The Good NET Guide

Posts Tagged ‘entrepreneur’

Alex van Someren is a “Dealmaker” with the Global Entrepreneur Programme at the department of UK Trade and Investment. A serial entrepreneur specialising in IT software and hardware product development businesses, he’s had two exits through IPOs and is now Entrepreneur in Residence at Judge Business School. Below, he answers our recent guest post which attacked the way UK business regulation authorities treat small but fast-moving startup businesses in the same way as regular, slow-moving ones.

Azeem Azhar’s article about UK small business bureaucracy doesn’t tally with my own experience running businesses in the UK. In fact, from what other entrepreneurs are telling me it’s a lot easier here than in most developed countries.

Silicon Valley investors often have a picture in their heads of the type of person who is worthy of funding: young, brash, stubborn, and arrogant. They believe that successful entrepreneurs come from entrepreneurial families and that they start their entrepreneurial journey by selling lemonade while in grade school. Angel investor and entrepreneur, Jason Calacanis said as much in his recent talk to Penn State students. And after meeting Wharton students, VC Fred Wilson expressed shock when a professor told him that you could teach people to be entrepreneurs. Wilson wrote, “I’ve been working with entrepreneurs for almost 25 years now and it is ingrained in my mind that someone is either born an entrepreneur or is not.”

Jason, Fred, and Silicon Valley VCs, I’ve got news for you: you’ve got it all wrong. Entrepreneurs aren’t born, they’re made. And they aren’t anything like you think they are. My team surveyed 549 successful entrepreneurs. We found that the majority didn’t have entrepreneurial parents. They didn’t even have entrepreneurial aspirations while going to school. They simply got tired of working for others, had a great idea they wanted to commercialize, or woke up one day with an urgent desire to build wealth before they retired. So they took the big leap.

We found that 52% of the successful entrepreneurs were the first in their immediate families to start a business — just like Bill Gates, Jeff Bezos, Larry Page, Sergei Brin, and Russell Simons (Def Jam founder). Their parents were academics, lawyers, factory workers, priests, bureaucrats, etc. About 39% had an entrepreneurial father, and 7% had an entrepreneurial mother. (Some had both.)

Only a quarter caught the entrepreneurial bug when in college. Half didn’t even think about entrepreneurship, and they had little interest in it when in school.

There was no significant difference between the success factors or hurdles faced by entrepreneurs who were extremely interested in entrepreneurship in school (and who likely set up the lemonade stands) and the ones who lacked interest. But entrepreneurs with extreme interest started more companies and did it sooner. Of the 24.5% who indicated that they were “extremely interested” in becoming entrepreneurs during college, 47.1% went on to start more than two companies (as compared with 32.9% of the overall sample). Sixty-nine percent started their companies within 10 years of working for someone else (as compared to 46.8% of the rest of the sample population).

What did affect their successes?  Education — but not the college they graduate from. In a different study of the 652 CEOs and CTOs of 502 tech companies, we researched the correlation between education and the sales and headcount of companies founded. We learned that the there was a significant difference between companies started by founders with just high-school diplomas and the rest. Education provided a huge advantage. But there wasn’t a big difference between firms founded by Ivy-league graduates and the graduates of other universities.

The education and training of entrepreneurs is something that the Kauffman Foundation has been researching extensively. Over the last six years, it has invested around $50 million on academic research to understand what makes entrepreneurs tick and what policies are most conducive to entrepreneurship and to construct data bases to permit analyses of these subjects. (Kauffman has also funded some of my research at Duke, UC-Berkeley, and Harvard.) Its VP of Research, Bob Litan, says that Kauffman has learnt conclusively that entrepreneurship can be taught. The key is to provide education at “teachable moments” — when the entrepreneur is thinking about starting a venture or ready to scale it. What entrepreneurs need isn’t the type of abstract course they teach in business schools, but practical, relevant knowledge.  That’s why Kauffman created a program called Fast Trac, which has trained 300,000 entrepreneurs so far.

