I. Creating the Business

2. The Opportunities

2.1 Types of Opportunities

- paradigm shift: new market and a new product. Early players have to develop the market. Risky. 
- new product or business model in existing market. 
- me-too product in existing market.

2.2 Opportunity Recognition

- markets that change
- markets that are not well understood
- large market: check the scale of competitors to visualise potential company size
- large market: gap between degree to which is needs are met and size of the potential demand
- fast growing market: a lot of new decisions being made in fast growing markets
- markets where incumbents are stagnating
- markets where there is little competition

2.3 Process of Opportunity Recognition

- intuitive approach: develop a business out of passions
- analytical approach: rigorous analytics process in search of an opportunity

2.4 Refinement Process

- need to be able to answer the question why an opportunity exists, how your business creates value and why you can do it better than anyone else

2.5 Research Process

- learn about industries: read trade journals to understand economic drivers of industry, how value chain works and where your company fits in.  Speak to people in the industry.  Don’t be afraid of people taking idea, more important to refine idea.
- need to break the building of the company of down into stages.  Could be a 6 months process.  Take enough time to pick and articulate the idea.
- could research two ideas simultaneously, then compare and contrast to two more ideas. Continuously looking to understand why idea 4 is better than 5.

2.6 General Advice on Idea Generation Process

- should start with understanding a market need, and that market need is broad enough in scope
- watch which other industry players success is dependant on
- recognising the opportunity is more important than having the solution
- go into an industry that will enjoy

3. The Homework

3.1 Defining the Market Need

- understand customer need and validate idea
- talk to customers: this is fundamental and most important
- in talking to customers, refine the problem to a point that it is mission-critical problem. Then assemble what is needs to build a solution.

3.2 Defining the Customer

- not only the company, but the buyer within the company

3.3 Defining the Market Size

- need to try and determine what would pay for the product
- present prototype to customer
- see what other players charge for similar products. Start to model pricing and revenue.  If you’ve a typical profile of a customer, multiply number of customers with that profile and beginning to get total available market.

3.4 Defining Market Timing

- is market ready for what you will provide?
- not too early, not too late.  Be ahead of the curve by  short period of time.

4. The Window of Opportunity

How fast you need to build your company depends on the time window of the opportunity.  A one-year, two-year, or decade-year opportunity?  Time of opportunity depends on the rate of change in the relevant market and intensity of competition.

How many people and how much money do you need to develop the company to a point that it can enter the market before the window of opportunity closes.

5. The Background of the Entrepreneur

6. The Founders

The most important thing to make a company succeed is people.  Founders need to share the same vision and values.  Each founder has to be sensitive to what the goals of the other founder/s are.

The dynamics of the founding team is pivotal.  Problems with founders number one reason startups fail.

Should never take on a partner unless the business really cannot succeed without both people.  Need to ask beforehand whether each founder is really required- without that partner business will fail.

The chemistry between the founding team is critical.  Friendship helps.  Need a germination period where all working day in day out on the same goals.

Should probably have 3 key founders: a market visionary (who understands the market, the customer and the problem the customer has), a product or technology visionary (someone who understands how the product and technology might be applied) and it needs a business execution person because without execution the idea is worthless.

Founders should hold equal stakes in the company so in every respect equal partners.  No matter whose idea, who contributed what in founding process, company should be split equally.

7. The Role of the Founder

Idea is to build a business to create wealth.  Founder and company are distinct.  Do whatever it takes to increase the value of the company, irrespective of personal interests.

7.1 Management of the Company

May let someone else be CEO: let someone else take your job if they are better at it.  This will increase the value of the company.

Company may grow faster than the founder can learn.

Companies usually double in size every year for 5 or 6 years.

Need to bring in professional management early.

7.2 Ownership of the Company

Will need to give up equity and unlikely to end up with 51% of the company.  No way that going to be successful with venture capital and keep 50%, will get diluted below that amount. Will be diluted every financing. As take the money, the value of the company goes up more then than the amount get diluted, so better off from net worth perspective.  Outside money is making pie bigger, not making slice bigger.

