 Sunday, July 09, 2006
This is a quick, random blog entry. I have just stumbled upon Venturewoods.org, an interesting blog on entrepreneurship and venture/private equity investing for the Indian venture community by like-minded people. The blog has some interesting stuff.
On a totally irrelevant note, I am super excited for the final World Cup match where France plays against Italy. I will head out after submitting this entry to play squash with AJ before heading down to Phoenix Landing to catch the game.
Tuesday, June 13, 2006
I contributed a link and a short comment on Paul Graham's essay on replicating Silicon Valley elsewhere in America a few weeks ago. However, in an era of globalization, can Silicon Valley be replicated elsewhere in the world? What economics conditions and policies are conducive to producing a successful Silicon Valley overseas? Paul Graham, once again, explored the issues and came up with an essay entitled "Why Startups Condense in America" that addresses the question.
Although I study policy and management that focus on entrepreneurship and national economic competitiveness, I never really delve into the success of Silicon Valley and how it may be emulated. I have read and learned from class many of the things that Paul had mentioned in his essays; but I just didn't had the time or the opportunity to link these percepts together. I think that the essays are thought-provoking and I agree with Paul wholeheartedly. To replicate a successful cluster of high-technology companies, the best thing that policy-maker can do is not to force it to happen but build the right conditions and let it happen. It is like that inner voice in the movie Field of Dreams: "If you build it, they will come."
Saturday, June 10, 2006
Last Wednesday night, I attended an MIT Enterprise Forum event called "Talk to an Angel: Crucial Connections to Early Stage Capital," a panel discussion on the role angel investors play in early stage companies. Here are the main points from panelists:
- The definition of angel investor
- There are many types of angels.
- Angels usually invest out of their pocket money and manage their own investments.
- Angel investing is a hobby and consequently usually a part-time endeavor.
- Angels were successful entrepreneurs before.
- The definition of venture capitalist (VC)
- VCs invest with a set of criteria, which are typically:
- They invest with a minimum amount of capital (typically, no less than $3 million).
- They invest in companies that fit their profile.
- These days, they invest in revenue-producing ventures with very short product cycles.
- VC is a full-time job.
- There are some VCs who may dabble in angel investing on the side.
- It may take 1-6 months for a VC to write a company a check. For angels, this time frame is drastically reduced.
- Advices for entrepreneurs
- There are 8 1/2 million millionaires in the U.S. and all of them have the potential to write checks for startups.
- On approaching an angel, don't ask for money from the onset. Establish a relationship first. Remember that most angels were entrepreneurs before, so ask for advices.
- Find investors who understand what the company is doing.
- How to pitch to an angel?
- A pitch should be terse. Keep it under 3 minutes. During a pitch you should always mention what you are selling?
- To take this value proposition further, entrepreneurs need to show how investor's money will grow and how their enterprise can be self-sustaining.
- Having difficulty composing a pitch? Try writing an newspaper ad for your company. It is recommended by one of the panelist because an ad is about selling something and you keep it terse because of the space constraints.
- Different business plans should be given to different investors. There is no "one-size-fits-all" business plan or executive summary. Build an arsenal of various business plans and executive summaries, each catering to a different investor.
- Put your contact information on every page.
- How to work together after funding?
- Keep in mind that a majority of small businesses that received angel funding won't see VC funding.
- A company's growth strategy may not need to involve VC funding or IPO.
- Useful resources
- Do due diligence before approaching an investors. You can get a wealth of information including forms and tools, from these websites:
Friday, May 26, 2006
I have always been a fan of Paul Graham's essays on entrepreneurship. His recent essay entitled "How to be Silicon Valley" is a sobering paper that starts off with an interesting question: "Could you reproduce Silicon Valley elsewhere, or it there something unique about it?" He concluded the main reason Silicon Valley is what it is today is due to a sustained partnership between rich people and nerds. He also mentioned that many of today's highly successful companies in Silicon Valley were derived directly or indirectly from one stellar technological breakthrough in the 1950's - William Shockley's invention of the transistor. But the essay isn't written solely about Silicon Valley, it also highlights some of Paul's opinions on why Boston attracts a certain type of people (namely nerds). Having lived in Boston for the past 10 years, I certainly subscribe to Graham's theses about Boston and the people the city attracts.
