Showing posts from March, 2011

More Advice from Class of 1999 MBA Entrepreneurs

by Tom Eisenmann

I recently wrote some former students from the HBS MBA classes of 1999 and 2000, asking what advice they'd give to current students considering an entrepreneurial path. In a prior post, I shared their responses to the question, "Do you have any regrets about founding a firm upon graduation?" Below, I present their advice to current students.

In 2000, Rod Harl co-founded GiftwareExchange, an online B2B marketplace that connected gift stores with product suppliers. The business never gained traction, and after several career twists and turns, Rod is now President of Alene Candles, a business he and a partner purchased in 2008 that manufactures custom candles. Rod shared this advice:
Ample low-cost funding can compensate for founders’ weaknesses. In such periods I might endorse aggressively pursuing new businesses regardless of your experience or the quality of your idea. Playing musical chairs, you can make a lot of money. But outside those periods, entrepren…

No Regrets (Mostly): Reflections from Class of 1999 MBA Entrepreneurs

by Tom Eisenmann

MBA students who are debating whether to launch a startup upon graduation often ask me, "What are the career consequences if my business fails? What do MBAs who founded failed firms do now?  Do they regret their decision to launch a business right out of school?"

We have plenty of experience with student entrepreneurship at HBS. Over the past 15 years, an average of 3-4% of students in each class of 900 HBS MBAs have founded firms upon graduation, and another 4-5% have joined startups in non-founder roles.

At the dot com bubble's peak in 2000, 11% of our MBA class founded firms upon graduation. To determine whether we're in another bubble, I'll track this figure for the Class of 2011. Interest in entrepreneurship has been rising at HBS, but so far, it lags 1999/2000 levels.

To respond to my students' questions, I assembled some data on career outcomes for a sample of a dozen MBAs who founded firms upon graduation in 1999 or 2000. I also asked th…

Tonight We're Going To Party Like It's 1999

by Tom Eisenmann

Are we in a new bubble, as Steve Blank recently wrote, or do current high valuations for early- and late-stage consumer Internet companies reflect sound fundamentals, as argued by Ben Horowitz?

From an academic's perspective, this is a difficult question, and I won't tackle it here. Instead, I'll share some data on the performance of Internet startups launched during in the late-1990s boom.

The table below compares the market value at the end of 2001—the trough of the valuation cycle that began in the mid-1990s—to total capital raised since inception (private and public) for all 2,121 U.S-based Internet companies that had ever got funding from VCs or public markets (see appendix below for my definitions and methods). The firms had an aggregate market value of $99 billion at the end of 2001, and they had raised $85 billion of capital. This doesn't imply an attractive return for someone who invested pro rata in all rounds, especially if you consider the tim…

If the Customer is King, the Product Manager is Regent

On Not Bending to Customers' Whims

by Katharine Nevins (blog:

The goal for any startup (or product manager for that matter) is to build a product which customers need and love.  It’s easy to call yourself or your company customer-centric, but actually doing what is best for customers isn’t always straightforward or intuitive.  There are two main reasons why listening to customers doesn’t inevitably lead to good products.  Firstly, not all customers need or want the same thing.  Secondly, customers often do a poor job of knowing or articulating what they want.  Fortunately, both of these problems are addressable.

For most products, different customers will have different needs.   Power users have different needs from new users: Sarah Dillard points out that Quora’s integration of feature requests from its power users have led to a bewildering experience for new users.  Different user segments may also have conflicting needs.  Natasha Prasad give…

VCs: Angels or Demons?

by Private

In this day and age where it seems that every entrepreneur’s dream is to be funded by some bigwig VC firm… I wanted to raise a note of caution against this potentially risky pursuit.

Yes, VC funding definitely has its many benefits. Be it purely for financial reasons as a source of funding which was previously inaccessible, to gain access to a wider network of potential customers, recruits and acquirers, or even for their ‘added value’ from wisdom gained through years of industry experience. It is thus often assumed that any venture backing is good for a startup company and a clear indication of its successes to come. However, I definitely believe that albeit useful, VC funding undoubtedly has its fair share of drawbacks as well. Besides the obvious loss of control and equity, there are other fundamental and often overlooked challenges of entering into a VC partnership. This post will try to explore this from the perspective of a lean startup

Entrepreneurs who practice the le…

Do Founder/Users Expand Moore's Chasm?

by Jonathan Enav

In many LTV classes we discussed Geoffrey Moore’s Chasm and whether it is a benefit or a hindrance through the lens of startups following the lean methodology.  However, we never discussed what can make the “chasm” shrink or expand.  Moore’s theory is that there is a “chasm” that separates the innovators and early adopters of a new technology from the mainstream, and that technology companies often find it hard to cross this chasm and grow beyond their core user base to become a widely adopted medium. 
Crossing the chasm is not easy and often requires pivoting your product away from your core early adopters towards the mainstream.  The lean methodology offers guidelines to achieve this; pivot early, pivot often, form a hypothesis, test it, pivot again until you find product/market fit.  So why do so many startups fail at this stage?  The lean methodology tries to make crossing the chasm easier by effectively making the chasm smaller.  However, some founders seem to, un…

