Introduction to Entrepreneurship Startup Thinking
March 2013
Rapid Startup School
A journalist and an artist in 1977ā¦..
In the late 1970S Banana Republic pioneered a new form of storytelling as marketing, filling its catalogues with tales of jungle treks and safaris. Former journalists Mel and Patricia Ziegler, now 67 and 63, respectively, spun their yarns into retail gold.
We came up with the idea of Banana Republic by fantasizing about the source of our merchandise. We invented a world in our catalogue that quickly found a following. In the beginning, every day was about making enough money to survive. In 1979 we charged $1 for the catalogues. We'd work until we were exhausted, go home, open the mail, and take the dollars from the envelopes to go to dinner.
This story is from the March 18, 2013 issue of Fortune
ā¢ By the end of 1982 the firm had $2.5 million sales (80% margins) with no outside investment
ā¢ Were getting offers to let them open stores in shopping centers but they felt they didnāt have the money or knowledge
ā¢ A connection introduced them to the founder of Gapā¢ Gap buys Banana Republic in Feb 1983; start to create their own
private label goodsā¢ By 1988 they had 100 stores and turnover of $250 millionā¢ They left after a disagreement on strategy with Gapā¢ Set up Republic of Tea and sold it three years laterā¢ Now working on a healthy foods companyā¦..
Why did we set up AREA48 as a Formation Space
ā¢ Help individuals learn skills needed to follow an entrepreneurship path
ā¢ Help people to find the right ideasā¢ Help people to find the right team membersā¢ Give you the opportunity to work on your ideas through the
business model canvasā¢ Prepare you to use other resources in the ecosystem e.g.
incubators, accelerators, co-working spaces, funding opportunities
ā¢ The Applied Regional Economic Action (AREA)48 is termed a Formation Space (pre startup/pre incubator)
ā¢ It is designed to help individuals to form new teams, ideas, products, services and skills
ā¢ It accomplishes this by bringing together a range of different groups of people
ā¢ These work together with a number of academic assets including mentors, ecosystem partners, researchers, staff and students
ā¢ Its projected outcomes are:ā¢ New innovation and startup teams ā¢ New products and services that reach their respective marketsā¢ Participants with enhanced innovation and entrepreneurial capabilities and
skills
AREA48: a Formation Space āBirthing New Entrepreneurial Teams and Innovators
I never perfected an invention that I did not think about in terms of the service it might give others... I find out what the world needs, then I proceed to invent
Thomas Edison, inventor and scientist
Why are people getting into entrepreneurship?
ā¢ Costs are fallingā¦. Off-the-shelf technologies/platformsā¢ Coding is being ādemocratizedā for internet startupsā¢ Financial crash has made people re-assess their aims and futuresā¢ No longer seen as a ācrazyā idea ā now a real career choiceā¢ Rapid growth in freelancers and supports e.g. Freelancers Union ā¢ Rapid growth of support structures for aspiring entrepreneurs
from training to space to mentorsā¢ Growth of new methodologies like Lean & Business Model canvas
So before we get into more detailā¦..
why are you all here?
Lean thinking states that a startup is ātemporary organizationā
ā¢ First we have untested hypothesis so we conduct a system of āsearchā for a value proposition
ā¢ Use the business model canvas as a framework for testing these hypothesis with customers
ā¢ This means customer discovery (talking to, not selling to)ā¢ Repetitive process as we glean more information ā¢ This goes with agile development (software, engineering) in
which we speed up product development (iterative, incrementally)
Objective of all this?
ā¢ Our search for a business model will result in success (or we change direction or āpivotā)
ā¢ Find a value proposition backed by multiple customer interactions
ā¢ A business model to allow us to deliver on this value proposition
ā¢ That we have a scalable business (depends on what you mean by this)
ā¢ That we can get/keep/grow our customer base
We donāt believe in the term ālifestyleā business
ā¢ Every potential startup is a Great Little Company ā¢ The ability to succeed is based on ability to executeā¢ AREA48 is designed to help āshorten the oddsāā¢ Scalability can often be based on ambition level of
the foundersā¢ How much do you really want it, how much are
you willing to sacrifice?
