GEFGettingStarted1 8 13

1
Entrepreneurship
Please do not share outside the Dartmouth Community without permission.
Copyright G. Fairbrothers 2005-2013 All rights reserved.
A Tuck mini-course on commercializing innovation,
entrepreneurship, and starting new businesses
January March 2013
2
Vision is the art of seeing things invisible.
- - Jonathan Swift
3
The success of an economy depends on its ability to
invent and embrace new protocols.
David Brooks, New York Times, December 22, 2009
4
What really matters is economic culture attitudes
toward uncertainty, the willingness to exert leadership,
daring consumers, and young researchers with money...
David Brooks, New York Times, December 22, 2009
5
Innovation
Entrepreneurship happens when
Politics + Culture + (Science X
Technology) + Initiative
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Innovation
Entrepreneurship happens when
Politics + Culture + (Science X
Technology) + Initiative meet CHANGE
7
8
Robert Fulton

Folsom, Burton. Urban Capitalists. (Baltimore, MD: Johns
Hopkins University Press, 1981).
Folsom, Burton. The Myth of the Robber Barons (Herndon, VA:
Young Americas Foundation, 2010).
9
Zopraxiscope, 1867
1925

May 10, 1869
March 10, 1876
Chicago Centennial 1876
1976
December, 1879
August 28, 1859
Gottlieb Daimler, 1886
July 20, 1969
January 22, 1984
December 17, 1903
November 17-December 23, 1947
April 3, 1973
1835
Thomas Newcomen, 1712
Nikola Tesla, ca. 1891
GeigerMarsden, 1909
A. Fleming, 1908
Edward Jenner, 1796
N. Borlaug, 1914-2009
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A coming entrepreneurial age?
An upcoming wave of new workers in our society
will never work for an established company if they
can help it.
To them, having a traditional job is one of the
biggest career failures they can imagine.
Entire careers will be built on perpetual change,
serial company-building, independence and the
endless pursuit of the next opportunity.
Continuity and predictability will become the
rarest of commodities.

Michael S. Malone, The Next American Frontier The Wall Street Journal,
May 19, 2008, p. A15
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I had not fully realized in 1932 how profoundly the social
structure of civilization has been shaken by scientific,
engineering, and industrial development. This radical
changefrom an established to an adaptive social order
has brought into being a host of new and unanticipated
problems for the individual worker.
Elton Mayo. The Social Problems of an Industrial Civilization. (London:
Routledge and Kegan Paul Ltd., 1949): 66.
12

I had not fully realized in 1932 how profoundly the social
structure of civilization has been shaken by scientific,
engineering, and industrial development. This radical
changefrom an established to an adaptive social
orderhas brought into being a host of new and
unanticipated problems for the individual worker.
Elton Mayo. The Social Problems of an Industrial Civilization. (London:
Routledge and Kegan Paul Ltd., 1949): 66.
13
10 to 15% of Americans operate entrepreneurial
businesses.
1

In 2006 there were 22 million sole proprietorships
(excluding farms) filing tax returns.
2

They operate over 70% of the nations
businesses.
2

1
Fairlee, Robert W., Kauffman Index of Entrepreneurial Activity 19962009, (Kansas City: Ewing Marion Kauffman
Foundation, May, 2010).
2
Table 731. Nonfarm Sole Proprietorships--Selected Income and Deduction Items, U.S. Census Bureau, http://
www.census.gov/compendia/statab/cats/business_enterprise/sole_proprietorships_partnerships_corporations.html
(accessed Sept. 2, 2010).
14
In a 2005 survey 58% of Americans said they dream of
starting a business and being their own boss.
1
Other studies
find the number as high as two thirds to three quarters.
2
Under half a percent start new businesses in a given year.
3

In a 2009 survey, 82% of randomly selected respondents said
they had at least once considered starting their own
businesses and didnt do it.
4

More said they believed there were critical things they didnt
know than said they were worried about the risk.
4

1
Bygrave, William D. and Andrew Zacharakis. The Portable MBA. (Hoboken, NJ: John Wiley & Sons, 2010): 5.
2
McArdle, Megan, In Defense Of Failure, Time International (South Pacific Edition), 175 Issue 11, 3/22/2010: 35.
3
4
Alibaba.com QuickRead Report, May 2009, provided by company: summary published online, Three Out of Four
Americans Believe New Entrepreneurs Are Key to Reviving Economy, June 2, 2009 01:13:59 PST: http://
news.alibaba.com/article/detail/alibaba/100111970-1-three-out-four-americans-believe.html.

15
In a 2005 survey 58% of Americans said they dream of
starting a business and being their own boss.
1
Other studies
find the number as high as two thirds to three quarters.
2
Under half a percent start new businesses in a given year.
3

In a 2009 survey, 82% of randomly selected respondents said
they had at least once considered starting their own
businesses and didnt do it.
4

More said they believed there were critical things they didnt
know than said they were worried about the risk.
4

1
Bygrave, William D. and Andrew Zacharakis. The Portable MBA. (Hoboken, NJ: John Wiley & Sons, 2010): 5.
2
McArdle, Megan, In Defense Of Failure, Time International (South Pacific Edition), 175 Issue 11, 3/22/2010: 35.
3
4
Alibaba.com QuickRead Report, May 2009, provided by company: summary published online, Three Out of Four
Americans Believe New Entrepreneurs Are Key to Reviving Economy, June 2, 2009 01:13:59 PST: http://
news.alibaba.com/article/detail/alibaba/100111970-1-three-out-four-americans-believe.html.

