06.3. tips on improving resources
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The Science of StartSession 3: Key Resources
paulshawsmithscientific business strategy
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paulshawsmithscientific business strategy
Physical 1
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Lease vs. buy
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AMAR BHIDE
paulshawsmithscientific business strategy
Source: Wall Street Journal Video, 2009-10-15
“When we started the airline 25 years age this year. I went to Boeing. I remember the telephone call. “Hello this is Richard Branson, wonder whether you could sell me a second hand 747?” “What is the name of your business?”“Virgin.” “What do you do?” “We have a record company and have great bands like the sex pistols the rolling Stones.“And then there was a long pause, and instead of putting the phone down. He said, “We will send a salesman over and as long as your airline goes further than your name suggests we will let you have a plane.”
The key point there is we said to Boeing we don’t know if this is going to work. We realise that this is risky, and we want to be able to hand the plane back after 12 months if it doesn’t work out. And that is the element of protecting the downside and that is the critical thing.
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Barter
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James Dyson & the vacuum companies
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Use second rate resources (Dial up internet)
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Use second rate resources (Off the shelf servers)
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paulshawsmithscientific business strategy
Intellectual 2
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Partner with experts
Daniel SaksenbergDaniel Saksenberg specializes in machine learning and artificial intelligence. He has developed models for life insurance, forensics, anti-money laundering, offshore financial centers and transfer pricing. His models are use by corporations around the world.
Actuary and specialist in predictive analytics
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Hire ex-employees (Fairchild & Intel)
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Reverse engineering (B-29 & T-u4)
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paulshawsmithscientific business strategy
Human 3
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Give employees a financial stake
Source: Hambrick and Crozier (1985)
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Use affordable loss with employees
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Broad search
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“To get hired in this organization was a joke. If you came in and we needed a warm body, you were hired. Literally for any
position. Our turnover was high because we had to fire many employees… In a small company, unfortunately, such
problems are unavoidable. We could not afford committed professionals”
Source: Bhide (2000)
Use second rate employees
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paulshawsmithscientific business strategy
Financial4
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
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Market Understanding
“Start ups need 2 – 3 times longer to validate their market than most
founders expect. This underestimation creates the
pressure to scale prematurely.”
Source: Start up Genome (2011)
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
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Realistic Forecasts
“Start ups that haven’t raised money over-estimate their market size by 100x and often misinterpret their
market as new.”
Source: Start up Genome (2011)
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
Experience of team
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Series1
paulshawsmithscientific business strategy
25.5 %
54.5 %
Source: Bruderl, et al. (1992)
5-year failure rate?
Industry Experience
No Industry Experience
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paulshawsmithscientific business strategy
Sales
Financial Operations
Manager
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
Experience of team
Size of founding team
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Series1
paulshawsmithscientific business strategy
3.3%
0.4%
Source: Stam and Schutjens (2004)
Twenty employees?
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Series1
paulshawsmithscientific business strategy
13.1%
54.2.%
Source: Bruderl, et al. (1992)
5-year failure rate?
+
>
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paulshawsmithscientific business strategySource: Aldrich, Nancy, Carter & Ruef (2004)
48%
38%
7%4%
3%
1 founder2 founders3 founders4 founders5 + founders
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
Experience of team
Size of founding team
Market growth rate
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1996 2006
Growth in online advertising
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
Experience of team
Size of founding team
Market growth rate
No. Of competitors
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Series1
paulshawsmithscientific business strategy
Fortune 500
(5%)
No direct competition
Small companies
Source: Bhide (2000)
(73%)
(18%)
Mid-sized companies
(4%)
Competition faced by Inc. 500 start ups
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
Experience of team
Size of founding team
Market growth rate
No. Of competitors
Competitive advantage
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Industry Number of Inc 500 firms
Firm starts Percent of Starts