Saturday, April 22, 2006
Even though I work at Analog Devices, I never have the opportunity to interact with Ray Stata, founder and Chairman of Analog Devices as well as a revered figure in that company. I was really excited when I heard that he would be the keynote speaker at the Technology and Entrepreneurship Forum (TEF) at MIT. Yesterday, Eimear and I attended the event and I took notes of Stata's talk. Here is a summary of his talk:
- You have to have passion if you want to be an entrepreneur.
- Even before MIT, he has always been interested in math and was motivated to start a company.
- He worked for Hewlett Packard after graduating from MIT; but after a short stint there, he founded Analog Devices with his former MIT roommate.
- Analog Devices started as a company that designed and manufactured transistor modules. At the beginning, things didn't go well in the startup. By today's standards, you can conclude that Analog Devices then was a failure. But it started producing products and more importantly established a good relationship with a customer who ended funding the company.
- But even if you fail, you will learn and do it better later. Again, you have to have passion for what you are doing, especially starting a new enterprise.
- It is not the initial business model that the company survived but rather the competence of the organization, and the flexibility to identify opportunities and threats and then reacting accordingly.
- As a startup, Analog Devices struggled with funding and there weren't a lot of venture capitalists in the Boston area in the 60's. Nonetheless, Analog Devices negotiated a deal with a bank who provided $1 as loan for every $1 the company earned.
- When Fairchild Semiconductors introduced the first Integrated circuit operational amplifiers (IC op amps) in the mid 1960's, the performance of these devices were dismal but were very cheap to manufacture. Furthermore, Stata said that the new technology which enable thin films to be deposited on silicon and then be laser trimmed to adjust the circuit resistance was elegant. He was absolutely convinced that IC op amps are the way of the future. But engineers disagreed and complained that the performance of the device was inferior to performance of the transistor modules that the company was making. So they resisted his call to develop IC op amps at Analog Devices. He went to the board and told them about this new technology. Again, the board resisted his call citing that the company was doing well with their current product offerings and there is no reason to adopt a new technology especially when it was still unproven and not very profitable. Still convinced that IC is the way of the future, Stata proposed to the board that he would sell his personal shares of Analog Devices and use the proceedings to fund and start a company that specializes in developing IC op amps. He said that if the startup were successful, Analog Devices can always acquire it later. If the startup fails, it was his loss. The board approved his proposal and Stata started the company that develops IC. Some years later as the IC technology became the dominant design in the semiconductor industry and was fast becoming a highly profitable enterprise, Analog Devices acquired the company that Stata started with his own money. Stata joked: "Well, here is your first case of disruptive technologies, way before Clay Christensen coined the term in his book, The Innovator's Dilemma."
- On leadership, Stata mentioned the 4 pillars of leadership.
- Sincerity - a good leader doesn't spin and is committed to people.
- Competence - a good leader uses good judgment.
- Trust - a good leader needs to know the people to gain trust.
- Reliability - a good leader has to be consistent in his/her actions.
- Looking for someone who is competent but without the ego is hard.
- Entrepreneurship is hard work. He quoted Thomas Edison: "It's 10% inspiration and 90% aspiration." Yes, that's 90% of hard work.
- Stata is a huge fan of system thinking and has this to say: "Understand how parts work together not how they work individually."
- When creating an organization, create a culture where people play nice and are accessible.
- Building a board is tough. Venture capitalist (VC) is a good member but make sure you check his/her reference.
- VC used to be risk-tolerant but they have now become risk averse.
- Stata ended his talk by emphasizing that entrepreneurship requires passion and a lot of hard work. He has been very lucky to have a very supportive and understanding wife. He continued to give attributes to his wife and family for the support they have given him.
During the Q+A session of the talk, I couldn't resist but to ask Ray Stata the following question:
Startups rather than big companies are more likely to adopt disruptive technologies and take risk in developing business around them. Do you think Analog Devices still has the competence in this area? Also, what do you see the next technology and business model for Analog Devices?
He answered that not many big companies, past and present, have successfully adopted new technology. Strong leadership is needed in making such transition. He believes that Analog Devices can do it. As for the next big thing, he said that we need to follow where the money is. The government is funding research in energy and nanotechnology. He believes that these are hot areas. Overall, I don't think he answered the question fully but it was still a pleasure listening to his talk.
