Duke University – Pratt School of Engineering – www.pratt.duke.edu
Entrepreneurship and keys to success
© 2010 Vivek Wadhwa
Vivek Wadhwa
Visiting Scholar, UC-Berkeley
Director of Research, Center for Entrepreneurship and Research
Commercialization and Exec in Residence, Pratt School of
Engineering, Duke University
Senior Research Associate, Harvard Law School
Columnist, BusinessWeek, TechCrunch
www.GlobalizationResearch.com
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Overview
American technology entrepreneurs: myths & realities
Backgrounds, life histories, motivations, and beliefs
Factors that provide greatest advantages/obstacles
Why more people don’t become entrepreneurs
Key’s to building a successful tech business
Importance of markets
Understanding customer needs
What is a business model and how to get this right
Building the right management team
Selling
Public relations—getting known
Failure, luck
© 2010 Vivek Wadhwa
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Entrepreneurship Research
Based on 3 projects:
Survey of 652 CEO’s/CTO’s of 502 tech companies
Interviews with 144 Immigrant tech company founders
Detailed survey of 549+ founders of companies in 12 high-
growth industries
Common Myths:
Tech entrepreneurs: unmarried, rich, college-dropouts obsessed
with making money
Ivy-league education provides huge advantage
Venture Capital prerequisite for economic growth
© 2010
Vivek Wadhwa
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Tech entrepreneurs: Not young
© 2010 Vivek Wadhwa
2,5%
10,5%
34,1%
37,5%
14,2%
1,2%
0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0%
60 - 69
50 - 59
40 - 49
30 - 39
20 - 29
0 - 19
Percentage of all Respondents
Fou
nd
er
Age
US Tech Founder Age at the Time of Startup Establishment
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Married with children
24,9%
69,9%
4,5%
0,7%
Single Married Divorced/Separated Widowed
40,3%
16,4%
28,0%
11,0%
3,4%
0,9%
0 1 2 3 4 5
Average Number of Children
© 2010 Vivek Wadhwa
Marital Status
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Entrepreneurs: Not from rich families
0,7%
36,9%
5,4%
21,8%
34,6%
0,6%
LOWER-LOWER CLASS LOWER-MIDDLE CLASS LOWER-UPPER CLASS UPPER-LOWER CLASS UPPER-MIDDLE CLASS UPPER-UPPER CLASS
© 2010 Vivek Wadhwa
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Tech entrepreneurs: Not college
dropouts
High School Diploma or Lower, 5,9%
Bachelors, 44.0%
Masters, 31.0%
PhD, 10.0%
Associates Degree,
Certification,Some
College, 2.3%
MD, 3.8%
JD, 3.5%
Highest Completed Degree
© 2010 Vivek Wadhwa
Applied Sciences*,
9.0%
Engineering27.6%
Mathematics 1.5%
Computer Science,
Information Technology
9.0%
Business, Accounting,
Finance, 33,4%
Healthcare, 5.5%
Arts, Humanities and Social Sciences,
2.8%
Economics, 1.8%
Law, 4.2%
Other, 4.6%
Fields of Highest Degree
STEM Fields 46.5%
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Even better educated than their parents
19,7%
24,5%
5,2%
27,8%
10,0%
5,6% 5,8% 5,8%
Father
19,3%
36,8%
10,0%
22,7%
8,3%
0,2% 1,0% 0,2%
Mother
© 2010 Vivek Wadhwa
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Pretty smart in high school,
but drank too much in college
51,2%
23,2%
20,1%
3,7%1,4% 0,4%
Top 10% Top 30% Average Bottom 30%
Bottom 10%
N/A
High School
36,5%
29,9%
26,1%
3,1%1,6%
2,9%
Top 10% Top 30% AverageBottom 30%Bottom 10% N/A
University
© 2010 Vivek Wadhwa
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Education counts…
not necessarily ivy-league
0
10
20
30
40
50
$0
$1
$2
$3
$4
$5
$6
$7
$8
All Startups Startups w/ an Ivy-Leauge Founder Startups w/ a High School Founder
Ave
rage
20
05
To
tal E
mp
loye
es
Ave
rage
20
05
Sal
es
(Mill
ion
s o
f U
SD)
Average 2005 Sales Average 2005 Employment
© 2010 Vivek Wadhwa
What makes the difference is higher education: not the degree or school.
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Entrepreneurs: Highly experienced
24,6%
27,6%
23,3%
14,3%
10,3%
0-5 years 6-10 years 11-15 years 16-20 years 20+ years
Approximately how many years did you work for another employer prior to starting your first business?