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Introduction to Entrepreneurship
turning an idea into a success
17
Why study entrepreneurship?
Entrepreneurship is not a specialty
Its an integration of other specialties,
marrying creativity and execution
Career preparation
Not just in startups!
If not to do it at least know good
entrepreneurship when you see it
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Plus a change, plus c'est la mme chose.
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Entrepreneurship at Tuck

Introduction to Entrepreneurship
First-year Projects
Advanced Entrepreneurship
Independent studies
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FALL
Adner Entrepreneurship and Innovation Strategy

WINTER
Ferneau Field Study in Private Equity
Trimble How to Execute an Innovation Initiative
Fairbrothers et al DMS: Innovation in the Clinic (audit)

Research-to-practice seminar
Adner Strategy in Innovation Ecosystems

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SPRING
First year projects!
Helfat Business Strategy for Internet Companies

First half mini
Vogel Entrepreneurship in the Social Sector, Part 1

Second half mini
Vogel Entrepreneurship in the Social Sector, Part 2

Research-to-practice seminar
La Porta International Entrepreneurship Finance
Townsend Private Equity

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Goals for the course
Encourage you to think about ideas
and how to make them valuable
Help you know what to do with a
good idea when you have one
Learn how to learn by doing
experiential learning
Leave you with a toolkit to help you
get started, and where to find what
you need
Starting out
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Agenda
INTRODUCTIONS
DEFINITIONS AND CONTEXT
SO YOU HAVE AN IDEA
- licensing vs. startup
- starting a company
- the process whats involved?
- its all about risk and learning!
CLASS OBJECTIVES AND OUTLINE
DETAILS AND ADMIN.
24
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
25
Dartmouth 1975, Rutgers MS1977,
Univ. of Tulsa MBA 1983
Texaco 1977-1979
Samson Resources 1980-1989
Samson International 1989-2000
DEN, DRTC & Tuck 2001+
26

Samson Investment Company
A large, privately held exploration and production company headquartered in Tulsa, Oklahoma, U.S.A. with International
and Offshore Divisions headquartered in Houston, Texas, U.S.A.
One of the top 20 independent exploration and production companies based in the United States.
Operations in the United States, Canada and Venezuela.
Since 1971 Samson has grown into a large, financially sound, independent exploration and production company with
more than 1100 employees. .
27
Samson Russia : Komi and Udmurt 1989-2000
179 million shares
28
29
The Dartmouth Entrepreneurial Network
Summer, 2000
10
Education
Commercialization
Strategy & culture change
30
If not blind
31
X X
O
X X
O
O
O
32
X X
O
X X
O
O
O
33
Laptops down, phones away
34
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
35
Half of all new college graduates now believe that
self-employment is more secure than a full-time
job.
60% of Gen Y business owners consider
themselves to be serial entrepreneurs. (Inc.
Magazine survey)
70% of high-schoolers intend to start their own
companies. (Gallup poll)

Michael S. Malone, The Next American Frontier
The Wall Street Journal, May 19, 2008, p. A15
36
Students: The Alumni Magazine asks graduating
seniors, "Where would you ideally end up working?"

The Results: 2002 2004
a) corporation 24% 8%
b) academic institution 18% 14%
c) non-profit 16% 14%
d) research or hospital 10%
e) other (incl. government) 16%
f) small business 10% 10%
g) for myself 31% 28%

Source: May/June 2002 Dartmouth Alumni Magazine, p. 18; July/
August 2004, p. 24

A spinning flywheel inside a bike
wheel that provides a bike going
2.5 mph with the natural stability
of a bike going 10 mph
Solution is to amplify
the natural stability of a bike
38
PharmaSecure, Inc
N. Taylor Thompson
Nathan J. Sigworth
_
__
____
______
________
___________
______________
A social and business enterprise addressing the problems of drug
diversion and counterfeit drugs through end-user drug verification
Proprietary and confidential
Copyright Thompson & Sigworth 2008
n.taylor.thompson@gmail.com
8/1/08 presentation
41
Definition #1
business -- essentially a human activity in
which judgments are made with messy,
incomplete, and incoherent data

42
Definition #1

- - Warren G Bennis and James O'Toole, in How Business
Schools Lost Their Way, Harvard Business Review, May 2005
43
Definition #1

44
Definition #1

45
Definition #1

Conclusion #1
(the complete quote)

When applied to business -- essentially a
human activity in which judgments are
made with messy, incomplete, and
incoherent data -- statistical and
methodological wizardry can blind
rather than illuminate.

Conclusion #1
(the complete quote)

When applied to business -- essentially a
human activity in which judgments are
made with messy, incomplete, and
incoherent data -- statistical and
methodological wizardry can blind
rather than illuminate.

48

Definition #2
Research: the old model
DEF - 1955
49
things changed over time

The Fairbrothers Plant Resources Center
at Rutgers University

The Future of Plant Research

A Symposium and Banquet
Honoring the Legacy of

David E. Fairbrothers

June 4, 2005

DEF - 1955 DEF - 2009
50

Entrepreneurial
Research the new model
51

Entrepreneurial
Conclusion #2

Ideas execution impact = social value
52
Growth in Research Funding
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Dartmouth Total Sponsored Research $
53
Definition #3: What is entrepreneurial?

starting and operating new ventures?
54
entrepreneurial is not a verb
55

a personality type?
56
or a noun
Microsofts Bill Gates was photographed by the Albuquerque, New Mexico police
in 1977 after a traffic violation (details of which have been lost).
3

Empirical support for the somatic marker hypothesis comes from a series of
gambling studies that have found that patients with orbitofrontal damage do
not show anticipatory anxiety before taking big risks.
1, 2

1
Beer, Jennifer S., et al. Orbitofrontal Cortex and Social Behavior: Integrating Self-monitoring and Emotion-Cognition
Interactions, Journal of Cognitive Neuroscience, 18, no. 2 (2006): 871-879.
2
Bechara, Antoine, et. al. Emotion, decision making, and the orbitofrontal cortex, Cerebral Cortex, 10, no. 6 (2000): 295-307.
3
http://www.thesmokinggun.com/mugshots/gatesmug1.html