One of the findings of Kauffman research is that of the appx. 600,000 businesses that are started every year, less than a fraction of 1% become high-growth “scale” businesses. These new firms, especially the “scale” firms, have added all of the net incremental jobs to U.S. economy since 1980 (about 40 million), and probably account for about 1/3 of GDP growth since then. So the key to boosting economic growth is to increase the number of successful high-growth startups.  After all, the growth rate of our economy is nothing more than the aggregation of the growth of our firms.

That is why Kauffman (which has a $2 billion endowment) is investing heavily in an ambitious new program called Kauffman Labs.  This aims to dramatically increase the ability of small businesses to become big businesses. The Labs program is built around a novel idea: that highly motivated individuals with “scalable ideas” can be recruited to be entrepreneurs and to be made successful, by surrounding them with a network of other experienced entrepreneurs; sources of money; and mentors. The goal is to educate entrepreneurs and surround them with a powerful network. This is like a Y Combinator on steroids.

Anecdotal evidence also shows that there are many more factors at play than that of genes. Note this BusinessWeek article about waves of spinoffs from Google. I doubt that all of these Google employees who are starting successful businesses were born with entrepreneurial genes. VC and former entrepreneur Brad Feld also blogged about how many of his frat buddies at MIT had become successful entrepreneurs. Were all of these people born to be entrepreneurs as well? I don’t think so. It is probably education, exposure to entrepreneurship, and networks that led these people to pursue the entrepreneurial path — which means that Kauffman Foundation may have hit on the right idea with Kauffman Labs.

The reason this topic is really important is that, as Wilson writes, “Venture Capital is a lot about pattern recognition”. The reality is that VCs like him make quick judgments about people based on the stereotypes in their minds. So, like the women that I wrote about in my previous posts, we may be disadvantaging another important segment of our population – a segment that is older, more humble, more sensible, and more realistic than the population that is getting all the attention (and the money).

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.

About three weeks ago, eBay’s electronic payments daughter PayPal suddenly started blocking personal payments going in or coming out of accounts from Indian customers, resulting in a flood of online complaints from the latter that ranged from accusations of racism to sheer amateurism.

Last week, rumors that PayPal was actually forced into halting personal payments by Reserve Bank Of India (RBI) because they did not comply with all relevant regulatory requirements, were confirmed. Last night, PayPal posted a status update on its corporate blog, saying that they anticipate to resume part of its service, namely bank withdrawal abilities, as of Wednesday, March 3rd.

From the blog post:

We have been diligently working with the RBI and our business partners to resume Indian bank withdrawals for the thousands of Indian businesses who use PayPal to sell their goods or services in the global marketplace.

I’m pleased to tell you that the RBI has now allowed us to resume bank withdrawals for settlements for exports of goods and services. We are currently making changes to comply with Indian regulations for settlements for exports of goods and services, and we anticipate that as of Wednesday, March 3rd, we will be able to resume the bank withdrawal service.

As part of the changes, Indian customers will be required to fill out a new field dubbed ‘Export Code’ when they request a withdrawal (here’s how to get one). This information is apparently required under current Indian laws in order to identify the nature of cross-border merchant transactions. PayPal will share specific instructions on how users can move money into bank accounts on Monday, March 1st.

But Reserve Bank Of India has informed the eBay company that it requires specific approvals to allow personal inward remittances to India, which it currently does not have. In other words: PayPal is still forced by law to effectively suspend personal payments going into the accounts of its Indian customers for the foreseeable future, unless they are exporters.

We’ll provide an update when that changes.

In my last post, I discussed how the gap between the web and enterprise-computing worlds has narrowed. Some of the Valley’s developers are now building web-based systems that make old-world transaction processing seem like child’s play. After all, Twitter processes more transactions per day (in the form of messages) than the systems of many large corporations process in a month. Applications that would take years to design and develop can now be built in weeks.

I called on Silicon Valley entrepreneurs to rescue the California government—to help rebuild its legacy systems. I also went out on a limb and “bet” that an unemployment check-processing system that California State had budgeted $50 million to upgrade could be rebuilt from scratch for a tenth of the cost, in a fraction of the time.