Control depends on how much value bring to the business, how important you are.  Can sell 90% but if you’re the core of the company you can be in control.

7.3 Building a Sustainable Business

Have to share ownership and let go control.

8. The Ideal Startup

Ideal startup a combination of opportunity, team and timing.

II. Launching the Business

9. The Location

Depth of knowledge, understanding, financial resources, partners etc.

To compete on worldwide basis need to find out where the heart of the industry is and locate the company there.  Among other entrepreneurs, universities to recruit from, where venture capital is, and first customers.

Connect company to most important market for the product where ever in the world and go global early.

10. The Advisors

Assemble a board of advisors which can monitor the venture, advise and counsel, and provide connections and credibility.

11. The Support Players

- surround yourself with great lawyers

12. IP

Patent IP (I say no though)

13. The Funding

13.1 Milestone Financing

First question: how much money am I going to need and when am I going to need it?  From these requirements, can develop a funding strategy.  Take as much money as you need early on and raise a next round of financing every time you reach a milestone.  Milestone may be development of a prototype, launch of commercial product, first beta customers etc.  When you reach a milestone shows have reduced the risk of the venture.  Then take next round of money which allows you to get to the next milestone.

- seed: prove the technology by building a prototype
- A: need to have completed the product, have three customers, two officers in the company, established business model that shows how the company can make money and investors will get paid.
- B: lunch the commercialisation of the product.
- C/D: ramp up product sales

13.2 Risk Identification and Elimination

Next step is to choose the milestones

First money should be attacking risks to understand risks as early as possible.  As get over risk hurdles, so-called milestones, investors will put more money into the company.

Market risk: understanding whether the customer wants the product.  Market risk is either: the customer does not want the product because the product does not meet his need, or the product is great but the customer is not yet ready for it.  Market risk only disappears after revenue.

Technology risk: can you make the technology work.

People risk: does the team in place have the skills required.

Financial risk: can you obtain financing for the venture.

13.3 Sources of Funding

Bootstrap if the window of opportunity is large and the capital requirements are low.  Raise external capital early if the window of opportunity is small and the capital requirements are high.

Try to bootstrap to get off the ground, reduce the principal risk and get a higher valuation for the venture when go to raise external capital.

Angel investors: best angel investors are key people from industry or other startups because they understand what the company is going through and can offer advice.  Usually first and only source of funding once the founder cannot bootstrap the company anymore.

Venture capital: brings professionalism because want to see numbers, profits and loss accounts, are focused on obtaining liquidity.  Seek to get acquired or go public.  Need to assess firm, but more importantly actual partner would be working with.

Corporate investors

13.4 Choosing an Investor

Need to do due diligence on your investors.  Ask for references and speak to others they have invested in. Best investors take time to learn their business, worst don’t take time but assume they know everything about the business.

Handpick investors the same as the management team, because they’re important partners.  Choose investors who understand your business.

Also go for money that brings more value than just money.  Pick smart money that provides value-add and gives leverage.

13.5 General Advice on Funding Process

Must always have financing in mind.  Watch cash and check how much money is left and how much you are spending i.e. what your burn rate is.  Must therefore learn how to do fund raising- need to have someone dedicated to this task.

Be paranoid about money.  Once have raised one round, start preparing the next.  Always raise money when you do not need it.  To get money always takes longer than you expect.

Sell a story.

Always take more money than you think, particularly in early stages.

Seek out introductions to investors.

14. The Culture

14.1 Importance of Culture

Most important ingredient for building a successful company is culture.  With the right culture, the right people will get hired, and behave right, and make the right decisions.  The job of management is to create the culture.

14.2 Values

Need guiding principles and values to run a company so that people know what is valued and can make the right decisions.

