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© Should I keep control of my company?

© How do I turn potential into profit?

© How can a resource-challenged start-up grow?

© What legal mistakes should I watch out for in starting a new company?

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xich or xoyal: What Do Founders Want?

It's a fundamental tension many entrepreneurs face, the conflict between wanting to become rich and wanting to keep control

of their new company. Few can have both. Professor 



discusses his research into the motivations of

entrepreneurs and the people who invest in them.

Key concepts include:

© Entrepreneurs are often motivated by the potential of money and control, but very few ever achieve both.

© A fundamental tension between "rich and regal" starts to develop as entrepreneurs look to attract resources to

grow their ventures.

© Investors need to understand the motivations of the entrepreneurs they back to make sure their goals are

aligned.









^urning High Potential into xeal xeward

^ransforming high-potential ventures into high-performance ventures, says professor 

 
, depends on

combining what, how, and who you know.

Key concepts include:

© Successful entrepreneurs look ahead and say, "^wo or three years from now, this is exactly the customer and

exactly the product, and this is exactly why they're going to be compelled to buy."

© A key issue is who do you do business with initially who lets the venture start moving down the "right" product

road map?

© ^urning high-potential ventures into high-performance ventures is always an elegant combination of know what,

know-how, and know who!










How Can Start-Ups Grow?

For new ventures a lack of resources makes growth difficult to come by²just ask those nine out of ten fledgling firms that fail.

Professor !
 says the key may be in acquiring intangible resources such as legitimacy, status, and reputation.

Key concepts include:

© Small companies can grow by developing intangible social resources such as legitimacy, status, and reputation.

© In some cases the location of a new venture is a critical facilitator of success because of the symbolic benefits

offered by an office address that is legitimate in the minds of stakeholders.

© Firms have to work at maintaining their status in the hierarchy, while legitimacy is a critical issue only in the

early stages of firms' lives.

© For new firms in established industries, there is value to doing some nontechnical, symbolic things in the

manner that is widely accepted and to adhering to industry norms and culture.


 



 
 







^op ^en Legal Mistakes Made by Entrepreneurs

^he life of a startup can be precarious, a wrong turn disastrous. Harvard Business School professor"




  discusses the most frequent legal flops made by entrepreneurs, everything from hiring the wrong lawyer to puffing up

the business plan.

 Key concepts include:

© Entrepreneurs tend to delegate too much to the lawyers.

© Lawyers are risk averse; delegating to them can often compromise business objectives.

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Published: March 31, 2011

Author: Dennis Fisher

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At a panel discussion on entrepreneurship, professor 
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 and several successful start-up veterans discussed the
case of John Osher, father of Dr. John's Products, Ltd., and the wildly popular battery-powered toothbrush, the SpinBrush. Key
concepts include:

© Look for gaps in the existing market or product lines to exploit.

© Anticipate product knockoffs and plan accordingly.

© xaise money when you don't need it, so you'll have it when you do.

© Be quick to market with the initial product and improve as you go along.

John Osher is one of those casually and spectacularly successful people who make serial entrepreneurship look like a
cakewalk. He began racking up wins at an early age²starting and selling both a vintage clothing store and an earring outlet
before he was out of college²and then embarked on one of the more eclectic business careers of the last few decades.

His entrepreneurial journey culminated (at least temporarily) in the sale of his electric toothbrush company to Procter &
Gamble for almost a half-billion dollars. Not bad for a former plumber, cabdriver, and carpenter who took seven years to finish
college.

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^he meandering and seemingly random path that Osher took in his career and the lessons it holds for other executives and
entrepreneurs looking to succeed in today's difficult economic climate was the subject of a panel discussion at Harvard
Business School recently. ^he discussion, part of a one-night event called "Entrepreneurship During an Uncertain ^ime,"
featured four highly successful executives. ^he event was hosted by HBS and ^he Economist.
HBS professor William Sahlman, who studied Osher's career and wrote the case study on his company, Dr. John's Products,
Ltd., said in an introduction that while much of Osher's success might look from the outside to have been the result of a series
of happy accidents or lucky breaks, it was in fact the product of a sharp intellect and dozens of lessons learned over the
course of a long career.

"He's a street-smart guy, and he has this observational power. He had in mind designing the perfect company, which
included the lesson of, 'Don't make the same mistakes I did,' " Sahlman told the audience of HBS alumni and Executive
Education participants. "He hated having to manage employees, so he built a big company with very few employees."

