Becoming a Successful Technology Entrepreneur

Becoming a Successful Technology Entrepreneur

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Description: Business basics of becoming a successful technology entrepreneur. Entrepreneurial Skills, Keys to Entrepreneurial Success, What Product, Service, Opportunity to Pursue? Mistakes to Avoid. Total Investments: 1980-YTD 2009, Investments by Industry and Investments by Stage of Development: Q1 2009.

Keep it simple, easy adoption, honest and forthright, show an understanding of technology, focus/focus/focus, and have fun. Some Entrepreneurs donít plan to fail, they just fail to plan.

 
Author: Stan Tomsic (Fellow) | Visits: 1683 | Page Views: 1701
Domain:  High Tech Category: Business 
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Contents:
Green Tech Connect Forum
2009 Entrepreneur Workshop

Business Basics of Becoming a Successful Technology Entrepreneur
Stan Tomsic
Business Technology Center of Los Angeles County
August 2, 2009

Administrator

Business Technology Center of Los Angeles County

Building a Positive Economic Environment for Technology Startups

Your Success Starts Here
� State-of-the-art infrastructure

Subsidized rent and services 40,000 square foot facility Below market rates through special Los Angeles County Loan Program Award winning incubator including being a top accelerator for average client revenue increases per year � Mentoring from top experts in technology and entrepreneurship � Pasadena Angels In-house, among many other Angel and VC affiliates � Close to Caltech and Jet Propulsion Laboratory

� � � �

Are you an Entrepreneur? Do you have Vision?
Where do you want the company to be in the future? Can you communicate this vision enough to excite employees and investors?

Vision is not a business plan, it is a direction of where your new organization is going
Vision coupled with a strong business plan is what gives the direction and Implementation documentation that "cements" the vision on paper

Entrepreneurial Skills
Needed to conceive, launch and grow their new organizations:

Focus: goals, customers, employees must be reached,

satisfied, and motivated. Vision: Where the company will be in the future and be able to communicate and motivate others to help achieve it. Leadership: You can't do it alone by yourself. The greatest athlete doesn't make a championship team. Persistence & Passion: passion is a must. Commitment and ability to persist in good and bad times. Technical skills: You need to be savvy enough to lead the technical team. An understanding of the technical challenges is critical. Flexibility: Being a successful entrepreneur means understanding the world and environment are constantly changing. Being able to adapt your strategies and offerings are critical.

Keys to Entrepreneurial Success
The top four key lessons:

Focus, Focus, Focus: as in real estate, where its location,

location, location. Never take mindshare and resources from objectives and goals of company. Hire Smart: The quality of the people that comprise the company will determine its success. Decisions are made by everyone in a small, growing company. Must be able to work in fast-paced always changing environment. Communicate: Laser sharp focus and goals must be communicated to your staff. A management team that works together and continually communicates with each other is imperative. Winning Spirit: Entrepreneurship is like a game. There are winners and losers. Davids and Goliaths. The team should be instilled with a competitive spirit that is committed to winning.

What Product, Service, Opportunity to Pursue?
The top three factors to consider:
it can meet criteria, don't do it.

Size of Opportunity: Large enough for ROI. Unless Complexity of Opportunity: How difficult will it be

to execute. Does it need cooperation of other people or companies that may not cooperate? Too technically complex or difficult to execute. necessary to execute? If your vision needs hundreds of millions of dollars and thousands of employees to be successful, it is not an entrepreneurial project.

Funding & Resources: How much of what is

Mistakes to Avoid
Not Doing Proper Market Research
Evaluate known product/service area:

Meet with potential customers of target market
Evaluate their unmet need with intent on determining/fine tuning solution Understanding value to customer Process should be repeated continually

Understand the market and what it takes to address it

Determine Market Size
Sales & Marketing plan � how best to address the market Pricing

Mistakes to Avoid
Solution Isn't a Killer

Market sees solution as a "Nice to Have"
Need to revisit customers to determine: Must find value of Solution that creates need What modifications need to be made to make solution more "critical"
Save Money Save Time Lower costs Enhance their service/offering

Mistakes to Avoid
Not Narrowing Focus to Initial Target Market

Solution can be used in multiple Vertical Markets
Must choose initial Vertical Target Market
Determine markets potential sizes Choose market that: is quickest to revenue Needs least amount of Development Has least cost of sales to pursue You have personal contacts You have the most experience Amongst top market potential of choices

