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Tag Archives: Start-up

Entrepreneurship is a Profession, Not a Cool Pastime

15 Comments Posted by on October 18, 2011

While traveling in the Valley I had a chance to catch up with a few local entrepreneurs and accelerators. Many of them are doing interesting work, but I noticed a disturbing trend: entrepreneurship has become “cool” for a whole generation.

As a an entrepreneur who had gone through several popular accelerators told me, “It used to be that if you didn’t know what to do at the end of college you would go to grad school. Now the same people go to accelerators instead.” And they bring with them their culture: beer games, lawn chairs, geek gadgets, and “bro culture” galore. Everybody is a ‘rebel,’ but in exactly the same way.

As much as I applaud entrepreneurial energy, I believe that this trend is a bad news for society in general. Entrepreneurship is risky business, requiring highly skilled, disciplined and motivated people.  Encouraging entrepreneurship among individuals who lack any of these three characteristics is setting them up for failure, and setting society up for a big bill in the future.

The parallels to graduate school are strong. While I am a strong advocate of graduate studies, I also spent much of grad school surrounded by people without clear goals or motivation. Putting the same crowd into startups achieves nothing. If you lack the drive, self-control and people skills to finish a PhD in 3-4 years, then you likely won’t be building strong businesses either. These “Peter Pan” grad students won’t drive the economy even if they become trendy entrepreneurs (or whatever the next cool thing might be).

Instead, society pays for their leisure. This is obvious for grad students, because educational subsidies are fairly visible in our economy. For trendy entrepreneurs, government new business grants can play the same role, but the real economic cost is less visible. My parents produced economic value from the age of 17, contributing to social security and their own retirement savings. Whether unfocused grad school or unfocused entrepreneurship, we are creating a generation that delays this kind of societal contribution for years, decades or even forever – burdening the rest of society with their bills.

I am a strong believer in progressive taxation. The wealthy should pay more than their fair share because society has a moral obligation to fight poverty and support those unable to improve their lives for reasons of intellectual, social or physical hardship. But this kind of system is weakened when capable individuals delay their social contribution indefinitely. “Lifestyle poor” students and entrepreneurs are not in the same camp as those with true hardship. Their lack of economic productivity is due to personal choice, a lack of discipline, or unrealistic expectations. They are potential net contributors to society who decide to become net beneficiaries instead – robbing the truly disadvantaged twice, by first reducing the available resources, and then competing for the smaller resource pool [1]. This hurts our collective future.

Both entrepreneurship and graduate studies should be goal oriented, execution focused, and make a net contribution to the world. Entrepreneurship, like graduate studies, isn’t about wearing a hoodie, speaking at conferences, following people on Twitter, or reading the latest buzzword ebook. It’s not even about building a great website or product. Entrepreneurship is about building a scalable business with people, products and meaningful financials.

That requires pretty specific skills and beyond average discipline that not a lot of people possess[2]. Given that you either succeed as an entrepreneur or you don’t, it is irresponsible to perpetuate the myth that everybody can be an entrepreneur (or should be). It is as amoral as encouraging lottery participation in poorer neighbourhoods, or home ownership for those without sufficient income. Somebody will make money, but it won’t be the ill-suited entrepreneurs, and it won’t be society as a whole.

[1] This is not an issue of personal financial balance. It doesn’t matter whether you have a lifestyle that “works” with $10k a year or not. Unless you live on the moon, society *does* subsidize your lifestyle whenever you earn less than the average income level for your age group (government debt and the degree of progressive taxation in your country modify that bar a bit but it is a good first-order approximation). You don’t get the subsidy cheque but it flows into everything from the streets that you walk on, the food that you consume, the energy that you consume and so forth.

[2] The tough part is finding out whether you are one of the few people who can build businesses instead of working in one. There are no ultimate rules for this but a good indicator is whether you have the discipline to consistently succeed in non-entrepreneurial activities that your peers have difficulty with (e.g. making your marriage work when 50% of them fail, getting through college without debt when 80%+ of students have debt, etc.).

Entrepreneurship , , , , ,

Setting a meeting on fire

3 Comments Posted by on September 14, 2011

A few years ago, during my first start-up adventures at Sunnybrook Technologies, a prototype fire taught me two important tech entrepreneur lessons: 

 1. Good entrepreneurs don’t panic.

2. Adversity is an opportunity, not a problem.

We had just finished the first prototype of what would become the world’s first commercial high dynamic range LED display: the venerable Zeetzen-5.

Today’s LED TV bring power to the very efficient backlight at fairly high voltage. That wasn’t possible for us in those early days. Lacking dedicated LED drivers, we brought 1400W up from two huge power supplies at 4 volts through a thick cables (the picture shows the base unit on the top right, main chassis with power bus in the middle and backlight unit on the right edge). 

