Educating Entrepreneurs Who? What? Why?

Steve Blank Stanford Technology Ventures Program

News From Silicon Valley

Small VC Funds ($50-250M)

Union Square Ventures First Round Capital

Traditional VC Funds (>$250M)

Benchmark Sequoia

Angels & Incubators ($0-10M)

Y-Combinator TechStars

Seed Funds ($10-50M)

SoftTech (Clavier) Maples Investments Felicis (Senkut) SV Angel (Conway)

Source: Dave McClure 500hats.com

News From Silicon Valley

Small VC Funds ($50-250M)

Traditional VC Funds (>$250M)

Angels & Incubators ($0-10M)

Seed Funds ($10-50M)

Source: Dave McClure 500hats.com

Innovation is happening here

News From Silicon Valley

•  Internet startups - $500K is the new $5M –  Driven by the top of the pyramid

•  Seed Funds providing entrepreneurial education –  Ycombinator, TechStars, SeedCamp, LaunchBox, etc

•  Customer Development/Lean Startup adoption –  Methodology to test hypothesis and business model

Some Definitions

Small  Business  Startup  

Small  Business  Startups  

Small  Business  Startup  

- Business Model found - Profitable business -  Existing team < $10M in revenue

Small  Business  Startups  

Small  Business  Startup  

- Business Model found - Profitable business -  Existing team < $10M in revenue

Small  Business  Startups  

•  5.7 million small businesses in the U.S. <500 employees •  They employ 99.5% of our workforce

Scalable  Startup  

Large  Company  >$100M/year  

Scalable  Startup  

Scalable  Startup  

Large  Company  >$100M/year  

-  Total Available Market > $500m -  Company can grow to $100m/year -  Known business model -  Focused on execution and process

Scalable  Startup  

Scalable  Startup  

Large  Company  >$100M/year  

-  Total Available Market > $500m -  Company can grow to $100m/year -  Known business model -  Focused on execution and process

Scalable  Startup  

•  In contrast a scalable startup is designed to grow big •  It typically needs risk capital •  These are what Silicon Valley means when they say “Startup”

Small  Business  Startup  

- Business Model found - Profitable business -  Existing team < $10M

Scalable  Startup  

Large  Company  >$100M/year  

-  Total Available Market > $500m -  Company can grow to $100m/year -  Known business model -  Focused on execution and process

Very  Different  Startup  Curriculums    

Small  Business  Startup  

- Business Model found - Profitable business -  Existing team < $10M

Scalable  Startup  

Large  Company  >$100M/year  

-  Total Available Market > $500m -  Company can grow to $100m/year -  Known business model -  Focused on execution and process

Silicon  Valley  Startup  Curriculum  

X X X

Scalable  Startup  

Large  Company  

Transi9on  

-  Founders depart -  Professional Mgmt -  Process -  Beginning of scale

The  Transi0on  

Scalable  Startup  

Large  Company  

Transi<on  

-  Business Model found -  Product/Market fit - Repeatable sales model - Managers hired

- Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people

The Search for the Business Model The Execution of the Business Model

Startups  Search,  Companies  Execute  

E-School instead of B-School

Scalable  Startup  

Large  Company  

Transi<on  

-  Business Model found -  Product/Market fit - Repeatable sales model - Managers hired

What’s  A  Startup?  

A Startup is the organization used to search for a scalable business model

Teach the Business Model Not the Plan

•  No Business Plan survives first contact with customers

•  A Business Model diagrams how a company creates, delivers and captures value

•  Or in English: How a company makes money

Emphasis On Hypotheses Testing

How Do Startups Search For A Business Model?

•  The Search is called Customer Development •  The Implementation is called Agile Development

Scalable  Startup  

Large  Company  

Transi<on  

-  Business Model found -  Product/Market fit - Repeatable sales model - Managers hired

- Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people

Startups  Don’t  Last  Forever  

You fail if you remain a startup!

Scalable  Startup  

Large  Company  

Transi<on  

Durant  Versus  Sloan  

Scalable  Startup  

Large  Company  

Transi<on  

Entrepreneurship  School  

Entrepreneurship School

-  Hypothesis testing -  Business Model testing -  Customer Development -  Agile Development -  Metrics -  Venture Finance -  Hands-on

Scalable  Startup  

Large  Company  

Transi<on  

-  Hypothesis testing -  Business Model testing -  Customer Development -  Agile Development -  Metrics -  Venture Finance -  Hands-on

-  Execution -  Accounting -  Products -  Engineering -  Management -  Administrative

Business School

Business  School  Versus  Entrepreneurship  School  

Entrepreneurship School

Scalable  Startup  

Large  Company  

Transi<on  

Courses -  Entrepreneurial Management -  Creativity and Innovation -  Technology Entrepreneurship -  Patent Law for Entrepreneurs -  Global Entrepreneurial Marketing -  Entrepreneurial Finance

Business School

Business  School  Versus  Entrepreneurship  School  

Entrepreneurship School

Courses -  Managerial Finance/Accounting -  Managing Groups and Teams -  Financial Accounting -  Operations -  Modeling for Optimization -  Global Value Chain Strategies