Mistakes to Avoid
Not Knowing your Competition Well Enough Who else is approaching your target market?
are you better?
What value do their solutions deliver � their strengths and weaknesses vs. your solution: How How is it marketed � Business Model and sales approach Pricing How well Do you know the companies behind your competition? The management team and their backgrounds The history of the company and how they came to be in that market

Mistakes to Avoid
Not Properly Protecting your Intellectual Property Have a Top Notch IP Lawyer Good Patent protection
Broad Disclosure
Prior Art Specification or

Trade Secret

Proper Procedure � Train Staff Don't get lax and let IP fall into public domain

Mistakes to Avoid
Not Having Strong Business Plan

Old Saying: Some Entrepreneurs don't plan

to fail, They just fail to plan.
Realism vs. Optimism

Plan and forecasts must be compelling, and show confidence in a market Must be optimistic, but also must be credible Should continuously refer to hard facts and realistic assumptions to build credibility and genuine excitement

Mistakes to Avoid
Not Having Strong Business Plan (Continued)

Financials cannot be too aggressive.
First place some investors go to for credibility. Assumptions and projections need to be realistic. Make sure your prototype/manufacturing costs are clear, offer options on quantity and location of resources for parts and assembly. Know your numbers. Base your projections of financial performance on public companies in your marketplace.

Mistakes to Avoid
Not Having Strong Business Plan (Continued)

Too Much Focus on the Technology
IP is significant, but focus on how solution satisfies a large, unfulfilled customer need.
Illustrate understanding of customer needs. Identify which target markets most exemplifies those needs. Document plan to penetrate those markets.

Feature vs. Benefit
No one will invest or license Features � only their benefit from them & base what they will pay on how much value the benefits bring them.

Mistakes to Avoid
Not Having Strong Business Plan (Continued)

Must not define Market Size too Broadly.
No real value to investor. Market metrics must be derived from specific target market. Capturing a significant share of a credible target market is much more powerful and believable.

Mistakes to Avoid
Not Having a Honed Elevator Pitch

30-45 seconds of brief description of your business
Concise definition of the benefits of solution Illustrate with examples of other well known companies.
then,
Instead of laboriously describing details, mention those well known companies. Benefits vs. technology/features.

Stress competitive differentiation

Make your vision compelling so listener gets excited and wants to learn more.

Focus on how you differ in delivering the market's unmet needs.

Mistakes to Avoid
Not Knowing How to Fund What Amount of Funding
Analyze amount of funding needed to get to certain levels of growth � prototype, production, profit, level of Revenue Self � Savings, Home Equity, Life Ins., etc. Friends & Family. Loans � LA Co., SBA, Banks, Assets, Receivables, etc. Government Traditional Channels� SBIR, Grants Angels � up to $1 million Venture Capital � above that

Where to get Funding

$100

$120

$20

$40

$60

$80

$0 1980 $0.6 $1.1 $1.6 $2.8 $2.9 $2.7 $2.9 $3.2 $3.3 $3.2 $2.7 $2.1 $3.4 $3.6 $4.0 $7.7 $11.0 $14.5 $20.4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 YTD Q1 $3.0 $21.5 $19.5 $22.2 $23.0 $26.5 $30.8 $28.2 $39.6 $52.5 $102.6 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

PricewaterhouseCoopers, Shaking the Money Tree ($ in Billions)

Total Investments: 1980-YTD 2009

Investments by Industry: Q1 2009
Software Biotechnology Medical Devices and Equipment Industrial/Energy Media and Entertainment IT Services Semiconductors Telecommunications Financial Services Networking and Equipment Business Products and Services Consumer Products and Services Healthcare Services Computers and Peripherals Retailing/Distribution Electronics/Instrumentation Other $0 $110.3 $107.9 $83.2 $58.6 $56.6 $46.7 $35.2 $28.2 $26.7 $15.8 $100 $200 $300 $400 $500 $600 $700 $234.4 $217.3 $206.7 $172.6 $412.4 $614.2 $576.8

Q1 2009 Total: $3,003 Million in 549 Deals

Visit www.pwcmoneytree.com for Industry definitions

($ in millions)

Investments by Industry: Q1 2009
Industry
Software Biotechnology Medical Devices and Equipment

# of Deals
138 81 52

% Change $ from Q4 '08
-41.98% -46.34% -26.81%

Industrial/Energy
Media and Entertainment IT Services Semiconductors Telecommunications Financial Services Networking and Equipment Business Products and Services Consumer Products and Services Healthcare Services Computers and Peripherals Retailing/Distribution Electronics/Instrumentation Other Total
Visit www.pwcmoneytree.com for Industry definitions

