Presented to entrepreneurial engineering students

1. Entrepreneurship
From a Silicon Valley perspective

2. FLI-0226-2DM-6N
What We’ll Cover
Intro
Overview
+ Ideation Funding Ecosystems Team Risk

3. About Me
Intro

4. How I got here
Intro
Started career building fiber optic networks around the globe:
•Determine product (layout of the network) and scope (immediate and growth)
•Negotiated contracts with vendors and contractors
•Engaged stakeholders (public, government, vendors, employees)
•Built and developed teams
•Secured leases
•Transitioned revenue generating organization
Took on increasingly senior operations and diverse roles – PwC, Booz Allen, Honeywell
•Started SagaciousThink, LLC in 2008 with bifurcated practice – consulting to large
companies: eBay, Cisco, PG&E, Gap and working with small and medium companies
expanding globally.
•Adjunct at Golden Gate University and UC Berkeley Extension
Work with and mentor startups + small business – Astia, CTO, GGU

5. And you?
Intro
What brings you to this entrepreneurship class?
What are you working on?

6. Intro
Overview +
Ideation

7. Entrepreneurship vs. Small Biz
Overview
Do you think there is there a difference?

8. Entrepreneurship vs. Small Biz
Overview
Different goals – for the entrepreneur its all about the hockey stick
and the exit.
Generally always a product business, rarely service
Its all about the exit

9. Entrepreneurship vs. Small Biz
Overview
Reasons why people want to be a small business
owner:
Be their own boss
Do not want to “work for the man”
Work – life balance
Family
See a problem
Passion

10. Characteristics of an Entrepreneur
Overview
Passion
Perseverance
Resourceful
Open-minded (coachable)
Sponge-like
Confidence
Risk Aware
Accepts Failure
Networker
Salesperson
Ethical
Self-Aware

11. How do you see yourself?
Overview
Are you an entrepreneur or a small business
owner?
What are your reasons for starting a business?

12. So you have an idea what should you do?
Overview
Be prepared to drink a lot of coffee

13. So you have an idea what should you do?
Overview
Get out and meet people
• Share your idea, do not keep it to yourself – don’t
worry about NDAs
• Action feedback, or not
• Learn about your target customer: how they make
their purchasing decisions and their pain points
• Identify the competition – all of it and know how you
will be different
•Test your elevator pitch – what resonates, what
doesn’t

14. Have a minimum viable product
Overview
Remember it’s a learning experiment
• You’re testing the market
• Validating assumptions
• Identify both positive and negative results (failures)
• Find out why consumers made their decisions
Agile vs. waterfall

15. Overview
You need
Validate
idea
Find
team
Find
Customers
Find
Investors
traction

16. Ideas on Funding
Intro
Overview +
Ideation
Funding

17. Some Alternatives
1. Bootstrapping
2. Loans
3. Grants
4. Crowd Sourcing
5. Partnerships
6. Bartering
funding

18. What Investors Look For in a Pitch
funding
Its never just about the product
ID total addressable market
Address channel issues
Bottoms up and top down approach to finance
What is required to build pipeline
People, money and time to close the deal – cost of
customer acquisition
The competition – it is out there

19. What Investors Look For
funding
When looking at the founder
1 – Successful entrepreneurs
2 – Entrepreneurs that have failed
3 – Untried entrepreneurs
They pick team over product

20. #2
funding
FAILURE IS GOOD IN SV
Fail fast

21. But not all failure
funding
Celebrate and recognize
the path to success is
never a straight line
•Issues outside of your
control
•Tried something new –
controlled experiment
Not this
•Didn’t do
homework
•Lacked skills
•Did not practice

22. What Entrepreneurs Look For
1. FFF
2. Angels or Syndicates of Angels
3. VC
What else can they bring to the table?

23. Smart Money
funding
1. Connections?
2. Industry expertise?
3. Are they a cultural fit?
4. What do their entrepreneurs think of them?
5. Do they add value beyond the money?
Do due diligence on them
This is a long term relationship – like a marriage – don’t mess it up

24. Getting a Foot in the Door
funding
1. Don’t spam
2. Leverage connections – better response
with “warm” introductions
3. Know your investors – not all created
equal
4. Not everyone invests in everything
Start the fundraising process early, before you need funding

25. Stages of Funding (US)
funding
1. Bootstrapping, FFF
2. Angel
3. Series A
4. Series B
5. LOC
6. Series C…
7. Mezzanine
8. IPO

26. Stages of Funding (US)
funding
Funding Reason Riskiness
Bootstrapping,
FFF
Fleshing out ideas – entrepreneur working
alone or with a few partner
Before product - not too
risky
Seed Supports initial market research, and build
team
Beta product, some VC and
angels (very risky) <$2M
Series A Some traction, optimizing product,
expanding user base
Established business plan
(less risky) <$15M
Series B B = build – taking business to the next level Wrapping up talented team
– diminishing risk
Series C … Seeks to ramp up operating funds –
operating revenue insufficient –
Scaling the company, perfecting the model
Less risky – beyond VC, PE,
Hedge Funds
Mezzanine Hybrid of debt/equity funding –
Financers anticipated high interest rates and
rapid appreciation of earnings
Later – closer to IPO (in
sight)
IPO / Acquisition Exit for investors, expansion Now a mature company

27. Stages of Funding (US)
funding
Funding Reason Riskiness
Bootstrapping,
FFF
Fleshing out ideas – entrepreneur working
alone or with a few partner
Before product - not too
risky
Seed Supports initial market research, and build
team
Beta product, some VC and
angels (very risky) <$2M
Series A Some traction, optimizing product,
expanding user base
Established business plan
(less risky) <$15M
Series B B = build – taking business to the next level Wrapping up talented team
– diminishing risk
Series C … Seeks to ramp up operating funds –
operating revenue insufficient –
Scaling the company, perfecting the model
Less risky – beyond VC, PE,
Hedge Funds
Mezzanine Hybrid of debt/equity funding –
Financers anticipated high interest rates and
rapid appreciation of earnings
Later – closer to IPO (in
sight)
IPO / Acquisition Exit for investors, expansion Now a mature company
Drives Seed Funding
– critical to
entrepreneur
ecosystem

