John Hennessy - Guest Lecturer

Challenges of growing a startup

• Google and Facebook are by far the exceptions

Finding an appropriate busines model

• as technologists, we tend to focus on the tech. However finding the business models can be as or harder than the business plan

MIPS

• founded before there was the idea of fabless chip companies
  • companies like qualcomm didn’t exist
• turned out to be the hardest part for MIPS. Companies weren’t willing to simply buy chip designs

Yahoo was spun out of the university, before it had a business model. Sequoia helped them figure it out. Paypal, had an unviable business model to start with.

Scaling, going beyond the first product

• the game has only begun with a first successful product
• rarely are companies successful with only their first product

Finding management talent

• it’s hard to management of the same caliber as the techinical team
• it’s often the case that the initial management team is not the same team that takes a company to scale
• In case of MIPS:
  • first CEO was great for the start of the company
  • however, the company wasn’t moving quickly after a while
  • not enough agressiveness
• founders of MIPS were not the management types
• without Sheryl facebook doesn’t work
• nobody would have executed as well as Schmidt

Sales

• good sales people are worth their weight in gold
• hard to find and hard to gauge

Growing at the right speed

Building the company at the right speed can also be a challenge:

• if you try to build out the company too fast, you might build out marketing and sales force before you have a technology
  • This can result in layoffs: terrible for startup morale
• you can also grow the business part too slowly, and have a product that you can’t sell!
• it’s a great balancing act

Being adaptive

• Apharos had a two year technology lead, but got cut by about 50% due to economic slowdown
• competition changes
  • at the outset, the competition is soft
  • however, competition can pickup quickly
• Apharos quickly

Post IPO

first remark:

• the public ipo market for companies without revenue models is going to collapse, simply based on what we saw last time.

Then, when you’ve gone public, how do you continue to grow?

• as the company grows, the core market can’t support the whole company
• once everyone has a pc, the market for pc’s doesn’t grow that quickly

some companies then turn to acquisition models in order to grow

other points

• fostering future management: startups often fail at doing this
  • even in academia, this mentorship doesn’t just happen

Questions:

Q: when do you buck the trend?

MIPS was started by reluctant entrepreneurs. They realized that if they didn’t take this technology out of academia, nobody was going to pick it up.

Q: Role of university president in fostering entrepreneurial culture

Possible Questions

• Read some notes about power law distribution on startup returns
• open hardware
• you’ve been around more than one boom/bust cycle, can you give us some context about what is happening now, and what you see is going to happen in the near future