John Callahan May 15 2008

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  • 1. Shelter from the storm: Starting up without venture capital John Callahan Technology Innovation Management Carleton University May 15, 2008
  • 2. Blood on the Tracks - Bob Dylan (1975) • An album “about heartache, anger and loneliness” Shelter from the Storm: I was burned out from exhaustion, buried in the hail, Poisoned in the bushes an' blown out on the trail john_callahan@carleton.ca May 15 2008 Slide 2
  • 3. Two points • Technical entrepreneurs have a limited repertoire of business models (with or without VC $$) • Doing without VC $$ is getting easier (and more necessary) john_callahan@carleton.ca May 15 2008 Slide 3
  • 4. ew N Technical entrepreneurs are romantics with a limited repertoire of business models • Standard approach – Develop a neat product – Let the product pick the customer • Consequences – Economic free fall during product development – Need for venture capital • New technical entrepreneurs are romantics – Success is more than just financial reward • Dominant role models have used the standard approach – Terry Matthews, Newbridge – Other role models • Rob Hall, Momentous.ca • Out of IBM service operations, HP purchase of EDS john_callahan@carleton.ca May 15 2008 Slide 4
  • 5. Coming out of a corporation the standard approach makes real sense – BUT! • Executives provide resources • Development team executes • No revenues during product development • The standard approach is what you are used to – You do what you really know about BUT! • Choose a business model, don’t assume one – Have a startup team with diverse business experience – Be patient for growth and impatient for profits john_callahan@carleton.ca May 15 2008 Slide 5
  • 6. Entrust and Versign – one business, two business models john_callahan@carleton.ca May 15 2008 Slide 6
  • 7. Doing without VC $$ – Stay above the grey zone cumulative cash flow do it yourself time - $1M grey zone - $5M VC territory john_callahan@carleton.ca May 15 2008 Slide 7
  • 8. Staying above the grey zone is getting easier (and more necessary) • Software as a service (SaaS) • Cloud computing • Abundant electronic manufacturing • Open source – Cheaper to bring OS product to market – Cheaper to use internally • Internet contacts with customers – Blog style marketing – Direct feedback john_callahan@carleton.ca May 15 2008 Slide 8
  • 9. Just delaying need for VC $$ is useful • A startup needs to find a fit between the right customer and the right offer • A startup seldom knows what the fit is right away • Two stages in a startup – Before the fit – learning, adjustment – After the fit – planning, execution • Many advantages to getting financed after the fit – VCs want extraordinary returns not learning – Easier to align VC and founder incentives after the fit – Company culture gets set while low on $$ – Remember that the marginal resource has the power john_callahan@carleton.ca May 15 2008 Slide 9