Center for entrepreneurial studies nasf 2-12-2010

Entrepreneurship in Silicon Valley and at Stanford December 2, 2010 Center for Entrepreneurial Studies

Agenda
Entrepreneurship in the U.S.
Silicon Valley – What Is So Special?
Entrepreneurship at Stanford and the Graduate School of Business (GSB)
Q&A

Entrepreneurship in the U.S.

New Ventures in the U.S.
Many U.S. businesses start small (1-5 people)
Three common misconceptions are:
The typical founder is a “serial entrepreneur” with a technical and business background
New ventures are started by young, highly-educated entrepreneurs
Entrepreneurs must raise hundreds of thousands or millions of dollars to achieve profitability
Surveys show otherwise…

Silicon Valley – What is So Special?

Where is Silicon Valley? Dec 2, 2010 Center for Entrepreneurial Studies

Silicon Valley Ecosystem Entrepreneurs
Sources of capital
Government
Private
Risk capital (angels and VCs)
Skilled human capital
Workforce
Service providers and advisors
Institutions that generate ideas and talent
Research universities
Labs
Think tanks
Incubators
Unique culture
Free markets
Stable legal system
Reliable infrastructure

The Secret Sauce
Unique Culture
Free flow of people and information
Supports experimentation
Innate desire to discover and disrupt
Continual innovation
Collaborative
Rewards risk taking and tolerates failure
Sharing of risk and reward
Meritocracy
Ethic of extreme work habits
Highly sophisticated support system (lawyers, developers, marketers, accountants, headhunters, designers, etc.) willing to share early risk
Free Markets
Encourage labor and capital mobility
Tax regime that does not penalize new venture creation
Support real competition
Provide many potential options for exits
Sufficient, but not overwhelming, government regulation
Government funds and turns over new ideas to private sector
Stable Legal System
Well defined corporate and securities law
Clear intellectual property rights
Low barriers and costs to start a new venture
Well-defined corporate governance
Reliable Infrastructure
Utilities
Transportation
High penetration of technology (internet, broadband)

New Ventures in Silicon Valley
Silicon Valley supports larger, more technically and scientifically-based new ventures or “start-ups”
These businesses are supported by well-developed funding models and networks (e.g., series financings by venture firms)
Founders typically bootstrap the business - goal is to develop a business plan, prototype, proof of concept and customers
Founders then shop the business to angel, VC, private equity or strategic investors
Financing is typically done in “Rounds” (A,B,C,D) that gradually dilute founders’ stakes
Founders do not try to keep control of company long term - they usually are not creating a family business

New Ventures in Silicon Valley
Many new ventures in Silicon Valley fail - some never return all of the capital invested
Despite this, professional financial investors are willing to invest, and entrepreneurs willing to try (sometimes repeatedly)
Professional investing models take a portfolio approach when investing. Their economics often rest on having a few big successes (e.g., Google) amid the many failures
Entrepreneurs who are funded bear substantial risk

Selected Silicon Valley Demographics

Professional Investors
Silicon Valley has a well-developed network of professional investors that support a vibrant start-up environment:
Angels – high net-worth individuals
“ Super Angels” – angels who invest their own money and have raised “micro funds” of additional capital (e.g. $10-30 million)
Angel Groups – associations of high net-worth individuals
Venture Capitalists – professional managers of institutional money
Corporate Venture Capital – company-sponsored venture arms
Private Equity – often venture capital, but includes management buyout firms

Other Investors
Silicon Valley also has other investors:
Friends and Family
Government Grants – SBIR and STTR grants
Bank Debt – Common with equipment purchases
Real Estate/Law Firms
Suppliers

Some Comparisons…

Venture Capital in Silicon Valley

Entrepreneurship at Stanford and the GSB

Venture Capital Firms Near Stanford

Stanford University Office of Technology Licensing
Disclosures
Licenses*
Royalty Income
Staff
Majority of disclosures are never licensed; many disclosures have one license; some disclosures have multiple licenses
Source: Stanford OTL
1970 28 3 $50,000 2 Cumulative 8000 2900 $1.3 B 2009 438 77 $65.1 M 33 Active ~3000 ~1000

