1 Engineering 145Engineering 145Session #2Session #2Silicon Valley and EntrepreneurshipSilicon Valley and EntrepreneurshipProfessor Randy KomisarStanford UniversityCopyright © 2008 by the Board of Trustees of Stanford University and STVP.This document may be reproduced for educational purposes only.2AgendaAgenda1. Admit and Waiting List - Emily & Austin2. Discussion of Stanford and Silicon Valley - Randy3. Key Frameworks and Models for TechnologyEntrepreneurship - Randy4. Opportunity Analysis Project - Ann and Anand(Chi-Hua)5. Team Formation - Ann and Anand3First, A Look at Stanford UniversityFirst, A Look at Stanford University4Early Years: Fred Terman and HPEarly Years: Fred Terman and HP Professor Terman brought Hewlettand Packard together at Stanford In 1939, the two decided to “makea run for it ourselves” and foundedHP at a now-famous garage indowntown Palo AltoSource: John Hennessy5Another Golden Age: Early 1980sAnother Golden Age: Early 1980s Many new technologies as radical innovations Emergence of John Hennessy as another Terman Very productive era ...61990s: The Internet1990s: The Internet Two EE students in a trailer Use of Yahoo on and off-campus explodes Form independentcompanySource: John Hennessy72000s2000s 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 behind8StanfordStanford’’s Role in Silicon Valleys Role in Silicon Valley Interaction with industry as just discussed Research funding and overall creativity Silicon Valley as a nearby planting ground for ideas Students as inventors, disseminators, and workforce Encouraging entrepreneurship on campus …9Other Factors inOther Factors inSilicon ValleySilicon Valley’’s Successs Success• Its talent pool and social networks Loyalty to the technology with a unique openness Highly skilled and motivated Diverse (highly multicultural)• Its many early adopters of new technology• Its services infrastructure with many suppliersfor outsourcing10Even More Factors inEven More Factors inSilicon ValleySilicon Valley’’s Successs Success• Its venture capital industry that provides morethan financing (e.g., assembling teams)• Its entrepreneurial spirit or DNA Role models that demonstrate both confidenceand paranoia OK to fail, learn from it, and then try again Flat organizational structures and meritocracy OK to talk and partner across companyboundaries about common issues and challenges11Questions for DiscussionQuestions for Discussion1. 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 Berkeley12© 2003 Mark P. Rice, Babson13Key Framework #1: Dorf and ByersKey Framework #1: Dorf and ByersVisionStrategyExecution14Vision:Strategy:Execution:Reference: Dorf and Byers (Figure 7.1)15Fundamental 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?16Do 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: ExecutionCan we do it?What resources are needed?What is the blueprint for growth?Can we adapt?17Reference: SahlmanKey Framework #2:Key Framework #2:SahlmanSahlman’’s Concept of Fits Concept of FitA race againsttime to createvalue andreduce riskFramework #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 companyFurther growth is delayeduntil milestones arereached and risk offailure is reduced(3) Growth Stage:More money, ideas, and people areobtained, but for much less stock thanin the earlier stage due to lower riskCompany 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 againValue has beensuccessfully created.Reference: Start-Up by Jerry Kaplan191. Big Market?2. Winning Strategy?3. Excellent Team?Framework #4:Framework #4:KomisarKomisar’’s s ““3 Questions Every3 Questions EveryVenture Capitalist Wants to KnowVenture Capitalist Wants to Know””Reference: Randy Komisar20Opportunity Analysis ProjectOpportunity Analysis ProjectOverviewOverview21Team FormationTeam