Business Plans versus Lean Startup
ā¢ Business plans are falling out of favorā¢ Being replaced by lean thinking including
the Business Model Canvas ā¢ BUT banks and funders still seek the 3-5
year business plan ā¢ Lean can help develop a business plan easily
Whatās the difference between a business plan, marketing plan and other plans?
Entrepreneurship is a āMinority Sportā that only suits certain types
Some Sobering Thoughtsā¦ā¢ The average working week for a self employed person is
64 hoursā¢ Most people do not increase their income by becoming
self employedā¢ 1 in 5 Entrepreneurs do not earn anything within the first
12 monthsā¢ Support of the spouse or partner is critical (3 Fās)ā¢ 50% of all new businesses in fail in the first 12-24 months
Benefits of Being an Entrepreneur
ā¢ Do what you enjoyā¢ Control your own destinyā¢ Contribute to societyā¢ Potentially huge financial rewards
Push the Team Idea
ā¢ Nothing like the feeling of running your own businessā¦.
ā¢ But it takes commitmentā¦.ā¢ ā¦and you canāt do it aloneā¦.ā¢ Investors look for TEAMs and invest in
these more than in ideasā¦.
Create Like a God
Command Like a King
Work Like a Slave
Ref: Guy Kawasaki (Ex-Apple, Garage.com)
Some Points to get across to budding Entrepreneurs
ā¢ Donāt do it if you think you will get rich easy or quickā¢ Donāt do it if you think it means 9-5 hour, 5 day a week jobsā¢ Donāt do it on your own ā successful companies are
TEAMSā¢ Or at the very least advisors, mentorsā¢ Donāt assume just because you came up with the idea that
you will be the CEO or Bossā¢ There are a lot of programs outside of the university that
can support you too
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āEntrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the
success or failure of a venture and are answerable for all its facets.ā
Victor Kiam, Remington
Technology Transfer Office Partners
Funding Partners
Furnace Technology Transfer Accelerator ā first in the world
Support Partners
Furnace offers an opportunity to take unused patents and turn them into businesses
ā¢ Furnace is designed to stimulate even more activity:ā¢ Take the best, unencumbered technologies from Arizona research institutionsā¢ Offer them to external entrepreneurs/mixed teamsā¢ Offer acceleration and $25K in grant funding each
ā¢ Pilot in 2012 resulted in ten new startups:ā¢ Created a successful public/private partnership ā¢ Over 200 patents, copyrights uploaded to Furnace website (after ātranslationā)ā¢ Over 50 applications, 22 finalists, 10 chosen startup teamsā¢ Total of $250,000 in startup state grant funding awarded
www.azfurnace.org
MYTHS WE TELL OURSELVES
"The real act of discovery consists not in finding new lands but in
seeing with new eyes."
Marcel Proust
Where do entrepreneurial ideas come from?
ā¢ Passion
ā¢ Opportunity
ā¢ Despair (small d and big D)
ā¢ Situation
The world of entrepreneurship is full of myths and half truths
ā¢ It must be your idea to be passionateā¢ Being passionate isnāt enoughā¢ You must have deep knowledge ā¢ You must be fully committedā¢ There must be a visible market or need
ā¦these are all trueā¦BUTā¦..
How to spot a good thing....and being brave enough to switch
From accident to empire
It wasnāt their ideaā¦..but that didnāt stop them
Your Idea?
Starting one at a timeā¦and changing your mind to catch an opportunityā¦.
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Your knowledge?
