Presentation to Larry Lenihan's NYU Entrepreneurship Class April 2010

1. Learning from FailureAn Insider’s View of What NOT to do orHow to Create a Successful Start-up<br />Roger Ehrenberg<br />IA Venture Strategies<br…
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  • 1. Learning from FailureAn Insider’s View of What NOT to do orHow to Create a Successful Start-up<br />Roger Ehrenberg<br />IA Venture Strategies<br />NYU Stern School of Business<br />April 7th, 2010<br />
  • 2. History of Success/Failure<br />
  • 3. I hope this isn’t my destiny…<br />
  • 4. Is it possible to “fail successfully?”<br />YES<br />But How?<br />
  • 5. Case Study Monitor110<br />
  • 6. Why Did We Fail?<br />Leadership<br />Lack of a “buck stops here” leader<br />Product Development<br />Development running Product organization<br />Case Study: Monitor110<br />PR<br />Too much, too early<br />Money<br />Too much<br />Feedback<br />Too far from the customer<br />Speed<br />Too slow to adapt to market reality<br />
  • 7. Leadership<br />Lack of a “buck stops here” leader<br />No single vision<br />Inability to efficiently manage through crisis<br />Difficult to avoid factions behind each leader<br />Source of conflict with Board<br />Case Study: Monitor110<br />
  • 8. Product Development<br />Development running the Product organization<br />Results in a backwards product development process<br />Creates conflict and ill-will with sales and account management<br />Expands the distance between customer requirements and what is built<br />Enables a “science project” to be perpetuated<br />Case Study: Monitor110<br />
  • 9. PR<br />Too much, too early<br />Creates unrealistic market expectations<br />Creates unrealistic internal expectations<br />Raises anxiety around customer interaction<br />Facilitates raising too much money<br />Case Study: Monitor110<br />
  • 10. Money<br />Too much<br />Defers the need to generate revenues<br />Delays the need to face into severe product problems<br />Provides the resources to pursue non-customer driven science projects<br />Works against creating a scrappy, hard-edged, “us against the world” culture<br />Case Study: Monitor110<br />
  • 11. Feedback<br />Too far from the customer<br />Results in a product not geared towards customer requirements<br />Enables product management to stay off course <br />Results in a team not accustomed to interacting with and servicing customers<br />Creates an isolated, insular, tech-focused culture<br />Case Study: Monitor110<br />
  • 12. Speed<br />Too slow to adapt to market reality<br />Wastes money and development cycles<br />Creates fractures between technology and business organizations<br />Seeds conflicts between Management and the Board<br />Often results in key departures<br />Case Study: Monitor110<br />
  • 13. Other mistakes<br />As if that wasn’t enough…<br />Built huge, costly infrastructure prior to generating revenues<br />Engineered every part of the business – harvesting, data cleansing, semantic analysis, display and reporting<br />Didn’t have a single core competency – IP was dispersed throughout the Firm<br />Case Study: Monitor110<br />
  • 14. Attributes of failing successfully<br />Paraphrased from blogger Dave Friedman, commenting on Information Arbitrage<br />
  • 15. One man’s view of the successful entrepreneur<br />“It's not that they're brilliant or well-educated…They work all the time. They don't let failure demoralize or destroy them. They pick themselves up and keep going and eventually, every once in a while, one of your ideas actually breaks through and works, and it makes all that stuff seem worthwhile.”<br />Dean Kamen, Founder of Segway, as told to Thom Patterson of CNN<br />
  • 16. Being a first-time entrepreneur is hard<br />True entrepreneurs – those who believe “You can’t fail – you can only stop trying” – are few and far between<br />A related study* has shown that: <br />The timing of a start-up may be more important than the quality of the idea <br />Entrepreneurs who are successful the first time are more likely to succeed in subsequent ventures because of available resources<br />* Performance Persistence in Entrepreneurship, Gompers, Kovner, Lerner and Scharfstein, Harvard Business School, published December 3rd, 2008 <br />
  • 17. Some other deep thoughts<br />“We all have a philosophy that ideas and vision are important. But execution is the thing that distinguishes companies.” <br />Mike Maples<br />Man has an infinite capacity for self-rationalization.”<br />Sigmund Freud<br />Don’t be so humble …<br /> You’re not that great.”<br />Golda Meir<br />
  • 18. Case StudyStocktwits<br />
  • 19. The Good Stuff<br />Correcting Monitor110’s mistakes<br />Single leader – Howard Lindzon<br />Separation between Development and Product – Chris Corriveau and Soren Macbeth<br />PR only after functioning product in market<br />Initially built for less than $50k, has raised $4.8 million in three rounds as product/revenue milestones were achieved (Monitor110 raised $20 million before $1 of revenue)<br />The product is aggressively used by and shaped by our customers<br />Product/market fit has been insured<br />Case Study: Stocktwits<br />
  • 20. The Good Stuff<br />Creating barriers<br />Focused on building core IP – leveraging open source software, APIs for data and the cloud for storage and processing<br />Ruthlessly focused on our customers – working to segment our audience and to provide the stuff they value<br />Paranoid about data quality – built reputation algorithms and community self-policing mechanisms to kill spam before it spreads<br />Case Study: Stocktwits<br />
  • 21. Pretty successful seed stage investor with significant deal flow<br />Viewed as value-added because of deep experience in both investment and operations<br />Co-founded/incubated two businesses and doing more through my fund<br />Stocktwits, Kinetic Trading, stealth IDS company, stealth database company (hopefully…)<br />Have a grip on my core competencies and focusing ruthlessly on the intersection of those skills and market megatrends<br />IA Ventures, a seed-stage venture fund<br />Where am I today?Learning from failure<br />
  • 22. Big Data is pervasive<br />Advertising, Finance, Commerce, …<br />Extracting value is hard<br />Large<br />Unstructured<br />Real-time<br />The best organizations use Big Data effectively … The rest fall behind<br />Big Data revolution is underway driven by<br />Pervasiveness of actionable data<br />Powerful commodity hardware<br />Cloud computing<br />Advanced algorithms, analytics, and visualizations<br />IA VenturesThe Big Data opportunity<br />
  • 23. IA Ventures invests in early-stage companies developing tools and technologies for managing and extracting value from Big Data<br />
  • 24. Starting a companySome Things I Want To See<br />Product visionary / Domain Expert<br />Technically strong founding team<br />Cash disciplined<br />Milestone based execution <br />
  • 25. “Illegitimi non carborundum”<br />Translation: Don’t let the bastards grind you down<br />Failure isn’t life-threatening; it’s part of life<br />Understand your core IP; keep costs down and leverage open source wherever possible<br />Bond with the early-stage ecosystem; thousands have gone through what you are going through – leverage this collective wisdom<br />Winning is hard, but victory is very, very sweet <br />It you don’t think the pain is worth it, don’t be an entrepreneur<br />Key Take-aways<br />
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