57
Entrepreneurship is not a treasure hunt.
There are other goals besides riches.
58

a personality type?
characteristics
59
Entrepreneurial Characteristics
innovative
flexible
dynamic get things done
creative
growth-oriented
opportunistic see a need and fill it
takes initiative, willing to decide and act
value creation and exploitation
60
The Entrepreneur asks:
Where is the opportunity?
How do I capitalize on it?
What resources do I need?
How do I gain control over them?
What structure is best?
61
The Entrepreneur asks:
Where is the opportunity?
How do I capitalize on it?
What resources do I need?
How do I gain control over them?
What structure is best?
62
Administrative Characteristics
risk adverse
threatened by change or the unknown
prefers security to growth
predictability fosters effective management
focuses on control of resources over pursuit of
opportunity
thrives in a structured environment: demands
and behavior are predictable, interactions
scripted: process is essential, results are
optional
63
Administrative Characteristics
risk adverse
threatened by change or the unknown
prefers security to growth
predictability fosters effective management
focuses on control of resources over pursuit of
opportunity
thrives in a structured environment: demands
and behavior are predictable, interactions
scripted: process is essential, results are
optional
64
The Administrator asks:
What resources do I control?
What structure determines our organizations
relationship to its market?
What is the process?
How can I minimize the impact of others on my
ability to perform?
What opportunity is appropriate?
65
The Administrator asks:
What resources do I control?
What structure determines our organizations
relationship to its market?
How can I minimize the impact of others on my
ability to perform?
What opportunity is appropriate?
66
Pressures to be administrative
The social contract the necessity to use
resources once acquired
Performance criteria no one is fired for
failing to pursue a new opportunity.
Targets rule.
Planning systems and cycles formal
planning is the enemy of adaptability.

67
Pressures to be administrative
The social contract the necessity to use
resources once acquired
Performance criteria no one is fired for
failing to pursue a new opportunity. Targets
rule.
Planning systems and cycles formal
planning is the enemy of adaptability.
In a world of rapid change, what do you do?

68
Entrepreneurs are born optimists?
69
Entrepreneurs brains work differently!
70

Psychological and biomedical research has
traditionally considered risk-taking an
abnormal expression of behaviour
We propose that entrepreneurs represent
highly adaptive risk-taking behaviour, with
positive functional outcomes in the context of
stressful economic decision-making.

Nature 456, 168-169 (13 November 2008) | doi:10.1038/456168a;
Published online 12 November 2008
71

A growing body of evidence from functional
neuroimaging and studies of patients with
brain injuries points to the involvement of
distinct processes in risky and risk-free
decision-making.
Referred to as 'hot' and 'cold' processes,
these appear to be localized to distinct
regions of the brain's frontal lobes
4
.

72

This 'functional impulsivity' may have evolutionary
value as a means of seizing opportunities in a
rapidly changing environment.
What does it take to make an entrepreneur is it
an inherited, inbuilt characteristic, or is it acquired,
and if so, can it be acquired by anyone?
if these impulsive risk-taking traits can be
beneficial, can they be taught or otherwise imparted
to the potential entrepreneur?

73

What does it take to make an entrepreneur is it
an inherited, inbuilt characteristic, or is it acquired,
and if so, can it be acquired by anyone?
beneficial, can they be taught or otherwise
imparted to the potential entrepreneur?

74
Newsflash: one expert says, No.
75

What does it take to make an entrepreneur
is it an inherited, inbuilt characteristic, or is it
acquired, and if so, can it be acquired by
anyone?
beneficial, can they be taught or otherwise imparted
to the potential entrepreneur?

76
People are different

77

Innate or learned: Can learning make a
difference?
???
78

You can help people learn to be more
entrepreneurial
79
Conclusion #3
Its about entrepreneurial: characteristics, not actions
or types of people.

Definition: Entrepreneurship is the art of getting things
done with resources you dont control.
- - Howard Stevenson

Its not all-or-nothing
You can apply it almost anywhere.

80
Conclusion #3
or types of people.

Definition: Entrepreneurship is the art of getting
things done with resources you dont control.


81
Conclusion #3
or types of people.

Definition: Entrepreneurship is the art of getting things


82
Everybody wants to be innovative, flexible, and
creative.
So the question for the would-be entrepreneur is:
How can I make innovation, flexibility, creativity
operational?
Stevenson, Howard and David E. Gumpert, The heart of
entrepreneurship, Harvard Business Review, March-April 1985, pp. 85-94
83
Everybody wants to be innovative, flexible, and
creative.
So the question for the would-be entrepreneur is:
How can I make innovation, flexibility, creativity
operational?
Stevenson, Howard and David E. Gumpert, The heart of
entrepreneurship, Harvard Business Review, March-April 1985, pp. 85-94
84
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
85

So you have an idea.

86
Everybody has ideas

87
Some are more impressive than others
88

If you dont know where youre going, any
road will take you there.
- - Charles Lutwidge Dodgson (1832-1898; pseudonym Lewis Carroll)
89
"Would you tell me, please, which way I ought to go
from here?"
"That depends a good deal on where you want to
get to," said the Cat.

"I dont much care where--" said Alice.
"Then it doesnt matter which way you go," said the Cat.
"--so long as I get SOMEWHERE," Alice added as an
explanation.
"Oh, youre sure to do that," said the Cat, "if you only walk long
enough."
- - Alice's Adventures in Wonderland, Chapter 6

90
One never goes so far as when one doesn't
know where one is going.

- - Johann Wolfgang von Goethe, in a letter to Carl Friedrich Zelter,
December 3, 1812
91
Successful people start out with the end in mind
- - Stephen R. Covey

Whats the end goal?
92
Definition What is success?

93

Success = results expectations
94

Perception is one definition
95

What is success for you personally?
96

Whats the endgame? Think about
exits.

97

Whats the endgame? Think about
exits.
AND think about what the
experience will be like!

