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Part salesmanship

Part communications - surprising number meet criteria - but they are not necessarily traditional finance CFO, but they are entrepreneurs, but not great technically.
- What investors look for
Zain: Started co. Felt they undervalued business - how do you value future sales.
Quick answer - risk basis. Risk element is wildly underestimated by entrepreneurs.

Unlikely you will come near projections.

I say, either guarantee me or accept my risk projections.
- Integrity, Passion, Experience, Knowledge, Skill, Leadership, Commitment (you better not walk away), Vision, Realism, Coachability (listen and take advice)
Things we know about e.

- Starting is easy. Running is hard

- Takes a lot of money

- All get seeded

- Flow

- achieve goals

- most succeed.
ALL WRONG

Once you get it going, becomes easier.

Operating exec - 2/3 years.

Google guys brought in Eric Schmidt.

Those guys could not have started it.

Guys who started are not good day-to-day managers.
First internet company.

In second iteration, multinational - headed to Asia.

No background in multinational operations.

Went out to find CEO.

Asked headhunter.

Experience in mobile arena.

Who?

Guy at IBM. #3 guy. Raised - IBM.

Got this guy. He comes in. Leaves 17 year career.

700 people reporting to him.

Fascinating to see him run this. Did things I never would have thought.

Could Mark have started this? No.

He had big co. operating skills. Not CTO of Symantec.

Ever going to start a business - completely different skill set.
In terms of taking money for starting business.

Costs are dropping like a rock.

IT enabled - not heavy duty - web services.

Angel investors would love to fund every business, but they don't.

Only 2-3%. 97% will have to find money somewhere else.

VCs only fund 1 in 400 businesses. That is the exception rather than the rule. Tiny tiny tiny percentage.

Last year - founded 1000.

600 000 started last year.

You see something new, really risky.

Not getting appropriate valuation based

Not one company has come within a country mile of hitting

projections.

If you perceive how risky it really is, we'd all be in a different business.
Zain:

We don't cut down what you are doing.

Based on what I know, what might you actually get.

I have idea what numbers really are.
Anders: Top 4% that wins or worst?
In reality, investors - ultra-capitalist, blog posts.

They are not evil. Not out to screw you. Not stupid.

If you were a VC, what would you do.

Best VCs have both

Do they always get it right? Many have lost money.

Made best guesses they could.

Investing in top 1/4 of 1%. Best efforts on everything, still blew it.

If God were to rank every company out there.
Did ones that got funded fall in the top 10%? Probably.

There is luck.

Circumstance.

Things happen.

Best CEO, then black swan event.

Can't canonically rank that.
Anders: From yesterday and Copenhagen.

Bootstrapping gets to be way.
VC is almost the last resort. Anyone who starts expecting VC.

If you are a bootstrap business - Odds are against you as a VC-backed business..

Functional business becomes within shooting distance of VC funding.

In right set of seats.
IF you can be bootstrapped - tight on cash - viable.

Still have business that can be success, get funded.
Scott Shane -

Several books.

Debunks

Illusions of E

Why not the case. Very bright guy.

Don't disagree on facts.

Tends to take same facts.

\"we think we are e but we are small bus types\"

Vision: H Ford, Dean Kamen - only small % like you.

you are not going to open a local waffle house franchise.

That is not an e

Scott - takes \"Fool's Gold\" who are Angels

1/4 m people in america - not all David Rose types.

They have met a guy a cocktail party ...

There is increasing core of professional angels.

Have portfolio theory

You heard from Rob about decentralization of capital.

atomization

Or disintermediation

Or decentralization

Taking central and spreading into parts.

100 000s of investors out there.

Where do e come from?

Are we all nascent e?

Is there a difference?

- Thomas Harrison

Book: instinct

Tapping Your E DNA to Achieve Your Business Goal.

One trait -you don't learn from your mistakes - that is the gene for e

How many people blithely go charging ahead despite NO.
- John Gartner. John Hopkins

Religion and psychiatry. Can you go back to the record and say

was this god given voice or were they just nuts.

Joan of Arc - just Schizophrenic

Populations had interesting traits in common.

