Early Venture Evolution PDW

Chuck Eesley (Stanford University)Lynn Wu (U. Penn – Wharton)

Wesley Koo (Stanford University)David Hsu (U. Penn – Wharton)

Quick overview – 2 studies

• Early stage – MOOC randomized experiment

• Later stage – Stanford alumni data

Visions, Entrepreneurial Adaptation and Social Networks:

Evidence from a Randomized Experiment on a MOOC Platform

Charles Eesley (Stanford)Lynn Wu (Wharton)

Early-stage programs

• Accelerator and incubator programs outside of universities, such as YCombinator, TechStars and the Founder Institute

• National Science Foundation has recently launched an $18M program to pair select engineers and scientists who win SBIR grants with mentors and to teach them a more adaptive process for startup creation (I-Corps)

Difficult to Observe Entrepreneurial Processes

Planning Approach

• Create an unwavering vision• Persistent in executing the

vision• Less likely to modify the vision

to leverage newly available resources

• Delmar and Shane, 2003; Porter, 1980

Adaptive Approach

• Take adv. of new resources and change the vision if necessary

• Suitable in uncertain environment such as early stage entrepreneurship?

• (Baker and Nelson 2005, Blank 2013, Brown and Eisenhardt 1997, McGrath 2010)

Networks & Entrepreneurial Strategy

Adaptive & Network Diversity

• Mentor with diverse networks offers new and novel information and opportunities.

• Adaptive entrepreneurs are likely to take advantage of the new resources.

Planning & Network Diversity

• Entrepreneurs would not always use the resources from a mentor unless it conforms with the original vision.

• A mentor in a cohesive network may collaborate better with the entrepreneur.

Networks & Entrepreneurial Strategies

• Difficult to observe endogenous matching process between mentors and mentees.

• Difficult to alter coworker and friendship ties.• Difficult to observe the process of

entrepreneurship.• Randomized experiments could help.

Setting & Data

• NovoEd class: Technology Entrepreneurship• Class offered: Fall 2013 for 8 weeks• Free to anyone• Students in 61 countries in the world• Goal: Create a video pitch at the end of the

class

Summary Statistics

Variable Obs. Mean Std. Dev. Min Max English 1670 .588 .492 0 1

Male 1670 0.741 .438 0 1

Age 1670 2.169(25-35)

.833 1 4

Final Grades 1410 11.649 2.858 3.288 19.971

Complete any assign.

23918 .138 .345 0 1

Completion 23918 .0602 .458 0 1

Treatment Effects On Outcomes (1) (2) (3) (4) (5)Dependent var.

Completed Class

Final Grade Final Grade Earlier Grade Earlier Grade

Diverse -0.00273(0.00774)

0.298(0.269)

0.333 (0.267)

0.0499(0.160)

0.0567(0.159)

Diverse Adaptive 0.00591

(0.00773)0.448*(0.265)

0.434*(0.266)

-0.0824(0.158)

-0.0652(0.157)

Diverse Planning 0.00575

(0.00773)0.511**(0.256)

0.451*(0.259)

0.188(0.158)

0.192(0.157)

Planning 0.0134*(0.00773)

0.525*(0.302)

0.541*(0.303)

0.125(0.157)

0.125(0.156)

Obs. 23,918 1,411 1,411 4,866 4,866

Mentors and Performance

(1) (2) (3)Dependent var. Final Grade Final Grade Final GradeFound a Mentor 0.974**

(0.376)0.718*(0.394)

0.762*(0.390)

# Mentors Approached -0.0110

(0.0232)-0.0144(0.0229)

Having a Diverse Mentor 0.683*

(0.373)0.593

(0.370)Pursued Adaptive Approach 0.588

(0.405)0.592

(0.411)English 0.0208

(0.249) Male -0.0768

(0.216) Age 0.381***

(0.128)Obs. 1,080 1,075 1,075

Effects of Strategic Change on Venture Performance: The Implications of Change Location, Level and Top

Management Team Composition

Charles EesleyStanford University

David HsuWharton School, Management Department,

University of Pennsylvania

Wesley KooStanford University

Stanford Alumni Data• Survey of 143,482 individuals

—all living Stanford alumni, current faculty and selected (research) staff—to explore the influence of education on life and career choices.

• Responses were received from 27,780 individuals, for a response rate of 19.5 percent.

• These numbers are the percentage of respondents

out of the total number in that category who received the email. – Women: 19% – Men: 19% – Business: 23% – Earth Sciences: 30% – Education: 30% – Engineering: 22% – Law: 20% – H&S: 13% – Medicine: 27%

IPO             minor, core 0.383**   0.409**        (0.120)   (0.125)                   major, core   -0.0264 0.0953          (0.130) (0.136)      minor, peripheral       0.225+   0.296*

        (0.129)   (0.135)             major, peripheral         0.152 0.229+

          (0.122) (0.127)industry fixed effect Y Y Y Y Y Y

department fixed effect Y Y Y Y Y Y

_cons -15.85 -15.87 -15.65 -15.86 -15.44 -15.32  (13.79) (13.74) (13.80) (13.80) (13.73) (13.80)N 2300 2300 2300 2300 2300 2300

IPO  (1) (2) (3) (4)    <20 years <10 years <5 yearsminor, core change 0.383** 0.347* 0.496* 0.792*

  (0.120) (0.150) (0.209) (0.342)team diversity 0.261** 0.234* 0.422* 0.887**

  (0.0937) (0.118) (0.187) (0.296)startup experience 0.0171 -0.00214 -0.135 -0.361+

  (0.0537) (0.0660) (0.100) (0.188)industry experience 0.00407 -0.000315 -0.00311 0.00887  (0.00663) (0.00938) (0.0152) (0.0263)mean age -0.00911 -0.0185+ -0.0277 -0.0504  (0.00831) (0.0109) (0.0177) (0.0368)team size -0.0141 0.000138 -0.163 -0.152  (0.0585) (0.0740) (0.121) (0.191)firm age 0.0706*** 0.143*** 0.305*** 0.743***

  (0.00800) (0.0142) (0.0383) (0.210)gender 0.0490 0.0600 0.123 -0.0401  (0.128) (0.162) (0.233) (0.421)grad. year 0.00668 0.00521 0.000226 -0.0101  (0.00677) (0.00917) (0.0147) (0.0307)had board 0.310** 0.293* 0.369+ 0.463  (0.114) (0.147) (0.211) (0.356)crisis 0.233* 0.420** 0.718*** 0.0332  (0.114) (0.136) (0.209) (0.659)Industry fixed effect Y Y Y YDepartment fixed effect Y Y Y Y_cons -15.85 -12.14 -2.388 18.38  (13.79) (18.69) (30.00) (62.24)N 2300 1638 988 567

Conclusion• Contrary to work on discovery-driven planning, “lean startup”, we

find that at the early stages, a planning approach appears to be more effective.

• Davis, Eisenhardt et al. (2009) simulation – suggests entrepreneurial firms add structure and established firms stick to stable environments.

• Adaptive approach is inferior to the planning approach contrary to the popular notion that adaptive is better for early stage entrepreneurship.

• However finding a mentor with high network diversity can mitigate the disadvantages of using adaptive approach.

• Important to examine processes of entrepreneurship through RCT to elicit causal inferences.