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Entrepreneurship wasn’t necessarily
in the genes or pre-planned
Which Members of Your Family Started a Business Before You Did?
51,9%
38,8%
6,9%
15,2%
I was the first in my immediate
family to start a business
Father Mother Siblings
How interested were you in becoming
an entrepreneur while you were
completing your higher education?
7,2% 6,1%
34,7%
27,5%
24,5%
Not at all interested
Not very interested
Didn't think about it
Somewhat interested
Extremely interested
© 2010 Vivek Wadhwa
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Reasons for becoming an entrepreneur
© 2010 Vivek Wadhwa
1,2
2,9
3,2
1,7
3,1
1,4
3,0
3,1
2,1
Couldn't find traditional employment
Working for someone else didn't appeal
Wanted to build wealth
Co-founder encouraged to start company
Wanted to capitalize on a business idea
Developed a technology in lab
Startup company culture appealing
Always wanted own company
Entepreneurial friend or family role model
1= Not important factor, 5 = Extremely important factor
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Bootstrapping is the norm – not VC
© 2010 Vivek Wadhwa
10,0%
13,8%
70,0%
15,4%
10,8%
9,2%
14,6%
6,2%
0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0%
Other
Friends and family
Personal savings
Business partner(s)
Venture capital
Private/angel investor(s)
Bank loan(s)
Corporate investment
First business started
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Success factors
1,3
1,7
2,2
2,5
3,0
3,2
3,2
3,3
3,3
3,8
4,0
4,1
4,4
Assistance provided by the state/region
University/alumni contacts/networks
Advice/assistance provided by company investors
Location
Personal/social networks
Your university education
Availability of financing/capital
Professional/business networks
Good fortune
Company's management team
Lessons you learned from your previous failures
Lessons you learned from your previous successes
Your prior industry/work experience
© 2010 Vivek Wadhwa
1= Not at all important, 5 = Extremely important
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Obstacles faced by entrepreneurs
2,9
2,6
2,5
2,3
2,2
2,0
2,0
1,9
1,8
1,6
1,0 1,5 2,0 2,5 3,0
Amount of time and effort required
Lack of available capital/financing
Lack of prior experience in running a business
Concern about protecting company's intellectual …
Concern about the consequences of failure
Lack of available mentors or advisors
Lack of industry knowledge
Availability of health insurance/risk of losing …
Family or financial pressures to keep a traditional, …
Difficulty of co-founder(s) recruitment
1= Not at all a challenge, 2=Small challenge, 3=Somewhat of a challenge, 4= Big Challenge, 5=Extremely big challenge
1= Not at all a challenge, 5 = Extremely big challenge
Duke University – Pratt School of Engineering – www.pratt.duke.edu
What stops others from becoming
entrepreneurs?
4,3
4,0
3,8
3,6
3,4
3,3
3,2
2,7
2,5
1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5
Willingness or lack of ability to take risks
Amount of time and effort required
Difficulties in raising capital/financing
Lack of business management skills
Knowledge about the industry and markets
Knowledge about how to start a business
Family or financial pressures to keep a traditional, steady job
Availability of health insurance/risk of losing existing coverage
Difficulties in recruiting co-founders
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Building a business
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Understand your market & stay focused
To build a successful company, you need a great
product. But a great product doesn't lead to success by
itself
You can have the right product for the wrong market and
fail. And you can have the right product for the right
market and still fail because no one knows you exist
You can also be on the road to success and wake up
one day to find that the market has changed and you
haven't adapted
Stay focused on marketing at every stage of your
business
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Selecting a market
You may have a product that can solve many problems for
a broad set of customers, but you are not going to be
able to reach everyone at the same time. Some will be
more ready to buy from you than others
Key lessons:
1. Research your market and pick your niche
2. Expect that markets will constantly change
3. Expand from a position of strength
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Understand customers needs
Lack of customer validation is biggest cause of startup
failure
Learning customer needs is more important than
revenue for a nascent startup
Revenue doesn’t build traction for a business
Needed: tested and proven products that customers
are ready to buy, and that you can sell and deliver
profitably
Duke University – Pratt School of Engineering – www.pratt.duke.edu
What customers do and don’t know
Customers know:
What their problems are
What they like
What they don’t need
They don’t know:
What they need
What you can develop for them that they will really want
Your challenge:
Learn what you can build that customers will buy
Duke University – Pratt School of Engineering – www.pratt.duke.edu
How to learn customer needs
Interview customers, do what they do—feel their pain
Study every product in the market space—successes
and failures—related or unrelated
Use your experience and vision to conceive solutions
Quickly build solution/prototype. Perfection/features not
important
Share with potential customers. Let customers test drive
Keep iterating until you have a product that customers
MUST have. Don’t hesitate to trash everything you’ve
built
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Business Model: The 7 components
A business model is the nuts and bolts of how a
business generates revenue and profits
1. Reaching customers. How are you going to find
customers or have them find you?