Bill Gross of Idea lab - just lost $2 bn why smiling.

Hmmm. Maybe another crazy group.

Went back to psychiatric manuals - anything to account for this?

Test hypothesis. Sent around a survey to dozen or so.

On scale of 1 - 5

- filled with energy

- flooded with ideas

- driven

- wildly grand ambitions

- little sleep

- feel brilliant

- can be euphoric

- irritated

- fast talking

- risk taker

- overspend

- witty

- charismatic

- prone to making enemies
Typically, if you are within a half a standard deviation.

On scale of 1 to 5.

5.

No 7.

This described me.

Full research study.

Confirmed these characteristics.

How many described here: [95%]

-Hypomania

Why a little bit of craziness equates to a lot of success

If you break it down

Hypo

less than

Mania - top end of manic depression.

This is psychopathy. Can be socio

Just less than manic.

Diagnostic difference - 1 thing:

Hypomanics are functional.

If you can just tone it down and harness that energy, you are not manic.
Emem: What makes you cross the line to the other side?
Line is very close.

Take Mark Cuban.

Steve Jobs -

I know people have worked with Steve.

No question brilliant.

Products have changed world.

People would never work with this guy again.

Howard Hughes -

http://en.wikipedia.org/wiki/Howard_Hughes

Spent last half of life in room growing his hair and fingernails.
Galdwell's book Outliers: [most]

Smart?

Not necessarily brilliant.

Just a question of being smart enough.

For entrepreneurs - don't need to be manic, just manic enough.

Get into the ballpark.
- Hypomanic \"enough\"

- cultural tradition

What does society feel about e

If you look at it as a genetic thing.

Ultimate is going somewhere else - immigration.

What happens if you chart large immigrant vs e

US

Australia

Israel - large or entire population - people are e
France

England - what is e there? Not a whole lot.
On two occasions - brought to England.

How do we get e economy going?

We don't have it in UK.

They are smart.

What is it?

As we were talking.

Gave them my background, up / down, bankruptcy.

\"

Goes back to Scott Shane stuff.

Consequences in Silicon Valley.

Failing is actually a good thing for many people.

At least you've been through it.

In other places, concept doesn't apply.
Emem: Noticed something here.

When people say, \"I left my job\" here they say congratulations.

In my country, they put you in a
Obama.

Islamic e

Goal not to export imperialism.

Share the ideas of e.

On panel at law firm.

People from Jordan

Get Angelsoft in Jordan

Early stage - people who fund them.

Major major change.

Countries beginning to realize

Tough in middle east to change cultures.

But it is happening.
Personal role model

Do you know an e?
Talking to a guy.

Degree in interactive technology.

Looking at guy, really bright. Interesting ideas.

[sniffing]

I smell something of interest.

Have you thought of starting your own company.

Anyone in your family.

Let me try a little test.

If you were to start a company - any product or service?

Company.

Anyone in your family.

Let me try a little test.

If you were to start a company - any product or service?

T

Tool for interface.

Just give me a couple of pages - who might want to buy it.

Week or so later best business plan I've ever seen.

Here's the product, market...
I'm not going to make you

EIT - Entrepreneur in Training
Zero role model.

Never occurred to him.

Started 6 months ago.

Blog about it.

You will learn from what they are doing.

Turn you into E

help others along the way.
Now that he is in the middle of Silicon Alley
how many who are e have had someone as role model.

[about 2/3rds]

Oldest daughter- had father as e

Her grandfather was e
My parents were proud. That I was in the e of the year.

My father WON the e of the year at 77 years old

Just in his spare time.

Second gen e.

My daughter, having seen the riskiness of startup world - no no no

Will be philosopher queen.

Wanted more pocket money - began tutoring. Put out business cards.

Soon as she had more customers - organized friends. Recruited more tutors.

Test to see if qualified.

Had staff of 13

Run rate of 100,000 pounds per year.

Sold business to professor.
You may say you are one thing -but you are another.

You are all at a perfect time now where anybody can create anything.

You will bring opportunity back with you.

You can carry the opportunity with you like a bubble.

This is not an e course, but you will get some.

