How to Start a Company and Make a Million Dollars

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Clemence Farmer
10 years ago
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1 How to Start a Company and Make a Million Dollars Starting the Venture in Your High Tech Adventure Matthew Mather Officer, Office of Technology Transfer 1

2 My Experience Degree in electrical engineering from McGill Worked as engineer, artist, direct sales, technology licensing, chief financial officer, consultant to VCs, Started four companies, from advertising and marketing to information technology All but one still in operation Last company was Haptic Technologies Inc. McGill spin-off with Dr. Vincent Hayward Offers for $3.2M in VC, used $1.2M Sold for $10M in cash and stock in 2000

and marketing to information technology All but one still in operation Last company was Haptic Technologies

3 What is Entrepreneurship? Process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled *(H. Stevenson, Harvard Business School) Creation, distribution of value and benefits to individuals, organizations, society Rarely get-rich-quick; build durable long term value Ultimately, a human creative act Vision, passion, commitment Seeing opportunity where others see chaos Making sure you don t run out of money

*(H. Stevenson, Harvard Business School) Creation, distribution of value and benefits to individuals,

4 What s It Like? In the thin edge of space where the stars came out at noon and a plane could start tumbling end over end like a brick in the skids and tumbles, there was only one thing you could let yourself think about: What do I do next? Chuck Yeager Entrepreneurship is a bit like downhill racing Always at the edge of both disaster and victory, you win if your skill, and quick judgments keep you going faster than anyone else to the finish

a brick in the skids and tumbles, there was only one thing you could let yourself think about: What do I do

5 In Practice Creating a new company is a holistic process that needs to address many parties Business, market, managers, founders, employees, customers, shareholders, government Like solving a jigsaw puzzle Many of pieces will be missing or obscure, your job to bring the picture into focus, anticipate patterns And do it before somebody else finishes theirs

government Like solving a jigsaw puzzle Many of pieces will be missing or obscure, your

6 The Dream Anyone can be an entrepreneur who wants to experience the deep, dark canyons of uncertainty and ambiguity; and who wants to walk the breathtaking highlands of success. But I caution, do not plan to walk the latter, until you have experienced the former The Unknown Entrepreneur In 1993, one in seven North Americans were self-employed US National Science Foundation reported that entrepreneurial firms were responsible for 95% of radical innovations, and 50% of all innovations, since WWII Estimated 70% of the two million millionaires in North America in 1993 accumulated their wealth through entrepreneurship *New Venture Creation, Jeffry Timmons

But I caution, do not plan to walk the latter, until you have experienced the former The Unknown Entrepreneur In 1993, one in seven North Americans were

7 Survival For approximately 30 million enterprises in N. America, failure is the rule, not the exception Perception in general public that failure rates are higher Since actions governed by perceptions not really by facts, this can be serious obstacle Business Failure Rate Percentage Failure Source: Wall Street Journal Oct.16, % 51.7 % 23.7% Years in Operation * Note: firms go out of existence, entrepreneurs do not

actions governed by perceptions not really by facts, this can be serious obstacle Business Failure Rate Percentage

8 High Potential Ventures Success, not failure, is the rule for high potential ventures World class technology, dedicated founders, experienced management able to attract the right people, networks, resources and financing A High Potential venture Potential for significant capital gain, sales of at least $500k to $1M, growth of over 10% Higher gross margins, superior products, niche strategy, greater marketing expense as a percentage of sales, better able to retain personnel, larger attainable market and fast growing industry

significant capital gain, sales of at least $500k to $1M, growth of over 10% Higher gross margins, superior products, niche

9 Markers for Success Cross threshold of about 20 employees, sales of $1 million or better One year survival rate jumps from 78% to 95% Four year from 50% to 70% Newness and small size make survival problematic (Frontiers of Entrepreneurial Research, 1991) Six year survival rate for businesses jumps from about 40% to close to 80% for high growth (10%+) Venture capital backing (about 1-3% of new firms) instead of 70 to 90% failure, these firms see survival rates in these terms Still, about 1/3 eventually totally fail, and more than 2/3 won t manage to return original investment Only about 7% see big payoff of 10 times or more *from Venture Economics, 1988

to 80% for high growth (10%+) Venture capital backing (about 1-3% of new firms) instead of 70 to 90% failure, these firms see survival rates in these terms Still,

10 Keys to Success Hard to come up with traditional business models or analyses Risk, uncertainty, chaos, paradox, contradiction, asymmetries rules rather than exception in entrepreneurship Founders Opportunity recognition Resource requirements Fit personal values and lifestyles of founders, market opportunity, timing, investment climate, network

entrepreneurship Founders Opportunity recognition Resource requirements Fit personal

11 Founders If you can find good people, they can always change the product. Nearly every mistake has been to pick the wrong people, not the wrong idea Arthur Rock, lead investor for Fairchild, Teledyne, Intel, Apple Venture capitalists will tell you the five most important factors for success 1. Lead entrepreneur and quality of management team 2. Lead entrepreneur and quality of management team 3. Lead entrepreneur and quality of management team 4. Lead entrepreneur and quality of management team 5. Technology and market potential In majority of cases, requires two key contributors

Venture capitalists will tell you the five most important factors for success 1. Lead entrepreneur and quality of management team 2.

12 Opportunity Recognition A good idea or technology is not necessarily a good opportunity to start a business Far more good ideas than good business opportunities Entrepreneurship is ultimately market-driven, not technology driven Opportunity is created by gaps, asymmetries, lags or leads, inconsistency of knowledge, or changing circumstance that create vacuums in market Successful business opportunity is one with rewarding, forgiving, durable high margins and growth

Opportunity is created by gaps, asymmetries, lags or leads, inconsistency of knowledge, or changing circumstance that

13 Resources Requirements More with less Find all available ways to push ahead with minimum resources; sweat equity Control resources rather than own them informal advisors, board members, outside consultants, borrow, rent or lease materials, customer advances Money is not the key ingredient Financing follows from good people & opportunity More money will not fix a bad opportunity or staffing Too much money too early can bring disaster

rent or lease materials, customer advances Money is not the key ingredient Financing follows from good

14 Summary Key to a new business is the people first Market-driven, not idea driven Implementation is key Need access to a great network Entrepreneurs can usually come up with great plans by themselves, but need all the help they can get to in developing and implementing tactics Ultimately, all about the creation of value Need to clearly understand how all this will create value in the market for customers, and return value to shareholders

help they can get to in developing and implementing tactics Ultimately, all about the creation of value Need

15 Any darned fool can start a love affair, but it takes a real genius to finish one successfully George Bernard Shaw

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