The prototype was just finished, when we got a major strategic meeting with top executives at Kodak.  At the time Kodak was in the process of shifting from analogue film to digital, and they saw us as a potential major opportunity.  Dynamic range is a key issue for film, and we had created a digital high dynamic range which would be a great companion piece for them.  After some soul-searching about the state of the prototype, we flew to Rochester, excited for our first major commercial demo. 

After arriving in Rochester and meeting the executives, we set up the unit, started the demo, flipped the power switch and BOOM!  The whole room turned black.  There was the kind of nasty black smoke that you get when you burn tires and a flame shooting out of the unit.  Everybody got up in a panic, people were in the hallway and there was a fire alarm warning.  It was just a humiliating disaster.  We just managed to avoid a full scale evacuation of the whole Kodak research facility and got everybody back into the room. 

So what do we do now?  The instinctive response would be to slink away, cry a little, and write off the meeting.  Instead, we did what good entrepreneurs should do.  My partner just calmly took over the PowerPoint and said, ‘We’re just having some minor technical issues here,’ and gave the presentation.  Meanwhile, I opened the box and found that a strand of the metal cables had come out from the connection point and shorted against the unit’s case.  At 100 amps, the short instantly evaporated the insulation around the wire, and that’s where the thick rubber smoke had come from.  I thought, ‘I can fix this.’

Warning: Do not attempt this at home. I wish I could say that I was a training professional but at the time I was just an undergrad student with just too much hacker hustling energy. Electricity at this current *will* do very unpleasant things to you.

Step 1: The fuse on the power supply was blown, and we didn’t have spare parts other than little pocket screwdriver.  I took a metal bit from the screwdriver and popped it in the fuse holder.  Any good engineer will tell you that this is not something you should do (listen to them!). 

Step 2: I then tried to figure out how to insulate the wire.  The only thing I had available to me was a stack of napkins from the muffins on the table.  I took the napkins, made a little carrying hammock out of them, and put the wire inside.  I was able to hold the hammock with my hand and pull up the wires to keep them from touching the ground. 

So we went back to the demo.  I was giving the demo pitch, pointing with my right hand to the screen and illustrating all the different issues, while my left hand was behind the unit, hidden by the open box, holding this little napkin hammock.  I was praying hard that the wires wouldn’t short out again turning the napkin, and by extension myself, into another flaming contraption. It worked.  Kodak was duly impressed.

After the meeting, we drove from Rochester to southern Ontario, invaded the home of an old acquaintance of my colleagues, and used his tools for a slightly more robust repair of the unit – and then spent another few days doing fundraising demos with prayers on our lips. The show must go on!

Lesson 1: Don’t panic.  Things will go wrong in demos.  The best and only thing you can do is to take parts with you (more than a screwdriver – these days I travel with entire carrying cases full of nothing but spare parts).  Most importantly, when something bad happens don’t lose your cool, don’t freak out, don’t start crying, and don’t give up.  The reality is that you will only make it worse by panicking or giving up.  You have done your homework, traveled a long distance, and these people have booked time for a meeting with you.  You might as well salvage the meeting.

Lesson 2: I am pretty positive that Kodak’s take-away from the meeting was not, ‘These guys can’t build displays.’ They knew that the technology we were developing was complex and a world’s first with a lot of technical risk in the system.  I think what they took away was, ‘These guys know this stuff so well, they can field repair with a napkin and a screwdriver.’  When a big company looks at a start-up, that knowledge is much more valuable than your ability to make polished little systems.  Companies are not going to buy you for your polishing skills; they have plenty of those.  They are looking for deeply ingrained technical expertise. Technical problems actually give you an opportunity to demonstrate that expertise.  I still would not deliberately break demos during a meeting, but don’t be scared if it happens. For entrepreneurs, adversity is an opportunity, not something to be feared.

Demo Stories , , ,

5 Guidelines to Evaluate Accelerator Programs

4 Comments Posted by on September 6, 2011

For the last month I had three people independently ask me for advice on selecting (Web2.0) Accelerators. Two of them were student entrepreneurs contemplating their first venture. All where attracted by the Accelerators promise to kick-start their business but a bit confused by the choices between different Accelerator programs. Students, inventors or entrepreneurs in similar circumstances might find the following guidelines useful:

1. Mandate

The first and foremost checkpoint is the mandate of the accelerator. You want a structure and culture that is exclusively devoted to profit. Ethical, moral and legal – but focused on turning some money into more money. That’s going to be the mandate of your own venture and promise to your shareholders. An accelerator with a different mandate will have misaligned interest to you right from the start.

