There was lots of entepreneurial energy in the room at MIT’s Kresge Auditorium today — as a sizable crowd gathered in the morning for a free daylong“Startup Bootcamp” full of lessons from technology entrepreneurs. Here are some insights from just a few of the day’s speakers:
MIT’s Ken Zolot offered a set of questions to ask about an invention when you’re thinking about starting a business around it:
Does it work yet?
Is it special?
Who cares?
What do I have and who do I know?
Who can help?
When you’re in those early stages of developing your idea, Robin Chase, founder of the car-sharing company Zipcar, advised entrepreneurs to think of every person you meet as a free consultant — and pay attention to the questions they ask you about your idea when you explain it to them. “When people ask you things, they aren’t asking dumb questions,” she explained. “You should hone your idea and the way you express it and move forward.”
Adam Smith, founder of Xobni, mentioned the importance of staying small until you achieve product market fit — i.e., you have a product that people want. When you achieve that, you can scale up, according to Smith — and then it’s more about execution.
Daniel Theobald, founder and CTO of Vecna, recommended avoiding taking “other people’s money” as investments if you can — particularly if you have a socially responsible business model as a vision. Vecna, he said, allows employees to spend up to 10% of their work time on community service projects — and the company’s model wouldn’t have worked if the company had taken outside investors’ money. Instead, he said, the company used IT consulting to bootstrap its startup stage — structuring its consulting agreements so that Vecna retained the intellectual property.
More than one speaker alluded to the need for start-up entrepreneurs to experiment and iterate quickly until they get to a successful business model. But that process isn’t necessarily easy for entrepreneurs — as Kyle Vogt, one of the founders of Justin.TV, vividly described. Vogt spoke of stages Web start-ups go through – including the “Trough of Sorrow” that occurs after the initial product has launched but before the company has reached a stage Vogt calls “Acquisition of Loyalty.” While in the “Trough of Sorrow,” Vogt said, entrepreneurs may face tough questions from family, friends — and from themselves. However, according to Vogt, if you stick to it long enough and try enough times, you’ll probably find something people will like. Justin.TV, which began by providing live video coverage from the life of a guy named Justin, now includes a wide range of live video, such as coverage from the Startup Bootcamp — including this excerpt from Robin Chase’s presentation:
Henry Chen, Paul Gompers, Anna Kovner and Josh Lerner examined the location of U.S. venture capital firms’ headquarters, branch offices, and investments — as well as their investment success rates. Here are highlights of a few of their findings:
First, no surprsies: U.S. venture capital is heavily clustered in just three areas of the country – San Francisco/San Jose, New York, and Boston. More than half of all venture capital offices in the U.S. are located in those three metropolitan areas. Just under half of all companies financed by venture capital are located in those areas, too.
And, it turns out, there are reasons for that. Venture capital firms are disproportionately concentrated in regions where VC investments have been successful in the past — and those regions are in states with higher than average levels of economic output per person. VC-intensive regions are also areas with high numbers of patents per capita. What’s more, venture capital firms headquartered in the three regions that the researchers call “venture capital centers” have a higher average success rate than VC firms based elsewhere.
Now, here’s a surprising finding. Even though VC firms headquartered in venture capital centers like San Francisco and Boston perform better overall — and even though VC firms disproportionately invest in local start-ups – the VC firms, on average, get better results from their investments in locations outside their headquarters region.
Why would that be? The researchers suggest one possible explanation: Because venture capitalists prefer to invest close to their offices – so they can more easily monitor performance — they may only invest farther afield when start-ups are particularly promising. Conversely, the investors may have slightly lower standards for start-ups that are closer to home, since such start-ups are less costly to keep tabs on.
In other words, start-ups outside the hubs of venture capital may have to overcome higher hurdles to gain VC investors – and then are more likely to perform well.
This week was a big one for innovation here at MIT — in that the winner of the 20th annual MIT $100K Entrepreneurship Competition was announced Wednesday. Ksplice, the winning company from a record 260 entries, has developed technology that enables users to install software updates without rebooting their computers. The start-up was founded by five MIT engineers.
From an innovation point of view, the story of Ksplice’s founding illustrates an important theme: an idea born from a frustration with the status quo. According to an article by Ksplice COO Waseem Daher, Jeff Arnold, one of the company’s founders, was managing servers at MIT. A security update arrived in the middle of the week. Arnold decided not to install it until a more quiet weekend period – only to see the system compromised before then, so that all the software had to be reinstalled.
Arnold’s response, according to Daher? After expressing frustration, Arnold went on to write “an award-winning master’s thesis” addressing ways to update software without system reboots. And that’s the technology behind KSplice.
But the news isn’t all bad. The San Jose Mercury News recently highlighted entrepreneurial companies that are growingdespite the economy, in sectors such as online video, software as a service (SaaS) and open source software. One key to getting venture capital now? Offering a business model that will save money for customers, according to The New York Times ”Bits” blog. And there’s always the possibility of eschewing venture capital entirely:
How do you ensure that your product stays relevant in the future? Reach out to the next generation of innovators. In what sounds like a smart marketing tactic, several large companies are seeking to encourage software start-ups to use their products and services – through initiatives that range from free software development tools to a contest.
Microsoft in November launched a program called BizSpark that offers eligible software start-ups around the globe free access to various Microsoft products — as long as the start-ups are privately held, less than three years old, have annual revenue of less than $1 million and are referred by partners such as venture capitalists. (The start-ups do pay a $100 fee when they leave the program.) Meanwhile, Sun Microsystems has a program for start-ups called Sun Startup Essentials that includes discounted servers and open source software. And Amazon Web Services (AWS) recently announced this year’s winner of a contest it sponsors for start-ups that use its cloud computing platform.
Microsoft is also reaching out to those who may become future innovators: High-school and college students in a number of countries can participate in its DreamSpark program to download a number of Microsoft software development tools for free.
Transparency, accidental innovation, trust, collaboration — as sustainability affects how the world works, so will it affect how business works in the world.
