Presentacion wadhwa

Entrepreneurship and keys to success
Duke University – Pratt School of Engineering – www.pratt.duke.edu

Vivek Wadhwa
Visiting Scholar, UC-Berkeley

Director of Research, Center for Entrepreneurship and Research
Commercialization and Exec in Residence, Pratt School of
Engineering, Duke University

Senior Research Associate, Harvard Law School

Columnist, BusinessWeek, TechCrunch

www.GlobalizationResearch.com
© 2010 Vivek Wadhwa

Overview

 American technology entrepreneurs: myths & realities
 Backgrounds, life histories, motivations, and beliefs
 Factors that provide greatest advantages/obstacles
 Why more people don’t become entrepreneurs
 Key’s to building a successful tech business
 Importance of markets
 Understanding customer needs
 What is a business model and how to get this right
 Building the right management team
 Selling
 Public relations—getting known
 Failure, luck


Entrepreneurship Research

Based on 3 projects:
 Survey of 652 CEO’s/CTO’s of 502 tech companies
 Interviews with 144 Immigrant tech company founders
 Detailed survey of 549+ founders of companies in 12 high-
growth industries

Common Myths:
 Tech entrepreneurs: unmarried, rich, college-dropouts obsessed
with making money
 Ivy-league education provides huge advantage
 Venture Capital prerequisite for economic growth

© 2010

Tech entrepreneurs: Not young

US Tech Founder Age at the Time of Startup Establishment

0 - 19 1,2%

20 - 29 14,2%

30 - 39
Founder Age

37,5%

40 - 49 34,1%

50 - 59 10,5%

60 - 69 2,5%

0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0%
Percentage of all Respondents


Married with children

69,9%

40,3% Average Number of Children
Marital Status

28,0%

24,9%
16,4%

11,0%

4,5% 3,4%
0,7% 0,9%

Single Married Divorced/Separated Widowed 0 1 2 3 4 5


Entrepreneurs: Not from rich families

36,9%
34,6%

21,8%

5,4%

0,7% 0,6%

LOWER-LOWER CLASS LOWER-MIDDLE CLASS LOWER-UPPER CLASS UPPER-LOWER CLASS UPPER-MIDDLE CLASS UPPER-UPPER CLASS


Tech entrepreneurs: Not college
dropouts

Associates
Degree, High School
Certification, MD, Diploma or Economics, STEM Fields 46.5%
JD, Arts,
Some 3.8% Lower, 5,9% 1.8%
3.5% Humanities
College,
2.3% and Social
Sciences, Other, Applied
Law, 4.6%
2.8% Sciences*,
4.2%
9.0%
Healthcare,
PhD, 5.5%
10.0%

Engineering
27.6%

Bachelors,
44.0%

Masters, Business, Mathematics
31.0% Accounting, 1.5%
Finance, Computer
33,4% Science,
Information
Technology
9.0%

Highest Completed Degree Fields of Highest Degree


Even better educated than their parents

27,8% 36,8%

24,5%

Father Mother
19,7%

22,7%

19,3%

10,0%

10,0%
5,2% 5,6% 5,8% 5,8% 8,3%

0,2% 1,0% 0,2%


Pretty smart in high school,
but drank too much in college

51,2% University
High School

36,5%

29,9%
26,1%
23,2%
20,1%

3,7%
1,4% 3,1% 2,9%
0,4% 1,6%

Top 10% Top 30% Average Bottom Bottom N/A
Top 10% Top 30% Average
Bottom 30%
Bottom 10% N/A
30% 10%


Education counts…
not necessarily ivy-league

$8

50
$7
Average 2005 Sales (Millions of USD)

Average 2005 Total Employees
$6
40

$5
30
$4

$3 20

$2
10
$1

$0 0
All Startups Startups w/ an Ivy-Leauge Founder Startups w/ a High School Founder

Average 2005 Sales Average 2005 Employment

What makes the difference is higher education: not the degree or school.


Entrepreneurs: Highly experienced

Approximately how many years did you work for another
employer prior to starting your first business?