Common accelerator mandates to avoid, in my opinion, are

  • VC deal flow (limits your future and biases your decision making into the wrong direction – focus on building a great business, not convenience for VCs)
  • Media attention (an accelerator looking for ego PR will turn you into a PR monkey – this is what happens if you spend all your time being a conference darling without building a viable business)
  • Job creation (government funded accelerators often have this political mandate but jobs are really an incidental result of start-ups – focus on building value, not employment)
  • Community involvement (conference hopping is only good for your ego, building a successful company is the best way to help your community)

Avoid all of these and find somebody who wants to build strong companies for monetary gain. That’s the only reason to run a venture-funded start-up in the first place.

2. Economics

Explore the core economics of the accelerator. Consider where the financial payout for the operators and mentors will come from. For example, consider the basic Web2.0 accelerator clone: A paid operator, less than 10 companies per cohort and a 5-10% stake per company. Let’s say that the operators cumulatively receive a 1% stake per company (personally – check those numbers before joining). At an expected next phase valuation of $2-4M per company (if all goes well), their upside potential is less than $500k (around $200k mid-point).

Compare this to their base compensation package. If both are in the same ballpark then they will have a fundamental alignment problem. If the base is paid by a VC or government then their actions will be biased towards those parties (and thus occasionally out of alignment with their cohort companies). It’s unavoidable unless they don’t understand economics (in which case you definitely shouldn’t join).

3. Operators

The operator(s) of the accelerator will effectively be a very active Chairman of the Board and possibly your CEO. You are paying the bulk of your equity premium for their guidance, so you should evaluate them just as carefully as any other co-founder or senior leader. Ask for background and lots of references in past companies or investments. Focus on operational skill and integrity. Consultancy you can get for a lot cheaper than a 5-10% equity stake.

As a rule of thumb, look for somebody to whom you would gladly entrust your business for a year if you had to take a long vacation. If possible, somebody to whom you would give your business tomorrow if only they were available. This is a high bar but for a highly influential early stake in your venture it should be pretty high.

Avoid the entrepreneurial title trap. Unlike corporate careers, entrepreneurs can basically manufacture any title they want. At a conference earlier this year I saw a speaker line-up that promised all varieties of “successful entrepreneurs”. Even superficial digging on Google quickly confirmed that the “successful acquisition” of the first was a $10k purchase of their software; the “exit to a Fortune 500” of the next was a fire-sale acquisition of assets/team for ~$1M after having burned through ~$10M in investment; and the “expert in entrepreneurship” had become so via social media self-declaration without ever building any kind of company in the first place. Run.Like.Hell!

The sole measure of successful entrepreneurship is the past creation of either profitable stable businesses or high-return exits. Even that doesn’t by any means translate into automatic success in the next venture – but it’s the least you should expect from an accelerator operator.

4. Mentors

Use a similar benchmark to evaluate mentors. Mentors cover a broader range of functions so there is a lot of value in having non-operators as well. You are looking for a mix of successful entrepreneurs, market experts and secondary skills relevant to your particular business model (e.g. connections to possible acquirers, media expertise if you need PR in your business core, etc.).

Beyond qualification, make sure that you understand mentor motivation and time commitment for the accelerator. They should have a direct financial stake in your venture (via the accelerator stake). That stake should be meaningful enough so that they in effect become *your* advisors and not just guys who are doing the operator a favour. It would never occur to any entrepreneur to have their advisory board members paid by their VC, so make sure that you aren’t doing exactly that in your accelerator.

It’s ok to establish contact with potential future investors, fellow CEOs in the sponsor’s portfolio and so forth. But keep in mind that these people have inherently misaligned goals relative to your own. Ask your future accelerator to explain the difference, categorise mentors by their motivation and then interaction with them at a level consistent with these categories.

5. Valuation

Bluntly put, the financial commitment of most accelerator programs is trivial. Any decent valuation estimate needs to first assess the non-financial investment. Try to reduce the components to comparable independent contributions: office space (comparable rent), consultant-like mentors (hourly market rate), board-like mentors (comparable equity stake for full BoD members), and so forth. The comparison in the intangible areas will be harder (e.g. media exposure). Ask the accelerator for past example and try to correlate it to a meaningful metric in your field (e.g. what was the average number of TechCrunch articles per cohort company in your last 3 batches? – how much would it cost to get that from a PR firm).

It’s worth breaking these items down on a sheet of paper and asking the accelerator about their own perspective on their valuation per item. Remember that bundling is a tool invented by companies to mask effective price increases, not to make things cheaper for consumers.