Success consists of going from failure to
failure without a loss of enthusiasm.
- - Winston Churchill (1874-1965)
98
Peaks and valleys
Synectics, Inc. brochure, Imagine, p. 46
Jason Freedman, T08
99
Two dimensions of commercialization
Licensing

Starting a new company

100
Advantages and disadvantages of licensing
Advantages
- license revenues and sponsored research
- licensee develops and commercializes
- experienced in R&D, market development
- you can focus on research and teaching
Disadvantages
- loss of control over prosecution and development
- less $ than doing a startup: 2-5% royalty (maybe
more for software); maybe small equity share

101
License terms improve with maturity
5.0%
8.0%
15.0%
30.0%
0.5%
2.0%
5.0%
20.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Academic discovery in-
license
Corporate discovery in-
license
Corporate Phase II out-
license
Corporate Phase III
out-license
%

R
o
y
a
l
t
y

Stage/Type of Licensing
Precedent Deal Terms
Top of Range Values Bottom of Range Values
102
8
!"# %&'()&* +,-# ). /!)) 0,'123 45
Idea PoC License Promotion of
Champion
Project Hibernation 2 years or so!. Diligence Letter IP Burial Ground
103
Advantages
- you can focus on research and teaching
Disadvantages
- risk of non-development, or being prioritized
out
104
Advantages
- you can focus on what you really like to do (or your
class work!)
Disadvantages
- risk of non-development, or being prioritized out
- Really hard to do!
105
Advantages and disadvantages of starting
your own company
Advantages
- more control over team, development
- larger ownership shares
- no risk of being sidelined by other priorities
Disadvantages
- have to secure a team and funding
- have to learn business or find the right people
- no infrastructure
- time
106
Both are hard theres no right answer!
107
Starting a company making something
of an idea
www.standrewspres.org/.../images/Lemonade.jpg
108
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
109
of an idea
110
111
of an idea
a blank page is all an entrepreneur starts with
112
Entrepreneurs should learn to:
Take initiative
Frame appropriate questions and
implementations
Execute effectively
Take risks intelligently
with close attention to detail
(most of all) learn how to learn!
113
Successful entrepreneurs will:
create a vision
communicate it to others
recruit and motivate a talented team
execute the vision:
- integrate
- lead
- raise the money
- sell the customers
- sooner or later, a little of everything
- and leave when its time
114

So you have an idea.

115

you think youre here
Ed Diffendal (Tuck 00)
On the summit of Mt. Everest,
June 24, 2005

116

but youre really here
117
You have an idea.
idea

118
What are the scales?
idea

VALUATION
($)
Chance of success
Learning curve
What goes here?
(1/risk)
119
idea

VALUATION
($)
Chance of success
Learning curve
Time?
(1/risk)
120
idea

VALUATION
($)
Chance of success
Learning curve
Time doesnt create value
(1/risk)
121
Execution creates value
idea

VALUATION
($)
Chance of success
Learning curve
E x e c u t i o n . . . !!
(1/risk)
The secret of success is to do the
common things uncommonly well.
- - John D. Rockefeller
John D. Rockefeller, 1885
122
idea

VALUATION
($)
Chance of success
Learning curve
E x e c u t i o n . . . !!
(1/risk)
123
Execution = developing the idea
idea

VALUATION
($)
Exit Growth Development
and launch
Funding Market
Validation
Team
Prototype
124
From: sean@benevolentcapital.com
Date: Wed, 7 Jan 2009 06:38:57 -0500
To: 'David L. Fairbrothers'<dfairbrothers@sportspageinc.com>
Subject: RE: Following up on this morning

Thanks David. Really like the new strategy- brilliant. Great market
and some low hanging fruit. It will be all about the execution. Will
take a look at the PPT and look forward to seeing you on Mon.
Brett Johnson, our other partner, has confirmed he is in town- so
that will be good. His bio is below.

Cheers,
Sean
125
From: sean@benevolentcapital.com
Date: Wed, 7 Jan 2009 06:38:57 -0500
To: 'David L. Fairbrothers'<dfairbrothers@sportspageinc.com>
Subject: RE: Following up on this morning

Thanks David. Really like the new strategy- brilliant. Great market
and some low hanging fruit. It will be all about the execution.
Will take a look at the PPT and look forward to seeing you on Mon.
Brett Johnson, our other partner, has confirmed he is in town- so
that will be good. His bio is below.

Cheers,
Sean
126
-----Original Message-----
From: Zachary B. Blatt [mailto:Zachary.B.Blatt@Dartmouth.edu]
Sent: Monday, May 25, 2009 11:29 AM
To: Gregg Fairbrothers
Subject: RE: Blattistics

PayPal suspended payments to my site because they need to
verify that Blattistics is a legitimate business. It took forever to get
on the line with them. It probably will take over a week to resolve.
It's these little, unanticipated, obstacles that make running a
business so challenging. It also takes much longer than I
anticipated.
127
-----Original Message-----
From: Zachary B. Blatt [mailto:Zachary.B.Blatt@Dartmouth.edu]
Sent: Monday, May 25, 2009 11:29 AM
To: Gregg Fairbrothers
Subject: RE: Blattistics

PayPal suspended payments to my site because they need to
verify that Blattistics is a legitimate business. It took forever to get
on the line with them. It probably will take over a week to resolve.
It's these little, unanticipated, obstacles that make running a
business so challenging. It also takes much longer than I
anticipated.
128
funding and execution
idea

VALUATION
($)
and launch
Funding Market
Validation
Team
Prototype
Seed $ - 3 Fs
Angels
Venture Capital
Banks, etc.
M&A, IPO
C
A
U
S
E

!

E
F
F
E
C
T

!

