E145/STS173 Session 2 Silicon Valley and EntrepreneurshipAgendaFirst, A Look at Stanford UniversityEarly Years: Fred Terman and HPAnother Golden Age: Early 1980s1990s: The Internet2000 +Stanford’s RoleOther Factors in Valley’s SuccessMore Success FactorsQuestions for DiscussionKey High-Technology Entrepreneurship Framework #1: Dorf and ByersSlide 13Fundamental Questions: VisionDo we have the right strategy? Who is going to buy? What are we selling? Why are we better?Slide 16Slide 17Key High-Technology Entrepreneurship Framework #4: Komisar’s “3 Questions Every Venture Capitalist Wants to Know”E145/STS173E145/STS173Session 2Session 2Silicon Valley and EntrepreneurshipSilicon Valley and EntrepreneurshipProfessor Randy KomisarStanford UniversityCopyright © 2004 by the Board of Trustees of the Leland Stanford Junior University and Stanford Technology Ventures Program (STVP). This document may be reproduced for educational purposes only.AgendaAgenda1. Discussion of Stanford and Silicon Valley2. Key High-Technology Entrepreneurship Frameworks 3. Opportunity Analysis Project and Study Team Formation (Course Organization)First, A Look at Stanford UniversityFirst, A Look at Stanford UniversityEarly Years: Fred Terman and HPEarly Years: Fred Terman and 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 AltoSource: John HennessyAnother Golden Age: Early 1980sAnother Golden Age: Early 1980sMany new technologies as radical innovations Emergence of John Hennessy as another TermanVery productive era ...1990s: The Internet1990s: The InternetTwo EE students in a trailerUse of Yahoo on and off-campus explodesForm independent companySource: John Hennessy2000 +2000 +Two students dissatisfied with Net searchThey work furiously in their spare time to develop a better wayThey form a company to exploit the opportunity others had left behindStanford’s RoleStanford’s Role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 …Other Factors in Valley’s SuccessOther Factors in Valley’s SuccessMany lead users and early adopters to quickly learn fromInnovatorsInnovatorsEarlyEarlyAdoptersAdoptersEarly Early MajorityMajorityLateLateMajorityMajorityLaggardsLaggardsBowling AlleyMain StreetTornadoSource: Moore (1995), Inside the TornadoMore Success FactorsMore Success FactorsTalent poolLoyalty to the technology with a unique opennessHighly skilled and highly motivatedSocial networks of peopleDiverse (highly multicultural)Support infrastructure with many suppliers & outsourcingVenture capital for both financing and team buildingEntrepreneurial spiritRole models (with 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 issuesQuestions for DiscussionQuestions for Discussion1. What could go right (and wrong) in Silicon Valley in the coming 10 years?2. Where do you plan to live to start your career next 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 BerkeleyKey High-Technology Entrepreneurship Key High-Technology Entrepreneurship Framework #1: Dorf and ByersFramework #1: Dorf and ByersVisionStrategyExecutionVision:Strategy:Execution:Reference: Dorf and Byers (Figure 8.4)Fundamental Questions: VisionFundamental Questions: VisionWhat 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?Do we have the right strategy?Who is going to buy? What are we selling? Why are we better?Fundamental Questions: StrategyFundamental Questions: StrategyReference: Steven BrandtFundamental Questions: ExecutionFundamental Questions: Execution Can we do it? What resources are needed? What is the blueprint for growth?Can we adapt?Reference: SahlmanKey High-Technology EntrepreneurshipKey High-Technology EntrepreneurshipFramework #2: Sahlman’s Concept of FitFramework #2: Sahlman’s Concept of FitFramework #3:Kaplan’s Startup Game“A race against time to create value and reduce risk” (1) Founding:An entrepreneur begins with a vision and shares of stock in the new venture.Entrepreneur trades stock for ideas, money, and people(2) Seed Stage:•Venture capitalists provide money in return for stock•Employees join via friends & associates in return for cash salary and stock options•Ideas become intellectual property which represents the initial value in the companyFurther growth is delayed until milestones are reached and risk of failure is reduced(3) Growth Stage:More money, ideas, and people are obtained, but for much less stock than in the earlier stage due to lower riskCompany balances earning cash, taking investment, and spending cash to create value(4) Exit Stage:•Company files for IPO•Entrepreneur, investors, and employees can cash in stock for money •A viable public company has been created•Each party continues to build the company, retires, or starts the game againValue has been successfully created.Reference: Jerry Kaplan1. Big Market?2. Winning Strategy?3. Excellent Team?Key High-Technology EntrepreneurshipKey High-Technology EntrepreneurshipFramework #4: Komisar’s “3 Questions Framework #4: Komisar’s “3 Questions Every Venture Capitalist Wants to Know”Every Venture Capitalist Wants to Know”Reference: Randy