entrepreneurial lessons

Entrepreneurial Lessons

Rafi Gidron

rafi@prologue.co.il

Prologue – Parallel Entrepreneurship

Prologue is an investment and entrepreneurship organization that invests

intellectual, financial and management resources to create and nurture early-stage

ventures targeted at high growth markets and applications

The Prologue Parternership

• Principals:– Dr. Rafi Gidron

• Chromatis (founder), Scorpio (founder), AST, Columbia University

– Orni Petruschka • Chromatis (founder), Scorpio (founder),

Cellaris, ECI, Bellcore, Cornell– Albert Olier

• Chromatis, Scorpio, ZettaLight, IAF, Technion– Nimrod Goor (US Office)

– Model N, Devicescape, MedSim, Banner Aerospace, HBS

High-Tech Commercialization – Drivers

Capital

Technology

Market

Entrepreneurship

Prologue – Value Proposition

Undeployed Capital

Technology Backlog

Large Markets

The Prologue Concept

A Company is Born

A Company is Born

Entrepreneurial Lessons

From $0 to $4.75 billion in 27 Months

Ha’aretz, June 2000

Lucent’s Share

August 2001

From Acquisition to Closure in 14 Months

Ha’aretz, August 2001

“Because it is there” George Mallory, British Mountaineer,

before attempting to climb Mount Everest in 1924

The Challenges

• Market

• Technology

• Finance

• Business

• Execution

• Exit (financial reward)

• Fun

The Means

• Team• Product selection• Execution and culture• Finance• Timing• Luck

The Team

• Core team• Employees• Venture capital• Board of directors,

board of advisors

Team Selection -Core Team and Employees

• Balanced and seasoned founding team

• Founders from the target market and from Israel

• Employees with high B/E (Brain/Ego) ratio

• Preference to potential vs. experience

• Enhance the management team with expertise according to the company’s life stages

Road to Success

– The right product at the right cost point (Marketing, R&D, CTO)

– Development execution (R&D)– Bugs free easy to operate systems (R&D)– Be in front of the customer (Sales)– On-time delivery (Operations)– Customer support (Sales, R&D)– Infrastructure (HR, Finance,

Administration)– Financing, coordination, management

Team Selection - Venture Capital

• Resources to support the company over time

• Chemistry with management

• Leading US-based VCs for their reputation and contacts base

• Israeli VC for comfort level for US-based VCs

• Strategic investment: dilemma

Team Selection - Directors and Advisors

• Enhance board with external director

• Name recognition

• Experience

• Contacts to client base

• Contacts to strategic partner base

Product Selection - Tradeoffs

• Market opportunity is not obvious - some selection criteria:– Market needs vs. Market trends– Execution risk vs. Technology risk– Niche vs. Mainstream– Geographical focus vs. Worldwide – Point product vs. Platform

• Numerous roadmap choices

(depending on product

complexity)

• Product selection is only

a basis for change!

Product Direction

• Keep an open mind• Be in the face of customers• Listen to customers• Listen to your colleagues, peers,

subordinates, supervisors

Execution

• Company setup

• Focus Focus Focus• Professionalism

• Culture and values

Company Setup

• Target market based company - facilitates access to market and strategic partners

• Israeli R&D

• Avoid usage of government aid programs with strings attached

• Significant target market presence from Day 1

• Over time move center of gravity to the target market as company matures

Professionalism• Take responsibility - no “small head”• Dedication• Be on time• Challenging, not impossible milestones• Balance between orderly and creative

processes - know, or ask, when it is ok to cut corners

• Raise a red flag the moment you identify the problem

• Do your utmost to solve the problem

Company Culture and Values• We are all partners• Listen and communicate • Team work• Hierarchy does not mean much• Talk at eye level internally and

externally • Help recruit more good people• No bullshit

Timing is Everything

• Market development and product introduction phases: Prefer time to market over completeness

• Financing rounds

• Exit considerations

IPO vs Acquisition

• Build the company solely for IPO

• When an acquisition opportunity comes up, consider shareholders value in light of IPO track risks:– stock market volatility– political risks– execution risks

Luck

“I have climbed my mountain,

but I must still live my life”Tenzing Norgay, first to climb Mount

Everest together with Sir Edmund Hillary

Lessons Learned the Hard Way

• A few examples:– Strategic investment - created

misperception in the industry– Operations support was

started too late– Product definition zigzag– R&D performance could be

even better– Late in correcting staffing

mistakes