Friday, February 17, 2006
What I really like about last night's presentation on "How to make a
great pitch to investors" is that it offer 2 perspectives of business
pitch, that of a CEO and that of a Venture Capitalist (VC). Between the 2
presentations, I find Rana Gupta's presentation more illuminating. Here
are the main points from his presentation:
- Started off by disagreeing with Cary. He jokingly said that VCs are
not the smartest people in the room. If they are so smart, why they
didn't see the Internet Bubble coming?
-
Pitch is like a resume, it's a hook, but it has a story to tell.
- Each point of greatness has to be countered with risk reduction. Don't use the clique "a great opportunity."
- Convey how you have reduced substantial risk in the deal.
- Make investors excited and comfortable.
- Grab the investors by describing the drama of pain. For example, "the market can't live without this."
- State your assumptions on your slide - this often overlooked.
Assumptions cast off the investors doubts and questions by recognizing
what is most variable.
-
Don't splash your presentation slide with corporate icons especially
when you don't have any substantive contact with those companies yet.
Sorry, middle managers and engineers don't count. Only when you have
contacted a decision maker with substantial follow-up can you even
mention that you have contacted that company in your pitch. If you do
have credible contacts, show them on a table (no names please, just
title) and when, including follow-ups.
- A deal has three legs (like a stool), comprising of the team, the
product, and the market. Always build your pitch around these 3
components.
- Don't say we have a patented technology when you haven't even
filed for one or even possess a provisional. Saying patent-pending
isn't great either. Say this instead: "We have 3 provisionals, 1 filed,
and 1 issued."
- State clearly the deal (usually at the end), including the terms and timing. Keep it simple and clear.
- If you have advisors in your team, it is important to tell
them how accessible you are to them. Please if you consult your advisor
only once a quarter, that doesn't count. They have to be accessible to
your enterprise.
- Finally, Rana in defense of all VCs over the world, causally
debunked the fact that VCs are not evil people. He emphasized that VCs
have no collateral on you. They are not giving you a loan, they are
investing. If they lose it they lose it all. Of course, they want to
know about risk. Everything is examined under careful scrutiny.
Therefore, every attribute that you pitch has to have a risk-reducing
component.
Excellent presentation... I really like it.
The MIT Enterprise Forum of Cambridge kicked off the 2006 $125k Ignite Clean Energy Business Competition featuring 2 excellent speakers: Cary Bullock, CEO of GreenFuel Technologies and Rana Gupta, VC at Navigator Technology Ventures. Both presenters gave excellent presentations on pitching a business to investors with Cary giving the perspective of an ent>
Here are the main points of Cary's presentation:
-
Don't run out of money when you are in a startup, you have less leverage asking investors for money when you have exhausted your money. The investors know that you are desperate.
-
Sometimes investors are more receptive if they know that you don't come with an agenda of asking for money. Investors are especially keen if you come to solicit feedback from them about your idea. Believe it or not, many investors are more than happy to help you.
- Investors don't have a long attention span. Keep it terse and go straight to the point. That's why a good pitch is key.
- Of course, being investors, they are interested in making money. So tell them how you make money with your idea.
- Practice your presentation. If you have more than 1 person presenting, choreograph it. Have people available to answer the different aspects of the business - from products to finance.
- Be prepared with the elevator speech. Oh yeah, elevator speech isn't just done in the elevator. Telephone follow-up is a situation where elevator is done.
- Get a great lawyer don't skim!!! All lawyers sound articulating but look for someone with substance.
- Don't overvalue your company.
- Partnership is critical.
- Everyone in the company has to have the same story. In other words, everyone in the company should say the same thing consistently to the customers and investors.
Friday, December 02, 2005
One of the perks of being at MIT is that students get to form teams with other entrepreneurial minded students and enter the $50k competition
to compete for the best business plan at MIT. Prelude to the $50k
competition is the $1k competition, which serves as warm-up to the big
event. Ever since I went to my first $50k competition event,
I have been hooked to entrepreneurship. Back with a vengeance from not
getting into the finals of the last $50k competition, our team was one
of the 10 winners in last night's $1k award ceremony. We won the
tiny tech category. It was a good team effort. The next stop: the $50k
competition next spring.