How Entrepreneurship is Taught at the GSB
“ Foundational” Entrepreneurship Electives
Formation of New Ventures
Managing Growing Enterprises
Entrepreneurship and Venture Capital
Experiential Electives
Evaluating Entrepreneurial Opportunities (business plan class)
Design for Extreme Affordability
Specialized electives
Sales Management
Aligning Start-Ups with Their Markets
Social Entrepreneurship
Information Technology
Sports Business Management
Entrepreneurship from the Perspective of Women
Environmental Innovation, Sustainability and Entrepreneurship

GSB Entrepreneurship Offerings for non-MBA Students
Summer Institute for Entrepreneurship (http://www.gsb.stanford.edu/sie/)
~70 Masters, PhD, MD and Post-Docs (mostly from Stanford)
4 weeks full-time
Certificate program
Program in Innovation & Entrepreneurship (http://www.gsb.stanford.edu/prie/)
5 months part-time
½ Stanford graduate students (non-MBA) and ½ Silicon Valley technologists
Certificate program
Executive education course

The Role of the Center for Entrepreneurial Studies
Recruit practitioners to teach side-by-side with faculty to bring academic and “real world” perspectives
Develop timely and meaningful courses
Continual supply of up to date cases in entrepreneurship courses
20-30 cases/year written for our courses
Bring case protagonists into the classroom for most case studies
Foster a sub-community of alumni entrepreneurs
Bring investors and entrepreneurs on campus frequently for co-curricular activities
Provide ample opportunities for students and alumni to “test drive” their idea

Program Offerings from the CES
Students
Student/alumni banquet
Student advisory sessions
Opportunities to pitch
BBLs with companies and entrepreneurs
Annual Entrepreneurship Conference
Entrepreneurial Summer Program
E-treks (visits to early stage companies)
Women’s Mentoring Program
Personalized counseling
Brainstorming sessions and small group dinners
Structured and informal interaction with students “across the street”
Alumni
Founders’ Forums and Entrepreneurship Commitment Groups
Continuing education for alumni on entrepreneurship
Alumni entrepreneur reunions
Online community/email groups/discussion boards/Facebook page
Personalized counseling

Useful Resources

Useful Resources - Stanford
http://www.gsb.stanford.edu/ces - GSB Center for Entrepreneurial Studies
http://otl.stanford.edu – Office of Technology & Licensing
http://sen.stanford.edu – Stanford Entrepreneurship Network
http://stvp.stanford.edu – Stanford Technology Ventures Program
http://ree.stanford.edu – Roundtable on Entrepreneurship Education
http://www.gsb.stanford.edu/sie - Summer Institute for Entrepreneurship
http://www.gsb.stanford.edu/prie - Program in Innovation and Entrepreneurship
http://ecorner.stanford.edu – Entrepreneurial Thought Leaders Seminar

Useful Resources – Entrepreneurship Organizations (a select sample)
http://www.churchilllclub.com – Churchill Club
http://www.svase.org – Silicon Valley Association of Startup Entrepreneurs
http://www.sdforum.org – SDForum
http://www.astia.org – Astia (women focused)
http://www.fweande.org – Forum for Women Entrepreneurs & Executives
http://www.springboardenterprises.org – Springboard Enterprises (women focused)
http://www.women2.org – Women 2.0 (women focused)
http://www.tie.org - The Indus Entrepreneurs (focused on entrepreneurs with roots in the Indus Region)
http:///www.orrick.com – Orrick, Herrington & Sutcliffe (law firm) – see Entrepreneurs Toolkit: http://www.orrick.com/practices/corporate/emergingCompanies/startup/index.asp

Useful Resources – Incubators (a select sample)
http://www.plugandplaytechcenter.com – Plug and Play Tech Center
http://www.ycombinator.com – Y Combinator
http://www.founderinstitute.com – The Funded Founders’ Institute
http://www.techstars.com – TechStars (Boston, Boulder, Seattle)
http://ventures.io/ – i/o Ventures
http://fbfund.com – fbFund REV (Facebook, Founders Fund, Accel Partners)

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