Shelter from the storm:
Starting up without venture capital

John Callahan


Technology Innovation Management
Carleton Uni...
Blood on the Tracks - Bob Dylan (1975)

 • An album “about heartache, anger and loneliness”

 Shelter from the Storm:
 I w...
Two points

 • Technical entrepreneurs have a limited
   repertoire of business models (with or without
   VC $$)
 • Doing...
ew
N Technical  entrepreneurs are romantics
with a limited repertoire of business models
   • Standard approach
         –...
Coming out of a corporation the standard
approach makes real sense – BUT!
  •    Executives provide resources
  •    Devel...
Entrust and Versign –
one business, two business models




  john_callahan@carleton.ca   May 15 2008   Slide 6
Doing without VC $$ –
Stay above the grey zone
   cumulative cash flow




                                    do it
     ...
Staying above the grey zone is getting
easier (and more necessary)
  •    Software as a service (SaaS)
  •    Cloud comput...
Just delaying need for VC $$ is useful

  • A startup needs to find a fit between the right
    customer and the right off...
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John Callahan May 15 2008

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John Callahan May 15 2008

  1. 1. Shelter from the storm: Starting up without venture capital John Callahan Technology Innovation Management Carleton University May 15, 2008
  2. 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. 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. 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. 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. 6. Entrust and Versign – one business, two business models john_callahan@carleton.ca May 15 2008 Slide 6
  7. 7. Doing without VC $$ – Stay above the grey zone cumulative cash flow do it yourself time - $1M grey zone - $5M VC territory john_callahan@carleton.ca May 15 2008 Slide 7
  8. 8. Staying above the grey zone is getting easier (and more necessary) • Software as a service (SaaS) • Cloud computing • Abundant electronic manufacturing • Open source – Cheaper to bring OS product to market – Cheaper to use internally • Internet contacts with customers – Blog style marketing – Direct feedback john_callahan@carleton.ca May 15 2008 Slide 8
  9. 9. Just delaying need for VC $$ 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
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