27,6%
24,6%
23,3%

14,3%

10,3%

0-5 years 6-10 years 11-15 years 16-20 years 20+ years

Entrepreneurship wasn’t necessarily
in the genes or pre-planned
How interested were you in becoming
Which Members of Your Family an entrepreneur while you were
Started a Business Before You Did? completing your higher education?

51,9%

38,8%

34,7%

27,5%
24,5%

15,2%

6,9%

7,2% 6,1%

I was the first in Father Mother Siblings
my immediate
family to start a Not at all Not very Didn't think Somewhat Extremely
business interested interested about it interested interested


Reasons for becoming an entrepreneur

Entepreneurial friend or family role model 2,1

Always wanted own company 3,1

Startup company culture appealing 3,0

Developed a technology in lab 1,4

Wanted to capitalize on a business idea 3,1

Co-founder encouraged to start company 1,7

Wanted to build wealth 3,2

Working for someone else didn't appeal 2,9

Couldn't find traditional employment 1,2
1= Not important factor, 5 = Extremely important factor


Bootstrapping is the norm – not VC

Corporate investment 6,2%

Bank loan(s) 14,6%
First business started
Private/angel investor(s) 9,2%

Venture capital 10,8%

Business partner(s) 15,4%

Personal savings 70,0%

Friends and family 13,8%

Other 10,0%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0%


Success factors

Your prior industry/work experience 4,4

Lessons you learned from your previous successes 4,1

Lessons you learned from your previous failures 4,0

Company's management team 3,8

Good fortune 3,3

Professional/business networks 3,3

Availability of financing/capital 3,2

Your university education 3,2

Personal/social networks 3,0

Location 2,5

Advice/assistance provided by company investors 2,2

University/alumni contacts/networks 1,7

Assistance provided by the state/region 1,3

1= Not at all important, 5 = Extremely important


Obstacles faced by entrepreneurs

Difficulty of co-founder(s) recruitment 1,6

Family or financial pressures to keep a traditional,… 1,8

Availability of health insurance/risk of losing… 1,9

Lack of industry knowledge 2,0

Lack of available mentors or advisors 2,0

Concern about the consequences of failure 2,2

Concern about protecting company's intellectual… 2,3

Lack of prior experience in running a business 2,5

Lack of available capital/financing 2,6

Amount of time and effort required 2,9

1,0 1,5 2,0 2,5 3,0
1= Not at all a challenge, 2=Small challenge, 3=Somewhat of a challenge, 4= Big Challenge, 5=Extremely big challenge

1= Not at all a challenge, 5 = Extremely big challenge

What stops others from becoming
entrepreneurs?

Difficulties in recruiting co-founders 2,5

Availability of health insurance/risk of losing existing
2,7
coverage
Family or financial pressures to keep a traditional,
3,2
steady job
Knowledge about how to start a business 3,3

Knowledge about the industry and markets 3,4

Lack of business management skills 3,6

Difficulties in raising capital/financing 3,8

Amount of time and effort required 4,0

Willingness or lack of ability to take risks 4,3

1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5


Building a business

Understand your market & stay focused

 To build a successful company, you need a great
product. But a great product doesn't lead to success by
itself
 You can have the right product for the wrong market and
fail. And you can have the right product for the right
market and still fail because no one knows you exist
 You can also be on the road to success and wake up
one day to find that the market has changed and you
haven't adapted
Stay focused on marketing at every stage of your
business

Selecting a market

You may have a product that can solve many problems for
a broad set of customers, but you are not going to be
able to reach everyone at the same time. Some will be
more ready to buy from you than others

Key lessons:
1. Research your market and pick your niche
2. Expect that markets will constantly change
3. Expand from a position of strength

Understand customers needs

 Lack of customer validation is biggest cause of startup
failure
 Learning customer needs is more important than
revenue for a nascent startup
 Revenue doesn’t build traction for a business

Needed: tested and proven products that customers
are ready to buy, and that you can sell and deliver
profitably

What customers do and don’t know

Customers know:
 What their problems are
 What they like
 What they don’t need
They don’t know:
 What they need
 What you can develop for them that they will really want
Your challenge:
Learn what you can build that customers will buy

How to learn customer needs

 Interview customers, do what they do—feel their pain
 Study every product in the market space—successes
and failures—related or unrelated
 Use your experience and vision to conceive solutions
 Quickly build solution/prototype. Perfection/features not
important
 Share with potential customers. Let customers test drive
Keep iterating until you have a product that customers
MUST have. Don’t hesitate to trash everything you’ve
built

Business Model: The 7 components

A business model is the nuts and bolts of how a
business generates revenue and profits

1. Reaching customers. How are you going to find
customers or have them find you?
2. Differentiating your product. What makes you better
than everyone else?
3. Pricing. What can you charge that will bring profit to
you and value to the customer?

