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/entrepreneurship
TE - I - I - 0
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
TE - I - I - 1
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
TE - I - I - 2
Internet Revolution (Worldwide)
Quelle:
Der Spiegel 38/99
TE - I - I - 3
Internet Revolution (Germany)
30
Geschätzte
Umsätze mit ECommerce in
Mrd. DM
(Deutschland)
25
20
15
10
Quelle:
Berliner Wirtschaft
Aug./Sept. 99
5
0
1999
2000
2001
TE - I - I - 4
E-COMMERCE IN GERMANY
Quelle: Wirtschaftswoche 42/99
TE - I - I - 5
USEFUL SITES COLLECTION
•
Books
–
•
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
–
–
•
•
•
•
Struck, Uwe: Geschäftspläne, Voraussetzung für erfolgreiche Kapitalbeschaffung, Schäfer Verlag,
Reihe: Kompaktes Wissen für Führungskräfte, ISBN: 3-8202-0562-4
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)
TE - I - I - 6
3 M’s of ENTREPRENEURSHIP
MANAGEMENT
MONEY
MARKETING
TE - I - I - 7
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
TE - I - I - 8
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
TE - I - I - 9
HOT TOPICS (1)
Fast Growing Areas
Specific Topics
Electronic commerce / virtual stores:
buying online and picking up physically
problem (3 c’s: community, content and
commerce).
· Auctions, flea market, e.g., used books (www.ebay.com)
· Auctions for B2B competitions
· Email to media (letter, book, photo, poster, CD, DVD) gateway
city net including delivery, e-commerce infrastructure, logistics
Security
·
·
·
·
·
Telecommunication, mobile computing,
communication networks, wireless
communication
· Wireless Internet access (www.sandner.net)
Remote control, observation,
diagnostics
· Intelligent building
· Remote housekeeping/controlling
· Video control
Audio/video streaming, protocols,
visualization, 3D, entertainment,
games, leisure, education
·
·
·
·
·
Biometrics
Cyber cash
Firewalls
Encryption
Operating system extensions & tools
Internet video/TV (broadcast)
Video distribution (music: www.mp3.com) ,
Online photo- and copy center
Online training center
Games over (wireless) networks
TE - I - I - 10
HOT TOPICS (2)
Fast Growing Areas
Specific Topics
Healthcare, medical applications, bio
informatics, remote patient care
• Online expert locating and consulting
• Online drugstores www.drugstore.com
• “Virtual experiments” by processing the Human
Genome database
Transportation, aerospace, defense,
airlines, aviation, automotive, travel,
package delivery
Robotics, intelligent control, micro
mechanics, embedded systems
Financial services, banking,
insurance, trust center
Billing/charging systems
Smart cards & wearable computers
• Collision avoidance
• Logistics
• Packing chip, tracking systems
· Autonomous coordination
· Remote control
· Online stock markets
· Venture Capital: Capital network for startups und
business angels (www.garage.com)
· Micro payment systems
· Internet payment systems
· Payment systems, e-purse
· Security
· New applications
(www.microsoft.com/smartcard)
TE - I - I - 11
HOT TOPICS (3)
Fast Growing Areas
Specific Topics
Matchmaking: people matching
· “Competition server” matchmaking between people
engaging in any kind of on- or offline games/sports
· “Reverse” auctions for services (painter, carpeter, IT
experts, etc.), taking care of information asymmetries.
Agency for self-employed IT experts: www.careercentral.com
Matchmaking: product matching
· Price broker (books, CDs, DVDs)
www.powershopping.de
· Specific search engines (music, photos:
www.ditto.com, videos)
Work over net, market research,
customer feedback
· Remote secretary
· Internet call center: redirect incoming calls to home
offices via Internet
· www.epinions.com
TE - I - I - 12
Entrepreneurship is the engine of growth for
the turn of 21st century
Entrepreneurship is the best hope for an
eternal economic springtime
TE - I - I - 13
A MODEL OF THE ENTREPRENEURIAL PROCESS
Personal
Achievement
Locus of control
Ambiguity
tolerance
Risk taking
Personal values
Education
Experience
Innovation
Environment
Opportunities
Role models
Creativity
Personal
Risk taking
Job
dissatisfaction
Job loss
Education
Age
Commitment
Sociological
Networks
Teams
Parents
Family
Role models
Triggering event
Personal
Entrepreneur
Leader
Manager
Commitment
Vision
Implementation
Environment
Competition
Resources
Incubator
Government policy
TE - I - I - 14
Organizational
Team
Strategy
Structure
Culture
Products
Growth
Environment
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
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
TE - I - I - 15
WHAT MAKES AN ENTREPRENEUR?
The Ten D’s (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.