Dr. John's was the third major venture that Osher built from the ground up and brought to a successful and lucrative exit.
ConServ was his foray into energy conservation and baby products in the 1970s and '80s, followed by Cap ^oys, offering
toys and candy, in the 1980s and '90s. ^he latter venture, which produced the uniquely American and insanely
popular SpinPop battery-powered lollipop, would later serve as the blueprint and inspiration for Dr. John's huge hit,
the SpinBrush

After his successes with SpinPop and various baby products, Osher discovered that one of the keys to building a successful
company and creating a product that people love is to find and exploit a gap in the existing market. ^he SpinBrush was
designed from the beginning to sit in the enormous space between cheap manual toothbrushes and ultra-high-end electrics
produced by companies such as Gillette and Johnson & Johnson. Osher wanted his offering to sell for about six dollars, work
for three months on the included batteries, and clean teeth as well as the premium models.

It was a simple plan, but one that would be quite difficult to execute with Osher's limited budget and small team. But, as
several of the panelists acknowledged, the small, agile nature of Dr. John's in fact may have been an advantage in the end.

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"Big companies get stuck on analysis paralysis, and they look for the perfect answer. In my company, we iterate very
quickly," said Sheila Lirio Marcelo (HBS MBA 1998), founder and CEO of Care.com a website for providers and users of child
care, senior care, and other related services. "Large companies look for the perfect solution [and] analyze everything to a ^,
as opposed to putting something in production, getting it going, and analyzing off of that."

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^hat's the template that Osher followed with Dr. John's, basing the idea for the SpinBrush on the proven design of the
SpinPop, getting an early product on the shelves, and then improving it from there. ^he first iteration of the product was a
success right from the beginning, selling as many as 6,000 units a day in grocery stores, drugstores, and large retailers
including Walmart and ^arget.

Osher had taken for granted from the start that SpinBrush would be copied quickly by other companies. As a result of that
planning he had designed Dr. John's to work on a short product cycle, able to respond very quickly to shifts in the market.

^he SpinBrush had its problems, though. It had a tendency not to last as long as Osher and his team had planned, and there
was an issue with the way the spinning bristles worked with the stationary bristles. But consumers were so taken with the
SpinBrush's design and value for the price that sales didn't suffer while the Dr. John's team worked out the kinks. ^he
company didn't have a huge war chest, but Osher had raised additional capital after the company's launch in order to pay for
additional inventory once the product took off. ^here's a clear lesson there for today's business leaders.

"A lot of companies spend a lot of resources playing defense. We want to play offense, we want to innovate, pilot, template it,
build for scale, and go," said Mark Norman (HBS MBA 1994), president and COO of Zipcar, the time-sharing car service.
"xaise money when you don't need it, while you're figuring things out."

As SpinBrush continued to gain market share, Osher's little company began to attract the attention of big players in the
market: P&G, Colgate, Johnson & Johnson, to name a few. Osher held discussions with P&G about licensing the Crest brand
for the SpinBrush.

"He knew it would be knocked off, so he had a two- to three-year product plan," Sahlman said. "He built this company to flip,
not to last. It was organized to be sold."

^he SpinBrush became a huge success for P&G, helping revive the Crest brand, while Osher and his team pocketed $475
million.

While the number of huge opportunities like the one that Osher exploited may be limited, the lessons he learned over the
years and the methods he employed still can be applied in a wide variety of situations and industries.

"He found a gap that was the size of the Grand Canyon," Sahlman said. "But you have to be realistic. Sometimes you can
confuse a rising tide with genius."

&



^he panelists and Sahlman agreed that today's economic climate is not only a challenging one for entrepreneurs interested in
launching new companies, but also for those who already are in business and looking for ways to keep their heads above
water and preparing for the turnaround.

"During periods of randomization, make it so that you do something different going forward," Sahlman said.

Don Young (HBS MBA 1984), president and CEO of Aspen Aerogels, observed that downturns can be opportunities for the
well prepared. "^hose economic disruptions, as long as you have money in the bank, can be opportunities to succeed," he
said.

For example, during good times it can be difficult for small companies to get into large accounts where the vendors are
established and the corporate focus is on growth. But when the economy begins to slow down, he said, companies start
looking for ways to streamline operations and save money, and that can be a way in.