To my surprise, Joanne Moretti, Senior Vice President of Product Marketing at software giant Computer Associates, posted comments saying I was naïve and clueless. Her demand: “don’t kick something you know absolutely squat about”. It was clear that my post had angered her. But what I think was behind these comments was the need for her to defend her aging product stream. She claimed that CICS/IMS (tele-processing monitors developed in the ’60s), “are two of the fastest transaction engines in the world, and could very well be valuable pieces of a well designed well integrated environment”. (Joanne, no hard feelings, but I don’t think that you’re going to sell any CICS/IMS systems in the Valley. And please ask your CEO, John Swainson, about my background. During his days at IBM, he licensed my technology to provide the backbone for IBM’s large-scale client–server systems-development tools).

But on the flip side, two entrepreneurs agreed to step up to the challenge. Jeff Whitehead, CEO of Real Time Matrix (who I had mentioned in my post), wrote:

We accept the challenge.

Real Time Matrix will make a $5 million bid to produce a 100% non-proprietary system to process California’s unemployment checks upon receipt of detailed specifications, and we’ll deliver the solution in less than a year.

I invite the State to reach out so we can help to free you from the strangle hold that companies like CA [Computer Associates] have been exerting. We’re here, able and willing to help.

Disclosure: Jeff worked at both of my startups. He has a reputation for delivering more than he promises. So I take his words very seriously.

Another entrepreneur who agreed to take the challenge is Scott Broomfield, CEO of Veeple, which provides cloud-based online video support. Here is part of what he wrote:

I will also rise to the challenge (along with Jeff) of delivering a solution to process CA’s unemployment checks, subject to seeing the detailed specification for $5M within one year of the sign-off of the system spec or FRD.

Note the qualifier in my acceptance of the challenge; that we could do it within 1 year of the time the FRD (Functional Requirements Doc) is signed-off. We would build it using COTS tools and databases and deliver the solution securely in the ‘Cloud.’ As some have noted in this amazing thread, often the issue with time and cost has more to do with government processes and regulations than with the technology. That said, as long as we have access to the State’s databases and as long as we can read AND write to those databases, we will do it for $5 million.

Scott is rightfully nervous about government bureaucracy. But he and his CTO, Craig Sproule, too have a solid track record of building large-scale enterprise systems. I believe they too can deliver what they promise.

To be clear, we’re talking about a system that processes payments for fewer than 1 million individuals. One reader wrote that he believes he could run the entire system from his laptop (and fit the database on a 32GB flash drive). I’m sure the system is much more complex than this. But I have little doubt that a new, stand-alone system could be developed for less than $5 million. I suspect that Jeff and Scott see this as a good alternative to raising venture capital and that that’s why they’re throwing their hat in the ring.

Does anyone else want to bid? Do I hear $4 million? ….

I also wanted to reach out to California State CIO, Teri Takai, and CTO, P.K. Agarwal. Teri/P.K.: I know you’re doing your best to modernize the legacy you inherited and that you have made great progress. How can we balance the scales so that entrepreneurs like Jeff and Scott have a chance to take on the giant state contractors who win all the bids and reap the fortunes? I think you’ll agree that we can save taxpayers many hundreds of millions of dollars and greatly improve public services if we get this one right.

Photo credit: Flickr/Matthew Smith.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.

Remember the dustup last summer over Apple’s rejection of the Google Voice app for the iPhone? Everyone was pointing fingers and even the FCC got involved. Michael was so upset that he quit the iPhone rather than give up his Google Voice. Well, now he can come back because Google Voice is finally on the iPhone via its browser, and Apple can’t really do anything about it..

Google Voice will become available today for both the iPhone and Palm Pre/Pixi via a new mobile Website which will go live later today at http://m.google.com/voice. The new Google Voice mobile site shows your inbox with transcribed calls, which you can play from the browser. You can also send SMS messages or dial from the browser. The application ends up making a local call through your cell phone to Google Voice, which then routes your call through its own lines. When someone gets the call, they see your Google Voice number instead of your AT&T number. And when you get a voicemail, a notification even pops up on your iPhone with the transcribed message (through SMS).

