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Key Elements of a Successful Startup
Marina Hatsopoulos emphasizes the key elements for startup success, including importance of entrepreneurship, market understanding, competition, and team dynamics. She shares her experiences, insights into financing options, and highlights the significance of intellectual property and mentorship for startups, particularly in the context of Greece. The document also provides guidance on creating a strong business foundation, networking, and achieving growth.
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Key Elements of a Successful Startup
- 1. Key Elements ofa Successful Startup Marina Hatsopoulos Entrepreneur Director at Cynosure and Levitronix Technologies Advisor, MIT Enterprise Forum Greece, The EGG accelerator, OK!Thess
- 2. Agenda My Story Entrepreneurship Intellectual Property Market Competition Team Culture Board of Directors Financing
- 3. My Story Background ChaseManhattan Bank - Wall Street - finance Thermo Electron - technology conglomerate MIT – Masters, Mechanical Engineering Pivot: search for job>turnaround>technology MIT technology licensing office > Inventors Z Corporation (early 3D printing leader) - Founder, CEO Cynosure ($340M public company) & Levitronix Technologies – Director Director on other boards Investor in startups based in US and Greece, as well as startup funds
- 4. My Story Z Corporation MIT Technology Early leader in 3D printing No venture capital (hardware) Focus on Profits and Cash Flow Fastest-growing business in New England in 2001 Raised $11M from angels and strategic corporates $9M in bank when we sold $30M in revenues 125 employees
- 5. My Story My involvementwith Greece/Cyprus Invited to MIT Enterprise Forum Greece Inspired by Israel: “Startup Nation” Why can’t we do what they’ve done? Israeli-founded businesses generate $9B in Massachusetts Israeli model: CEO & Sales in Boston, Development in Israel
- 6. Entrepreneurship What’s the point? Jobs Upward social mobility & economic opportunity Independence In today’s environment, startups require very little capital to get off the ground & go global
- 7. MIT Culture of Entrepreneurship 30K Active Companies from MIT Alumni 5 million jobs, $2 Trillion Annual Revenues 10th Economy in the World 100K Competition has created >60 companies valued at $10.5B
- 8. MIT Technology Commercialization Model Sandbox grants $1K for students to explore their startup idea Grants of $25K-$250K at Deshpande Center, to get research out of the lab & connect to professional investors $100K Startup Competition Venture Mentoring Service Technology Licensing Office patents inventions & licenses it Patent Fees paid by startup Royalty (about 5%) on Revenues paid by startup Equity (about 5%) of startup granted to MIT
- 9. MIT Enterprise ForumGreece (mitefgreece.org) MITEF is a global organization Focus on early-stage technology entrepreneurship Turn ideas in to world-changing companies Events for inspiration and networking Diaspora Group to connect Greeks to thriving tech ecosystem in Boston StartSmart Conference-Sat. Nov. 5 in Athens (Attend!) Startup Competition and Accelerator (Enter now!) International partners, mentors, judges Global visibility through MIT Technology Review One-week Bootcamp at MIT Sponsorships available
- 10. Idea Cocktail NapkinSpreadsheet # Units Revenues Time and investment to get to revenues and profitability Development, Manufacturing, Sales & Marketing higher than you expect Pricing is critical! We would have gone out of business Talk with 20 prospective customers Does anyone care? How much would they pay for this? How big is their pain today? Who would be better positioned to do this? A great idea is necessary but not sufficient You have much more to lose by not talking than you have to gain
- 11. Intellectual Property Patents Difficult to invent, Easy to copy Trade Secrets Easy to invent, Difficult to copy Know-how Processes, Ingredients, etc. Use all for competitive advantage
- 12. Market Market isbig enough Try to sell product, before it even exists Early prospects help guide development Customers may fund research and development Don’t worry about people stealing your ideas! Get prepayments from customers-20% up front Clear Value Proposition My Company Product A Competitor #1 Product X Competitor #2 Product Y Price $45K $30K $55K Speed Fast Slow Medium Resolution 2 mm 3 mm 5 mm Quality High Medium Low
- 13. Competition Competition isgood: they pay to educate the market Easier to have a benchmark to sell against than nothing 100-pound Gorilla competition (or potential competition) is bad Who is perfectly positioned in terms of customers or technology Why haven’t they done it already? What will keep them from entering the market? Will they have an unfair advantage or will you? The important thing is product differentiation over the competition What is the one thing that makes your product significantly better than anything else? What do you have as a company that makes you uniquely positioned to do this?