Once you have your effective valuation, compare it to alternative scenarios. Angel valuations for early stage companies in your city are often fairly well bracketed. Also compare to other accelerators (e.g. Y-Combinator and Techstars take 3-10% for ~$20k plus significant intangible value). Compare your accelerator of choice to those deals and decide if their offer is worth it (most regional accelerators will have much smaller value-adds than these two power-houses, so their stake should be proportionally smaller unless your business/team is also comparably lower in value).

All of this sounds like a lot of work, right? In both of my discussions the first response was: “Hey, it’s only 5% so isn’t it always worth it?”. That’s the wrong perspective. Like a co-founder, early executive or lead investor, the impact of joining an accelerator goes way beyond the (small) equity stake. Earlier influencers decide or strongly bias the direction of your company. That gives accelerators the power to truly accelerate your business. It also, implicitly, creates the risk of destroying it. So take your time for careful due diligence and make your choice wisely.

Entrepreneurship , , , , ,

Tell me what you are going to do tomorrow!

1 Comment Posted by on June 29, 2011

Entrepreneurship has never been easier: Buy Steve Blank’s book on Customer Development; read all of Eric Ries’ posts; reduce your fundraising presentation to the Business Model Canvas; wear a hoodie and pivot like a lean ninja. Success is guaranteed.

Not…

Creating value from nothing is just as hard as it has always been. You wouldn’t get that from many of the investment pitches that I see though. Instead, I hear about “viral” marketing plans without budget (but massive predicted revenue), “lean” business models without unfair advantages (but massive predicted profit) and “Ramen” operating plans without paid employees (but cheerful ever increasing productivity). Don’t fall into this trap. Focus on real actions, not fluffy jargon. Instead of “viral marketing”, tell me that you are going to put short in-progress videos of our product on YouTube every week. That sounds less sexy but at least it gives investors something factual to evaluate and you an actual task.

Similarly, don’t spend your day doodling on the Business Model Canvas in a quest for the ultimate business strategy. Strategy is important, but it won’t come from using a(ny) tool. Recognize that these tools will at best help you to organise your thoughts. Don’t mistake them for answers to the unique questions in your venture. For that you need to go out into the world and get things done.

Entrepreneurship, General , , , ,

Why we do what we do

5 Comments Posted by on June 21, 2011

For the last few months I have shared stories and opinions about university entrepreneurship. I figure it’s time to talk about the “why” rather than the “how”. Specifically, why do we try so hard to bring university technology into the world?

First same background: I spent my career commercialising university innovation as an inventor, entrepreneur and operator across technical, strategy and business functions. I love building technology organisations. That’s the basic motivation. You need to love what you to in order to be good at it.

But why universities? Why not websites or apps – a market that is about as frothy as it has ever been? I am successful serial entrepreneur with dozens of software patents and a PhD in computer science, EE and physics. Until recently I had an office right smack in Silicon Valley. I raised eight rounds of financing from over 50 investors. With that background, why am I not on Sand Hill Road where cheques are currently falling from the sky for teenagers with a landing page? Why focus on universities, an environment shunned by almost all investors today?

Because it’s the right thing to do and nobody else does it!

Technology has to improve lives. I believe that down to my very core. It doesn’t have to solve world hunger but in some form it should make lives easier, better or less environmentally impactful. Some websites and apps do this quite nicely, but creating the 17th Groupon clone to cash in on the bubble seems hardly the right choice. University technology almost always addresses meaningful human issues. It might be misguided in terms of market, implementation and economics but the goal is worthy.

Over 90% of our Nobel Laureates did their work at universities. The vast majority of technical revolutions came out of university labs. University research funding in the US alone accounted for $39B in 2008. That’s 3.5 times more than the entire basic research budget of the US economy at $12B. And almost all of it will have been devoted to solving fundamental life-improving issues.

Yet, less than 5% of all US products and services contain university intellectual property. That’s the other side of the coin. Our universities are exceptional at creating high value knowledge but truly pathetic at getting it into our hands. Unfortunately, technology without users is useless.

This tech transfer inefficiency is the result of cultural, political and economic gaps between university and industry. That leads me to the second half of my statement above: Nobody else is trying to fix this. Venture investors are moving up stream. We have gone from VC partners placing $5M per year on average in 1997 to $35M in 2007. The new Super Angels and Accelerators have re-introduced smaller early stage amounts but virtually all with an exclusive focus on websites. That leaves preciously few resources for university technology transfer.

At TandemLaunch we are committed to bridging this gap. We recognise that traditional investors are moving up stream for sound economic reasons. Giving money to a multi-disciplinary team of business-savvy founders in a frothy market yields better results than giving it to a lone university researcher. So we give more than money. We provide co-founders, team members, facilities, back-office services, industry connections and just about everything else needed to bring the risk profile of a university project in line with that of a traditional start-up (and yes, that includes money as well).

