Lecture 1 - entrepreneurial evolution.pdf

ELEC4445 – Entrepreneurial engineering
The entrepreneurial revolution
Entrepreneurial engineering
ELEC 4445 / GSOE 9445
Professor François Ladouceur
f.ladouceur@unsw.edu.au
Hilmer 647
!1

Table of content
Lecture 1 consists of a general introduction to the topic of
Entrepreneurial Engineering and (hopefully) sets the course’s
expectations
• Course goals and objectives
• Course overview, guest lectures and evaluation
• Lecturer’s background
• Assignment 0: Team registration
• Assignment 1: Interview with an entrepreneur
• The entrepreneurial revolution
!2

Course goals and objectives
At the end of the semester, you should:
• Understand what is involved in starting up a high-tech
business;
• Understand the challenges and rewards of
entrepreneurship;
• Understand the entrepreneurial process;
• Be able to screen business opportunities;
• Understand the various mechanisms for raising capital;
• Understand and value the roles of engineers in an
entrepreneurial context.
!3

Course overview
!4
Week Date Topics
1 23-Jul-2018 Course introduction
2 30-July-2018 The entrepreneurial process
3 6-Aug-2018 Opportunities recognising and screening
4 13-Aug-2018 The entrepreneur and the internet
5 20-Aug-2018 Venture team
6 27-Aug-2018 Obtaining venture and growth capital
7 3-Sep-2018 Quiz
8 10-Sep-2018 Disruption
9 17-Sep-2018 Entrepreneurial finance + Student Entrepreneurs
Mid-semester break
10 1-Oct-2018 Labour day
11 8-Oct-2018 Rapid growth and troubled times
12 15-Oct-2018 The destination
Study and exam period

Course evaluation
!5
Week Date Assignment/Exam Value
1 23-Jul-2018
2 30-July-2018
3 6-Aug-2018
4 13-Aug-2018
5 20-Aug-2018
6 27-Aug-2018 Assignment 1: Interview with an Entrepreneur 5
7 3-Sep-2018 Quiz (covers lectures and guest lectures) 25
8 10-Sep-2018
9 17-Sep-2018 Assignment 2: Headlines 10
school break
10 1-Oct-2018
11 8-Oct-2018
12 15-Oct-2018
13 22-Oct-2018 Assignment 3: Disruption 20
Final 40

Guest lectures
!6
Week Date Guest lecturer (indicative only)
1 25-Jul-2018 no tutorial or guest lecture
2 1-Aug-2018 Tutorial: Corporate Finance
3 8-Aug-2018 Baraja – Cibby Pulikkaseril (CTO, Founder)
4 15-Aug-2018 Intro to IP – Peter Lightbody (IP Counsel)
5 22-Aug-2018 Disruption – Steven Scheeler (ex-CEO, Facebook)
6 29-Aug-2018 Textbook Ventures – David Lu (Founder)
7 5-Sep-2018 Founders: a story – Zedelef’s founders
8 12-Sep-2018 Patience, grasshopper – Iain Maxwell (CEO, Investors)
9 19-Sep-2018 Marketing for early stage start-up – Paul Barrett (IP Group)
school break
10 3-Oct-2018 The Deal: valuation, structure and negotiation
11 10-Oct-2018 Blackbird Ventures – Rick Baker (Founder)
12 17-Oct-2018 UNSW Innovations + UniSeed – Graham Morton
13 24-Oct-2018
Study and exam period

Lecturer’s background
!7
silanna
François Ladouceur – B.Ing, M.Sc., Ph.D.
Professor
Engineering background (Physics, 1984)
30 years expertise in photonics R&D – over 100
publications, one book, 8 patents
2 years asVP software production andVP Strategic HR
atVPI Systems Inc.
2 years as Founder and Managing Director
of the Bandwidth Foundry Pty Ltd
Co-founder of Silanna Pty Ltd and Zedelef Pty Ltd
Zedelef

Academia vs private sector
The choices you make impact on the life you will live... in ways
that are impossible to predict.
!8