14.3 People

What kind of people are hired is essential.  Need to hire the very best people, particularly from the outset. Never compromise on this:
- Hire people who are smarter than you.
- Hire people who complement your weaknesses.
- Need to hire people who are compatible with the value of the culture.  Don’t hire anyone who won’t fit in with the team.
- Hire people who have experience, and hire people who have finished products.
- Hire people who have failed.
- Hire people who are comfortable without support staff or infrastructure.
- Hire people who can do several jobs at once.
- Have to let people go who cannot grow fast enough.
- Early on, hire people you or someone in the company has worked with previously.
- Hire people who are self-motivated.
- Hire people who do not worry about job security but about wealth creation.
- Give everyone in the company stock options.
- Early on, look for people who themselves know excellent people.
- Need to court the good people.  Learn to sell the company and vision to potential employees.
- People join a startup because they want to make a difference.  Need to give them this feeling.
- Get rid of people who do not perform or fit. Fast.

14.4 Mission

With great people, just need to get alignment around the mission.

14.5 Information Flow

Need to establish free flow of information.  Information is open to everyone. With free flow of information, enables people to get more information and more input and ultimately make better decisions.

Open-door meetings.  Use status meetings and status reports to disseminate information widely.

All-Hands-Meeting every two weeks for CEO to give update on what the company is doing, how it is doing, and the things the company need to focus on.

14.6 Communication

Communicate, communicate, communicate.  Can never over communicate in a startup.

14.7 Decision Making

Need maximum input and maximum speed for decision making.  System where one person who makes the decision owns the implementation of the decision, and everyone else can be contributors to the decision in the sense that they have the opportunity and responsibility to contribute.  Need to ask who will be responsible for implementing decision.

Key to successful startup is leverage.  Need to move faster and do more things with fewer people.

There are very few mission-critical decisions.  Most decisions are not worth spending so much time on.

Learn how to make decisions fast with imperfect information and correct later if necessary.  Learn to live with the bets you make.

14.8 Result Orientation and Management-by-Objectives

A culture based on results allows people to manage their work themselves.  Let people self-manage their tasks.  Manage by objectives. Do not micromanage.

14.9 Great breakdown of culture.

14.10 Keeping Culture when the Company is Growing

14.11 Leadership

Leader needs to build a vision for the company, assemble a high-performance team to execute the vision, reinforce the company culture and to create a sense of urgency.

15. The Management Team

Need to bring in an experienced management team.

16. Technology and Market Orientation

Technology is a qualifier, but the best technology rarely wins.  Never underestimate the marketing expenses and the importance of a great sales team.

17. The Flexibility

May need to pivot through approaches and must be flexible.  When things change need to change even if it hurts and means throwing away all what has been been worked on.

18. The Focus

Don’t try to do everything. Learning to say no is important. “We are capable of doing that, but we are not going to do that because we are going to do this.”

Focus for two reasons:
- can’t be distracted with other customers or products given limited resources
- need to clarify to the market what you are doing.
Focus on one product, one market and one customer segment.  Do not chase every business opportunity you can.  Otherwise you get nowhere. Learn to say “No”.

19. The Execution

Execution is taking the idea from an idea form and turning it into an executable plan that you are working against.

Split huge problems into a series of smaller problems.

20. The Network

To be a successful entrepreneur need a good personal network of other entrepreneurs, advisors, lawyers, potential customers and suppliers.  Success depends on what you know and who you know.  Who you know is the leverage of what you know.  Thus the network is the leverage of your work.

Networking is helping other people and getting help from others. Figure out whom you can be useful to, and who can be useful to you.

III. Growing the Business

21. The Partners

Alliances with other players in the industry can leverage your company through providing access to customers and distribution and credibility.

Alliances need to be win-win.  They depend on people to make them work.  Identify champions in the large company who can make the partnership work.

22. The Game of Mindshare

Having the largest mindshare with the customer, partners, investors and employees is important as having the best product.

Often the vision you are selling is an important as the actual product.  Get people excited about your vision so that they buy your product even if it will take some time until your product matches the vision.

23. The Breakthrough

24. The First Customers

25. The Competition

26. The Growth Management

IV. The Entrepreneur

Thoughts on what makes a great entrepreneur.

27. The Motivation

28. The Doubts

29. The Sacrifices

30 The Qualities of an Entrepreneur



Team spirit

Risk attitude

No fear of failure

Ability to learn

Entrepreneurship is very personal

Sense of reality





Standing of an Entrepreneur