TE - I - I - 16
WHAT MAKES AN ENTREPRENEUR?
The Ten D’s (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.
TE - I - I - 17
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
TE - I - I - 18
ENTREPRENEUR, OPPORTUNITY AND RESOURCE
Uncertainty
Entrepreneur
Uncertainty
Opportunity
Fits & Gaps
Resource
s
Uncertainty
TE - I - I - 19
Uncertainty
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.
TE - I - I - 20
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
FAMILY MEMBERS
BANK LOANS
PERSONAL SAVINGS
(12,45)
(12,9%)
(14,4%)
(78,5%)
TE - I - I - 21
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
TE - I - I - 22
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
TE - I - I - 23
INGREDIENTS FOR A SUCCESSFUL
NEW BUSINESS
The Ten F’s (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.
TE - I - I - 24
INGREDIENTS FOR A SUCCESSFUL
NEW 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
TE - I - I - 25
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
TE - I - I - 26
TECHNOLOGY TRANSFER AT FOUR
LEVELS OF INVOLVEMENT
Collaboration
Level IV
Complexity
Application
Level III
Implementation
Level II
Acceptance
Level I
Quality R&D
G. Kozmetzky, UT-Austin
TE - I - I - 27
KEY FACTORS IN THE DEVELOPMENT
OF A TECHNOLOGY TRANSFER INFRASTRUCTURE
Talent
K
n
o
w
H
o
w
Technology
Transfer
Infrastructure
Capital
TE - I - I - 28
T
e
c
h
n
o
l
o
g
y
G. Kozmetzky
UT-Austin
ENVIRONMENTAL CONDITIONS
Climate
Environment
Push/Pull
Factors
Talent
Business
Technical
K
n
o
w
H
o
w
Technology
Transfer
Infrastructure
Capital
T
R&D
e
c Performers
h
n
o
l
Nature of
o
Technolog
y
gical
Innovation
Private
Capital
Institutions
TE - I - I - 29
Technology
Venturing
Institutions
G. Kozmetzky
UT-Austin
POLICY IMPLICATIONS
Local infrastructure
Access to other areas
Successful role models
Culture for Innovation
Quality of life
Push/Pull
Factors
Climate
Environment
Incubators
Educational
Programs
Technical
Support
Programs
Professional
Support
Organization
Local
Advisors
Business
Networks
Talent
Business
Technical
K
n
o
w
H
o
w
Technology
Transfer
Infastructure
Capital
Private
Capital
Institutions
T
e
c
h
n
o
l
o
g
y
Government
Funding
R&D
Performers
Technology
Transfer
Nature of Science
Parks
Technological
Innovation Consortia
Intellectual
Property
Technology
Venturing
Institutions
Venture Capital Pools
Business Angels Network
Tax Advantages
Government Programs (SBIR)
R&D Limited Partnerships
State Venture Capital Funds
Small Business Investment Corp.
TE - I - I - 30
G. Kozmetzky
UT-Austin
SUCCESS FACTORS FOR TECHNOLOGY
TRANSFER
Academic
Business
Government
Community
Talent
Technology
Capital
Know-How
Market - Need
Successful
Value-Added
Technology Transfer
G. Kozmetzky
UT-Austin
TE - I - I - 31
ELEMENTS OF THE TECHNOPOLIS
New
technologies
Government
services
Business
services
Global
linkages and
relationships
Airporttelecommunication
infrastructure
Quality-oflife support
University
and other
institutions
Technologyrelated
industries
Technopolis
model
Program
Marketing
Land use allocation and site requirements
G. Kozmetzky
UT-Austin
TE - I - I - 32
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
TE - I - I - 33
•
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)
1990
1991
1992
1993
1994
1995
Statement of Operations Data:
Total revenues
$542
$--- $4,699 $12,746 $26,878 $50,000
Operating income (loss)
(653) (3,808) (1,904)
(735)
1,539
Net income (loss)
(590) (3,732) (1,885)
(735)
1,397
0,11
Pro forma net income per share 1
Pro forma weighted
average common
13,239
shares and equivalents 1
Shares Purchased
Total Consideration
Average $
Number
Percent
Amount
Percent Per Share
85,6% $11,089,925
35,7%
$0,94
Existing stockholders 2 11,845,038
2,000,000
14,4
20,000,000
64,3
10,00
New investors 2
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 Company’s
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
TE - I - I - 34
2,325,000 or 16,8% of the total number.