It is built on HTML5 with most of the functionality of the original iPhone app, except that it cannot access the local contact list in your iPhone’s address book. It lets you manage a separate Google Voice contact list which is kept in the cloud instead. Google Voice voice routes your calls through its servers and acts as a new hub through which you can manage calls and forward them to various phones. You can also manage your settings and various phone numbers. The HTML5 makes it very fast, allows for local caching of data, and supports the voice tags necessary to play the audio voicemails through the browser.

Mobile apps like Google Voice really show what can be done in the browser and point to an alternative way to build sophisticated apps for the iPhone without going through the gatekeepers in Cupertino. VoiceCentral, one of the third-party Google Voice apps that was also pulled from the App store, created a similar browser-based version of Google Voice for the iPhone. Both of these apps went the browser route because they didn’t have any other choice, but you can hardly tell them apart from regular apps. Once mobile phones allow access to deeper phone functions such as the local contact list from the browser, there will be even less reason to create a device specific app. The Web, after all, supports many different platforms. With a few tweaks to the UI, the mobile Google Voice site also works on Palm phones.

Adeo Ressi’s Founder Institute is going international. This Spring, the startup mentorship program will be expanding to Singapore, Paris, Los Angeles, and Denver, meaning that the Founder Institute is now active in nine cities worldwide. Interested entrepreneurs can apply starting tonight, with an early application deadline of February 15 2010 and a final deadline of February 28. These four new programs will start simultaneously this spring.

Ressi, who founded the program, says that the Founder Institute is the first incubator program to expand beyond the United States (though there are other entrepreneur-focused programs like Seedcamp). As the Institute grows, it comes closer to Ressi’s goal of training 1000 founders a year. Conservatively, he think that this year the nine programs in aggregate will graduate over 700 founders and 500 companies, though he wouldn’t be surprised if the tally is more like 750 companies.

The Founder Institute was announced back in March 2009, offering entrepreneurs and very early stage startups an environment designed to help foster their growth and education. The program holds two four-month long sessions annually at each location, which include mentorship sessions from experienced tech entrepreneurs. The program also has a unique structure that allocates some equity to each of the founders involved, so that they have an incentive to work together (and there’s a better chance that they’ll see some financial gain out of the deal even if their startup doesn’t take off).

Here are some of the mentors Ressi confirmed for the spring semester. Ressi notes that about half of the mentors in Paris and Singapore will be visiting from Silicon Valley:

Nolan Bushnell, Founder of Atari, Chuck E. Cheese, and uWink;
Aaron Patzer, Founder and CEO of Mint.com;
Phil Libin, CEO of Evernote;
Philip Kaplan, Co-Founder of Blippy, Founder of Adbrite and F’d Company;
Ross Levinsohn, Founder of Fuse Capital and former President of Fox Interactive;
Bryan Thatcher, CEO of LockerBlogger, Empressr, and Fusebox;
and Mathieu Nouzareth, Founder of Cafe.com and serial web entrepreneur.

Editor’s Note: In this guest post, Raj Kapoor gives entreprenuers advice on how to pitch VCs. Kapoor knows both sides of the equation. For the past five years, he’s been a VC at the Mayfield Fund. Before that he founded the photo site Snapfish, which he sold to Hewlett-Packard.

Its been almost five years now that I’ve been in venture capital.  I finally know what i don’t know.

The one thing I do know is how to give better advice on pitching VCs now that I’ve sat through hundreds of pitches and made 8 investments.  I gave some advice in an earlier post—this one builds on it at a deeper level (three years later)

I’ve mentioned in the past that there are some key things you should include in your presentation when you are pitching a VC.  David Cowan’s post on what to include is a great starting point.  I thought I would expand on this and add some of the nuances within each section. This may not apply to all types of companies but I think it works for internet-related businesses.