When I took MBA - one course.

Now Columbia, NYU, training in how to start bus.

Can you train e?

Is it teachable?

What is the result of this?

What is the e life like.

I'll go through some of the adjectives.
- Challenge. You can't sit back.

Not like flipping burgers. Concept of FLOW.

Psychology of optimal experience. What makes people really really happy.

Self actualization is really important.

you are really in the flow of things when you have a challenge just in your grasp.

If you try something too easy ...

If you try something too hard...

If just right -

Alex: You don't think too much.

How many have felt [all]

Right there we have the essence of SU. General population - not that answer.

You are all high functioning.

Runners high.

That is flow.

Peak of endurance.
- Work.

- Dedication - game is worth the prize.

- Perseverance

When you are in that state of flow.

Not the IPO.

When you hit your numbers -

- Exhilaration - uptake. Buzz. Feeling is really special.

- Agony

Eghosa - only cyclical thing. Asset allocation.

Angel things, then out again. Say he is right.

May be agonizing. When Angel Capital Assoc established

needed platform for web investing.

Commission. Spent 6 months.

Decided NOT using Angelsoft. That is agonizing.

Free.

So I said, screw it, doing it anyway.

4 years later - 85% of members using it.

Turn down was agonizing.

Filing for bankruptcy - not fun.

When you see something you have built, become sustainable.

- Accomplishment

Comixology

Pond5

- Failure

Should be familiar. We really are psychopathic.

Takes enormous amount of personal psychological capital.

- Sacrifice

Not only cash.

Relationships. [nearly 100% impact]

Be careful not going over cliff.

- Control

Be able to control passions, sacrifice, downside.

Set up enterprise so you are in control.

Can take off several days and come out here.

Good for you. Good for me too.

I am in control of my time.

- Powerlessness

As a little startup entrepreneur - at end of the day - if and when pays off.

- Extraordinary Satisfaction

I have built this. I have created this.

I have created something.

Makes sacrifice worthwhile.

How many so far have found extraordinary satisfaction?

[2/3rds]

More work it takes, better it feels at other end.
- The Entrepreneurial Spectrum

You run the gamut.

Hyper-founders

Others ready - if all things in place.

People who are fearful.

People naturally not entrepreneurs.

you know who people are -

Richard Branson - you could drop him on a desert island and he would be natural e
On other end. Never would be that.

Wonderful spouse. Looks at me like I have 3 heads.

When I first said I'd start own ...

Most in middle

Natural / Ready / Potential / Fearful / Never
Juan: Teach them?
Can move along the spectrum.

Show them it is not magic.

What the economics are.

Move them up the spectrum.

Maybe work for a firm.

Encourage the stuff.

Potentially be able to see it.

Ready? Has tools. Given tools here is what you do.

Get those people into the mode.
For those who are naturals. Goal is to challenge, refine

give tools, let you go off to the moon.
That's what we try to do at SU and at incubator.
10:31 [applause]
Q: How does Angelsoft make money?

Case study. Will put at end.

Opt-in session.
Eric: Women?
Very involved.
ASTIA -

helps women

Springboard
A combination. A little genetic stuff - not determinative. Not universal.
Grameen - only lent to women. Men don't stick to it.
cultural norms are changing.

10% of CEOs are women. Ways to go.
Q: Kaufmann?

Started by guy who was a salesman.

Became top seller. Bigger region.

Company. Marion Labs - acquired.

Made billions.

In his estate - promote e

Lot of programs.

Pulled together Angel Capital Ass.

They realized after dot com crash - called leaders together

1999 / 2000 get act together.

Exchange best practices.

Good organization.

Can teach skills. Demystify it.

25 min break.

11:00 back in here. Tom Byers.

Technology Ventures

http://www.amazon.com/Technology-Ventures-Enterprise-Thomas-Byers/dp/0073380180

Slides: http://bit.ly/ahXIDZ

10:59

Tom- would be cool if you could sit with your team.
- High-Growth Technology Ventures

7 great questions.
David: Glad to see crowd.

First session to get more than assigned.

All of Silicon Valley.