So we went to Atari and said āHey, weāve got this amazing thing, even built with some of your parts and what do you think about funding us? Or weāll give it to you. We just want to do it. Pay our salary, weāll come work for you.ā And they said āNo.ā
So then we went to Hewlett-Packard and they said āHey, we donāt need you. You havenāt been through college yet.ā Apple Founder Steve Jobs on trying to get people interested in the start
of Apple Computers
Entrepreneurship as a second choice
People often start with what they likeā¦.even broken laser pointersā¦.in 1995
Your knowledge?
They even revolutionalize products and markets they know nothing aboutā¦.
Your knowledge?
ASU alums Kate and Andy Spade
ā¢ Kate was accessories editor for Mademoiselle magazine in 1991 ā she was a journalism major, her future husband advertising
ā¢ Before attending a large show she unpicked the labels from her bags and put them on the outsideā¦.a brand was born
ā¢ Two friends joined as equity partners as the business grew
āGrowing up I always had a passion for thriftingā¦ā Susan Kroger
People often start with something they loveā¦.modcloth.com
ā¢ Susan Kroger loved vintage clothingā¦.ā¢ Set-up an online store from her
Carnegie Mellon dorm room at 17ā¦.ā¢ Then moved into a house/officeā¦.ā¢ Now has over 100 employees
āGrowing up I always had a passion for thriftingā¦ā Susan Kroger
And they create markets where there are noneā¦the David Klein story
A visible market?
These Entrepreneurs are a bunch of clownsā¦
ā¢ it was founded in Canada in 1884 by two street performers Guy Laliberte and Daniel Gauthier
ā¢ Cirque du Soleil shows have since been seen by more than 90 million people worldwide.
ā¢ In 2006, LalibertĆ© was named the Ernst and Young Entrepreneur of the Year
ā¢ Its shows employ approximately 4,000 people from over 40 countries ā¢ Total revenue over $1 billion a yearā¦during the 1980ās the company
almost went bankrupt several times (familiar storyā¦McDonalds, Virgin etc)
āThe critical ingredient is getting off your butt and doing something. It's as simple as that. A lot
of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true
entrepreneur is a doer, not a dreamer.ā Nolan Bushnell, founder of Atari
Start with a broad view of the sector ā¦.and look for the gaps
Look for unfulfilled Needs
Look for problems to be solved
TALK to customers early
The road to being a startup is not straightā¦.
ā¢ Some entrepreneurs are ābornā to do a startup e.g. Richard Branson, Bill Gates
ā¢ Some fall into it by accident e.g. Steve Jobsā¢ Some wanted a particular product in a particular way e.g.
Anita Roddickā¢ Some developed college projects e.g. FedExā¢ Some were research students in universities e.g. Google,
Yahoo
Many reasons motivate entrepreneurs, particularly students
ā¢ Solving a problem or āsaving the worldāā Human angleā Environmental angle
ā¢ Creating a ācoolā technology or deviceā¢ Following a hobby or a ādreamāā¢ Stumbling upon an idea
Question: Which would you invest in
A. Great Idea, good team or
B. Good idea, great team?
What Makes a Great Business?
ā¢ Great People
ā¢ Well Differentiated Product
ā¢ Must Have Customers
ā¢ Sufficient Infrastructure and Resources
Sometimes products are developed by accidentā¦..
Teflon developed by DuPont (Plunkett) but
were actually looking for an alternative to Freon
gas
Microwave ovenā¦..super glueā¦..pacemakerā¦ā¦.polio vaccineā¦..X-Rayā¦..penicillanā¦.
Viagra was intended to treat hypertension. Cellophane was meant to be a waterproof tablecloth. Play-Doh was originally wallpaper cleaner
Entrepreneurship is risky becauseā¦..?
ā¢ Few entrepreneurs actually know what they are doingā¢ They lack the methodologyā¢ Management incompetenceā¢ Poor financial control (cash flow!)ā¢ Failure to develop a planā¢ Uncontrolled growth (cash flow)ā¢ Improper inventory control (cash flow)
The development of entrepreneurial ventures has changed a lot in the last ten yearsā¦
But the lessons from the failures are still very validā¦.
