegressionDependent Variable = IPO(subjects start being at risk at year of firm founding)
Note: coefficients are hazard ratios – numbers >1 represent higher likelihood of IPO
Idea from graduate thesis 1.15 (0.66)
Idea from MIT class 5.42 (4.50)*
Idea from MIT UROP 3.77 (2.45)*
Prior IPO 1.68 (0.39)*
Venture Capital 1.69 (0.43)*
Angel Investors 1.52 (0.51)
Patent 1.73 (0.32)**
# Cofounders 1.27 (0.09)***
Number of observations 1509
Bigger Founding Teams
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Founding teams can be a lot of fun!
Chuck Eesley
First Place in Duke Startup Challenge, May 20026
Early Hiring and Co-founder Mistakes Can Be Deadly!
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Prior Founding ExperiencePanel A –Revenues (in constant 2001 dollars)
Firm Rank1st firms(N=556)
2nd firms(N=182)
3rd firms(N=84)
4th firms(N=21)
5th firms and higher
(N=36)
Median Revenues (‘000’s) 836 1,784 924 1,181 7,274
Standard Dev. (‘000’s) 153,000 117,000 130,000 10,800 21,200
Panel B – Lag (from graduation and from the prior firm founding)
Firm Rank1st firms(N=761)
2nd firms(N=241)
3rd firms(N=150)
4th firms(N=71)
5th firms and higher
(N=31)
Lag Between Subsequent Firms (years) 14.02 7.95 7.38 6.99 6.71
Lag St. Dev. 9.78 6.90 6.73 5.42 6.378
Prior Founding Experience
9Revenues are in dollars and divide by the age of the firm and then take the natural log to adjust for skew.
Age Distribution of MIT Alumni Entrepreneurs at First Firm Founding
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2
4
6
8
10
12
14
16
18
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22-24 28-30 34-36 40-42 46-48 52-54 58-60 64-66
Age
Pe
rce
nta
ge
of
En
tre
pre
ne
urs
Firms Founded Prior to1970Firms Founded in the1970s
Firms Founded in the1990s
Work Experience
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# Responses % of FoundersMIT-Doing outside-funded research 33 2.1MIT-Graduate thesis 45 2.87MIT-In class 10 0.64MIT-Informal discussion with students 27 1.72MIT-Other 32 2.04MIT-Other research 16 1.02MIT-Professional literature 6 0.38
MIT-Undergraduate Research Opportunity 8 0.51MIT-Visiting scientists, engineers, or entrepreneurs 6 0.38MIT-Working with an outside company 30 1.91Other Sources-Discussions with social or professional acquaintances 193 12.3Other Sources-Other 102 6.5Other Sources-Research conference 10 0.64Other Sources-Working in the industry 915 58.32Other Sources-Working in the military 46 2.93
Sources of Product/Service Ideas
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Work Experience and Teams
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13
Work Experience and Teams
Work Experience and Ideas
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15
Work Experience and Ideas
Initial Funding – Savings and VC
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Net Worth Adjusted for Age
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1 2 3 4 5 6 ormore
Lifetime Firms
ne
t w
ort
h /
ag
e
Net worth / age
Persistence!
(in ‘000’s of $)17
Famous MIT Entrepreneurs
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Mr. d'Arbeloff co-founded Teradyne, now the world's largest producer of automatic test equipment with MIT classmate Nicholas DeWolf in 1960.
In 1965, Ray Stata founded Analog Devices, Inc. with his former MIT roommate, Matthew Lorber '56 EE and Richard Burwen (a Harvard alumnus).
Edward Roberts co-founded Pugh-Roberts Associates, Medical Information Technology, Inc., Sohu.com, Inc., Advanced Magnetics, Pegasystems, PR Restaurants, Interactive Super Computers, and Visible Measures.
Patrick McGovern
Phil Sharp
Noubar Afeyan
Bob Langer
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Current/Next Generation MIT Entrepreneurs
• Joel Moxley, Chris Loose – Stericoat• Josh Lake, David Kaufman – Hemetrics• David Miller• Micah Sze• Helen Chuang – MAD Nanolayers• Joe Jacobsen – Codon Devices• Prof. Angela Belcher – Cambrios• Prof. Yet-Ming Chiang – A123• Roanna Padre - Altagenix• Zeid Barakat• Albert Park• Forrest Liau• Andy Peterson, Tracy Mathews, Curt Fischer – C3 Bioenergy
• You?!?