Stanford - the Ur source.

Tom: But I'm a 3 time Berkeley grad.

David: On founding team.

Applied e

Relate to team projects.

[applause]
Tom: So excited. I should be applauding you.

I feel good.

We within shouting range of our teams.

Thanks for coming to California

Asia?

Europe?

Africa? Sister.

South America.

This is one of the joys of being involved.

I chose to be here.

Will join you for lunch.

Saw Tina Seelig

Got debriefed.

I'll have what she's having

That woman has a lot of passion.

Were you inspired? Better be - if you have a pulse.

Stanford Tech program.

Did she brief you?

We have 20 faculty, staff.

ECorner website

We've got lots of videos / podcast

Teach courses

Most proud of research. PhD students

going out to be future e school profs.

That is thrilling to have around us.

Those PhDs pushing envelope on theory.
There is e mindset

personality - e way of looking at life

Whether startup for profit

or social venture

or academic - my life for last 15 years.

Contribute to team.

Some sort of game changing advancement.

Invested your time to be here.
Best way to add value.

Saw VC panel.

Long week - just Wed.
- Legacy

visit campus - just informally.

Not here to promote Stanford.

I'm just perplexed by it.

Stanford / Silicon Valley relationship since HP founded.

I've been in it since Symantec.

Started another company.

Was going to make software for pads - 20 years ago - didn't make it.

Been really interesting being an educator

teach processes of SV.

Looking at it from ivory tower.

Pretty wild.

Incredible ecosystem that is so vibrant.

Like Jane Goodall studying gorillas.

What makes SV special from economics perspective. I'm not an economist.

Got into business from operations research - PC software wave.

Get out of the building = as one colleague calls it.
What I've tried to do -

aside from course, resources

If I tried to explain this.

SV state of mind.

Kept a list.

2 page list - 10 elements of e

Book.

Wasn't very good = 1st ed.

Then got young person to write again.

All tech :

green tech

med tech

4-500 pages

What is the SV way.

You can take this away - a 2 pager.

Or survey of all theory, practice.

Or, we can just practice.
So, how do we practice.

All of you have some connection to some startup or dream.

Connect to big five. Around there.

A little dreaming. Identify the issues.

7 essential questions.
1. Why is your venture a true opportunity?

...
- Making Sense of Startups.
Takeaway: define success.

Models/frameworks for how to put arms around SV.

Complexity.

Magic.
My favorites:
Product OR Service \x3c-> Market
Opportunity Recognition

Pursuit of Opportunity
People AND Organization \x3c- -> Resources AND Capital
Collision. Tech with problems.

Getting after it.
You are kind of dancing around it. Tina. VCs.

Leaves People.
Not fair. Static.

Now stretch over time.

I like this model from Jim Collins

Good to Great

Built to Last

aspires to be Peter Drucker.

http://en.wikipedia.org/wiki/Peter_Drucker
IF underway already. Let's get going.

Quick snapshot =

why doing this

what game are we trying to change

SW

Externally OT
Triangle:
IDEAS: Product / Market Strategy
Talent: Team and Culture
CAPITAL: Cash Flow and Venture Finance.
All interrelated.

Here's the key.

Managing the T - the time.

So intoxicating.
First things first: Assess the Venture's Vision.
7 Questions. Step through them.

Where is the water team?
2. What is your competitive positioning and how are you developing your partners and customers while developing the product and service?
3. As a focused and lean startup, what is the \"white hot\" risk to reduce as soon as possible?
4.
-
1. Why true opportunity?

Juan: Huge need.

Emem: Market

Time out- if team does not have idea yet, make one up . 3 min.

11:17

Emem: 2 bn people.

JG: because of the technology

Alex: not so aware of it

Gary: Everybody knows.

Alex: Execution.
11:23

Let's go down the list.

Water:

What could be true opportunity.

: Providing accurate real time information.

Need clean water - need information.
Water2: Desalination

Needed.
Energy:

Organization

Challenge: Profits
Space:

Opportunity

Challenge: extinct
Space2:

Remotely controlled humanoid robots - for inhospitable environments

Business opportunity is? What are they doing?
Upcycle:

EBAY for waste

True, growing market.