129
130
It looks simple.
Idea
Establish IP
Bench Top
1st Clin Use
Clin Validation
Safety & Efcacy = Approval
Market Launch
$ 1 MM Sales
$ 10 MM Sales
Series A
Series B
Pre Clinical
131
Not so simple
scientific advances
business and finance
regulatory pathways
132
Its complicated
133
Research and Development Plan
Product / Commercialization Plan
- Roadmap
- Major milestones
- Timing
- Projected revenue streams
Business Plan
Financial Model
- Explicit assumptions
- Greater revenue side depth
- Monthly cash flow
- Better inputs (e.g., local salary information)
- identify venture partners, present, close

Analyses of Drug Delivery and Product
Markets
- Industry size, growth, pricing, revenue
models
- Map of industry players
- Technology platforms
- Medical applications

Regulatory
- FDA approval status, clinical endpoints
- In vivo performance to date
- Doctor user perspectives
- Major milestones tied to product plan
- R&D steps and timing to reach
milestones
- Personnel plan (# and level, team
structure)
- Space, equipment, and supplies
- Projected costs
Lab Management Best Practices
Manufacturing approvals and inspections
134
Not so simple
scientific advances
business and finance
regulatory pathways
hard work
lots of people
135
Certain issues can create flashpoints in
the translational pathway.
intellectual property
conflicts of interest
conflicts of commitment
use of students
confidentiality vs. open inquiry
competition vs. collaboration
bridging the gaps
136
Financial Innovations Lab Report Milken Institute, October, 2006
The funding gap
137
and the culture gap

INDUSTRY
Short time frame
Applications orientation
Proprietary interests
Knowledge for profits sake
Lines of authority clearly
established
nomenclature/vocabulary
sense of urgency
assumptions on how the
world works
expectations
definitions of value
ACADEMIA
Long time frame
Basic knowledge orientation
Open inquiry Publish or perish
Knowledge for knowledges sake
Collegial culture; weak decision
processes, parochial policies
138
and the culture gap

INDUSTRY
Short time frame
Applications orientation
Proprietary interests
Knowledge for profits sake
Lines of authority clearly
established
nomenclature/vocabulary
sense of urgency
assumptions on how the
world works
expectations
definitions of value
ACADEMIA
Long time frame
Basic knowledge orientation
Open inquiry Publish or perish
Knowledge for knowledges sake
Collegial culture; weak decision
processes, parochial policies
139

Entrepreneurship: the process of getting from here
140

141

to here
142

The middle of every successful project looks like a disaster.
- - Rosabeth Moss Kanter, Harvard Business School
nothing is ever easy
143

We thought "achieving broad use" was the summit -- only to realize we should NOT "do
a little jig" yet, as there was the second peak of sustainability looming even bigger
ahead of us!!
- - Leslie Fall, MD; founding CEO iInTIME 12/20/06
and youre never sure when its safe to
celebrate!
144
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
145
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
146
Execution starts with ?
147 Someday man will find a peaceful use for my machines.
(New Yorker, 1987)
Its not about the product!
148
Execution starts with the need.
149
Execution starts with the need
Define the need, market, solution

150
Thomas Edisons first invention

The electric vote recorder
US patent application October 11, 1868
151

A US Congress committee chairman: If there is any invention on earth that
we don't want down here, that is it."
152

A US Congress committee chairman: If there is any invention on earth that
we don't want down here, that is it."
Thomas Edison: This is the last time I will invent something without first
making sure there is a market for it!
1

1
Dyer, Frank Lewis. Edison, His Life and Inventions. (New York: Harper & Bros., 1910): 53.
153
Thomas Edisons second invention

The universal stock printer
1871
1

Edison later described the conversation he had with General Lefferts, the
President of the Gold and Stock Telegraph company:

"I had made up my mind that I should be entitled to $5,000 but could get along
with $3,000 I hadn't the nerve to name such a large sum so I said: 'Well,
General, suppose you make me an offer.' Then he said: 'How would $40,000
strike you?' This caused me to come as near fainting as I ever got. I managed
to say that I thought it was fair.
2
1
http://edison.rutgers.edu/ticker.htm (accessed 1/6/13)
2
Dyer, Frank Lewis. Edison, His Life and Inventions. (New York: Harper & Bros., 1910): 53.
154
Execution starts with the need

155
WHO IS YOUR CUSTOMER??
The only way to know how customers see your business
is to look at it through their eyes.
Daniel R. Scroggin
1

1

Daniel R. Scroggin, president and CEO, TGI Friday's, Inc., quoted in LeBoeuf, Michael. How to
Win Customers and Keep Them for Life. (New York: Berkley Books, 1988): 65.

156
Think about the market
Identify who has this need. (the customer)
- How many?
- What will they pay? Are they able to pay?
- # customers X what they pay = the market
- (be sure to define the addressable market)
Do the customers know they have this need?
(Is there an education challenge?)

Distinguish utility and value

157
- How many?
Develop a proposed solution = the product
Product + Market = value proposition

158
- How many?

159
Utility and Value
Are they the same thing?
Can you have one without the other?
Which is more important?

160
Utility and Value
Are they the same thing?
Can you have one without the other?
Which is more important?

161
Utility and Value

The larger theme is the ordeal of what could be
called "commodity hell," the place where executives
find themselves when they cannot convince customers
that their widgets or services are better than those of
their ever-burgeoning competitors. All they can say is:
"Yep, we got 'em too."
- - Todd G. Buchholz, Drowning in Red Ink, Wall Street
Journal, May 30, 2007; p. D8
162
Utility and Value

163
Utility and Value

164
$2.00 for a bottle of sugar water
and 100% placebo?
1

1
description by John Bello, in a Tuck presentation,11/11/04
165
Or a $350 jacket?

New England Patriots NFL Leather Football Team Jacket
Support the New England Patriots with our officially licensed, colorful, all leather team
jacket! This jacket features a zipper front closure, and a polyfil liner for warmth at the
games! This jacket is a black body with team color accents and team logo on the back.
A must for the New England Patriots die-hard fan!
Suggested Price: $350.00
OUR PRICE: $269.95
FREE SHIPPING!