Pulp mills 6 33 18.182Computer and office equipment 99 2359 4.197Guided missiles, space vehicles, parts 2 60 3.333Nonferrous rolling and drawing 14 581 2.410Railroad car rental 3 136 2.206Measuring and controlling devices 49 2482 1.974Paper mills 3 125 2.400Search and navigation devices 6 310 1.935General industrial machinery 26 2173 1.197Photographic equipment and supplies 7 646 1.084Manifold business forms 3 281 1.068Household appliances 4 390 1.026Electrical industrial apparatus 11 1080 1.019Legal services 10 129207 0.008Eating and drinking places 34 494731 0.007Carpentry and floor work contractors 4 66383 0.006Real estate operators 5 90042 0.006Hotels and motels 2 39177 0.005Painting and paper contractors 2 43987 0.005Retail bakeries 1 22165 0.005Grocery stores 5 112473 0.004Used merchandise stores 1 24442 0.004Automotive repair shops 5 124725 0.004Beauty shops 3 79081 0.004Residential care 1 27710 0.004Videotape rental 1 27793 0.004
INC 500 vs. TOTAL STARTS BY INDUSTRY Source: Shane (2009)
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COMPUTER AND OFFICEEQUIPMENT
paulshawsmithscientific business strategy
Inc 500
99
Total start ups
2,359
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EATING AND DRINKING PLACES
paulshawsmithscientific business strategy
Inc 500
34
Total start ups
494,731
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INDUSTRY AND INC 500
paulshawsmithscientific business strategy
Source: Shane (2009)
Computer and Office Equipment (1/25)
Eating and Drinking Places (1/14,550)
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Glass Products 85.7Spinning, weaving and finishing of cottons, artificial and synthetic fibre 81.0Spinning, weaving and finishing of wool 76.9Slaughtering 68.0Knitting Industry 65.7 Cut Stone and Stone Products 65.6Footwear n.e.c. 65.4Iron and Steel Industry 64.6Tanning and Dressing of Leather 63.6Machinery for the industry n.e.c. 61.5Radio and TV Communication Equipment 47.4Fabricated Metal Products n.e.c. 46.7Manufacturing n.e.c. 44.4Cement Products 42.7Clay Products for Construction 42.1Pottery 41.2Household Textile Products 40.9Made-to-Measure Clothing 37.9Pastry 34.7Fish Preserving 25.0
INDUSTRY AND SURVIVAL (4 YEARS)Source: Mata and Portugal (1994)
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paulshawsmithscientific business strategy
How investors
make decisions
Marketing understanding
Realistic forecasts
Experience of team
Size of founding team
Market growth rate
No. Of competitors
Competitive advantage
Referrals and introductions
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Weak ties and funding
Being referred by indirect social ties
increased the likelihood of an entrepreneur receiving
funding.
Source: Shane and Stuart (2002)
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paulshawsmithscientific business strategy
Social5
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130
Six degrees of separation
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13016,900
Six degrees of separation
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13016,900
2,197,000
Six degrees of separation
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13016,900
2,197,000
285,610,000
Six degrees of separation
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13016,900
2,197,000
285,610,000
37,129,300,000
Six degrees of separation
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13016,900
2,197,000
285,610,000
37,129,300,000
4,8 x 1012
Six degrees of separation
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16.7%
55.6%
27.8%
At least once a week
More than once a year but less than once a
week
Once a year or less
Who did you find out about your job from?
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50%
Milgram stockbroker experiment
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20
108
Are you a connector?
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Ask for referrals and introductions
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Attend social events
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Do event follow ups
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Help others
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Create a database of contacts
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Use social networks (Vinny Lignham)
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Develop a support network
Incubator average(3/20 fail)
Industry average(10/20 fail)
Source: Phillips (2002) and Audretch (1995)
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Source: Watson (2007)
Advice from accountants 3< /yr (16/20 survived )
No advice from accountants(9/20 survived)
Seek advice
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Source: Watson (2007)
Network range = How often an entrepreneur networks x How widely an entrepreneur networks
Don’t seek to much advice
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Patrons or champions
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Thought leaders
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Inventory your resources
**
*
*
In groups of 3 – 4:
For each person:
Make plans on how you can acquire your dream
resourcesIs there a second rate version of your
dreamresources you could more easily acquire?Can you use your current resources to
acquire yourdream resources?
* Time: 20 mins
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Plan your up coming week
*In groups of 3 – 4:
Make plans for the area of your business that needs
work: Value proposition: Customers, lead users,
thought leaders,industry expertsCustomer acquisition: Sales & marketing
experiments Customer segment: Market research, customers Revenue stream: Pricing tests, customers Distribution: Channel partners Key resources: Partners, investors, production,
developmentKey activities: Production & development
experiments Key Partners: Partners Cost structure: Suppliers, production &
developmentexperiments, CA experiment