Accountable for how using waste.

Barrier: get on board.

$1 bn opportunity.

Increased transparency. Be very disruptive.

Waste stream trading - more on platform, better it gets.
Hear that one - big problem. Specific on solution.

VCs like that speak.

Big pain, here we come with specificity.
So, we have 6 there.

comments:

Stop at 12:30 the formal stuff. Continue into lunch. What have you.
Real delicate dance.

As you - the entrepreneur -

- Global Business Recession
Very aware of externalities

Worst of Times?

Level of real output

Peak / Trough cycle
Perfect time to start

Mother of markets out there.

I caught wave of PC.

I like talking about successes - and failures.

Would trade places with you in a second.

Opportunities everywhere.

Global Challenges = Huge Market Opportunities

Env and Sustainability

Security and Economic Stability

Digital & Physical Infrastructure

Human Health & Education
Interesting way to frame.

I'm going to explain pain.

Waves of innovation.

I will send PDF to David / Jon.

5th wave -

Digital Networks

Biotech

Software Information Technology

6th Wave -

You've got that wind behind you

Sustainability
Your goal - get to that next meeting.

Just part of a wave.

Gigantic.
Fine a macro level.

Of all the ones I heard - ready to endorse everything.

Affect humans, animals, kids.

Not everybody totally motivated by significance.

Where is there an economic model.

These are the questions and top 10 list.

Let me explain it first. Question #2.
Steve Blank. Let's meet him virtually.

Get out and talk.

You probably understand product development.

That is making advances.
Customer development process.

book is terrific - let's hear from him.

ECorner - 20 videos like this.

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2064

[start video]

Two essential assumptions.

Show me that there are customers who have agreed with you.

Show they would pay money.
While you are out there - find out millions of other things about customers.

I'm passionate. I've got it. We're launching.

This ought to be very quick exercise - get them to confirm.

For those thinking of starting - exercise will be sobering.

Goal of customer development process will be to take hypothesis

and see if there are customers outside the building.

[end video]
Sounds simple.

How would you do this?
Moore's \"Crossing The Chasm\"

Getting early adopters - disappointing.

Superstar developers - right into the chasm.

Why do some ventures get across?

This is where success is.

The big groups of people, the herds, the masses.

Start to adopt what you have.
Get specific.

A lot of you are passionate, write this up for your team.

Sentence : why care?

For (target customer) who (statement of the need or opportunity),
the (product/service name) is a (category)

that (benefit)
Sentence : why us?
For iPhone:

For anyone who wants to travel in style

who loves to communicate

the iPhone

that offers Apple's
For Energy:
For household in developing world

who lacks access to reliable energy,

the ETO is a vertically integrated energy solution firm

that combines knowledge, organization and financing to provide

appropriate solution.
Why us?

Unlike non-integrated solution providers or Grameen Energy,

our product offers one-stop solution including a variety of technologies.
http://www.gshakti.org/
--
EBay waste solution:
--

Water needed at specific times.

Quality.

Service - analytics and intelligence.

Better decisions.

Questions like that.

Competitor - takadu - focus on water loss.
http://www.takadu.com/
--

Water2:

People on coastal area.

People, Governments.

Differentiator - others not energy efficient way.
--

Space:

All customers are Small to Medium businesses

And Private individuals who want to go to space for tourism.
Why us?

Unlike chemical

3x more efficient.

May drop cost by 10x or 100x over time.
--

Great.

Huge potential.
---

Space2:

For govt. and

Remotely controlled - avoids risk of human life.

Low cost from mass mfg.

---
Which of those statements grabbed you and why?

Credible?
Big fan of David's here - not function - saving human lives.

More broadly believable why.

Liked Aaron's quantifiable.
What if I gave you a $10 m fund. Which to have further conversation with.

Which one appealed to you?
: Desal. Most profitable. Unidimensional VC.
: Financing energy. Really interesting. Finding appropriate scale of energy for third world.
: Who would you chose?

I'm all about the team.
3. \"white hot\" risk.

Back me up or disagree. Certain vocabulary.