And it seems to be working. My first wave of commercialising inventions from just under a dozen universities yielded a steady 40-60% IRR from 2002 to 2007. Early results from the second wave at TandemLaunch look promising as well. Ultimately time will tell. We might succeed wildly; fine-tune the model; or even tackle the problem with a different approach altogether. But we will keep trying. It’s the right thing to do!

Spin-Off vs Start-Up, Technology Transfer , , , ,

Confidentiality and Investors

1 Comment Posted by on June 14, 2011

“I have a world-changing, disruptive idea in the multi-media space! Can you sign an NDA so that I can tell you more?”

I get variants of this every week. And it never works.

Non-disclosure agreements (NDA) are legal documents that require effort to review and create long term liability. The vast majority of traditional venture investors will categorically refuse to sign any kind of NDA for the latter reason. It’s just not healthy for their business model to carry around years of liability for every business plan that they read.

So when should an aspiring entrepreneur ask for an NDA?

First and foremost, you need to understand that there are two different reasons from confidentiality: protection of information and protection of legal rights. The vast majority of start-up secrets are in the first category: business models, marketing strategy, product plans, software architectures, etc. You don’t want your competitors to have this information but you could hand your entire confidential business plan to a random guy at a cafe and absolutely nothing would happen (unless you are Apple).

Disclosing this information to investors without an NDA generally won’t cause any harm either. At least as long as they don’t put your slides on TechCrunch or hand your business plan to a competitor in their portfolio. The only protection against unethical behaviour like this is to validate the relationship. Work with reputable people; understand the constraints of their business (e.g. what competitors have they invested in); and remind them that your information is confidential. You want to get married to them, so you should be doing this kind of due diligence before the meeting anyhow.

Non-disclosure agreements are usually only needed to protect legal rights such as unfiled patentable inventions. Any kind of disclosure, even a quick story at a café, will severely limit your patenting options. It doesn’t matter if the receiving party cares about the information or even understands what you are doing. The act of disclosure itself is enough to cause commercial damage. It is therefore in the interest of your future investors to cover these concepts with solid paperwork.

Most investors never reach the depth where they need access to this kind of information. At TandemLaunch, the nature of our business model is such that we almost always have an NDA in the late stages of any project. Other “deep digging” investors will likely also have no concerns with an NDA at that stage. But there is no reason whatsoever to go to this level at the first meeting. At your first meeting you should describe who you are, what problem you are solving and how you are going to make money by doing so. None of this has anything to do with patentable inventions and thus shouldn’t need an NDA.

Technology Transfer , , , ,

Hustling for Seed Money

1 Comment Posted by on May 25, 2011

I gave a talk on entrepreneurship for students at Polytechnique Montreal today and the topic of seed money came up. Seed money are those few dollars needed to pay a lawyer, establish your initial network, find a business model and do all those other things needed to actually raise an initial investment round (and maybe even splurge on some food while you are doing this). Here are some tips to make it through this stage of the entrepreneurial process:

Grants: Universities are awash with grant program, bursaries, research funding and awards. A decent university entrepreneur ought to cover initial research cost with academic grants (if you can’t convince academic reviewers then the venture financing route will be very painful…). Other programs can cover your basic survival needs (i.e. food). Volume is key for these programs. Try to apply for something every week.

Frugality: It’s amazing how much money and time you can squeeze out of today’s student lifestyle. I meet countless students who bemoan their lack of funds while toting multiple subscription i-somethings in their designer jacket. Get real. If money is a barrier then strip away all the conveniences of our luxury society: no parties (unless you get free food), no booze, nothing that has a subscription (cell phones, TV, Netflix, newspapers, etc.), shared living, no car, nothing but used goods, etc. Doing so can significantly extend the initial runway of your venture and thus its chances of success. And if this sounds like an unpleasant lifestyle, keep in mind that you are doing it to fuel your million dollar opportunity while lots of people on the planet are doing the same just to survive.

Hustle: If all else fails, you simply need to get out there and make some cash. As a foreigner I was cut off from most university grants and my otherwise ultra-frugal lifestyle included $20k/year in incompressible tuition. Cash generation is essential under those conditions but avoid getting stuck in it. Try to find opportunities that can run in parallel to your main venture (and/or education). In my case, I set up a scripted brokerage system for this brand-new “Ebay” thing: My system would purchase auctions with bad headings (e.g. “Collection for Sale”) and then instantly re-list with keywords pulled from the main text (e.g. “17 Beanie Babies”). First seller ships to second buyer and the delta funded my life.