38
43 42 23 27 17 16 17 11 11 10 9 8 6 549

-74.95%
-44.56% -22.91% -34.61% -72.45% 25.58% -46.72% 42.15% -45.55% 9.77% -32.86% 0.08% -85.25% 78.19% -46.91%

($ in millions)

Investments by Stage of Development: Q1 2009
$1,331.9

Later Stage

Stage of Development
Expansion
$819.7

% Change in $ # of Deals Amount from Q4 2008 199 146 157 47 549 -35.15% -59.85% -45.93% -43.50% -46.91%

Later Stage
Early Stage
$682.8

Expansion Stage Early Stage Startup/Seed

Startup/Seed

$169.2

Total
$1,000

$0

Q1 2009 Total: $3,003.7 million in 549 deals
Source: Thomson Financial/National Venture Capital Association

Thomson Financial U.S. Private Equity Performance Index (PEPI)
(Investment Horizon Performance as of 3/31/2007)
Fund Type Early/Seed VC Seed VC Early VC Balanced VC Later Stage VC All Venture NASDAQ S&P 500 1 Year 8.0 6.8 8.0 25.4 23.5 18.1 3.5 9.7 3 Year 6.9 -0.2 7.2 12.3 9.6 9.6 6.7 8.1 5 Year -1.4 -4.0 -1.3 5.8 5.2 2.7 5.6 4.4 10 Year 37.7 0.8 40.0 18.0 10.0 21.0 7.1 6.5 20 Year 20.6 10.7 21.5 14.3 13.8 16.4 9.0 8.2

Source: Thomson Financial/National Venture Capital Association *The Private Equity Performance Index is based on the latest quarterly statistics from Thomson Financials' Private Equity quarterly Performance Database analyzing the cashflows and returns for over 1860 US venture capital and private equity partnerships over with a capitalization of $678 billion. Sources are financial documents and schedules from Limited Partner investors and documents General Partners. All returns are calculated by Thomson Financial from the underlying financial cashflows. Returns are net to Financial investor after management fees and carried interest.

Thomson Financial U.S. Private Equity Performance Index (PEPI)
(Investment Horizon Performance as of 12/31/2008)

Fund Type Early/Seed VC Balanced VC Later Stage VC All Venture (through 09/30/08) All Venture (through 12/31/07) NASDAQ S&P 500

1 Year 3 Year 5 Year 10 Year 20 Year -20.6 1.7 3.7 36.0 21.8 -26.9 4.6 8.4 13.5 14.5 -6.8 9.5 8.7 7.5 14.5 -2.1 20.1 -38.1 -36.1 6.3 9.5 -10.3 -10.0 8.4 8.6 -4.6 -4.0 17.1 18.1 -3.2 -3.0 17.0 16.7 7.3 6.1

Source: Thomson Financial/National Venture Capital Association
1The Private Equity Performance Index is based on the latest quarterly statistics from Thomson Reuters' Private Equity Performance Database analyzing the cashflows and returns for over 1266 US venture capital partnerships with a capitalization of $224 billion. Sources are financial documents and schedules from Limited Partner investors and General Partners. All returns are calculated by Thomson Reuters from the underlying financial cashflows. Returns are net to investor after management fees and carried interest.

Mistakes to Avoid
Not Knowing How to Fund (Continued) Where to get Funding -- Alternatives
Economic Development Agency (EDA) US Government Stimulus Funds Strategic Partners Customers Bootstrap/Organic Growth

Mistakes to Avoid
Don't Waste Money
Fancy offices and furniture Name law firms Name accountants Monster marketing

Endless meaningless market research Simple, focused market research or do your own Be smart with marketing dollars

Leverage the movers/influencers of your industry Articles in trades Web conferences Target customer audiences & Where they spend their time Use the Internet -- blogs, Web sites/Portals, Viral Marketing, Twitter, Facebook, Linkedin, etc.

"It is never too early to watch the cash"

In Summary
Keep it simple Make it easy for adoption of Solution Always be honest and forthright Show understanding of Technology & Marketplace Focus/Focus/Focus Have Fun

Business Basics of Becoming a Successful Technology Entrepreneur
Thank You!
Stan Tomsic
Administrator Business Technology Center of Los Angeles County 2400 Lincoln Ave. Altadena, CA 91001 626-296-6307

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