From why care, why us.

More granular - which risk? Focus of cash - team - key resources.

Notion of greatest risk - that's the one that has to be looked at.

Four risks:

Team Risk

Technology Risk

Market Risk

Capital Risk

What is greatest risk to address right now.
Do you have the people to pull this off?

Emem: Market risk?

12:00

Let's check back in.

Energy Emem: Market Risk (2x) Can we make money?
So getting out of the building is key there.
Upcycle Steve C: Willing to share what their waste streams are?

and tech risk.
Desal: Capital risk.
Water: Right team. Capital low. Significant Market Risk.
Space launch: Capital - far from product, need lots of investments. Markets are uncertain.
Space2: Mainly market risk. Need to mass produce.
Step back - Market, market, market.

Why?

If you'd asked me this morning, big picture thinking - I'd have guessed we'd say technology risk.

If market is there,

Team - every company has that. Filter that out.

Most tech can be addressed.

Alex: We have assumptions of tech.

Tony: We all believe in tech.

Ronen: Marketing is the most important. If done well, then everything follows.
Give me that camera. I need to film this.

Javier: Broad vision. Have not tried to break through.
: Would say -most market risk in breakthrough.

No mousetraps.

Anticipating that market.
NYSE - most amazing financial literacy program.

Works. proven,

cannot get districts to adopt it.
12:08.

I'm woefully behind.

Give yourself a round of applause.
I'm going to hit the accelerator.

Thinking going on in SV just blowing me away.

YOUR e thinking.

I'm going to take
- High growth startups.

Changing my whole view.

Next step

write plan - would be fiction.

Steve Blank - HG startups

Ones here meant NOT to be startup.

Looking for replicable business model.

What are you doing out there - not just talking, but

economic business model to let co go to scale.

If just a small bus, you failed.

So, let's hear from Randy Komisar \"Getting to Plan B\"

April 7, 2010

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2415
Could you build a business plan before there was a customer?

Vast majority of successes out there - Google, intuit, sun, did not succeed with Plan A.
Leap ahead in the time machine.

This book is one of the few tools I have seen

I'm a numbers person. I need something I can chew on.

That plan.

Why called Symantec. What grew us was anti-virus software.
Analogs / Antilogs / Leaps of Faith / Hypothesis
Revenue

Gross Margin

Operating

Working Capital

Investment
Where is the leap of faith?

Might be technical.

Identify, come out with hypothesis. Better to go measure it

in terms of as much data as possible.

Have framework for these discussions.
Question 4.

David had brought you curriculum.

Cash.

Why so hard for people in industry / public service, don't know how much cash is in their bank account.

If you were 20 entrepreneurs, you'd know.

That is the blood pressure of startups.
Sahlman's Concept of Fit

PEOPLE / DEAL / OPPORTUNITY / CONTEXT

Harvard B school 1997.
https://docs.google.com/a/singularityu.org/fileview?id=0B3BeYKoQJeyQZGFhYWNhNTctOWNjOC00MTNmLTkzZWEtYTY4ZmFlZjZlMzAz&hl=en
Different conversation.

Just the deal? Let's go there. These things happen when

the PEOPLE / OPPORTUNITY and CONTEXT line up.

Sun / moon / stars not lined up.

Not funded? Funders are not evil.

Urge you to take a look.

Even more than top 10 list.

10 pages long.
[ photo of Microsoft at founding ]

Innovation = f ( creativity, teamwork )

http://stvp.stanford.edu
Did you know the players on the World Cup winning team?
It is statistically shown it is a team that pulls these things off.

\"Innovation is the difference between a bleak future and a bright one.\"
Stuff to learn:

A. Recruiting - practice getting people fired up to be on your project.

Not just the 80 of you, but this network

B. Compensation

C. Culture - norms
What entrepreneurial skills do you need?:

Accepting failure

Patience http://en.wikipedia.org/wiki/Patience

Average length of time to exit is longer than average marriage
- Skill development

Creating \"T-Shaped\" People
Breadth of Knowledge about

Entrepreneurship, Innovation, and Leadership
Depth of

Knowledge

in a



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