Panel A – Proportion of Founders Choosing MIT for the Entrepreneurial Environment
Graduation Decade1960s
(N=313) 1970s
(N=373) 1980s
(N=315)1990s
(N=214)
12% 19% 26% 42%
Panel B – Factors as Important in Venture Founding*
Graduation Decade1960s
(N=111)1970s
(N=147)1980s
(N=144)1990s
(N=145)Students 24% 38% 50% 66%Faculty 42% 37% 28% 37%Research 32% 30% 26% 33%Entrepreneurial network 25% 32% 40% 50%
MIT Entrepreneurship Center 1% 2% 1% 12%MIT Business Plan Competition 1% 0% 3% 30%
MIT Factors in Venture Founding
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Why Are So Many Entrepreneurs Drawn to MIT?
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• Focused on de novo, seed and early stage investments in the physical and life sciences• Companies created by Lux Partners have cumulative market cap in excess of $20B• Built 20 companies – 15 exits via IPO or acquisition• Lux Research – provides strategic advice and intelligence for emerging technologies• ETF w/ Powershares w/ assets ~$150M• First to found political industry association on nanotechnology, The NanoBusiness Alliance • First to launch nanotech investment publication with Forbes• Currently investing $100 million fund, 6 investments so far
About Lux Capital
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In Summary:
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• These team/organizational factors likely apply to non-tech-based start-ups as well.• With technical risks and long R&D cycles, they become more important.
Cool tech. and a big market are not sufficient:
• Bigger founding teams• Prior founding experience• Work experience / social network • Connections to VCs, personal savings• Patents• Persistence
Chuck Eesley
Thank you!
As one survey respondent stated: “I look at the MIT experience as training in problem solving. Business is a series of ‘problem sets’ that must be solved, so MIT is a key training ground.”
* Thanks to Adam Kalish (Lux Capital) who provided extensive comments/edits/encouragement for this presentation.
Extra slides
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First Firm Foundings by Decade
0
100
200
300
400
500
600
700
800
1930s 1940s 1950s 1960s 1970s 1980s 1990s
Decade of Founding
# o
f fi
rms All Alumni
Women
Non-U.S. Citizens
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First Firm Foundings per 1000 Alumni within Category
0
50
100
150
200
250
300
350
400
1950s 1960s 1970s 1980s 1990s
Decade of Graduation
nu
mb
er p
er 1
000
gra
du
ates
All alumni
Women
Non-U.S. citizens
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Proportion of Entrepreneurs by School
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Proportion of MIT Entrepreneurs from Each School
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1930s 1940s 1950s 1960s 1970s 1980s 1990s
Decade of First Firm Founding
Per
cen
tag
e o
f E
ntr
epre
neu
rs Architecture and UrbanStudies
Humanities + SocialSciences
Sciences
Management
Engineering
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Figure 8
Proportion Entering Entrepreneurship from Each School
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1950s 1960s 1970s 1980s 1990s
Decade of Graduation
Per
cen
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e tr
ansi
tio
nin
g t
o
entr
epre
neu
rsh
ip
Architecture and UrbanStudies
Humanities and SocialSciences
Science
Management
Engineering
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Table 1Select Trends in Graduates Becoming Entrepreneurs
Panel A - Median Age at First Firm Founding (years)Decade of Graduation 1950s 1960s 1970s 1980s 1990sAll 40.5 39 35 32 28
Non-U.S. Citizens 38 35.5 36.5 32 29Women 42 41 40 35 29
Panel B - Proportion of Entrepreneurs by Final Degree (%)
Decade of First Firm Founding1950s
(N=60)1960s
(N=167)1970s
(N=284)1980s
(N=507)1990s
(N=653)Bachelor’s 53.2 44.0 41.3 46.8 25.3Master’s 36.4 36.0 40.3 38.4 56.2Doctorate 10.4 20.0 18.4 14.9 18.5
Panel C - Proportion of Founders from Certain Academic Departments (%)
Decade of First Firm Founding1950s
(N=54)1960s
(N=147)1970s
(N=2521980s
(N=448)1990s
(N=620)EE & CS degrees 20.4 26.5 18.7 25.4 22.7Management degrees 16.7 14.3 13.5 13.8 15.8Life Sciences degrees 0.0 2.7 4.0 4.9 4.7
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