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Entrepreneurship

David Spitz / CED Innovators Workshop

Part I: Prepare

Daves 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
Lets 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 youd 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 dont 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. Its ok to screw up, but learn.

The Business

What are you doing?


Articulate it in 30 seconds. Make it clear to the layperson. It better be. And it better be 10x.

Is it better, faster, or cheaper?


How do you know theres a market? Whats 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) -------------------------------= 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. Youve 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

Its amazing how many people start a business without talking to a customer. Its 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.


Have a supportive spouse. They will sacrifice for you sacrifice for them. Involve them but not too much.

If you are not


The Buck

If all goes well, youll make a lot of them. But it stops with you.

Dont expect it to be easy. It can be tough when youre 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

Dont do anything dont quit your job, dont form a company, dont 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.


Theyre worth the money (usually). Theyll save you time and headaches.

Assemble a supportive cast.

Favor those who offer flexibility to entrepreneurs Deferred payments


CED, etc. network, network, network

Support Groups

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). File patent applications? Worth your time and expense?

Consider protecting yourself.


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.

Dont

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 cant imagine. Stay true to yourself, trust your instinct.

Be scrupulously honest and ethical, and never lose your head.

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