Kit Needham - CMU

Entrepreneurship 101Kit Needham

Not all Startups are the SameSmall Business/Life-StyleØ Known businessexamples to learn fromØ Funded by banks orstockholdersØ Business planØ Sustain a particularlevel of incomeØ Provide dividends orincreased stock priceØ Ø Ø Ø Ø Investment/ExitUntested businessmodel with a highdegree of uncertaintyFunded by investors(angels and VCs)Business modelGrow big quickly andsell (exit)Provide a 5x-10x returnto the investors

The Players Incubators Accelerators TBEDs

Incubators Where the commercialization plan‘hatches’– Mentoring/coaching/guidance– Access to materials– Introductions to advisors, domain expertise– May provide space– May provide micro-grants Goal – get initial seed funding

Pittsburgh: A Community of InnovationFOR INVESTMENT/EXIT START-UPSIncubatorsleveraging billion research andstudent SIDEAFOUNDRYINNOVATI0NINSTITUTEEarly GrowthRapid GrowthEXIT

Accelerators Fixed term, cohort-based programs– Provide mentorship and educationalcomponents– Highly competitive to get in– Get seed investment ( 20k- 50k) in exchangefor equity Goal – “Demo Day” to attract follow-on investment Examples: AlphaLab/Gear, Idea Foundry, TechStars, Y Combinator, DreamIt Ventures, etc

Pittsburgh: A Community of InnovationStartupOLYMPUSIDEAINNOVATI0NEarly GrowthAlphaLabSOFTWAREAlphaLab ng billion research andstudent innovationUNIVERSITIESIdeaDevelopmentHARDWARE &ROBOTICSIdea FoundryHEALTHCARE &LIFE SCIENCESENTERTAINMENT &EDUCATIONSOC. ENTERPRISESWATERTHRILLMILLDemandCoRapid GrowthEXIT

Pittsburgh: A Community of InnovationStartupOLYMPUSIDEAINNOVATI0NEarly GrowthFOUNDRYINSTITUTERapid GrowthAlphaLabINNOVATIONWORKSAlphaLab leveraging billion research andstudent innovationUNIVERSITIESIdeaDevelopmentHARDWARE &ROBOTICSIdea FoundryHEALTHCARE &LIFE SCIENCESENTERTAINMENT &EDUCATIONSOC. BURGHLIFE SCIENCES GREENHOUSEEXIT

MONEY/FUNDINGInvestors INVESTORS– FRIENDS & FAMILY (& FOOLS)– CROWDFUNDING– ANGELS and ANGEL GROUPS– SUPER ANGELS– VENTURE CAPITALISTS

Angels vs VCsØ Ø Ø Ø AngelsHigh net-worthindividuals i.e. theirown money)Tend to invest locallyTend to invest early( 25k - 50k)Often form AngelGroups to research andco-invest in deals (e.g.BlueTree)Venture CapitalistsØ Create a fund usingother people’s moneyØ Seek deals fromeverywhere and oftenrequire them to relocatenearby

Angels: Majority of Startup Funding 12.4B 9.9B 9.8B 9.5B 8.4B 1.0B 0.45B* 0.22B**es matedAngel Investors 2011 22.5B 66,000 deals42% seed/startup55% early stage 318,500 individualsVenture Capital 2011 29B 3,750 deals3.5% seed/startup68% later/expansion capitalTotal 791 firms (not all active)Sources: UNH Center for Venture Research, PwC MoneyTree and NVCA

MONEY/FUNDINGTermsTerms-Seed FundingSeries A, B, etc.ValuationConvertible Debt10x returnExit (Sale or IPO – Initial Public Offering)

People Steve Blank – 4 Steps to Epiphany“Get out of the building” Eric Reis – The Lean Startup– MVP (Minimal Viable Product)– Feedback LoopBuildLearnMeasure

People and Terms Steve Blank – “Get out of the building” Eric Reis – “The Lean Startup” Business Model Canvas

Pittsburgh: A Community of InnovationFunding for investment/Exit StartupsIdeaDevelopmentANGELSBlueTree Allied AngelsKeiretsu ForumFunds startupsFUNDING*FOUNDATIONSFunds startups*FEDERALGOVERNMENTFunds researchFEDERAL GOVTSBIRS/STTRsFunds startupsVCs: Adams, Birchmere,PEP, Draper, etc.Funds startupsSTATE: DCEDFunds IW and subs, PLSGCROWDFUNDINGPUBLICSECTOR;Rapid GrowthEarly GrowthStartupPRIVATESECTORLocal: URAFunds StartupsEXIT

Pittsburgh: A Community of InnovationLifeStyle and Investment/Exit StartupsIdeaDevelopmentStartupEarly GrowthRapid GrowthChatham’s Center for Women’s Entrepreneurship (CWE)(CWESmall Business Development Centers- Pitt; DuquesneInnovation Practice Institute –Pitt LawSchool (Start Smart) with CMUEducationMaturity

Pittsburgh: A Community of InnovationLifeStyle and Investment/Exit StartupsIdeaDevelopmentStartupEarly GrowthRapid GrowthChatham’s Center for Women’s Entrepreneurship (CWE)(CWESmall Business Development Centers- Pitt; DuquesneInnovation Practice Institute –Pitt LawSchool (Start Smart) with CMUSCOREIEE - PittCWEPowerlinkEducationMentoringMaturity

Pittsburgh: A Community of InnovationLifeStyle and Investment/Exit StartupsIdeaDevelopmentStartupRapid GrowthEarly GrowthChatham’s Center for Women’s Entrepreneurship (CWE)(CWESmall Business Development Centers- Pitt; DuquesneInnovation Practice Institute –Pitt LawSchool (Start Smart) with CMUSCOREIEE - PittCWEPowerlinkRiverside Center for InnovationRevv I, II, III?Startup TownThe Beauty ShopEducationMentoringSpace/SupportServicesFormer Paramont StudioMaturity

Pittsburgh: A Community of InnovationLifeStyle and Investment/Exit StartupsIdeaDevelopmentStartupRapid GrowthEarly GrowthChatham’s Center for Women’s Entrepreneurship (CWE)(CWESmall Business Development Centers- Pitt; DuquesneInnovation Practice Institute –Pitt LawSchool (Start Smart) with CMUSCOREIEE - PittCWEPowerlinkRiverside Center for InnovationRevv I, II, III?Startup TownFormer Paramont StudioThe Beauty ShopPgh TechCouncilTech esMaturity

Q&Akit@cs.cmu.edu

Pittsburgh: A Community of InnovationFOR INVESTMENT/EXIT TI0NEarly GrowthRapid GrowthAlphaLabSOFTWAREAlphaLab ng billion research andstudent innovationUNIVERSITIESIdeaDevelopmentHARDWARE &ROBOTICSIdea FoundryINNOVATIONWORKSITMEDICALDEVICESHEALTHCARE &LIFE SCIENCESENTERTAINMENT &EDUCATIONSOC. ENTERPRISESWATERTHRILLMILLTHINKTIVPGH LIFE SCIENCES ee Allied AngelsKeiretsu ForumVCs: Adams, PEP,Birchmere, Draper,EXIT

Chatham’s Center for Women’s Entrepreneurship (CWE) (CWE Small Business Development Centers- Pitt; Duquesne Innovation Practice Institute –Pitt Law School (Start Smart) with CMU Education . Pittsburgh: A Community of Innovation LifeStyle and Investment/Exit Startups Idea