Why startups?
!9
What Is A Technology Start-Up?
We Must Be Crazy!
• Every stakeholder bets livelihood & reputation
• On people who’ve never worked together before
• To build a product never built before, using an unproven technology!
• This leap of faith requires passionate belief in the start-up
Ofidium: Lessons for Tech Entrepreneurs | Page 2
Start-up
Entrepreneur (CEO)
Technologists
Investors
cash
equity
products
cash
Customers
Suppliers
components cash, equity
Inventors
equity IP
Jonathan Lacey, Lessons for Tech Entrepreneurs, ACOFT-OECC
Entrepreneurship Seminar, 6 July 2014.

Free agents
Perhaps entrepreneurship can be view in the light of a global trend
of a growing number of economic “free agents”?
!10
Percent
of
“free
agents”
0
20
40
60
80
100
Year
1,750 1,800 1,850 1,900 1,950 2,000 2,050
80
10
1,980
Daniel H. Pink, “Free Agent Nation: The Future of Working for Yourself”, 2002. Also of
interest “A Brief History of the Corporation: 1600 to 2100” at https://goo.gl/HJeGeh

Questions
• Can you sell something you don’t own?
• Will the Web survive? (What’s that ‘app’ thing?)
• How can giants fall so quickly (e.g. Blackberry, Nokia)?
• What are the futures of transport? communications?
• How much would you pay for a company without products,
employees or customers?
• How will traditional news outlets morph?
• What’s the future of education? online? virtual?
!11

Entrepreneurs
!12
entrepreneur: derived from the French words
entre (between) and prendre (take) – is, in its
most general sense, a person who creates or
starts a new project, opportunity, or venture.
Wikipedia

Entrepreneurs
We discover that entrepreneurs […] earn more and have a very distinct
mixture of cognitive and non-cognitive traits than salaried workers and
other business owners.
[They] tend to be male, white, better-educated, and more likely to come
from high-earning, two-parent families. Furthermore, as teenagers,
[they] tend to have higher learning aptitude and self-esteem scores.
But, apparently it takes more to be a successful entrepreneur than
having these strong labor market skills: [they] also tend to engage in
more illicit activities as youths than other people who succeed as
salaried workers. It is the high-ability person who tends to “break-the-
rules” as a youth who is especially likely to become a successful
entrepreneur.
Ross Levine, Yona Rubinstein, “Smart and illicit: who becomes an entrepreneur and do
they earn more?”, National Bureau of economic research, Cambridge,
http://www.nber.org/papers/w19276
!13

Job creation
Data shows that firms in their first year of existence add an
average of 3 million jobs per year in the United States. The
following compares this fact to job creation by established firms
(age > 1 year).
!14
start-up existing firms
2,000 3,086,508 524,335
2,001 2,890,248 -2,397,512
2,002 3,223,919 -5,021,578
2,003 3,125,422 -1,067,903
2,004 3,116,725 -1,226,832
2,005 3,569,440 -1,088,343
Source: Kauffman Institute, The Importance of Startups in Job Creation and Job
Destruction, July 2010

The importance of engineers
The socio-economic value of engineers is difficult to assess
quantitatively. Typical salaries comparison can be an indication.
!15
Source: "What’s It Worth? The Economic Value of College Majors" from
Georgetown University’s Center on Education and the Workforce

