Technical Entrepreneurship

1
TECHNISCHE UNIVERSITÄT BERLIN INSTITUT FÜR
INFORMATIK
HUMBOLDT-UNIVERSITÄT ZU BERLIN INSTITUT FÜR
INFORMATIK
TECHNICAL ENTREPRENEURSHIP Vorlesung
1 INTRODUCTION Wintersemester 1999 Leitung
Prof. Dr. Miroslaw Malek Betreuer Peter K.
Ibach www.informatik.hu-berlin.de/rok/entreprene
urship
2
THE GOALS

• Development of a viable Business Plan
• Team Formation
• Idea Development
• Initial Presentation
• Midterm Report
• Final Presentation
• Prize Award Ceremony for the Winning Team
• Guest speeches on
• Sources of Financing
• Marketing
• Tax and Legal Issues
• Management
• Success Stories

3
TECHNICAL ENTREPRENEURSHIP

• 1. Introduction
• 2. Entrepreneurial Processes and Models
• 3. Creating a Successful Business Plan
• 4. Creativity the Product or the Service
• 5. Business Management
• 6. Financial Projections and Sources of Financing
• 7. Marketing
• 8. Legal and Tax Issues
• 9. Intellectual Property
• 10. Ethics
• 11. Special Problems and Who Can Help
• 12. Advanced Topics
• Lectures by M. Malek, Students, Guests

4
Internet Revolution (Worldwide)

• Quelle
• Der Spiegel 38/99

5
Internet Revolution (Germany)

• Geschätzte Umsätze mit E-Commerce in Mrd. DM
  (Deutschland)
• Quelle
• Berliner Wirtschaft Aug./Sept. 99

6
E-COMMERCE IN GERMANY

• Quelle Wirtschaftswoche 42/99

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USEFUL SITES COLLECTION

• Books
• Struck, Uwe Geschäftspläne, Voraussetzung für
  erfolgreiche Kapitalbeschaffung, Schäfer Verlag,
  Reihe Kompaktes Wissen für Führungskräfte, ISBN
  3-8202-0562-4
• Magazines
• www.infoquelle.de - Infoquelle Online
  Wirtschaftsmagazin, informiert u.A. über die
  Erstellung eines Business-Planes
• www.bizz.de - Bizz Online Kapitalmagazin mit
  Artikeln rund ums Thema "Existenzgründung"
• Websites
• www.gruenderstadt.de - Suchmaschine und
  Informationsplattform speziell für
  Existenzgründer.
• smallbusiness.yahoo.com - Entrepreneurial site of
  Yahoo with many hints and links
• Conferences and Workshops
• Organizations and Societies
• Venture Capital Companies
• BP-Competitions
• www.berliner-sparkasse.de - StartUp
  Gründungswettbewerb zusammen mit McKinsey.
• (exhaustive lists in Appendix)

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3 Ms of ENTREPRENEURSHIP
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ENTREPRENEUR

• A person who destroys the existing economic order
  by introducing new products and services, by
  creating new forms of organizations and by
  exploiting new raw materials
• (Joseph Schumpeter)
• Someone who perceives an opportunity and creates
  an organization to pursue it
• A person who organizes and manages a business
  undertaking
• A creator of a new company

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ENTREPRENEURSHIP

• Creation of a new company
• The Entrepreneurial Process
• involves all the functions, activities and
  actions associated with perceiving opportunities
  and creating organizations to pursue them

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HOT TOPICS (1)
12
HOT TOPICS (2)
13
HOT TOPICS (3)
14
Entrepreneurship is the engine of growth for the
turn of 21st century
Entrepreneurship is the best hope for an eternal
economic springtime
15
A MODEL OF THE ENTREPRENEURIAL PROCESS
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STATS

• BUT REMEMBER
• 1 business in 10 will reach its 10th birthday.
• Starting businesses is like starting love affairs
  (paraphrasing George Bernard Shaw)
• "Any fool can start one, it takes a genius to end
  one successfully."
• U. S. Examples
• JOBS
• 10.000 jobs have to be created every day ( 2,5
  million jobs per year)
• In the 80's 5 of the young companies created 77
  of jobs
• 15 of these companies created 94 of jobs
• Fortune 500 companies eliminated 3.5 million
  jobs in the 80's
• GROWTH
• 500,000 small companies grow by 20 per year
• ENTREPRENEURSHIP AT UNIVERSITIES - MIT
• Over 4,000 businesses established by alumni
• 1.1million jobs
• 232 billion in sales

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WHAT MAKES AN ENTREPRENEUR?

