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Introduction to Entrepreneurial Management - Entrepreneurship 101 (2013/2014)

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Recent research from Harvard Business School’s Shikhar Ghosh shows that 75% of all startup enterprises fail. What causes these failures and what can entrepreneurs do to mitigate the risk? Enter …

Recent research from Harvard Business School’s Shikhar Ghosh shows that 75% of all startup enterprises fail. What causes these failures and what can entrepreneurs do to mitigate the risk? Enter “Entrepreneurial Management.” In Session 4 of Entrepreneurship 101, we discuss the research from Startup Genome’s report, define the 5-Dimensions of success and introduce entrepreneurial management practices that startups can use to reduce the risk of failure. Startups are not just small versions of big companies – they need special tools and methodology to manage uncertainty and find their place in the market. We aim to equip attendees with the tools to mitigate risk and enjoy the journey of building a great company.

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  • 1. Entrepreneurial Management! 5 Dimensions of Success! ! ! ! ! Nathan Monk! Sr. Strategist,! Info. Technology (ICE) Practice, MaRS! ! @Cowboytweets! ! ! ! !
  • 2. Pg 3
  • 3. A set of principles and frameworks that helps startups identify a sustainable business model with the least amount of waste possible. - Jon Worren, MaRS Entrepreneurship Programs
  • 4. ‘A legendary hero is usually the founder of something – the founder of a new age, the founder of a new religion, the founder of a new city, the founder of a new way of life. In order to found something new, one has to leave the old and go on a quest of the seed idea, germinal idea that will have the potential of bringing forth that new thing.’ ! – Joseph Campbell, The Hero with a Thousand Faces ! ! ! !! ! !-! Pg 5!
  • 5. You do not need to just solve a ‘pain’ or ‘problem’ to be an entrepreneur.! ! ! ! !! ! Pg 6!
  • 6. Why?! ! ! !! ! !-! Pg 7!
  • 7. Ask yourself. What can I do well that I would love to do for an extended period of time? ! ! ! ! ! ! ! ! !! ! Pg 8!
  • 8. Where to start ‘digging’. 1.  Knowledge: what was the focus of your education or career?! 2.  Capability: what you most proficient at?! 3.  Connections: who do you know that has expertise in different industries? ! 4.  Financial assets: do you have access to significant financial capital, or will you be relying on a meager savings account to start out! 5.  Name recognition: what are you or your partners well-known for?! 6.  In previous jobs you’ve held, what inefficiencies or pain points existed?! 7.  Passion for a particular market…! 8.  Commitment: do you have the time and effort to devote? ! ! ! !! ! ! Read: Crush It! By Gary Vay-ner-chuck Pg 9!
  • 9. ‘Often you will find an idea or technology that improves something for you personally, then realize that idea or technology has the potential to help many others.’ ! - Bill Aulet, Sr. Lecturer, MIT Entrepreneurship - Sloan School of Management ! ! Pg 10!
  • 10. It’s not a solo sport. Your choice of co-founders is extremely important. The research at MIT suggest that businesses with multiple founders are more successful than those founded by an individual.! ! ! ! ! ! ! ! ! Read: ‘ The Founder’s Dilemmas’ – Noam Wasserman ! Pg 11!
  • 11. What is ‘Entrepreneurial Management’?! ! ! !! ! ! Pg 12!
  • 12. Ready to jump?! ! ! !! ! ! Pg 13!
  • 13. ‘75% of all venture-backed start-ups fail.’ ! – Shikhar Gosh, Harvard Business School ! ! !! ! ! Pg 14!
  • 14. Why?! ! ! !! ! !! Pg 15!