TIVOLI’S BALANCE SHEET (1)
PERCENT OF TOTAL REVENUES, YEARS ENDED DECEMBER 31
Revenues:
License fees and
other services
Total revenues
Cost of revenues:
License fees and
other services
Total cost of revenues
Gross margin
Operating expenses:
Sales and marketing
Product development and engineering
General and administrative
Total operating expenses
Total expenses
Operating income (loss)
Interest and other income (expense), net
Net income (loss)
TE - I - I - 35
1992
1993
1994
100%
no
100
91%
9
100
85%
15
100
21
no
21
79
13
9
22
78
10
11
21
79
42
63
14
119
140
(40)
no
(40)%
40
34
10
84
106
(6)
no
(6)%
43
22
8
73
94
6
(1)
5%
TIVOLI’S BALANCE SHEET (2)
Statement of Operations Data, (in thousands, except per share data)
Years Ended December 31
Revenues:
License fees and
other services
Total revenues
Cost of revenues:
License fees and
other services
Total cost of revenues
Gross margin
Operating expenses:
Sales and marketing
Product development and engineering
General and administrative
Total operating expenses
Operating income (loss)
Interest & oth. income (expense), net
Net income (loss)
Balance Sheet Data (in thousands $):
Working capital
Total assets
Long-term liabilities, net of current Portion
Redeemable convertible preferred stock
Common stockholders’ equity (deficit)
1990
$--542
542
1991
$-------
1992
$4,699
--4,699
1993
$11,542
1,204
12,746
1994
$22,725
4,153
26,878
--126
126
416
---------
991
--991
3,708
1,602
1,191
2,793
9,953
2,765
2,951
5,716
21,162
51
753
265
1,069
(653)
63
$(590)
630
2,406
772
3,808
(3,808)
76
$(3,732)
1,992
2,973
647
5,612
(1,904)
19
$(1,885)
5,134
4,287
1,267
10,688
(735)
--$(735)
11,599
5,765
2,259
19,623
1,539
(142)
$1,397
1990
$2,614
2,936
--3,500
(588)
TE - I - I - 36
1991
$2,092
2,889
201
6,810
(4,406)
1992
$2,443
4,721
242
9,449
(6,439)
1993
$3,075
8,201
388
11,158
(7,267)
1994
$3,652
15,908
1,375
11,369
(5,700)
FINANCIAL SERVICES
TELECOMMUNICATIONS
Automatic Data Processing Inc.
Cargill Inc.
Charles Schwab
Chase Manhattan Corp.
Citicorp North America Inc.
Fidelity Systems Development Co.
GE Capital Corp.
IDS Financial Services Inc.
MBNA Corp.
M. Lynch, Pierce, Fenner & Smith
Metropolitan Life Insurance Co.
Paine Webber Inc.
Prudential Securities Inc.
Securities Industries Automation C.
Union Bank of Switzerland
Wells Fargo & Company
American Telephone/Telegraph Co.
Ameritech Services Inc.
AT&T Bell Laboratoires Inc.
Bell Atlantic Network Services Inc.
BellSouth Telecommunications Inc.
BT North America Inc.
Claircom Communications Group
GTE Data Services Inc.
McCaw Cellular Communications
Network general Corp.
Pagenet Paging Network Inc.
TDS Computing Services Inc.
US West inc.
TE - I - I - 37
ELECTRONICS/COMPUTERS
Adobe Systems Inc.
Comdisco Systems Inc.
Cray Research Inc.
Cypress Semiconductor Corp.
Hitachi America Ltd.
Intel Corp
IBM Corp.
LSI Logic Corp.
Motorola Inc.
National Semiconductor Corp.
Siemens Rolm Communications
Sybase Inc.
Xilinx Inc.
GOVERNMENT
UTILITIES
Federal National Mortgage Association
Federal Reserve Bank of New York
Student Loan Marketing Association
U.S. Department of the Army
U.S. Department of Labor
Carolina Power & Light Co.
Delmarva Power & Light Co.
Detroit Edison Co.
Duke Power Co. Inc.
Florida Power Corp.
Northern States Power Co.
Public Service Electric & Gas Co.
Southern Company Services Inc.
TRANSPORTATION
OTHERS
BMW Manufacturing Corp.
Delta Airlines Inc.
Federal Express Corp.
Lynden Inc.
United Parcel Service Inc.
Amgen Inc.
Circuit City Stores Inc.
Eli Witt Co.
Exxon Corp.
Hughes Aircraft Co., Inc.
Marriott International Inc.
Martin Marietta Corp.
Mobil Oil Corp.
TE - I - I - 38
THE U.S. ENTREPRENEURSHIP
SUCCESS STORIES
•
•
•
•
•
•
•
•
FIRST COMPANY WHICH ACHIEVED $ 100 MILLION SALES IN THE
FIRST YEAR:
COMPAQ INC.
PRODUCT: PORTABLE PC’S
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
TE - I - I - 39