Also, I’ve found that if all the informoation below is addressed succinctly in an executive summary or first pitch deck, it can help us make a much faster decision —which is what the entrepreneur wants and so do we.  If we believe the story is lacking in too many areas, sometimes we just pass as there is too much else going on. At the same time, providing too much information is a problem as, like you, we are time-strapped and attention-starved.  I think most of the points below can be addressed in a few compelling sentences or slides.

1. What Do You Do? The first thing we want to understand is what you do, very simply.   What’s the problem/solution or what’s the new experience that you think is exciting?  Why is this important to your customers?  For mass-market internet businesses we want to understand if this appeals to a wide or narrow audience and if it’s a frequent (daily) habit or something done once in a while (which is tougher to build a brand in the consumers mind).  Don’t talk vision or market at this point.  Zero in on what you are about.
2. Reveal Your End Game. VCs typically don’t invest in just the first product or service being the end game or in a company’s whose biggest goal in life is to be a feature of a platform or “add-on” acquisition.  We want to understand that your product has really big potential and could be a platform possibly for others—like Facebook or Twitter.  Don’t be afraid to dream a bit.  Here’s an example from one of my companies -  “Rubicon Project will start solving the sharp pain point of optimizing ad networks for publishers and will leverage this position to be the trusted platform to help monetize all inventory for a publisher – the Control HQ for all revenue for web publishers”.  You won’t be penalized for having audacious goals.
3. What Is The True Size Of Your Market?  No, Really.  The important point here is whether it’s a big enough market to be interesting to a VC.   Too often entrepreneurs simply state the size of the online ad market for an internet content business or the size of a retail category for e-commerce sectors.   We’re less interested in the top down market sizing and more focused on your Total Addressable Market (TAM).  If you sell widgets, how many customers are really out there that are interested in your widget (segment the market) times what price you get for your widget.  The more thoughtful and realistic you are about how you define the customer set, the faster we can make a decision.  We don’t mind getting surprised on the upside later on.
4. The Secret Ingredient Is People.  Teams are critical and too little time is spent on them in pitches.  Don’t just include where you’ve worked but include in your slide or exec summary why this team is the best for this opportunity.  In many businesses, domain expertise matters a lot, so highlight that.  In some consumer businesses, its less about experience and more about product insight and relentless execution—highlight why you have that.  In other words, figure out what’s most important to the task at hand and make sure to tell us how each person will help accomplish that—not just where everyone worked and went to school.  In an early stage deal, Team and Market are the most important factors as everything else will change and a great team with wind at their backs will make it happen.  Also, be upfront about your holes/weaknesses in the team (and your own weaknesses) and if and when you believe you will need a new CEO.  Self awareness is one of the most important traits we look for in leaders.
5. Go-To-Market Strategy.   This is often ignored or not given enough thought.  What is the path of least resistance that you can take in terms of customers (be specific here), channels, and initial product focus.  Your go-to-market strategy should ideally be in your control (versus reliant on big, unproven partnerships) and take as much risk off the table as possible in the least amount of time.  You need to go through customer acquisition economics if you pay for customers (lifetime value vs CPA) and why you will spread for free if you don’t require marketing.   Address how you will make it as painless as possible for consumers to adopt the solution and how you will build on top of that.  Also, your go-to-market focus should not force you into a niche that’s hard to maneuver out of.
6. Be Honest About What Stage You Are At.  We need to understand what stage your company is at.  Are you at the idea stage or pre-traction in terms of customers and momentum?  Do you have momentum but are still working out the business model?  Or do you have both momentum and a solid understanding and proof behind the model.  The clearer you are about where you are, the faster we can make a decision.  Be upfront and honest on the risks and how you will deal with them.  If you have momentum, show graphs of key metrics over time (not just a snapshot of where you are)—we want to understand the shape of your growth curves and how your key metrics are performing against your expectations.
7. Your Real Competitive Advantage is Being Different In The Long Term.  On the internet, there are at least 25 companies that are or can compete with you on almost anything you do.  Often times, it’s all about execution but we want to see if there are fundamental factors which will help you outdo your competition—very hard technology/IP, network effects in your business that will make it hard for others to catch up (such as with Wikipedia, Google AdSense, Facebook, Twitter) or a fundamentally different business model that will be hard for an incumbent to change (for instance, it wouldn’t be easy for Electronic Arts to cannibalize its retail games with free to play online versions).  While we want you to list all your competitors (be exhaustive otherwise we won’t have confidence you know your business and have done your homework), its not useful to only show a chart of your competitors comparing features or positioning on a 2
   

It’s not a relaxing weekend for the people over at crowdSPRING, a startup that since March 2008 has been offering an online environment where creative people can come to collaborate on and contribute new design ideas.