28. It’s all tied together
Intro
Overview +
Ideation
Funding Ecosystems

29. It takes a lot of Stakeholders
ecosystem
Entrepreneurs
Investors
Businesses
University

30. But you cannot ignore
ecosystem
Entrepreneurs
Investors
Businesses
University
government

31. Governments help or hinder
ecosystem
Infrastructure
Cost of Living
Infrastructure to support business (roads, electricity,
transportation)
Employment laws
Hiring
Letting go
Taxation
Bankruptcy
Business ownership rules
Property laws
Business setup
World Bank: Doing Business

32. What Makes Silicon Valley Ecosystem Special?
ecosystem
•Investors who understand what motivates founders
•Entrepreneurs managing risks
•Businesses willing to try new ideas
•Local government that supports entrepreneurs
•Universities for smart skilled employees and a
breeding ground of ideas
•Generally favorable business laws
•Support (BoA, BoD)
•Desirable location

33. What government efforts work here?
ecosystem
In the Philippines?
In the US?

34. Investors – some tips on engaging
team
•Avoid cold intros, and don’t spam
•Target your message and show them you know
what they look for and why you are a good fit
•Don’t send a hefty business plan by way of intro –
pace yourself
•Be very clear
•Forget NDAs
•Don’t forget your contact information
I didn’t have time to write you a short letter, so I wrote you a long one – Mark Twai

35. Investors – Pitch Suggestions
team
•Show them you know the market
•You have traction and a trajectory – two points
do not make a trend
•Why you? Why your team?
•Bottom up and top down approach to numbers
•How much are you seeking and why?
•How are you going to make money?

36. Intro
Overview
+ Ideation
Funding Ecosystems Team

37. Investors
team
•They invest in people (teams), first – product, second

38. Investors
team
•A successful venture capitalist invests in people first and
business plans second.
•In real estate, the three biggest criteria are location,
location, and location. The venture capital axiom is people,
people, and people.
•Five major characteristics that investors look for in
entrepreneurs…, in order of importance are leadership,
vision, integrity, openness and dedication.
Jim Swartz, Accel Partners

39. Teams
team
•Emphasis on team, not one person
•Having a team shows:
•Others have bought in on the idea
•Traction is starting
•Coalesce around a goal
•Foundation for expansion in place

40. Teams
team
•Brutal self assessment
•Strengths / weaknesses
•What gives you (your teammates) flow
•Fill in the gaps
•Identify what resources you need when

41. Common Makeup of Teams
team
•Visionary – Founder/CEO
•Technologist – Founder/CIO/VP Engineering
•Closer – CEO, VP Sales
•Operations Guru – CEO/COO/CFO
•Watch Dog – CFO
Show management depth and stamina
Include experienced board and advisors
Be frank about gaps

42. Lessons Learned
team
•Breaking up can be hard to to – have an
understanding ahead of time
•The trouble with grand titles in a young team
•Know when to add
•Keep assessing the situation – are they right? Are you
right?

43. Team members + Equity
team
Smart and seasoned candidates want to know –
•What is your monthly burn rate?
•How much runway do you have?
•Does the company have a lot of debt?
•Has the company been audited?
•Can you please let me know how much money I’d
make from my options if the company were to sell or
IPO for $100m, 200m, 300m, 400m, etc?”
So be prepared to tell them

44. Intro
Overview
+ Ideation Funding Ecosystems Team Risk

45. Top 10 Reasons Businesses Fail
team
1. Poor management acumen
2. Lack of experience
3. Poor financial controls
4. Weak marketing effort
5. Failure to develop a strategic plan
6. Uncontrolled growth
7. Improper inventory control
8. Poor location
9. Incorrect pricing
10. Not a transformer
11. Government rules and regulations

46. Investors + Risk
team
•Understand the different types of risks a company
faces and what your investor is willing to accept, e.g.
some are comfortable with product risks, others
market. Understanding what risks are palatable for the
investor helps you focus on the ones to work with

47. Risky Business
risk
•Investors who understand what motivates
•Entrepreneurs managing risks
•Businesses willing to try new ideas
•Local government that supports entrepreneurs
•Universities for smart skilled employees and a
breeding ground of ideas
•Supporting business and infrastructure
As an entrepreneur, are you a bigger risk taker than
your peer?

48. Risks
risk
•Financial (currency, cash flow)
•People (succession)
•Legal/Regulatory (contractual)
•Political (SOX)
•Product (adoption)
•Market (demographics)
•Operational/Reputational (missed deliverables)
•Environmental (earthquake, monsoon)
What is yours?

49. There will always be Someone that doesn’t “get it”
Last Words
Heavier than air flying machines are impossible – Lord Kelvin – President of the
Royal Air Society – 1895
Everything that can be invented, has been invented – Charles Duell,
Commissioner, US Office of Patents, 1899
I think there is a world market for maybe five computers – Charles Watson,
Chairman, IBM 1943
We don’t like their music, we don’t like their sound, and guitar music is on the
way out – Decca Recording Company on rejecting the Beatles – 1963
There is no reason anyone would want a computer in their home – Ken Olson,
Founder and CEO Digital Equipment Corp, 1977

50. Questions or Comments
Maraming salamat

51. Stay in Touch
LouAnn Conner, Founder + CEO - SagaciousThink
415.517.2531
www.sagaciousthink.com