  • 15. Here’s what we know. ! 1.  Startups with helpful mentors, track performance metrics effectively & learn from thought leaders raise 7x more money & have 3.5x better user growth.! 2.  Pivoting startups raise 2.5x more money, 3.6x better user growth, & are 52% less likely to scale prematurely. Startups that haven’t raised money overestimate their market size by 100%. ! 3.  Premature scaling is common reason startups perform worse: scale team, customer acquisition strategies, or over build the product.! 4.  Solo founders take 3.6x longer to reach scale stage.! 5.  Business-heavy founding teams are 3.3x more likely to successfully scale with sales-driven startups! 6.  Tech-heavy founding teams are 3.3x more likely to scale with a product-centric startup! 7.  Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams! 8.  Founders that don’t work full-time have 4x less user growth and end up raising 24x less money from investors! 9.  Most successful founders are driven by impact rather than experience or money.! 10.  Startups need 2-3 times longer to validate their market than most founders expect. The underestimation creates the pressure to scale prematurely. B2B and B2C isn’t a meaningful segmentation because of the way the internet has changed customer dynamics. ! Source: Startup Genome Report: 3200+ high growth startups, co-authored by researchers at UC Berkeley & Stanford, supported by Steve Blank, the Sandbox Network & 10 global accelerators. Pg 16
  • 16. The art of ‘high-growth’ entrepreneurship is to master the chaos of getting each of these 5 dimensions to move in time and concert with one another. ! ! ! ! !!- Startup Genome Report ! Pg 17!
  • 17. 5-Dimensions Failure Causation! Customer   Product   Team   No  segmenta+on   Acquisi+on  b4  PMF   Missing  PMF     Vanity  metrics  trap   Influencer  focus   Wrong  archetype   Invalidated  PSF   Inves+ng  scale  before  PMF   3.4x  more  lines  of  code   Execute  on  irrelevant   Poor  MVP  /  conversion   Outsourced  dev.     Hiring  too  much  too  early   Adop+ng  mul+-­‐levels   Not  hiring  doers   No  accountability   Lack  of  Customer  Dvp.   Focus  on  features   No  ‘search  &  learn’     Business  Model   Financials     Profit  max.  too  early   Over  planning   Not  adap+ng  to  market   Costs  >  revenue   Pivot  with  no  valida+on   No  learning  capture     Undisciplined   Raising  too  much   No  innova+on  accoun+ng   Picking  wrong  investors   Deploying  capital  wrong   No  KPI  or  understanding   Misnomer Attributes •  •  •  •  •  •  •  •  •  Emphasis on market size Product release cycles Education levels Gender Cofounder history Entrepreneurial experience Age Number of products Type of tools to track metrics Source: Startup Genome Report: 3200+ high growth startups, co-authored by researchers at UC Berkeley & Stanford, supported by Steve Blank, the Sandbox Network & 10 global accelerators. Pg 18
  • 18. What can we do about this?! ! ! !! ! ! Pg 19!
  • 19. 6- Stage Life Cycle of a Startup! STAGE ‘Marmer’ DISCOVERY   • Learning   • Valley  of   death   VALIDATION   • PMF   • PSF   EFFICIENCY   SCALE   CONSERVATI ON   SUSTAIN   Valley of Death i: $100k / month threshold / scaling, BMC ops. 60% Search for problem space & fit (PSF-PMF) STARTUP ESTG   PMF   PSF   Extreme uncertainty BEHAVIOURAL & ACTUAL DIMENSIONS CUSTOMER   Validation PRODUCT   LSTG   BMC   Search 4 repeatable & scalable business model TEAM   BUSINESS   MODEL   FINANCIALS   MaRS ICE Practice Startup Methodologies (‘insurance policy)’ High-risk of pre-mature scaling along all dimensions Pg 20
  • 20. 1,000 Foot View Startup  Phase     Entrepreneurial   Management   Search   Execu+on   Business   Model?     Tradi+onal   Management     Growth  Phase  
  • 21. ‘Scaling successfully is what separates eventual industry leaders from longforgotten startups in the deadpool.’ 