166
Abraham H. Maslow
1908-1970
A theory of human motivation. Psychological Review, 50, 370-96.
Motivation and Personality, (New, York: Harper & Row, 1954
167
168
169
170
171
172
173
Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay
1
1
Oliver Goldsmith, playwright (1730-1774). The Deserted Village, 1770: Line 51.
2 graphics: : http://www.treehugger.com/culture/conspicuous-consumption-conscious-
consumption-and-the-fulfillment-curve.html (accessed 12/19/12)
S
e
n
s
e
le
s
s
c
o
n
s
u
m
p
tio
n
?
2
174
??
175
In our present condition of mass affluence, most
people can meet their basic needs for food, shelter
and clothing with a paltry fraction of their income.
Most spending is discretionary -- which means that
producers must engage in elaborate attempts at
persuasion, known as advertising.
And since human beings, with their irrepressible
imaginations, like to invest inanimate objects with
meaning, advertising often strives to associate
goods with appealing flights of fancy.

- - Brink Lindsey, in The Curious Problem of Having
More Than You Need, Wall St. Journal, 4/3/07
176
In our present condition of mass affluence, most
people can meet their basic needs for food, shelter
and clothing with a paltry fraction of their income.
Most spending is discretionary -- which means that
producers must engage in elaborate attempts at
persuasion, known as advertising.
And since human beings, with their irrepressible
imaginations, like to invest inanimate objects
with meaning, advertising often strives to associate
goods with appealing flights of fancy.

- - Brink Lindsey, in The Curious Problem of Having
More Than You Need, Wall St. Journal, 4/3/07
177
??
178
179
180
181
Understand the market youre selling to!
Nice to have?
Must have?
Why do they want it?
How badly do they want it??
Pricing is NOT COST-PLUS!
182
- How many?
- What will they pay?
Competition: barriers to entry (yours and theirs)
(Week 6)
Validate the market

183
- How many?
- What will they pay?
Competition: barriers to entry (yours and theirs)
Validate the market (Week 2)

184
Theres no substitute for interacting
with CUSTOMERS!
185
How to answer THE QUESTION?
Quantify Market (Size & Trends)
Web
Stock Analyst
Demographics
Customer Behavior
Identify the Customer
Talk to them
LISTEN
But I do not have my patent yet
if I could do X, would it make a
difference?

God gave you two ears and one mouth: use
them in that ratio.
- - a fathers advice to his son, paraphrasing Epictetus
186
Avoid having to fix this problem later.
Kaplan, Robert S., A Balanced Scorecard Approach to Measure Customer
Profitability, Harvard Business Review (August 8, 2005).
This figure occurs in virtually every customer profitability study
ever done; 15-20% of the customers generate 100% (or more)
of the profits.
187
This is your idea
Execution = everything else
Need customer market product value proposition
188
EXECUTION
Define the need, market, solution (week 2)
Validate the market talk to customers! (week 2)
Build the team (week 3)
Find the funding - many options to consider (week 4)
Create a plan and presentation (week 5)
Operations: working prototype and customers (week 5)
Competition (week 6)
Legal considerations IP, corporate (week 7)
Presentations (week 9)
Build, sell, manage growth (bon voyage!)
189
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
190
Lets talk about risk
191
Risk comes with the job:
risk is everywhere
192
People respond to risk in different ways
193
The solution: learn to manage risk
194
and exploit it!
195
Risk is inversely proportional to learning
idea

VALUATION
($)
Chance of success
Learning curve
(1/risk)
TIME
196
Learning curve trumps earning curve
idea

VALUATION
($)
Chance of success
Learning curve
(1/risk)
TIME
197
This is your most important job!
LEARNING
CURVE
TIME
198

How to learn?
199
Learning is 5% hearing, 10% seeing, 85% doing.
poster in a kindergarten classroom

Hearing (5%)
200

Seeing Imitative learning (10%)
We learn by example and by direct experience because there are
real limits to the adequacy of verbal interaction.
- - Malcom Gladwell
201

One must learn by doing the thing, for though you think
you know it, you have no certainty until you try.
- - Aristotle
Doing (85%)
202

What a man hears he may doubt, what he sees he may possibly
doubt, but what he does himself he cannot doubt.
- - Seaman Knapp, founder of the USDA Cooperative Extension Service
under the Smith-Lever Act, 1914

eventually you have to get in the pool!
Doing (85%)
203
Learning from mistakes
The biggest problem with a successful company is that you dont learn
from success. Learning from failure is so much easier.
- - Peter Brabeck, CEO Nestle

204
We learn wisdom from failure much more than from success. We often
discover what will do, by finding out what will not do; and probably he who
never made a mistake never made a discovery.
1

71% of executives say that aversion to risk and failure is
stopping people in their organizations from acting
entrepreneurially.
GE doesnt promote senior executives unless they have a
significant failure to their name, in the belief that if a
person has never failed, he or she has not been
sufficiently innovative or aggressive.
- - Accenture study, 2001
1
Samuel Smiles. Self-Help; with Illustrations of Character and Conduct
(1859): XI : Self-Culture Facilities and Difficulties
205
71% of executives say that aversion to risk and failure
is stopping people in their organizations from acting
entrepreneurially.
1

1
206
71% of executives say that aversion to risk and failure is
stopping people in their organizations from acting
entrepreneurially.
1

1
207
Youre not drilling enough dry holes.
208

How to learn?
What you see is all there is.

Whenever the ratio of what is known to what needs to be known
approaches zero, we tend to invent knowledge and assume we
understand more than we actually do. We seem unable to
acknowledge that we simply dont know.
- - David Rosenhan
2

- - Daniel Kahneman
1

1
Kahneman, Daniel. Thinking Fast and Slow. (New York: Farrar, Straus and Giroux, 2011): 88.
2
Rosenhan, D. L. , On Being Sane in Insane Places, Science, 1973: 179, 250-258.
209

How to learn?