Creative destruction
Creative destruction is the colourful expression
introduced by the economist Joseph Schumpeter
to describe his view of the process of industrial
transformation that accompanies radical
innovation.
In Schumpeter's vision of capitalism, innovative
entry by entrepreneurs was the force that
sustained long-term economic growth, even as it
destroyed the value of established companies that
enjoyed some degree of monopoly power – Wikipedia
!16
06/20/2005 04:15 PM
Joseph Schumpeter - Wikipedia, the free encyclopedia
Joseph Schumpeter
From Wikipedia, the free encyclopedia.
(Redirected from Schumpeter)
Joseph Alois Schumpeter (February 8, 1883 – January 8, 1950) was an
Austrian economist and a giant in the history of economic thought.
Contents
1 Early Life
2 Most important work
2.1 The History of Economic Analysis
2.2 Business cycles
2.3 Schumpeter and Keynesianism
2.4 Schumpeter, Capitalism and why it can't work
3 His Legacy
4 See also
5 External links
Early Life
Born in Trest (then part of Austria-Hungary, now in the Czech Republic), he began his career studying under the
great Austrian capital theorist Eugen von Böhm-Bawerk. He became a professor of anthropology at the University
of Czernowitz (now Ukraine, then a German-language university) in 1911, then Graz, where he remained until the
end of World War I. In 1919-1920, he served as the Austrian Minister of Finance; in 1920-1924, as President of
the private Biederman Bank; both with fairly little success. From 1925-1932, he held a chair at the University of
Bonn, Germany; having to leave central Europe because of the rise of the Nazis, he moved to Harvard, where he
taught from 1932 to 1950. He wasn't generally considered to be a very good classroom teacher because he tried to
pack too much into each lecture, but he acquired a school of loyal followers.
Although Schumpeter encouraged some young mathematical economists and was even the founding president of
the Econometric Society (1933), Schumpeter was not a mathematician but rather an economist and tried instead to
integrate sociological understanding into his economic theories. From current thought it has been argued that
Schumpeter's ideas on business cycles and economic development could not be captured in the mathematics of his
day - they need the language of non-linear dynamical systems to be partially formalized.
Most important work
The History of Economic Analysis
Schumpeter's vast erudition is apparent in his posthumous History of Economic Analysis, although some of his
judgments seem quite idiosyncratic and sometimes cavalier. For instance, Schumpeter thought that the greatest
18th century economist was Turgot, not Adam Smith, as many consider. Some of these judgments are partly
explained by his opinion that there is one general system of economic analysis, and Léon Walras found it. Other
economists are rated by how much of Walras' theory could be read into them. Schumpeter criticized John
Maynard Keynes and David Ricardo for the "Ricardian vice". According to Schumpeter, Ricardo and Keynes
reasoned in terms of abstract models, where they would freeze all but a few variables. Then they could argue that
Joseph Schumpeter
Joseph Schumpeter
Innovations impacting economic growth
New products
New means of transportation
New means of production
New means of distribution
New financial instruments
New methods of inventory management
New communication means (e.g. Internet)
New management techniques
New markets
New sources of labor and raw materials
New lobbies or legal frameworks
New advertising and marketing methods

Market disruption
The concept of Creative Destruction is closely linked to that of Market
disruption which is, ideally, the condition under which a start-up should
be positioned. Consider the following:
“The rise of Apple to become one of the world‘s most valuable firms is
credited to the elegant simplicity of the products envisioned by its co-
Founder and CEO, Steve Jobs. But the roots of Apple‘s
accomplishments lie deeper – like the pathfinders of the Industrial
Revolution, Apple visualises how technology can lead to new markets.
Rather than slog it out by battling low-cost computer makers cloning
IBM‘s PC, it created a new market segment with the Macintosh that it
has dominated for over 15 years. As growth in the computer industry
began to slow, Apple re-defined the music industry with its iPod. More
recently, it has generated explosive growth in smart-phones and
mobile applications with the iPhone, and initiated a totally new
product category with its iPad. Apple has not beaten its competitors
at the industry game – it has consistently changed the game to one
where competitors seemed irrelevant.” – Stephen Wunker, Capturing
New Markets, (McGraw Hill)
!17

Small company innovation
Entrepreneurs are responsible for the creation of numerous
markets and have contributed enormously to wealth creation in
the US.
!18
Airplane
Soft contact lenses
Biosynthetic insulin
Super-computer
Polaroid camera
Aerosol can
Artificial skin
Helicopter
Hydraulic break
Nuclear Magnetic Resonance
Bakelite
Piezo-electric devices
Heart valve
Safety razors
Pressure sensitive cellophane
Sonar fish monitoring
Air conditioning
Prefab housing
Quick frozen food
Cotton picker
Acoustic suspension speakers
Search engines
Social media
Web browsers
Source: New Venture Creation, J.A. Timmons