Thursday, November 03, 2005
To prep up MIT students who are interested in participating the upcoming business plan competitions at MIT - the $1k competition in the fall and the $50k competition in the spring - the $50k organizing team arranged for a class on business executive summary writing earlier tonight. Our guest speaker was Ian Carver from Price Waterhouse Coopers who has significant experience in advising startups. Without going into too much details, Carver said that the following are the things that every VC is looking:
- Addressable Target Market
- Market Validation
- Competition
- Revenue Model
- Management Team
- Go to Market Strategy
- Funding Requirements
Friday, May 06, 2005
After 2 weeks of suspense, the finalists for the MIT $50k Competition
were finally announced on Wednesday night. Sigh... Sorry to say, my
team didn't make it to the finals. I was disappointed but the
competition was a great learning experience for me and it certainly
kindled the entrepreneurial spirit within me.
For old time sake, John, our team leader, organized a get together
over a few pints of IPA beer at the Muddy Charles in the afternoon
today. It was consolatory to note that none of us was dwelling on not
making to the finals. We identified possible weaknesses in our business
plan and outlined a 6-month plan for our venture. In hindsight, we were
probably a little optimistic with the revenue streams in our business
plan, as well as being 6 months too early in making a pitch to venture
capitalists with our business. Nevertheless, everyone in the team still
believes that the business and technology of our venture is viable.
We'll see where this venture takes us.
Thursday, April 28, 2005
My team brought back the "bacon" earlier tonight. Yes, we won 2nd place
overall in the student category for our business presentation at the
$125k competition. In additional, we won the coveted top prize of $25k
rent credit to Cummings Properties. I am very excited and pleased that
my experience at Analog Devices and sleepless nights of crunching the
financial data have contributed to the team’s success.
No rest for us now, we need to focus in getting into the final
round of the MIT $50k competition - the holy grail of all business plan
competitions. To my some of my fellow classmates who have been telling
me that my free time could have better spent on class work, I have this
to say: "There's definitely more that one can experience beyond the
confines of the classroom."
Thursday, March 24, 2005
On other news, it looks like the management students in my 50k team will be taking control of the team while other team members take time off to complete their PhD thesis so that they can graduate in May.  But seriously, both Peter and I have plenty to do before the business plan and financial projection are due in a month from now. While it is a lot of work, I really enjoying the experience with this 50k business plan competition. I often compare the 50k experience to the taking of a 12 unit (or 4 credits) MIT class. The difference is that you actually have to "get down and dirty" in building a real business plan in 50k.
Friday, March 11, 2005
Being an entrant to the MIT 50k competition,
I was invited to the semi-final awards last night. Unfortunately, our
team didn’t make it to the semi-final. Perhaps, in hindsight it isn't
difficult to understand why our team
didn’t win. As you can see, the more technical the idea, the more the
judges (or venture capitalists) want to see a proof-of-concept of the
idea. A proof-of-concept has to be defensible and most of offer
competitive advantage. In other words there better be a patent or a
patent-pending associated with the idea. We have a great idea but it
was
a little premature to ask for funding to start making products when we
don’t even have any solid evidence if the idea even works. The purpose
of
the 50k competition is to build a company to sell products not
asking for research grant.
In hindsight it is always easy to reflect on our failure. Nevertheless,
I have learned so much from the experience. More than that, it is a
calling for me. The 50k competition has uncovered the entrepreneurial
spirit within me to get involved in building a successful enterprise.
The keynote speaker for the 50k event last night, Rizwan Virk,
expressed my thoughts most eloquently. Rizwan is a
successful entrepreneur who had start 3 different companies to date and
written a book on entrepreneurship. While most books
on entrepreneurship focus on the mechanics, his book titled Zen Entrepreneurship
look at entrepreneurship from a spiritual perspective. Rizwan provided
insights how entrepreneurship is like embarking on a Hero's journey, in
which the hero (which is you) grows to become more matured person at the end of the journey. The example that he used
to illustrate his point was Frodo in the Lord of the Ring. Overall, his speech last night can be summarized in the following:
Why is entrepreneurship like the Hero's journey?
- You can win a lot of treasure.
- You will be up against impossible odds.
- To be successful, you will have to recruit allies. For you Lord of
Rings fans, this means that you should go look for your Strider and
Gollum.
- You never know what is going to happen next.
- You'll end up a different person than when you started.
There's a happy ending to my 50k endeavors after
all as I was invited to join another semi-finalist team yesterday. I went for our first team meeting today. Like
my PDD team, this new 50k team made up of a diverse group of highly talented
and motivated individuals. I am really excited to embark on this new
journey of entrepreneurial learning experience. Wish us luck.