- - David Rosenhan
2

- - Daniel Kahneman
1

1
2
210

How to learn?

- - David Rosenhan
2

- - Daniel Kahneman
1

1
2
211
Another approach see for yourself.
Work multiple options

NIST/SEMATECH e-Handbook of Statistical
Methods,
http://www.itl.nist.gov/div898/handbook/, 9/16/06
212
because the value of opportunities is log-
normally distributed

Financial Innovations Lab Report Milken Institute, October, 2006
http://zoonek2.free.fr/
UNIX/48_R/g595.png
213
Options increase chances of success

Number of
opportunities
Chance of one
succeeding
1 0.10
2 0.19
3 0.27
4 0.34
5 0.41
6 0.47
7 0.52
214
An impulsion to action Dont just
stand there: do something!

An executive is a person who always decides; sometimes
he decides correctly, but he always decides.
- - John H. Patterson Dartmouth Class of 1867 (1844-1922); founder, NCR
215
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
216
Looking at vs. looking along
study analytically
learn by doing

C.S Lewis Meditations in a Toolshed
217
Goals for the class priming to:
Take initiative (fill the blank page)
Frame appropriate questions and figure out
how to get the answers
Create appropriate implementation actions
Execute effectively
Take risks intelligently
218
Goals for the class priming to:
Take initiative (fill the blank page)
Frame appropriate questions and figure out
how to get the answers
Create appropriate implementation actions
Execute effectively
Take risks intelligently with careful
attention to detail
219
Food doesnt have to be painful to be good

220
Neither does course material

Zenger, Todd R., Lawrence, Barbara S.,
Organizational Demography: The
Differential Effects Of Age and Tenure
Distribution on Technical Communication,
Academy of Management Journal.
Briarcliff Manor: June 1989.Vol.32, Iss. 2;
pg. 353, 24 pgs

Distribution on Technical
Communication, Academy of
Management Journal. Briarcliff Manor:
June 1989.Vol.32, Iss. 2; pg. 353, 24
pgs

221

Distribution on Technical Communication,
Academy of Management Journal.
Briarcliff Manor: June 1989.Vol.32, Iss. 2;
pg. 353, 24 pgs

This course is meat & potatoes.
222
CONTENT overview
Three parallel tracks:
content, readings, and toolkit (hearing)
invited speakers (hearing & seeing)
plan a business (seeing & doing):
- business idea
- plan development
- summary and pitch
- due diligence
- presentation and feedback

223
CONTENT toolkit topics
Markets and customers
Business models and plans
Financing
The people
Competition: barriers to entry
Social entrepreneurship
Presentations
Growth and selling
224
Agenda
INTRODUCTIONS
SO YOU HAVE AN IDEA
DETAILS AND ADMIN.
225
Class staff
Jessica Osgood (for-credit students)
- Academic Coordinator,Tuck School of Business
- Jessica.Osgood@dartmouth.edu
- Phone: 603-646-3959
- Tuck 309B
Sandy Rozyla (everybody else)
- DEN administrator
- Sandra.K.Rozyla@dartmouth.edu
- Phone: 603-646-0295
- Dartmouth Regional Technology Center
- http://www.dartmouth.edu/~blackboard
226
Assignments
an executive summary document (pitch
sheet) suitable for wide distribution in
promoting a startup idea;
a PowerPoint pitch presentation deck, and;
a due diligence analysis of another project
presented in the class.
227
Assignments detail
January 18: preliminary description of the idea and business model.
Substantiation of the idea or definition of the business model are not
expected at this stage.
teams of 3-5. Non-credit students may join a for-credit team by mutual
agreement with the team.
Written comments returned prior to class time, Monday, September 26.
Please submit all written material in Word and we will return all comments
using track changes.
228
Assignments detail
Sample summaries, Powerpoint presentations, and due diligence reports
from previous classes are available on TuckStreams and Blackboard.
January 21-25: first meeting to discuss the project. see Google
spreadsheet to sign up:
https://docs.google.com/spreadsheet/ccc?
key=0Aon6muDBuaxMdG1TenRwbWZxd1A5eW9RcHg2MUlCOVE&authke
y=COPiyPIP&hl=en&authkey=COPiyPIP#gid=22
February 15: turn in a first draft of 1 page summary and PPT presentation
deck.
February 22: hand in due diligence report
229
Due Diligence Reports
1) done in pairs (not from same project team) on another class plan.
2) scrutinize in the role of an advisor to an investor, key customer, or
other defined context
3) written summary recommendation, with support (3 pp. maximum
length); due February 22.
4) a view from the other side of the table
5) NOT a consultants report a critical analysis and a conclusion
See Google spreadsheet to sign up:
key=0Aon6muDBuaxMdG1TenRwbWZxd1A5eW9RcHg2MUlCOVE&a
uthkey=COPiyPIP&hl=en&authkey=COPiyPIP#gid=35
230
Assignments detail
February 25-March 1: second meeting preliminary team presentation and
discussion of draft presentation. see Google spreadsheet to sign up:
key=0Aon6muDBuaxMdG1TenRwbWZxd1A5eW9RcHg2MUlCOVE&authke
y=COPiyPIP&hl=en&authkey=COPiyPIP#gid=22
March 4: final presentation documents due - executive summary (pitch
sheet format, 2 page limit) and final PPT presentation deck (electronically,
in Word and PPT, due to the course folder by 9 AM on Monday, March 4.
No PDF files for the summary or the presentation deck.)
March 5: (Tuesday): final presentation event before a panel of reviewers -
team presentations of no more than 15 minutes, reviewer questions and
constructive feedback.
231
Grades and weighting
20% - First meeting to discuss project; preliminary draft
summary (pitch sheet) and PPT presentation deck,
documents handed in
15% - Due diligence reports
10% - Second meeting, preliminary presentation, executive
summary, and presentation deck
35% - Final presentations
20% - Class attendance and participation