7 components of a business model

4. Selling. What is your sales process?
5. Distribution strategy. How will you deliver the goods?
6. Support. What does the customer do if your product
breaks?
7. Customer satisfaction. How are you going to turn
customers into loyal fans?

Management team: 8 key functions

1. Company leader. Makes final decisions on business
strategy, hiring and firing, and resource allocation.
Responsible fr business's success or failure, to motivate
the team, communicate with the outside world, build the
corporate culture, and ensure that sound ethics and
values permeate the organization. The leader doesn't
have to be the founder of the company.
2. Operations head. Manage operational details: watch
the bottom line and make sure products are delivered
on time, customers are happy, company is meeting
legal obligations.

8 functions of a management team

4. Product development. Chief technology officer/head of
product development
5. Marketing. Makes customers aware that business exists
and differentiates products from competition
6. Sales. Closing deals is the most important part of any
business. Every employee must be able to sell.
7. Finance. To balance the books, pay taxes, build
financial forecasts, manage budgets, and collect
revenue
8. Legal and HR. Lawyers protect company interests;
human resource experts hire and help manage
employees

Selling: the single most important skill

1. Your goal is to fulfill the buyers personal needs:
 Understand why people buy
 Understand their need to ―win‖
 Understand what they need
2. Craft your message based on customer needs
 Be credible and competent: know your stuff or team up with
someone who does. Have testimonials from other customers
 Be trustworthy: be honest, fair, and stay positive
3. Communicate persuasively
 Talk in a way that customers understand and which fulfills their
interests and needs—not yours.

What Salespeople do

 Generate Sales Leads
 Qualify Leads
 Make Initial Contact
 Meet customers
 Handle Buyer Resistance
 Close the Sale
 Account Maintenance

Public Relations—getting known

Entrepreneurs believe when they achieve success,
fame will follow—Wrong
1. Build a compelling message that interests others
 Create a concise statement of what the company does without jargon or
technical language. Test the message by speaking to ―normal‖ people
 Create a one-page summary of what you want to say.
 Create a one-line version of what you want to say.
 You may want to talk about every single feature, too much detail dilutes your
message. Just highlight the few things that differentiate you.

Your products very interesting to you, but the world doesn’t care.
Others aren't interested in you, but may be interested in how your
product affects them.

Public Relations—getting known

2. Find the right journalists
 Read dozens of online and print publications. Find who covers
your ―beat‖.
 Look for local publications, trade rags, industry websites
 Read blogs in your market, learn who influencers are
 Follow all key players on Twitter and Facebook
3. Understand journalists
 They want to be first to report on a topic.
 Read other stories by the same journalists and get a feel for
what type of stories they write.
 Make sure that your story is relevant to their ―beat‖.

Public relations—getting known

4. Start small. Everyone wants to be in national publications, you
are going to be up against stiff competition if you go after them
immediately. Instead, start local, focus on trade press

5. Customize pitch for every journalist. Write or call.
 Most publications list email addresses on their Web sites and
provide phone numbers for editors.
 Most journalists do respond. May not be interested in you at
first, but may include you in a future story—always looking for
fresh ideas and sources.
 Use a ―news hook‖—big news story of the day or current trends

Public relations—getting known

6. Become a Trusted Source. If you do get an interview,
listen very carefully to what the journalist is interested in.
Don’t talk about yourself and your product, but what
journalist wants. Your goal is to become a trusted source
and build a relationship so you can be at the center of
future stories.
7. Be available. Journalists usually have tight deadlines
and need answers fast. If you want to get press
coverage, you will have to make yourself available within
a short time of getting a call.

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