2. Differentiating your product. What makes you better
than everyone else?
3. Pricing. What can you charge that will bring profit to
you and value to the customer?
Duke University – Pratt School of Engineering – www.pratt.duke.edu
7 components of a business model
4. Selling. What is your sales process?
5. Distribution strategy. How will you deliver the goods?
6. Support. What does the customer do if your product
breaks?
7. Customer satisfaction. How are you going to turn
customers into loyal fans?
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Management team: 8 key functions
1. Company leader. Makes final decisions on business
strategy, hiring and firing, and resource allocation.
Responsible fr business's success or failure, to motivate
the team, communicate with the outside world, build the
corporate culture, and ensure that sound ethics and
values permeate the organization. The leader doesn't
have to be the founder of the company.
2. Operations head. Manage operational details: watch
the bottom line and make sure products are delivered
on time, customers are happy, company is meeting
legal obligations.
Duke University – Pratt School of Engineering – www.pratt.duke.edu
8 functions of a management team
4. Product development. Chief technology officer/head of
product development
5. Marketing. Makes customers aware that business exists
and differentiates products from competition
6. Sales. Closing deals is the most important part of any
business. Every employee must be able to sell.
7. Finance. To balance the books, pay taxes, build
financial forecasts, manage budgets, and collect
revenue
8. Legal and HR. Lawyers protect company interests;
human resource experts hire and help manage
employees
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Selling: the single most important skill
1. Your goal is to fulfill the buyers personal needs:
Understand why people buy
Understand their need to ―win‖
Understand what they need
2. Craft your message based on customer needs
Be credible and competent: know your stuff or team up with
someone who does. Have testimonials from other customers
Be trustworthy: be honest, fair, and stay positive
3. Communicate persuasively
Talk in a way that customers understand and which fulfills their
interests and needs—not yours.
Duke University – Pratt School of Engineering – www.pratt.duke.edu
What Salespeople do
Generate Sales Leads
Qualify Leads
Make Initial Contact
Meet customers
Handle Buyer Resistance
Close the Sale
Account Maintenance
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Public Relations—getting known
Entrepreneurs believe when they achieve success,
fame will follow—Wrong
1. Build a compelling message that interests others
Create a concise statement of what the company does without jargon or
technical language. Test the message by speaking to ―normal‖ people
Create a one-page summary of what you want to say.
Create a one-line version of what you want to say.
You may want to talk about every single feature, too much detail dilutes your
message. Just highlight the few things that differentiate you.
Your products very interesting to you, but the world doesn’t care.
Others aren't interested in you, but may be interested in how your
product affects them.
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Public Relations—getting known
2. Find the right journalists
Read dozens of online and print publications. Find who covers
your ―beat‖.
Look for local publications, trade rags, industry websites
Read blogs in your market, learn who influencers are
Follow all key players on Twitter and Facebook
3. Understand journalists
They want to be first to report on a topic.
Read other stories by the same journalists and get a feel for
what type of stories they write.
Make sure that your story is relevant to their ―beat‖.
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Public relations—getting known
4. Start small. Everyone wants to be in national publications, you
are going to be up against stiff competition if you go after them
immediately. Instead, start local, focus on trade press
5. Customize pitch for every journalist. Write or call.
Most publications list email addresses on their Web sites and
provide phone numbers for editors.
Most journalists do respond. May not be interested in you at
first, but may include you in a future story—always looking for
fresh ideas and sources.
Use a ―news hook‖—big news story of the day or current trends
Duke University – Pratt School of Engineering – www.pratt.duke.edu
Public relations—getting known
6. Become a Trusted Source. If you do get an interview,
listen very carefully to what the journalist is interested in.
Don’t talk about yourself and your product, but what
journalist wants. Your goal is to become a trusted source
and build a relationship so you can be at the center of
future stories.
7. Be available. Journalists usually have tight deadlines
and need answers fast. If you want to get press
coverage, you will have to make yourself available within
a short time of getting a call.