Whatever you do, keep your eyes firmly locked on the primary entrepreneurial goal. Seed money has only one purpose: get you to the point of having partners, business model and funding. Every dollar or minute spent on anything but the pursuit of those goals will be wasted. Sound like too much single-minded hustling? Well, it’s only good training for your future start-up!

Entrepreneurship, Spin-Off vs Start-Up , ,

To join or not to join a startup:a 5-factor decision

2 Comments Posted by on April 5, 2011

I have written in the past about reasons for students to become entrepreneurs. Implicitely, I related this to starting your own business but there is a very valiable alternative: joining an existing start-up early on. Doing so gives you many of the benefits of entrepreneurship without having the need for idea generation and fund raising (at least not on day 1). As I haven’t done this in my own career, I asked TandemLaunch’s first employee, Alessandra Glavier, to talk a bit about her decision to join a start-up. Aless made the leap of faith so early that her very first job was to find an office for us… I will let her tell the story:

A year ago, I quit my steady and quite safe job to join a team of one. I was called crazy by some, audacious by some others, but it might be the best decision I ever made. Here are a few facts for those who are thinking about such a decision today:

1. The unknown
Start-up’s job posting are, most of the time, in free classified such as Craigslist, universities websites or specialized website like NextMontreal. They might also come directly from a friend of a friend that knows someone who is hiring. Depending on how long the startup has been running, the job description might not have much detail or might look like a scam. The company might not have a name (rare), a website (more common), an office address (likely) or employees (possible). It is common today to do a quick Google search on a company to see what they’ve been up to and worked on. So if you get zero result, don’t freak out! Don’t be afraid to reply to the ad asking for more information. It will show that you do have an interest and are intrigued by the position. If you get no answer, yes it’s a scam! But if you get a reply, hopefully you’ll have someone passionate and confident about his new idea that will make you eager to learn more. This is exactly how I met Helge: I saw an ad on Craigslist for an office administrator position, lots of details on the duties and responsibilities, but absolutely nothing on the company itself. So I sent him an email asking him to tell me more about his project but I didn’t sent him my resume with my personal info (hey! you never know). We exchanged a couple of emails, a phone call, met and the rest is history [Ed.: Inquisitive job applications are much preferred over their "please take me" cousins]. Bottom line is: don’t judge a place only because it’s completely unknown and has nothing (yet!).Go with your gut feeling on the project you’re about to join since the part you’ll play will require your full commitment.

2. Uncertainty of the short term future
Startups are extremely high risk and fail more often than not. Joining a startup doesn’t come with a guarantee of a job for the next 5 or 10 years. But with the current economy, what job does? Even Microsoft has to cut jobs frequently… Many factors can lead to a startup failure: not enough sales or no sale at all, cash flow running low, management style, etc. This is a startup reality that you should be conscious about. If you have a low tolerance for uncertainty then you should definitely reconsider the idea of joining at startup, or be ready to spend many sleepless nights.

3. Non-traditional work environment
Startups do operate, in general, in a different way than big companies; mostly because they have fewer employees to manage. All the administrative structure, policies and rules are not as formal, but still present. Working in a startup requires a lot of honesty, integrity and some good time management skills: you won’t have somebody constantly looking over your shoulder but you will have to show some results! You will have some flexibility with your work hours beyond the traditional 9 to 5, but you’ll learn soon enough that working in a startup requires a lot of hours that you won’t even count if you’re passionate and excited about your job.

4. Many hats to wear
As Helge mentioned in an earlier post, don’t be fooled by your title! Being called VP Engineering when you are the only soul in the engineering department, doesn’t mean much. Startups are not about titles. They are about people. At team of 4 might have the workload of 10, so some tasks need to be split between everybody. You might working in accounting but you will still have to assemble some desks or computers once in a while. Or you are an engineer but you will have to answer the phone or attend some PR events. Don’t expect to have one single task; it’s impossible in a startup environment. You need to be a multi-tasker (or you’ll learn pretty soon how to be one!).

5. Team work
“Together Everyone Achieves More”. Startups are all about team work. It is the center of all activities and is the key to success: “there is not I in Team”, well there is no I in startup either! Sharing the same open space, as well as working on the same projects, will leave you very little time alone and will test your patience! Like Buchholz and Roth said: “wearing the same shirts doesn’t make you a team”. You might have to leave your personal feelings asides to make it work (or at least try!). One a brighter side, there is a huge probability that you’ll truly bond with your co-workers and develop new friendships – because at the end you’re all in the adventure together.

People Management

10 Tips for Student Entrepreneurs

5 Comments Posted by on February 15, 2011

Starting your own company out of university is a tricky business. You tend to have other things on your mind – like getting your degree. Here are some practical tips for university students who want to commercialise their technology.

