Class 1: Assignment and Readings

- Blank, S.(2013), Why the lean start-up changes everything? Harvard Business Review, May: 63-72.
- Hamm, J.(2002), Why entrepreneurs dont scale, Harvard Business Review, December: 110-115.
- Wasserman, N.(2008), The founders dilemma, Harvard Business Review, February: 103-109.
- Gilbert, C.G. & M.J Eyring (2010), Beating the odds when you launch a venture, Harvard Business Review May: 92-
98
- Saxenian, A.L. (2002), Silicon Valleys new immigrant high-growth entrepreneurs, Economic Development Quarterly
16: 20-31.

CLASS 1: DILEMMA FOR ENTREPRENEURSHIP


THE FOUNDERS DILEMMA BY Wasserman, N
Founder do not let go easily, but often they are forced to step down from the CEOs post. The change in
the leadership can be damaging when employees loyal to the founder oppose it.
Entrepreneurs often make a decision that opposes making money despite their goal to be rich; it is due
the drive to create and lead an organisation. Balancing two goals make them end up neither wealthy nor
powerful.
Entrepreneurs attach to their creation (new venture) evidence of this is low salaries that they pay for
themselves. Many of them are overconfident about their prospects and nave about the problem they will
face.
Financial source: family, friends, angel investors or VC. Price for this: giving up control over the
enterprise. Angel investors may leave more control to entrepreneur than VC
The stage after success in developing a new product, entrepreneurs must have the ability to face business
challenge in terms of marketing, finance, and managerial. Entrepreneurs do not always see this due to
his emotional strengths become liabilities at this stage it hard for him to accept lesser roles when
someone else is needed to run the business part.
Dilemma faced by entrepreneurs of start-up:
Trade-offs between rich and king. Founder is faced with needs for resources to capitalise the
opportunities. To attract investors and executives, entrepreneurs have to give up control over most of the
decision making (less king), but when they choose right investors, company become more valuable
(more rich). The options depend on the choice that fits to the reason of starting the company.
The choice is affected by perception of a ventures potential. Founder can make different decision when
he believes that their start-up has the potential to grow into valuable company than when they believe
their venture wont be that valuable.
Choosing between money and power allows entrepreneurs to come to grips with what success means to
them. Founders who want to manage empires will not believe that they are successful if they lose
control, even they end up rich. Founders who understand that their goal is to a mass wealth wont view
their selves as failures when they step down from the job. -- FIN --


WHY THE LEAN UP START-UP CHANGES EVERYTHING by Steve Blank
Lean start up and how they evolve
Lean start-up:
Favors:
experimentation over elaborate planning (i.e. business plan are not robust, forecasting the
future is useless),
customer feedback over intuitions (i.e. launching product customers really want),
iterative and incremental design over traditional big design upfront development (i.e. iterative
agile technique vs linear product development waterfall model).
Testing hypothesis, gather early and frequent customer feedback and showing minimum viable
product and pivoting
Classic way: make business plan with 5 years projection to convince investor, the develop product with
no customer involvement, then launch
Start up looks for business model
Lean start up approach: temporary organisation designed and to search for a repeatable and scalable
business model
Key principles in lean start up:
a. Founders make business model canvas that contains how a company creates value for itself and
its customer (done in quick time to summarize hypothesis)
b. Use get out of the building approach called customer development to test the idea and get
feedback (price, distribution, features etc) from potential customers, suppliers, and partners. Use
this feedback to make adjustments.
c. Agile development: developing product iteratively and incrementally create minimum viable
product then test it.
Factors that constrained start up growth in the past: high cost of getting first customers; long technology
development cycle; limited people with risk appetite; structure in VC industry need big money to get
invest to get return; concentration of expertise.
Lean start up makes NV launch products quickly and cheaply and making start up less risky. -- fin


WHY ENTREPRENEUR DO NOT SCALE
By John Hamm
Fail to scale: fail to adapt their leadership capabilities to the growing businesses needs (due to
entrepreneurial personality)
Leader able to scale: understand the importance of streamlined strategy. Ability to focus on what is
crucial.
Four tendencies works for small business (makes them grow in launching and fall when they grow) but
not for big ones:
a. Loyalty to comrades blind loyalty can become liabilities in managing large business and can
lead to termination of the company
b. Task orientation excessive focus on details makes organisation lose its way as they fail to
establish strategic priorities.
c. Single-minded can harden into tunnel vision so that the leader cannot become more
expansive. Leaders need to listen to employees and communicate with them.
d. Working in isolation will not work for leader relies on kindness of customers, investors and
analyst ---fin


BEATING THE ODDS WHEN YOU LAUNCH NEW VENTURE
By Gilbert and Eyring
Entrepreneurs are doing great things but not doing them in the right order (most of them ignore
customer demand initially)
As the risk level of a new venture goes down, the value of it goes up
Great entrepreneurs dont take risks, they manage them:
Quickly determining whats right whats wrong with key assumptions then making speedy
adjustments
Test early, test cheaply: get something into the market quickly, learn from it and move on to the next
phase of development
Invest in stages: spending small sums on the assumption that your strategy will need adjustment, it is
much easier to adapt quickly and be successful lecture slides --

Risk in new venture: deal-killer risk, path-dependent risk, high-ROI risk
Deal-killer risks: uncertainties that if left unresolved could undermine the entire venture. Not harm at
first but can be dangerous when catastrophe happens
Path-dependent risk arises when pursuing the wrong path would involve wasting money and or time.
Risks should be assessed together.
Several financing round will make the new venture more effective.
Use first funding to test the deal-killer risk and path dependent risk asap. Then work with the remaining
risk.
Steps to make experiments more effective:
1) Limit the duration: get something into the market quick and learn from it to develop later
2) Test one thing at a time: to make easier knowing what causes what
3) Apply the lesson learned
4) Be willing to turn off experiments: -- fin

SILICON VALLEY might not important
Continuous customer interaction
Revenue goals from day one
No scaling until revenues
Designed to test hypothesis and answer the unknowns (i.e. assumes customers and features are
unknown)
Leverages: technology commoditization, agile management practices and customer development
Continuous cycle of product development:
product release cycle in hours not years, tightly coupled with customer development, minimum
feature sets and maximum customer coverage
Continuous cycle of customer interaction:
rapid hypothesis testing about market, pricing, customers, extreme low cost/low burn rate/tight
focus and measurable gates for investors

The new Argonauts (as transnational entrepreneurs) exploit their linguistic and cultural capabilities and
institutional know-how to identify and tap under-utilized resources and/or potential markets in their home
countries:

Seeking the golden fleece at home
Israelis tap military technology and skill base
Taiwanese seek low-cost manufacturing talent
Indians tap underemployed programming skill
Chinese seek to serve large domestic market