- 14. Team Most importantfactor for investors Companies with Salesperson on Founding Team have 3x chance of success Capitalize on your stars, even if they have holes Set up founders equity-consider stock options Leverage network but don’t hire someone you can’t fire Hiring philosophy Some employees are OK, not great: opportunity cost We all make mistakes. Deal with them & move on Articulate your direction and stay focused
- 15. Culture Focus; can’tdo everything All that matters is results, not face time or experience Time to market is critical and urgent; this is not time for a cafedaki 80/20 Rule: Perfection is your enemy Make concrete milestones-and deliver!
- 16. Monthly Dashboard AverageSale Price Revenues Gross Margin Net Income Cash Service Calls Repeat Sales
- 17. Board of Directors Selected passionate board members who invested in us through several rounds Find a mentor with relevant success who is willing to tell you what you don’t want to hear Find investors who understand your business, believe in it and have deep pockets to invest Find missing areas of expertise and fill those roles Start with a small board-hard to remove them Use your board; don’t just report to them. LISTEN! Half the answer is the question.
- 18. Financing Seed Capital andSeries A Angels Venture Capital Equity Debt Strategic investors Equity R&D Contracts Customer Deposits
- 19. Financing Angels Individuals orgroups which meet monthly to hear pitches & share diligence efforts Small investments: $25K to $500K Less control provisions Seed investments made as convertible debt Converts to equity in Series A at a 20% discount Postpones valuation until there’s more information Advantage: Better terms: control, valuation Disadvantage: May not have capital or appetite to invest through multiple rounds
- 20. Financing Venture Capital Lotsof capital to put to work; same work to invest a little or a lot, so they invest a lot: $1M-$25M VC’s expect dead, living dead, but they’re in it for the very few “unicorns” with 30x-100x returns Board seat Control Have access to larger pool of capital, so can invest through multiple rounds Advantage: Can carry credibility to be funded by a top VC Disadvantage: Pressure to grow fast, which can be good or risky Give up control
- 21. Financing Strategic Investors Corporateinvestors with interest in your success: Customers Distributors Suppliers Advantages: Give up very little control Access to large partner who can help grow business Validates business for outside investors Credibility Disadvantages : May limit ability to form partnerships with their competitors May reduce chance of selling business to their competitors May give them information you’d rather keep secret (eg, gross margins)
- 22. Financing Pitching to Investors Website & Pitch should be clear and simple: WHAT DO YOU SELL? Practice elevator pitch Forget about the quick flip Forget about the billion-dollar sale in a related area Find investors who have invested (with success) in related businesses
- 23. Financing Considerations for theEntrepreneur Capital vs. Control Low capital investment means higher ownership & control Lower growth can be lower risk or higher risk, depending on the business and who the competition is Growth vs. Profitability Some businesses need to reach critical mass before anyone else, in which case growth is paramount Other businesses take time to educate the market, so there’s no way to accelerate it in a way that can generate a return to the investors Some businesses require lots of capital. If you’ll need over $3M, might as well go to VC’s early. Otherwise, could retain more control and higher ownership Most businesses are not unicorns. You can make good money as an entrepreneur without building a unicorn, as long as you don’t raise too much money
- 24. Financing Acquisition Don’t messup a business to “look pretty” Don’t plan on acquisition-many issues out of your control Don’t sell into a buyer’s market Don’t put your startup in a situation where you have to sell Build a strong business and acquirors will come If they don’t, you won’t care
- 25. Financing Moments of Crisis Competition came out with similar product before our product launch Zero sales month We tripled our burn rate just before sales plummeted Failure is information. Use it to move forward.
- 26. Doing Business withAmericans Respond immediately—a few hours, or at the latest within the day Plan ahead-hard to get meetings at the last minute Follow through on anything you say you’re going to do Network using Linkedin, not Facebook & use a professional photo Mr. or Ms. (not Mrs.) for introductions, but shift to first name immediately
- 27. Entrepreneurship in Cyprus Political, economic and legislative stability, free of bureaucracy, and business-friendly Must go global early Bootstrap to early profitability Access to strong, well-educated technical talent Think bigger: commercialize university research What are problems you see that could be solved by innovation?
- 28. Parting Words Controllingyour own destiny is enriching and fulfilling Persevere. It’s hard. No “life balance.” This isn’t a Disney movie. Celebrate milestones and have fun!
- 29. Thank you Marina Hatsopoulos Angelinvestor and Director at Cynosure and Levitronix Technologies Marina Hatsopoulos Marina Hatsopoulos