1. Write Everything Down: Most university ventures are formed around intellectual property so you need to make that foundation as strong as possible. It is nearly impossible to retro-actively “clean up” your patents. Keep good lab books, use books with numbered pages and get your supervisor to sign your books every month or so. Keep your emails, time-stamp documents and use good backup policies for digital data. The US still uses a “first to invent” framework for patent priority. While your start-up is unlikely to engage in the legal wrangle known as interference, your future acquirer or licensees will be much more comfortable with a well-developed history (and comfort translates directly into dollars).

2. File Disclosures: Get into the habit of writing a short invention disclosure BEFORE you write your papers. In fact, I recommend that you write the invention disclosure as soon as you have clarity about your research path. They are free and don’t take long. Frequent disclosure writing will give you a good case history for your inventions but, more importantly, it gets you into the habit of thinking about invention as deliberate acts in your university life.

3. Talk to your Tech Transfer Office: Your Tech Transfer Office can help you manoeuvre through a lot of the early challenges. And they (usually) do it for free. Establish a relationship with the relevant tech transfer officer and keep in regular contact. They love hearing from students so don’t feel like you are intruding.

4. Don’t rely on your Tech Transfer Office: While a great sounding board, the Tech Transfer Office isn’t going to build your business for you. They can’t (no money, no staff, no risk capability). Every university has dozens if not hundreds of inventions where the inventors are just waiting for the Tech Transfer Office to “make it happen”. It won’t, until you get out there and build the business.

5. Leverage your Supervisor(s): For probably the last time in your career you are surrounded by world-class scientists who will help you for free. Beyond the obvious assistance with technical issues, you can ask them for advice on your business plan, for funding options, and even for networking suggestions. They will likely know a lot more potential investors, collaborators and business partners than you. Even a professor without any start-up experience will add credibility to your venture, especially for non-venture funding (e.g. commercialisation grants).

6. Network on Campus: Reach out across campus for other professors in related fields, other graduate students and anybody else who might be helpful. Most high value innovation comes from the overlap of problems and solutions form different technical fields. Try to find collaborators in different departments who can help you with specific problems but also broaden the scope of your project. For example, I started in the Physics department but early on set up collaborations with Computer Science for much of the core algorithm development.

7. Network off Campus: It might feel like it, but you really aren’t the first student to launch a company. Lots of people have done it before or contributed to new start-ups via funding, mentorship or executive work. But you will almost never find them on campus. This is one of the inherent problems of university spin-outs: Success implies departure. So you have to get out into the broader community and build relationships. Try to especially find those university entrepreneurs who have come before you but are still accessible enough to be of immediate help to you. Meet-Ups and entrepreneurship events are a good start for this, but ultimately nothing beats asking your Tech Transfer Office for past spin-outs and contacting the corresponding CEOs directly. Play the alumni angle for all it is worth!

8. Get Start-Up Grants: Canada offers some great ways to seed-fund your early commercial activities without giving away equity. Many of these options are tied to universities (e.g. the I2I program provides funding for university-industry pre-commercial collaboration). At BrightSide we raised in the neighbourhood of $6M in equity financing (over many rounds). Effectively matching this was another $5M in various grants and credits – many of which were only made possible through our close collaboration with universities. Not only is this free money, it can greatly reduce the cost of venture money later on.

9. Learn to be a Leader: Creating your own company will challenge your leadership skills. The university environment is a great place to practice those skills in relative safety. Don’t fall into the trap of becoming the lonely grad student at the bottom of the hierarchy. At the very least get some undergraduate students into your project and function as their supervisor. This will require some coordination with your professor but is well worth the effort. Those students are also a great source for initial hires into your start-up once you leave campus.

10. Start Now, Don’t Wait: More important than everything else, start now! Don’t wait until your degree is comfortably completed. Get out there, start a business and push forward. Set up a company, even if it is just a shell early on. Aside from immediate benefits such as tax credits (if you set up your employment with the company properly), this will force you to reach out to the world. Go out, learn about the market and then push your research efforts into the right direction. The faster and earlier you can start this iteration, the more value you will get out of your graduate research when you finally switch it into your start-up.

Entrepreneurship, Spin-Off vs Start-Up, Technology Transfer Offices , , , ,

Marriage – in life and entrepreneurship

1 Comment Posted by on December 23, 2010

This post started in the sane confines of my office but was completed on a holiday cruise with my family (I am sitting on the sun deck near Barbados right now). Emotional references abound! Happy Holidays!