 – Michael A. Jackson ! Pg 22
  • 22. Whose theories do we follow? ! Blank! Osterwalder! Ries! Mauyra ! Christensen! Moore! Aulet! Ellis! Ellis! Pg 23
  • 23. Compe++on   Social   Technological   Poli+cal   Economic  
  • 24. What is an MVP? (Minimum Viable Product) •  A tactic for cutting back on wasted engineering hours! •  A strategy to get the product into early evangelists hands as soon as possible! •  A tool for generating maximum customer learning in the shortest possible time.! •  Answers the question: “What is the smallest or least ! ! ! ! ! !! ! Pg 25! ! !!
  • 25. ! Part 1: BUSINESS MODEL GENERATION ! ! ! ! !! Pg 26!
  • 26. ! ! ! !! ! Pg 27!
  • 27. Environmental Factors! !! ! ! !! ! Pg 28!
  • 28. Part 2: CUSTOMER DEVELOPMENT! Pg 29!
  • 29. What we used to think…
  • 30. Big idea… ! We no longer compete on a product or service, but rather, a competitive, repeatable and scalable business model.! ! ! ! !! ! Pg 32!
  • 31. Listening to customers.! 1. •  •  Translate business model hypotheses to test with customers Develop an MVP of the solution to test with customers 2. •  •  •  Continuous testing of hypothesis. Careful analysis of customer interactions Pivot or proceed 3. •  •  Product is refined enough to sell. Build demand through marketing & sales. 4. •  Business transitions for startup mode to departments operating in functions Pg 33!
  • 32. THERE ARE NO FACTS INSIDE THE BUILDING, SO GET THE HECK OUTSIDE.
  • 33. Part 3: LEAN ! Pg 35!
  • 34. ! ‘Lean’ methodology favours experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional up-front development. ! ! ! ! !! ! Pg 36!
  • 35. This is lean.! ! ! ! !! ! Pg 37!
  • 36. Why is this important? ! ! ! ! !! ! Pg 38!
  • 37. Pg 39!
  • 38. Pg 40!
  • 39. CUSTOMER SEGMENTATION! Pg 41!
  • 40. The single necessary and sufficient condition for a business is a paying customer. ! Pg 42!
  • 41. A target customer is a group of potential customers who share many characteristics and who would all have similar reasons to buy a particular product. ! Pg 43!
  • 42. ! ‘By choosing a single market to excel in, your startup can more easily establish a strong market position, and hopefully a state of positive cash flow, before it runs our of resources.’ ! ! ! ! !! ! Pg 44!
  • 43. Pg 45!
  • 44. Milkshake Pg 46!
  • 45. But wait….don’t start building, scaling, hiring etc… ! Pg 47!
  • 46. 7 key questions I’ll leave you with. ! ! ! ! !! ! Pg 48!
  • 47. 7 key questions ! ! ! ! !! ! Pg 49!
  • 48. 7 key questions ! ! ! ! !! ! Pg 50!
  • 49. 7 key questions ! ! ! ! !! ! Pg 51!
  • 50. 7 key questions ! ! ! ! !! ! Pg 52!
  • 51. 7 key questions ! ! ! ! !! ! Pg 53!
  • 52. 7 key questions ! ! ! ! !! ! Pg 54!
  • 53. 7 key questions ! ! ! ! !! ! Pg 55!
  • 54. Summary •  Be driven by impact •  Segment your customers •  It’s not a solo sport •  Test, test, test •  Understand failure •  Listen to customers •  Search and learn •  Lean dev is key •  Remember the 7 key questions •  Build a business model •  Have fun •  Get out of the building
  • 55. Summary •  Entrepreneurial Management offers a set of tools and processes that makes the process of starting up more manageable: •  The philosophy brings clarity to the skillset required to succeed: –  Less persistence – more perception –  Stack the odds in your favour – rather than trying to win against all odds –  Commit to the process – not the idea
  • 56. It’s not the beginning of the end, but it is perhaps the end of the beginning. ! ! ! !! ! !- Steve Blank, Startup Owner’s Manual ! Pg 58!
  • 57. Thank you. ! ! ! ! Nathan Monk! nmonk@marsdd.com! @Cowboytweets!
  • 58. Appendix ! ! ! ! !! ! Pg 60!
  • 59. Lean Traditional! Pg 61!