Many people try and hop on the āhypeā wagonā¦
If there are front page articles on the front of Time Magazine then you have probably missed itā¦..
The key is understanding customers no matter what business you are inā¦.
Investors look for ability to deliver ā execution of the plan
āReal Artists Ship!ā
Steve Jobs, Founder of Apple
Rules for doing a high tech startup are the same ā¦ butā¦.
ā¢ Internet or Web 2.0 are the āeasiestā to set-up and get to revenueā¢ Pure software take a little longerā¦ā¢ Hardware generally takes a little longer than that and costs more
for developmentā¢ Medical devices take longer again and are also capital intensiveā¢ Biotech or pharma take the longest, are higher risk, take more
investment but have high rewards ā¢ And there are non-traditional startups tooā¦.
Hybrid Models
ā¦the space between āfor profitā and āmore than profitā is becoming blurredā¦.
Investor Motivation
Sources of Funding for pure social startups
ā¢ Friends and familyā¢ Community/Geographic locationā¢ High Net Worth Individuals (HNWI)ā¢ Government, Foundation fundingā¢ Social Venture FundsMore likely to get venture funding if a hybrid or have a social mission
as well as a profit one e.g. Ben and Jerryās
Art of the Pivot
Startup Teams ā Ability to Pivot
ā¢ Many successful startups go through some form of a āpivotā, changing their direction when their first idea was not successful.
ā¢ For Example:ā PayPal was originally about beaming money between Palm
Pilotsā YouTube was originally a video dating siteā Twitter was about Group SMSā Groupon started as a website for collective political actionā Easier for software/internet/Apps than devices or biotech
ā¦and plenty of companies who started in one segment and expandedā¦.
ā¢ Many companies started in one specific segment, dominated and then broadened their appeal
ā¢ Examples include Amazon, eBay, LinkedIn, Facebook and Yelp,
ā¢ An important distinction between pivots and merely expanding a core business: Amazon going from books to other categories and Facebook going from college students to open registration.
Start with a broad view of the sector you are inā¦.and look for the gaps
What can be counted as a ānewā product?
ā¢ A product that opens an entirely new marketā¢ A product that is adapted or replaces an existing
productā¢ A product that significantly broadens the market
for an existing productā¢ An old product introduced in a new marketā¢ An old product packaged in a different wayā¢ An old product marketed in a different way
Pivoting has actually been around since the dawn of
timeā¦.it is just easier to do now than in the pastā¦..
āThe greatest risk is not in the development of new products, but the development of customers and markets.ā
STEVE BLANK
The Four Steps to the Epiphany
ā¦why work on a start-up, spin-out company of your own?
5 top incentivesā¦..
ā¢ Because You Can Now!ā¢ What Have You Got to Lose? ā¢ Professional Experience and Networking ā¢ Perspectiveā¢ Marketability
ā¢ High numbers in early twenties and then again in early fiftiesā¦
Source: Investopedia./Forbes
ā¦.And sometimes a bit of luckā¦(right time, right place)
ā¦.what they call chutzpah!
So AREA48 is partly designed to help you form teams
ā¢ You should TALK to as many people as possibleā¢ You should use LinkedIn to connect with peopleā¢ You should try out your ideas in our Phase IIā¢ You should try out team members from day one
Itās about the People, Stupid
Wrap-Up
What new entrepreneurs need to do ā¦. tomorrow (or today)
ā¢ Focus on an ideaā¢ Build a teamā¢ Research the marketā¢ Build a planā¢ Startā¢ Look for ideas that are working elsewhere (similar,
complimentary)ā e.g. www.springwise.com
Online Resources
Fast Company www.fastcompany.com
Inc magazine www.inc.com
Entrepreneur magazine www.entrepreneur.com
Venturebeat www.venturebeat.com
Innovation America www.innovationamerica.us
Business Insider www.businessinsider.com
Springwise www.springwise.com
@VentureFaster
@EntrepreneurASU