My wife and I recently celebrated our 12th anniversary. Certainly not a massive milestone for many, but those 12 years represent my entire adult life. I guess something is working – to the surprise of everybody who judges us from a distance.
If we were a start-up team, we wouldn’t be able to raise a dime. Match.com wouldn’t even keep us in the same database. My wife is the type of person who draws an entire room to her at a party. I am the type that is glad that the room is gone. We share no hobbies. She has never worked at a company with less than 10,000 employees; I am a start-up guy. I am a tech geek; she a political activist – and our eyes both glaze over at the mention of each other’s fields. Her origin is Haitian, mine is German – two cultures that couldn’t be further apart (inviting friends for 7pm requires specifying “German time” or “Haitian time” with a solid 3 hour gap in between).

Our environment seems equally unpromising. We both have very demanding careers and studied in parallel to working. We spent the first seven years of our relationship in different provinces, racking up countless air miles on the weekends. In fact, even our starting point seems insane: We were in the same city for 24 hours, met at a Halloween party in full disguise, parted ways to different provinces at the end of the evening and my very first email was a statement of intent to spent our lives together (and yes, that was quickly analysed as “psycho” by her entire circle of friends). We met again a couple of weeks later at an airport, saw each other for the first time, and the rest is history (in the making at least).

So what does any of this have to do with entrepreneurship? Has the Caribbean sun finally fried my brains? Hopefully not!

The connection lies in the underlying mechanics that make all this work. Finding co-founders, investment partners and early employees for your start-up is a bit like entering into a marriage, though usually with a clearly defined pre-nuptial agreement and the intent to use it. As with a marriage, I believe that there are three fundamental components to such a relationship: Values, Tolerance and Respect.

The concept of values is easy to articulate but hard to implement. In essence, values are the foundation of your decision making. We are rarely in the possession of all facts necessary to make decisions and in their absence we use our values to guide us. My wife and I share a very similar set of core values, though for the life of me I couldn’t articulate what exactly those are. I could of course list trite words such as ethics, honesty and so forth, but those are mostly empty containers. Each human being fills them with subtle definitions and those shades of grey make all the difference. I consider honesty one of my core values, but of course I lie. We all do, if only to maintain our sanity. The question is where your personal definition of “lie” sits on the spectrum between “Your dress looks nice” and “I am Bernie and have a great investment for you”.

I also don’t believe that there is a “right” set of values, especially in the context of building a great business. Steve Jobs and Bill Gates seem to have fairly different value sets but they both managed to create great companies. The key isn’t to find the “right” values, but rather to find alignment between key stakeholders in the venture. And the good news is that this is a lot easier than actually defining those values with precision.

It’s often easiest to define your common value system when you step close to the borders. Try to explore the corner points of your new relationship early on: What are the visions for an exit of the company? How do we deal with employees who perform but don’t fit? What about the opposite? What are the scenarios where some people lose out on rewards and how do we deal with those? The list is long, but worth exploring earlier rather than later (don’t be concerned if it feels strange to contemplate the end of your venture on its first day – it’s the right thing to do).

On this platform of shared values you can now calibrate the interplay between tolerance and respect. Values are basically static, hardcoded into us through biology and long term social influences. The latter two concepts are a lot more dynamic and will govern the day-to-day evolution of your relationship.

Tolerance means that you allow your partner(s) to do anything they want to do and cheerfully support them in the process.

Respect means that you don’t do anything that would cause your partner(s) harm, grief or misfortune.

Taken individually, these principles result in complete insanity, but together they reach an equilibrium state where both partners have the best opportunity consistent with the opportunities of the other. Less philosophically, it means that your company achieves maximum leverage of each stakeholder’s talent and drive while keeping everybody on the same overall path.

In practice this isn’t the easiest set of rules to implement, but it provides a great platform for your decision making. Even better, it’s a great way to find out if somebody on your team doesn’t share this balance (if that happens, part ways as soon as you can – people really don’t change).

In my experience, very little beyond these three factors seems to matter. In the same way that my marriage prospers without a lot of common ground on the surface, so did my entrepreneurial relationship. My ventures and I benefitted greatly from those co-founders, investors, advisors and key employees who had matching values and a similar level of respect and tolerance. In many cases we had absolutely nothing else in common. On the other hand, I have had a few business relationships that turned into nightmares despite a lot of surface level similarities but no common foundation.

So when you find yourself in those all-important early days of a new entrepreneurial venture, think about what it takes to build a founding team with a strong foundation. Consider values as well as the interpretation of respect and tolerance in your team. Create alignment early and protect it ferociously. Resist the temptation to write code or fiddling with your website – no matter how en vogue the “hacker founder” has become in the last few years. In the long run your venture will succeed on the strength of the team that you built and getting that part right is the job of the CEO or founder (and arguably the only one that really matters).

Entrepreneurship, People Management, Technology Transfer , ,

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