232
need
upsides/exit
timeline
$ sources/uses competition
people
product
customer/market
For your class presentation:
financials
W
e
i
g
h
t
i
n
g

233
need
upsides/exit
timeline
$ sources/uses competition
people
product
customer/market
Articulation is critical
financials
W
e
i
g
h
t
i
n
g

234
Theres no shortage of e-ship books!
Readings are part of the 5%
good as references, not so good
for learning execution.
235
Theres no shortage of e-ship books!
Readings are part of the 5%
good as references, not so good
for learning execution. There is
no ideal book.
236
Resources are all around you
Knowledge
State of the Art
Facilities
People
Literature
Access
Network
International

Alumni
Ideas
Universities:
a vast resource

237
Conclusion

There is nothing more difficult to take in hand,
more perilous to conduct, or more uncertain
in its success, than to take the lead in the
introduction of a new order of things
- - Nicolo Machiavelli, The Prince, Ch. vi.
.

238
Conclusion 3 main points

#1 - Entrepreneurship = getting things

- - John H. Patterson (1844-1922); founder, NCR
239

#1 - Entrepreneurship = getting things
implication: Dont focus on controlling
resources. Focus on getting things done.
- - John H. Patterson Dartmouth Class of 1867 (1844-1922); founder, NCR
240

#2 - Ideas create opportunities. Execution
creates value.

Eliminate risks; kill ideas early.
Natural selection works develop multiple
alternatives and see which ones are robust.

241

creates value.

implication: Dont just stand there: do something.

242

creates value.

implication: Dont just stand there: do something.

243
Order execution steps for early validation
idea

COST
($)
and launch
Funding Market
Validation
Team
Prototype
244
Order execution steps for early validation
idea

COST
($)
and launch
Funding Market
Validation
Team
Prototype
245
Staged commitment of resources:
More information is incorporated in decisions to
spend:
- better allocation
- adaptability to changes in knowledge or circumstances
- at a price of more frequent failure
Allows you to do more projects with the same at-
risk funding
- failures are cheaper (fail fast)
Outsourcing makes you more efficient:
- you dont have to own resources to use them
- overhead carries base load, not peak load
246

#3 - Learning curve trumps earning
curve. Probability of success is
proportional to learning.

implication: Focus on learning. Earning will follow.
Where can you learn?
(failed deals are great starter kits)

247



248



249
The entrepreneur
The reasonable man adapts himself to
the world: the unreasonable one
persists in trying to adapt the world to
himself.

- - George Bernard Shaw
250
The entrepreneur
himself.

251
The entrepreneur
himself.

Therefore, all progress depends
on the unreasonable man.
252
Theres nothing reasonable about
entrepreneurship!
himself.

Therefore, all progress depends
on the unreasonable man.
253
Before and After

Mac Doherty, T09
Nathan Sharp T12
254
255
political entrepreneur

September 8, 2011
September 8, 2011
May 26, 2010
May 26, 2010
The leadership and actions of President Barack Obama,
Energy Secretary Steven Chu and the U.S. Congress were
instrumental in concluding this offer for a loan guarantee,
said Solyndra CEO and founder, Dr. Chris Gronet. The
DOE Loan Guarantee Program funding will enable Solyndra
to achieve the economies of scale needed to deliver solar
electricity at prices that are competitive with utility rates.
This expansion is really about creating new jobs while
meaningfully impacting global warming.
- - May 20, 2009, Solyndra press release
Generation costs of US power sources
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258
259

How to learn?
Hearing - listen
Seeing - Imitative learning
Doing - Experiential learning; learning from
mistakes
260

John Henry Patterson (1844-1922) industrialist
founder of the National Cash Register Company
established the world's first sales training school on the
grounds of the NCR factory campus in Dayton, Ohio
constructed the first "daylight factory" buildings in 1893
famous for hiring and firing Thomas Watson Sr., President of
CTR (later renamed IBM).
Patterson and Watson were sentenced to one year
imprisonment for unfair business practices, later overturned
by appeal.
1910-1930 it was estimated that one-sixth of US business
executives came from NCR
he left no great fortune. It was spent on social programs in
his lifetime; he believed "shrouds have no pockets."
left ownership of NCR to his son Frederick, who sold $55
million in stock to the public in 1925 in what was the largest
public offering to that time.
261

John Henry Patterson (1844-1922)
industrialist
founder of the National Cash Register Company
established the world's first sales training school on the
grounds of the NCR factory campus in Dayton, Ohio
constructed the first "daylight factory" buildings in 1893
famous for hiring and firing Thomas Watson Sr, President, of
CTR, later renamed IBM .
Patterson and Watson were sentenced to one year
imprisonment for unfair business practices, later
overturned by appeal.
1910-1930 it was estimated that one-sixth of US business
executives came from NCR
he left no great fortune. It was spent on social programs
in his lifetime; he believed "shrouds have no pockets."
left ownership of NCR to his son Frederick, who sold $55
million in stock to the public in 1925 in what was the largest
public offering to that time.
262
a higher level of anarchy exciting and
painful
if the entrepreneurial personality honors
smart failures, by the same token it has little
pity for weakness.
That fraction of Americans 10%, 20%
who still dream of the 30-year pin will suffer
the most.

May 19, 2008, p. A15
263
a higher level of anarchy exciting and
painful
if the entrepreneurial personality honors
smart failures, by the same token it has little
pity for weakness.
That fraction of Americans 10%, 20%
who still dream of the 30-year pin will suffer
the most.

May 19, 2008, p. A15
264
Four to six million Americans a year start three to
four million businesses for themselves
- 20-25% by purchase
- the rest from a standing start.
- two thirds start out home-based.

Dennis, William J., More Than You Think: An Inclusive Estimate of Business
Entries, Journal of Business Venturing 12, no. 3 (May, 1997): 175-196.
Dennis, William J., Business Starts and Stops, Wells Fargo-NFIB Education
Foundation Series, November, 1999.

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