• The Ten Ds (1)
• Dream
• Entrepreneurs have a vision of what the future
  could be like for them and their business. And,
  more importantly, they have the ability to
  implement their dreams.
• Decisiveness
• They don't procrastinate. They make decisions
  swiftly. Their swiftness is a key factor in their
  success.
• Doers
• Once they decide on a course of action, they
  implement it as quickly as possible.
• Determination
• They implement their ventures with total
  commitment. They seldom give up, even when
  confronted by obstacles that seem insurmountable.
  
• Dedication
• They are totally dedicated to their business,
  sometimes at considerable cost to their
  relationships with their friends and families.
  They work tirelessly. Twelve-hour days, and
  seven-day work weeks are not uncommon when an
  entrepreneur is striving to get a business off
  the ground.

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WHAT MAKES AN ENTREPRENEUR?

• The Ten Ds (2)
• Devotion
• Entrepreneurs love what they do. It is that love
  that sustains them when the going gets tough. And
  it is love of their product or service that makes
  them so effective at selling it.
• Details
• It is said that the devil resides in the details.
  That is never more true than in starting and
  growing a business. The entrepreneur must be on
  top of the critical details.
• Destiny
• They want to be in charge of their own destiny
  rather than dependent on an employer.
• D-Marks
• Getting rich is not the prime motivator of
  entrepreneurs. Money is more a measure of their
  success. They assume that if they are successful
  they will be rewarded.
• Distribute
• Entrepreneurs distribute the ownership of their
  business with key employees who are critical to
  the success of the business.

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IDEA

• The idea per se is not most important. In
  entrepreneurship, ideas really are a dime a
  dozen. Developing the idea implementing it, and
  building a successful business are the important
  things.
• Perhaps the biggest misconception about an idea
  for a new business is that it must be unique,
  obsessed with the thought that the idea might be
  stolen.
• "Always invest in a grade A man with a grade B
  idea. Never invest in a grade B man with a grade
  A idea.
• Georges Doriat

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ENTREPRENEUR, OPPORTUNITY AND RESOURCE
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KEY TO SUCCESS

• The crucial ingredients for entrepreneurial
  success are a superb entrepreneur with a
  first-rate management team and an excellent
  market opportunity.
• Would-be entrepreneurs who are unable to name
  customers are not ready to start a business. They
  have only found an idea and have not yet
  identified a market need.

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SOURCES OF STARTUP CAPITAL (USA)
OTHERS (3,9)
GOVERNMENT LOANS (1,1)
MORTGAGED PROPERTY (4,0)
VENTURE CAPITALISTS (6,3)
FRIENDS (9,0)
EMPLOYEES / PARTNERS (12,45)
FAMILY MEMBERS (12,9)
BANK LOANS (14,4)
PERSONAL SAVINGS (78,5)
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SOURCES OF STARTUP CAPITAL (GERMANY)
normale Bankkredite
75.8
staatliche Eigenkapitalhilfe
75
Überbrückungsgeld vom Arbeitsamt
38.4
Kredite und Bürgschaften von Verwandten und
Freunden
33.3
Wagniskapital
2.5
Quelle DtA, Hochschul-Anzeiger 44/99
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STARTUP CAPITAL

• 25 start with less than 5,000
• 50 start with less than 25,000
• 75 start with less than 75,000
• Less than 5 with 1,000,000 or more

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INGREDIENTS FOR A SUCCESSFULNEW BUSINESS

• The Ten Fs (1)
• Founders
• Every startup company must have a first-class
  entrepreneur.
• Focused
• Entrepreneurial companies focus on niche markets.
  They specialize.
• Fast
• They make decisions quickly and implement them
  swiftly.
• Flexible
• They keep an open mind. They respond to change.
• Forever-innovating
• They are tireless innovators.

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INGREDIENTS FOR A SUCCESSFULNEW BUSINESS

• The Ten Fs (2)
• Flat
• Entrepreneurial organizations have as few layers
  of management as possible.
• Frugal
• By keeping overhead low and productivity high,
  entrepreneurial organizations keep costs down.
• Friendly
• Entrepreneurial companies are friendly to their
  customers, suppliers, and workers.
• Fun
• It's fun to be associated with an entrepreneurial
  company.
• Fanatic
• Completely devoted to the cause

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PRODUCTIVITY PER EMPLOYEE (1990)IN COMPUTER
INDUSTRY

• Nintendo 1,000,000
• Apple 451,600
• Compaq 317,500
• NEC 198,200
• IBM 184,600
• Siemens-Nixdorf 106,700