Thursday, February 24, 2005
I have been very quiet on cyber blogspace the last 3 days. It’s not
that I have nothing to contribute to my blog, but I was simply
overwhelmed by a business proposal that I need to compose for the 50k competition
that was due earlier today. 2 days ago, I was contacted by a
semiconductor research scientist at MIT whom I met at last week's 50k
smoozing session about his interest in entering the 50k with me. I
wasreally planning to enter the 50k competition next year when I would
be better prepared for the competition after completing a few essential
management classes. But the scientist's idea was simply too good to
pass up. Our idea for the competition is to create a business venture
to commercialize semiconductor material that is based on his research.
After all these years working in the wafer fab as a software engineer,
I actually learned more about semiconductor in the past 2 days while
writing the executivesummary for the 50k entry than I ever did in my
entire career at Analog Devices. You are generally more motivated to
learn new things in graduate school while you tend to work on a
need-to-know basis unless it's a task that you are directly responsible
for.
I was glad that our team had managed to submit our entry successfully
by the deadline. I'll cross my fingers and hope that our business
proposal will go make it to the finals, which should make the 50k
experience much more interesting. Regardless, this is a great
educational venture for me whether we win or not.
Thursday, February 17, 2005
Since attending the last 50k competition
event last week, I have been receiving emails about upcoming events
relating to 50k competition. Last night's event was an informal pizza
dinner/get-together to discuss about energy related technology as well
as identifying compatible participants to form teams for the
competition. Once again, I was over dressed with suit and tie for the
occasion as I had mistaken the event as a formal dinner. Yeah, I did
appear looking like a sleazy well-dressed student from the management
school. Note to self, unless explicitly told, dont ever wear a tie and
suit to any MIT event. Gosh, I am a geek and I am hanging out with
geeks now. It's ok to be scruffy. Nonetheless, this is the best 50k
meeting that I have attended so far. It was very informative and I
really found myself surrounding by some of the brightest minds in
energy technology and research. I can see why 50k kick-off events are
melting pots of technologists looking for business people to
commercialize their ideas, while business people looking for
opportunities with new technology emerging out from the labs of MIT. We
openly discussed some great novel energy technology and business ideas
on how we can capitalize them. I dont think I am ready for the
competition yet nonetheless it was a good learning experience (and good
pizza).
Tuesday, February 15, 2005
So I met the 2 guys who invited me to form a team with them to enter the MIT 50k competition.
Unfortunately, I really thought that their proposed idea was too
complicated for entry to the competition. It would require a lot of
research and planning to write a good business plan and proposal to
convince the judges that the business model is sound. I think the idea
is fairly good but project would be time consuming. Consequently, I
decided not to join the team and wished them good luck.
I went for my first outside run of the year earlier tonight. I think
I am doing well for my triathlon training. I just need to start
practicing swimming soon. But what I really need is swimming lessons to
improve my strokes. There are some semi-private swimming lessons that I
can take at MIT but I need to buddy up with at least a person to
qualify for it. So anyone interested?
Thursday, February 10, 2005
I went to the MIT 50k competition
kick-off event last night. For those of you who dont know what the 50k
competition is, it is a competition at MIT where students form teams to
propose an idea or product (often the result of some research on
campus)that has huge business potential. Teams with the best business
plan wins. Entrants get to meet venture capitalists and other industry
contacts that may fund or help launch entrants' own companies. In fact,
50k competition has given birth to some very successful companies in
past, like Akamai, net.Genesis, Virtmed, etc. I didn't have any agenda
going to the 50k event other than checking it out. There were 2 guest
speakers that night who talked about the do's and don'ts of
entrepreneurship. One was the co-founder of net.Genesis and the other
the found of NewMerix and Service Metrics. There were also a few
venture capitalists that night, although I didn't get the chance to
talk to them. But seriously, it wasn't as extravagant as it sounds. It
was my first experience in such event and I found the atmosphere to be
very causal and cordial. To my surprise, you don't have to have a great
idea to participate in 50k. Is like this, people match up with people
who complements their own skills and talents. Diversity is critical to
any successful enterprise. Every team member of an enterprise
contributes something important, people with big ideas or vision will
look for people of other talents and vice versa. I was surprised that a
few people talked to me regarding opportunities in forming a team but I
doubt I have the time for it. However, I am definitely looking forward
to the 50k competition in the fall. This should give me the whole
summer to think about the next big idea.
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Name:Samuel Chow
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Location:Cambridge, Massachusetts, United States
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