Was fortune to have an opportunity to speak to
cadets at West Point last week majoring in computer science and other
engineering related majors about entrepreneurship... The audience was a little
different for me because I consider my self a sales and marketing person. It
was a wonderful experience. I took my slides and pasted the main points
below. (forgive the formatting - on a train and will fix that later)
Looking at a Market
Backward To Create Great Products: The Elements
-Passionate
dream
-Convergence
-Big
change that is blindingly obvious in hindsight
-Introduced
in steps that market can accept
Historical Case Study:
Galvin Manufacturing Corporation
Dream – Provide higher quality life through the mass distribution of
entertainment & information = Car Radio
Convergence - Home radio & battery eliminator developed & cars
widely distributed to consumers.
Big Obvious Change – in 1930s, consumers were spending many silent
hours in cars. Radio was a perfect fit.
Walking the market - 1st in home radios using home electricity
then a kit for popular cars… then OEM.
Personal Case Study: GeoTrust
Dream – Enable secure transaction over the Internet to assist the growth
of global commerce = enable encrypted transactions/ tunnels over the
Internet.
Convergence - 2001 Browsers widely distributed, VeriSign providing SSL
enabling technology, many new sites and applications coming on line.
Big Obvious Change –Enabling technology- Digital Certificates were hard to obtain due
to manual authentication (old world authentication methods in a world
that wanted instant gratification and automation). GeoTrust automated
the authentication of digital certificates and was able to distribute in
seconds what took VeriSign weeks.
Walking the market – Gained early adopters & credibility through retail and
then later integrated into every hosting & merchant provider package
facilitating billions of $ transaction per year. Today method accounts
for 70% of all certificates issued.
Current Case Study:
CounterTack
Dream – Create the next generation of anti-virus designed to stop
unknown threats allowing governments & commercial organizations to maintain
control of secrets, intellectual property & customer data.
Convergence – Attacker persistence, tools & techniques have become more
advanced than technologies used to protect (Symantec, McAfee, Trend, etc.)
Big Obvious Change – Most anti-virus/ anti-malware technologies are designed to
prevent known threats (seen before threats) with signatures. Most malware is
encrypted and unrecognizable so it evades current technologies. We need
new technologies that look at complete malware behavior in the operating system
to stop these attacks.
Walking the market – Deploy the technology as an advanced honeypot/honeynet and
malware analysis engine as customers become more comfortable running it on
production systems to replace AV software.
Building a Team
-Start
with a large group of co-founders with different expertise (marketing,
engineering, etc.).
-Understand
that skills required in one phase of growth may be different from the next
(initial prototype versus a product that scales to many customers).
-Try to
find a group of people with the correct skills who you trust and work with them
over-and-over.
-Use the
same technique to recruit your board (independent directors & investors).
This is often overlooked, but can destroy a company faster than any other
factor.
Working with Venture
Capital – What are they after?
-A return
that is well above market. 5x+ Money invested within 4-6 years.
-They are
looking for a hit rate of 20%-30% (80/20 rule). If 20% of their companies
hit their 5x + criteria they should be successful. The other
companies will fail, breakeven or provide a modest return.
-They are
looking for repeat entrepreneurs & teams that they can invest in over
again. Repeat successful teams increase the probability of success and
spawn new teams.
-They are
all looking for the next thing that is obvious in hindsight, but disruptive
now. These can apply to niche as well as large markets. However, the bigger
market is more exciting.
Working with Venture
Capital – What are you after?
-A fund
that is early in its lifecycle where there are plenty of reserves for follow on
investments.
-Domain
expertise in the general area related to your company.
-A real
partner willing to put in long hours to assist the team and who understands
that startups are more art than science. However, does not try to run the
company.
-Well
connected to all the strategic companies in your space – connections matter.
-Someone
who is also passionate about your dream with a track record of success