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TECHNOLOGY TRANSFER AT FOUR LEVELS OF INVOLVEMENT
G. Kozmetzky, UT-Austin
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KEY FACTORS IN THE DEVELOPMENTOF A TECHNOLOGY
TRANSFER INFRASTRUCTURE
Talent
Technology
Transfer
Te c hno l og y
Kn ow - How
Infrastructure
Capital
G. Kozmetzky UT-Austin
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ENVIRONMENTAL CONDITIONS
Climate
Push
/
Pull
Environment

Factors
Talent

RD
Business
Performers
Technology
T e c h n o l o g y

Transfer
K n o w - H o w
Infrastructure

Nature

of
Technical
Technolo- gical

Capital
Innovation

Private
Technology

Capital

Venturing
Institutions
Institutions
G. Kozmetzky UT-Austin
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POLICY IMPLICATIONS
Local

infrastructure
Culture for Innovation
Access

to

other

areas
Quality

of

life
Successful

role

models
Push
/Pull

Climate
Incubators
Factors
Environment

Educational
Programs
Government
Funding
Talent
Technical

RD
Business
Support
Performers
Programs
Technology
Transfer
Technology
Profe- ssional Support Organi-zation

T e c h n o l o g y
Transfer
K n o w - H o w
Infastructure
Science
Nature of

Parks
Techno-
Technical
logical
Innovation
Consortia

Capital
Local
Intellectual
Advisors
Property

Private
Technology
Business

Capital
Venturing

Networks
Institutions
Institutions
Venture

Capital

Pools
Business

Angels

Network
Tax

Advantages
Government

Programs
(
SBIR
)
G. Kozmetzky UT-Austin
RD

Limited

Partnerships
State

Venture

Capital

Funds
Small
Business
Investment
Corp



.
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SUCCESS FACTORS FOR TECHNOLOGY TRANSFER
Business
Academic
Government
Community
Talent
Technology
Capital
Know-How
Market - Need
Successful
Value-Added
Technology Transfer
G. Kozmetzky UT-Austin
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ELEMENTS OF THE TECHNOPOLIS
G. Kozmetzky UT-Austin
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CASE STUDY TIVOLI SYSTEMS INC.

• ONE OF THE HIGHEST PRICES AFTER ONE YEAR ON THE
  WALL STREET
• IBM PAID 743 MILLON
• PRODUCT
• NETWORK MANAGEMENT SOFTWARE
• HEADQUARTERS
• AUSTIN, TEXAS

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TIVOLI SYSTEM INC.

• In 1989, 12 IBM engineers left the company and
  founded Tivoli Systems Inc. in Austin, Texas
• Summary Financial Information (In thousands,
  except per share data)

Shares Purchased
Total Consideration
Average
Number
Percent
Amount
Percent
Per Share
2
11,845,038
85,6
11,089,925
35,7
0,94
Existing stockholders
2
2,000,000
14,4
20,000,000
64,3
10,00
New investors
Total
13,845,038
100,0
31,089,925
100,0

• Pro forma as of December 31, 1994, to give effect
  to the conversion of the Companys redeemable
  convertible Preferred Stock.
• Assumes the conversion of all outstanding shares
  redeemable convertible Stock into an aggregate of
  9,025,006 shares of Common Stock upon the closing
  of the offering. The net effect of sales by the
  Selling Stockholders in the offering will reduce
  the number of shares held by existing
  stockholders to 11,520,038 or 83,2 of the total
  number of shares held by new investors to
  2,325,000 or 16,8 of the total number.

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TIVOLIS BALANCE SHEET (1)PERCENT OF TOTAL
REVENUES, YEARS ENDED DECEMBER 31
Total expenses
140
106
94
37
TIVOLIS BALANCE SHEET (2)Statement of
Operations Data, (in thousands, except per share
data) Years Ended December 31
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THE U.S. ENTREPRENEURSHIPSUCCESS STORIES

• FIRST COMPANY WHICH ACHIEVED 100 MILLION SALES
  IN THE FIRST YEAR
• COMPAQ INC.
• PRODUCT PORTABLE PCS
• HEADQUARTERS HOUSTON, TEXAS
• FIRST COMPANY WHICH ACHIEVED 1 BILLION SALES IN
  THREE YEARS
• SUN MICROSYSTEMS INC.
• PRODUCT WORKSTATIONS SOFTWARE
• HEADQUARTERS MOUNTAIN VIEW, CALIFORNIA
• FIRST COMPANY WHICH ACHIEVED 4 BILLION SALES AT
  INITIAL PUBLIC OFFERING
• NETSCAPE COMM. CORP. (BOUGHT BY AOL IN 1999)
• HEADQUARTERS MOUNTAIN VIEW, CA
  www.home.netscape.com