I Don't Want to be a Sleazy Salesperson

by Seth Moulton

“The most important class you will take at HBS is marketing,” a successful entrepreneur once told me. After my RC year, I found this hard to believe. Yet it’s a theme that I’ve heard from a wide variety of people. Another friend started a small apparel company with no business experience whatsoever. Although it’s plodding along, much of his experience might fall in the category of “learning from failures.” He too tells me, with a certain disdain for my “classroom experience” of the past two years, that I need to get out and hit the pavement as a salesman if I ever want to succeed in business. The number one takeaway from one of our first case protagonists in Founders’ Dilemmas was, “Get a job in sales—carry a bag, and learn to hear ‘No,’ because you need to start with your customers.

But despite all this encouragement, I still don’t like to believe that sales and marketing are all that important—at least not as much so as developing a great product, or managing well, etc…

Overcoming the Concern Barrier

by Brett Gibson
 “This is the most useful class at Harvard Business School.”
As I sat back during David Skok’s remarks during #hbsltv, I turned to my neighbor and said, “this is the most useful class at Harvard Business School.”  Skok laid out a helpful description of the customer acquisition process and outlined each step of the sales funnel.  He shared tips on measuring and testing marketing strategies and driving the effectiveness of sales.  He gave us practical advice and recommendations for useful websites (Hubspot, Sysomos and Posterous) and shared best practices for bridging the relationship between marketing and sales teams.  What stood out most to me was his conviction that to win a customer, you need to know what the customer wants, and more importantly, break through their “concern barrier.”
“You want your customers to do something they didn’t think they wanted to do.”
As humans, we resist “being sold”.  We like to feel in charge, act on our own impulses and avoid falling into …

Architecting Pivots

by Mosbah Kahaleh
Eric Ries and Steve Blank, two of the pioneers of lean startup methodology who are trying to codify what lean startup methodology actually mean and how can future entrepreneurs benefit from such way of thinking. At the heart of lean startup methodology is the ability to ‘pivot’, which in simple terms can be defined as the act of changing the startup’s path as the founders learn by experimenting and gathering feedback. Startups pivot in an iterative process with the goal of reaching product-market fit.
Drawing on frameworks from other management theories, I hypothesize that pivots can be categorized along three dimensions that can help entrepreneurs in architecting pivots.
First, inspired by Clay Christenson’s innovation theory, I believe pivots can be classified into two categories: disruptive pivots and sustainable pivots. In disruptive pivots, the entrepreneur learns something about his/her market or consumer behavior that completely changes the entrepreneur perspecti…

Crash Landing

by Aldi Haryopratomo

“The very first company I started failed with a great bang. The second one failed a little bit less, but still failed. The third one, you know, proper failed, but it was kind of okay. I recovered quickly. Number four almost didn't fail. It still didn't really feel great, but it did okay. Number five was PayPal.” 

Max Levchin's (Co-Founder of PayPal) quote on failure is one of my favorites. It shows how important failure is to Paypal’s success. Unfortunately, most wannabe entrepreneurs learn by reading the success stories of start -ups that got bought by Google or completed a multi-million dollar IPO. A few spectacular failures such as, an online grocery company that raised $375 million before folding, are well known, but few of the “common” failures are published. It’s not surprising as entrepreneurs don’t like publishing them, because students don’t enjoy learning about them either. HBS cases like Cake Financial, where the entrepreneur had the c…

Startups Scale Like Revolutions Do!

by Charle Alfy

Those who have been following this recent Egyptian Revolution closely would know that the idea of demanding Mubarak to step down right away wasn’t foreseen when the calls for the protests started! They primarily started by calling for economic reform, political freedom and social justice. It was only by the end of the first day of the protests, 25 Jan, when demonstrators saw tens of thousands taking to the streets that they realized they have enough traction to demand those fundamental changes. And as the numbers grew larger, reaching the claimed millions in the next few days, people got to believe in their ability to achieve those demands and held fast to them.
Maybe it’s only because I’ve been pre-occupied with those events over the past period, but I do in fact see many parallels between the concepts we’ve been discussing about when to scale a startup and how to do it and those for scaling a grassroots revolution!
When to scale:
Achieving Product-Market-Fit: A basic prer…

