e145/sts173 session 2 silicon valley and...
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E145/STS173E145/STS173
Session 2Session 2
Silicon Valley and EntrepreneurshipSilicon Valley and Entrepreneurship
Professor Randy KomisarStanford University
Copyright © 2006 by the Board of Trustees of the Leland Stanford Junior Universityand Stanford Technology Ventures Program (STVP). This document may be
reproduced for educational purposes only.
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AgendaAgenda
1. Stanford’s Office of TechnologyLicensing - Linda Chao
2. Admit and Waiting List - Eric Carr
3. Discussion of Stanford and SiliconValley - Randy Komisar
4. Key High-Technology EntrepreneurshipFrameworks - Randy Komisar
5. Opportunity Analysis Project and StudyTeam Formation - Eric Carr
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First, A Look at Stanford UniversityFirst, A Look at Stanford University
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Early Years: Fred Early Years: Fred Terman Terman and HPand HP
! Professor Terman brought Hewlett
and Packard together at Stanford
! In 1939, the two decided to “make
a run for it ourselves” and founded
HP at a now-famous garage in
downtown Palo Alto
Source: John Hennessy
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Another Golden Age: Early 1980sAnother Golden Age: Early 1980s
! Many new technologies as radical innovations
! Emergence of John Hennessy as another Terman
! Very productive era ...
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1990s: The Internet1990s: The Internet
!Two EE students in a trailer
!Use of Yahoo on and off-campus explodes
!Form independentcompany
Source: John Hennessy
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2000s2000s
!Two students dissatisfied with Netsearch
!They work furiously in their spare timeto develop a better way
!They form a company to exploit theopportunity others had left behind
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StanfordStanford’’s Role in Silicon Valleys Role in Silicon Valley
! Interaction with industry (via legacy just discussed)
!Research funding and creativity
!Silicon Valley as a nearby planting ground for ideas
!Role of students as inventors, as disseminators, and
as part of the workforce
!Encouraging entrepreneurship …
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More Success FactorsMore Success Factors
! Talent pool and social networks
" Loyalty to the technology with a unique openness
"Highly skilled and motivated
"Diverse (highly multicultural)
! Many early adopters of new technology to quickly learn from
! Services infrastructure with many suppliers for outsourcing
! Venture capital for both financing and team building
! Entrepreneurial spirit
" Role models that demonstrate both confidence and paranoia
"OK to fail, learn from it, and then try again
" Flat organizational structures
"OK to talk/partner across company boundaries about common
issues
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Questions for DiscussionQuestions for Discussion
1 . What could go right (and wrong) in SiliconValley in the coming 10 years?
2 . Where do you plan to live to start your careernext year and why?
References for Stanford and Silicon Valley Content:President John Hennessy of Stanford University:
James Gibbons of Stanford University; John Doerr of Kleiner Perkins;John Chambers of Cisco; Annalee Saxenian and Homa Bahrami of UC Berkeley
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© 2003 Mark P. Rice, Babson
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Key High-Technology EntrepreneurshipKey High-Technology Entrepreneurship
Framework #1: Framework #1: Dorf Dorf and Byersand Byers
Vision
Strategy
Execution
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Vision:
Strategy:
Execution:
Reference: Dorf and Byers (Figure 8.4)
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Fundamental Questions: VisionFundamental Questions: Vision
What do the founders wish to achieve with the business? What is our shared vision and goals?Where do we want to go and what business are we in?
Example: what business are they really in?•Yahoo … Internet Directory?•Palm … Organizers?•Google … Search?
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Do we have the right strategy?Who is going to buy?What are we selling?Why are we better?
Fundamental Questions: StrategyFundamental Questions: Strategy
Reference: Steven Brandt
Fundamental Questions: ExecutionFundamental Questions: Execution
Can we do it?What resources are needed?What is the blueprint for growth?Can we adapt?
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Reference: Sahlman
Key High-Technology EntrepreneurshipKey High-Technology Entrepreneurship
Framework #2: Framework #2: SahlmanSahlman’’s s Concept of FitConcept of Fit
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A race againsttime to create
value andreduce risk
Framework #3:Framework #3:
Dynamics of the Start-Up GameDynamics of the Start-Up Game(1) Founding:
An entrepreneur begins with a vision and shares of stock in the new venture.
Entrepreneur trades stock forideas, money, and people
(2) Seed Stage:•Venture capitalists providemoney in return for stock
•Employees join via friends &associates in return for cashsalary and stock options
•Ideas become intellectualproperty which represents theinitial value in the company
Further growth is delayeduntil milestones arereached and risk offailure is reduced
(3) Growth Stage:More money, ideas, and people are
obtained, but for much less stock thanin the earlier stage due to lower risk
Company balances earningcash, taking investment, andspending cash to create value
(4) Exit Stage:•IPO or M&A
•Entrepreneur, investors, andemployees can cash in stockfor money
•A viable company has beencreated or expanded
•Each entrepreneur continuesto build the company, retires,or starts the game again
Value has beensuccessfully created.
Reference: Start-Up by Jerry Kaplan
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1 . Big Market?
2 . Winning Strategy?
3 . Excellent Team?
Framework #4:Framework #4:
KomisarKomisar’’s s ““3 Questions Every3 Questions Every
Venture Capitalist Wants to KnowVenture Capitalist Wants to Know””
Reference: Randy Komisar
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Opportunity Analysis ProjectOpportunity Analysis Project
OverviewOverview
(Eric Carr)(Eric Carr)
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E145/STS173
2005
Team
Formation