Example – Quantum dot displays
!19

Example – Photography/Imaging
!20

The internet changed everything
The internet changed everything for consumers and their shopping
habits.
!21
https://marketoonist.com/2013/01/showrooming.html
Showrooming:
where consumers
check out products in
a store, but then go
online to buy

From the way business operates
to how it is funded, the Internet
has fundamentally changed how
business are run and operated.
Business model are being
defined, audience captured,
fortune being made.
!22
http://stratechery.com/2014/dependent-digital-whales/

The internet has fostered
unforeseeable important market
The app economy: in 2014
iOS app developers
earned more than Hollywood
did from box office in the US.
!23
http://www.asymco.com/2015/01/22/bigger-than-hollywood/

Old and new value – 2018
!24
Revenue $b Employees ‘000 Market Cap. $b Profit margin
General Motor 144 150 55 –3.76%
Toyota 267 369 196 8.49%
Ford 160 202 42 4.85%
Tesla 12.5 10 53 –18.77%
Data: Yahoo! Finance, July 2018
finance.yahoo.com

Brand value
A brand is the identity of a
specific product, service, or
business.
A brand can take many forms,
including
• name
• sign
• symbol
• colour combination
• slogan.
The value of the brand (brand
equity, brand value) can be
measured using various (and
debatable) means.
!25
It's the real thing (1969)
Just do it (1988)
Think diﬀerent (1997)
It puts a rose in every
cheek (1954)
BrandZ Top 100 Most Valuable Global Brands 2011
# Brand Brand Value % Brand Value
2011 ($M) Change 2011
vs. 2010
# Brand
1 153,285 84%
2 111,498 -2%
3 100,849 17%
4 81,016 23%
5 78,243 2%
6
*
73,752 8%
7 69,916 N/A
8 67,522 18%
9 57,326 9%
10 50,318 12%
11 44,440 1%
12 43,647 -2%
13 42,828 N/A
14 37,628 37%
26
27
28
29
30
31
32
33
34
35
36
37
38
39
13 BrandZ Top 100 2011: INTRODUCTION

Brand value – Slogans
!26

Food for thoughts – Previous final exam
For some years, you have been involved in the technological development of carbon nanotubes. Your
research group at UNSW has been very productive over the last 3 years and you managed to
develop a production process that yields single wall carbon nanotubes of high purity and
reproducible mechanical characteristics. Of particular interest to you is that wires made out of such
nanotubes offer tensile strength1 120 times that of steel and 30 times that of kevlar.
Six months ago, you registered Singular Carbon Pty Ltd as a vehicle to commercialise your research.
With an ownership of 60%, you are the majority owner of this business with UNSW as the sole
minority stakeholder. You are hesitant in leaving your current ongoing position at UNSW and would
like to come to an arrangement where your involvement with the company, as the Chief Technology
Officer, would be on a part time basis. Furthermore, UNSW has requested a seat on your board of
directors and has nominated your head of School, Prof H: a specialist in the area of system and
control theory.
Three patents cover your production process. Due to historical reasons, the first one is owned by
UNSW and licensed to Singular Carbon while the other two are owned outright by Singular Carbon
with UNSW having a license to them for commercialisation outside Singular Carbon’s core business.
Is this reasonable? On what basis can this question be answered?
!27
Carbon nanotubes are a recently discovered allotrope of carbon. They
take the form of cylindrical carbon molecules and have novel
properties that make them potentially useful in a wide variety of
applications in nanotechnology, electronics, optics, and other fields of
materials science. – Carbon nanotubes, Wikipedia, 06/09/06

Lecture 1 - entrepreneurial evolution.pdf

Recommended

Recommended

More Related Content

Similar to Lecture 1 - entrepreneurial evolution.pdf

Similar to Lecture 1 - entrepreneurial evolution.pdf (20)

Recently uploaded

Recently uploaded (20)

Lecture 1 - entrepreneurial evolution.pdf