1 Engineering 145Engineering 145Session 2Session 2Silicon Valley and EntrepreneurshipSilicon Valley and EntrepreneurshipProfessor Randy KomisarStanford UniversityCopyright © 2007 by the Board of Trustees of the Leland Stanford Junior Universityand Stanford Technology Ventures Program (STVP). This document may bereproduced for educational purposes only.2AgendaAgenda1. Stanford’s Office of Technology Licensing -Linda Chao2. Admit and Waiting List - Eric Carr3. Discussion of Stanford and Silicon Valley -Randy Komisar4. Key Technology EntrepreneurshipFrameworks - Randy Komisar5. Opportunity Analysis Project and StudyTeam Formation - Eric Carr3First, A Look at Stanford UniversityFirst, A Look at Stanford University4Early Years: Fred Early Years: Fred Terman Terman and HPand 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 (via legacy just discussed)• Research funding and creativity• Silicon Valley as a nearby planting ground for ideas• Role of students as inventors, as disseminators, andas part of the workforce• Encouraging entrepreneurship …9More 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 commonissues10Questions 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 Berkeley11© 2003 Mark P. Rice, Babson12Key High-Technology EntrepreneurshipKey High-Technology EntrepreneurshipFramework #1: Dorf and ByersFramework #1: Dorf and ByersVisionStrategyExecution13Vision:Strategy:Execution:Reference: Dorf and Byers (Figure 8.4)14Fundamental 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?15Do 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?16Reference: SahlmanKey High-Technology EntrepreneurshipKey High-Technology EntrepreneurshipFramework #2: Framework #2: SahlmanSahlman’’s s Concept of FitConcept 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 Kaplan181. 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 Komisar19Study Group and Project TeamStudy Group and Project TeamFormation (EricFormation (Eric Carr)Carr)13 teams of 5 students each13 teams of 5 students each20Opportunity Analysis Project OverviewOpportunity Analysis Project Overview(Eric Carr)(Eric Carr)•Check out the OAP web site for more details + dates•Focus on Assessing an Idea to Opportunity•Not looking for a Used Car Sales pitch - Be Honest•Key Deliverables•Web Site + Interim Deliverables•Marketing Position Statement, Project Status Report, etc.•Presentation (15 minutes)•Term Paper (Executive Summary)•Check out Team tab for examples from last year•Good