Lean Logic Extends To All Functions, Not Just Product Development

by Private

Our class discussion around Foursquare highlighted a strange paradox that I’ve been trying to articulate for a while now. We all agreed that Foursquare follows and is one of the best instances of a lean startup method we’ve seen. They launched with a buggy product, initially did not have too many features, collected consumer feedback on the product and constantly improved. However, the discussion broke down when we turned to their monetization strategy. Yes, Foursquare does have data about location and users that can be broken down in several ways to add value to advertisers, but then all the methods that we discussed involved high touch activities. At first sight there also seems to be a lack of metrics around how the success of advertising campaigns can be made measurable to add value to advertisers. 
The discussion highlighted that the lean methodology may not be consistent with all divisions at a startup. Some startups have done a great job implementing the lean method in…

What Type of Lean Entrepreneur are You?

by Rick Hansen
This post is influenced by some news of the past week as well as a few of the case studies of LTV.  LTV teaches important concepts and principles for implementation, but perhaps lost in all the cases is the amazing variety of personalities whom we’ve covered.  Having worked with a few types of entrepreneurs in the tech space in the past (and having my attention piqued by events of the past week, when the start-up I was supposed to write an HBS case for was abruptly acquired), I think it is also appropriate to spend some time figuring out the different types of start-ups that fit our career vision. 
The Sell-out
I know, the name sounds bad.  But the negative connotation isn’t really fair.  In the end, start-ups hope to create value through new and innovative ideas.  At some point, there are economies of scale to be had which are usually best exploited by larger, more established firms. 
As an MBA, you better know whether you are working for the Sell-out, because as the com…

In Defense of Foursquare

by Katharine Nevins (blog:

Last week, half of my LTV classmates declared that they’d short Foursquare stock if they could.  I wonder whether their bearishness is driven by the popular caricature of Foursquare as a tool for urban hipsters to get sloshed together in the trendy bars.  Given that all of my classmates are interested in technology entrepreneurship, I’d like to think we’d have more imagination than that. After all, many normal people still think Twitter is primarily a tool for the self-absorbed to share the minutae of their day. (NB:  This use case actually does exist... in the past half hour as I write, fifteen people tweeted what they had for lunch.  Fortunately, it is far easier to avoid bores on Twitter than it is in the offline world.  But I digress.)

There are a number of interesting consumer use cases for Foursquare, of which the “serendipitously meeting friends at bars” scenario is among the least compelling.  I strongly believe t…

The Grass is Often Greener on Your Side of the Chasm

by Natasha Prasad
A few weeks ago, Fred Wilson and Jeff Bussgang supplanted our usual LTV class with a fireside chat on lean startup methodologies, monetization and VC value-add.  A Fred idea I found particularly compelling suggests that entrepreneurs should be “hunch-driven”, rather than “data-driven” in the early days of a startup.  Indeed, if Jack Dorsey and Mark Zuckerberg hadn’t stuck to their hunches, Twitter would never have gotten past 1000 users and Facebook’s newsfeed wouldn’t exist.
Hunches, however, can only get you so far: most successful startups will at some point face the excruciating transition from early adopter glory to mainstream success.  Founders like Dennis Crowley, who admit to having built products for their own friends, are now struggling to gain momentum with the mass market.  If users outside of NYC, LA and San Francisco lack the vanity-driven penchant for public bar and restaurant hopping, how can Foursquare possibly grow beyond its 6 million strong userbas…

International Lean Startups Moving to the US

by Krzysztof Jedrzejek

This topic came up recently during lunch with Spark Capital's Andrew Parker before the LTV class. Andrew mentioned that he would invest in international startups targeting the US market only if the founding team relocated to the US. He also mentioned cases of Skype and, which in his mind potentially moved too late and failed to reach their full potential. I started thinking about it in context of my own experiences and the lean startups methodology.

I envision different potential models that could work here. On one hand, I see clear benefits of relocating. In the lean startup process, being in the US makes it much easier to stay close to the customer, to get feedback through frequent and direct interactions, as we’ve seen in the foursquare case. If the team is ‘hunch-driven’, that enables better decisions on what turns to take. 

I believe it is also easier to evangelize the product, seek advice from top VCs and other entrepreneurs in Silicon Valley/NYC.

The Varsity Entrepreneur

by Trina Spear

Imagine a high school football field. Fall 2009.Division Championship. Sean Murphy, starting quarterback at Riverview High, throws the 80-yard touchdown pass to win the most exciting game of his young career.Sean has been a very successful quarterback exploiting this exact play, the long pass.As the clock runs up, the team hoists Sean onto their shoulders and carries him around the field.As he struts through the halls, he feels the eyes on him and grins as people pat him on the back.He is on top of the world – he is the star on the football team, has earned straight A’s, has recently received football scholarships to Northwestern, Wisconsin and Harvard and to top it all off, his girlfriend was just voted homecoming queen.
The following month Sean finds himself in a tough position playing for the Conference Championship: down by 4 points, 45 seconds left in the game, forty yards away from the end zone.Unlike in other games, worry and uncertainty consume him.Thoughts pour t…