A couple of days ago, the company set out to improve the performance of both the hardware and software that powers their website. Instead, the site update knocked the website down cold, and they’ve been having trouble getting it back online ever since.

When you go to the crowdsourcing startup’s website now, you’ll be forwarded to a message hosted on subdomain apology.crowdspring.com that reads:

In an effort to improve speed and stability, we began pushing a site update this morning at 9am CST. Unfortunately, this means that we needed to bring the site offline and this process may take as long as 24 hours (although we swear to all things good and holy that we hope it takes less).

We truly, truly apologize for the inconvenience but we also truly, truly hope that you’ll find the site much more well behaved after this update. If you have a project that will be affected by this, or if you have any questions at all, please don’t hesitate to contact us and we’ll do absolutely anything we can to help. We’ll be more than happy to extend any project affected by this outage or find other creative solutions to minimize the impact on you, so don’t hesitate to ask.

It has taken way more than 24 hours, though. The latest update posted on their Twitter account mentioned that they’ll be back in business on Sunday after getting some rest.

Downtime’s never fun, and it happens to the best of us, but posting an update that you’re tired and going to sleep before doing some final site testing is simply unprofessional.

Maybe they should have crowdsourced for some help while they were going to bed.

(Thanks for the tip, Brandon)

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Tim Schulz has resigned from his role as Senior Product Manager at MySpace, he confirmed a couple of hours ago on Twitter. Schulz let the MySpace executive team know that he was leaving the social networking company on Friday, and he informed us that starting January 2010, he’ll be running products as part of the general management team at e-commerce startup Magento.

Schulz was hired in the Fall of 2008 to work for MySpace International, and later moved to a senior role in the Product Strategy team together with Todd Leeloy (former VP of International Product and now VP, Strategy under Jason Hirschhorn). Schulz focused a lot on the realtime web.

He said he had a terrific time working at MySpace but decided that the Magento gig was a better fit considering his background as consultant at Sapient, and was excited to join a fledgling but fast-growing company that operates on the intersection of B2B and B2C.

His tenure at MySpace was surprisingly short though, so I suspect there were other things at play too, but we’ll give Schulz the benefit of the doubt because he sings nothing but praise for the company and its executive team.

Schulz also recently launched a tech blog dubbed TrendSlate, which he hopes will compete with TechCrunch some day.

What can we say, Tim? We hope Magento keeps you super busy.

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

Venture capitalists like to hire well known entrepreneurs and executives as “entrepreneurs in residence.” These are short term jobs, a place for someone to park themselves for up to a year or so after they’ve sold their company or otherwise have moved on. They sit in on pitch meetings, advise partners and portfolio companies, and plan their next move. And the VC generally, but not contractually, gets first dibs to invest in their next gig.

Sometimes people get creative with their titles - Jason Calacanis was called an Entrepreneur In Action during his stay at Sequoia Capital in 2006-2007, but his job was essentially the same.

Bessemer Venture Partners is expanding the idea further, and are adding what they’re calling a Designer In Residence. Jason Putorti, former lead designer at Mint (now a subsidiary of Intuit), is the guy they hired for the job.

Jason will work with Bessemer’s portfolio companies to help them build “simple, intuitive and engaging web sites,” said Bessemer partner David Cowan.

Some of the Bessemer startups that will now have access to Jason include Yelp, Hunch, Yodle, LinkedIn, Smule and Wix. For some startups, this may be a reason to go with Bessmer in a competitive funding round.

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