 ^
 
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Published: April 11, 2011

Author: Carmen Nobel
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Most startups fail because they waste too much time and money building the wrong product before realizing too late what the right
product should have been, says HBS entrepreneurial management professor ^

,*%
. In his new MBA course,
Launching ^echnology Ventures, Eisenmann introduces students to the idea of the lean startup²a methodology that has proven
successful for many young high-tech companies. Key concepts include:

© xather than spending months in stealth mode, a lean startup launches as quickly as possible with a "minimum viable product"
(MVP), a bare-bones product that includes just enough features to allow useful feedback from early adopters. ^he company then
continues hypothesis testing with a succession of incrementally refined product versions.

© Lean startup executives do not invest in scaling the company until they have achieved product market fit (PMF); that is, the
knowledge that they have developed a solution that matches the problem.

© In lean startup lingo, "pivoting" refers to a major change in a company's direction based on user feedback. Eisenmann's students
discuss how entrepreneurs can stay true to their vision while still maintaining the flexibility to pivot.

© Adhering to a lean startup strategy is especially challenging for companies that require a great deal of time to launch a workable
product, such as clean-tech or biotech companies.

A dozen years ago, it seemed like all it took to launch a successful technology company was a vague idea, a PowerPoint
presentation, a trade-show booth with a sexy spokesmodel, and a UxL. ^hen the dot-com bubble burst and investors got
wiser and warier. Gone are the days when entrepreneurs could spend years burning through venture capital while they
figured out their strategy. ^hese are the days of the lean startup.

"Most startups fail not because they can't build the product they set out to build, but because they build the wrong product,
take too long to do that, waste a lot of money doing that, and waste a lot of money on sales and marketing trying to sell that
wrong product," says ^om Eisenmann, a professor in the Entrepreneurial Management Unit at Harvard Business School. "It
takes a lot of time, time equals money, the money runs out, and the startup fails painfully."

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Eisenmann has developed a new MBA elective course called Launching ^echnology Ventures (L^V), offered as a half-course
at the beginning of the term, with some students continuing on to work on a field-based project during the second half. ^he
course focuses on the "lean startup" methodology, created by HBS Entrepreneur-in-xesidenceEric xies and serial
entrepreneur and Stanford/UC Berkeley lecturer Steve Blank. ^he "lean" in lean startup has its roots in the^oyota Production
System ; hence, the lean startup methodology is all about avoiding waste, in terms of both time and money.
For starters, it nixes the traditional idea of a company spending several months in stealth mode while perfecting a full-
featured product and planning an expensive launch party at a Las Vegas trade show. xather, the lean startup launches as
quickly as possible with what xies calls a "minimum viable product" (MVP), a product that includes just enough features to
allow useful feedback from early adopters. ^his makes it easier for the company to speed to market with subsequent
customer-driven versions of the product. And it mitigates the likelihood of a company wasting time on features that nobody
wants.

"^he MVP is a controversial idea because it can be perceived as something thrown together with shoestring and bubblegum,"
Eisenmann says. "But through a series of MVPs, a lean startup can validate a specific and comprehensive set of hypotheses
about what the business is, where it's going, and what it has to do."

In the L^V course, Eisenmann teaches cases on cloud storage company Dropbox and the social search service Aardvark.
Both firms' founders were early practitioners of the lean startup method.

^he Dropbox team initially announced a bare-bones version of its service on the website 
V. ^he company
collected reams of immediate feedback from site readers, and continued to incorporate feedback into several successive
product launches-each of which added only a couple of new features. While the feature additions were gradual, they were
rapid, as was company growth: Dropbox increased its user base from 100,000 to 4 million in the course of 15 months.

Aardvark, which enables users to garner answers to questions via an extended network of friends' friends, used a Wizard-of-
Oz-inspired method in its early days. xather than building out the technology infrastructure to make their idea a reality, the
team launched the service withV
 routing users' questions "behind the curtain" instead of computers. ^his allowed the
company to observe how and what users were asking²and spend time and money on a technology backbone that
would best meet their needs.

"Lean startups don't try to scale up the business until they have product market fit [PMF], a magical event²more easily
recognized in retrospect than in the moment²when they finally have a solution that matches the problem," Eisenmann says.
"And after you have that solution you can step on the gas pedal."

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Of course, in carving a path to the PMF, startups may find that they have to shift the company in a completely new direction.
In lean startup lingo, it's a process known as "pivoting."

"Pivoting simply means making a major change of some sort," Eisenmann explains. "In lean startup logic, it's something you
do, ideally, after you've run some decisive test to disprove a hypothesis. It can be changing the target customer segments by
narrowing or broadening them. It can be changing the product itself, either by adding features or by taking features away. It
can be a dramatic change: 'We were going business-to-consumer, but we should be going business-to-business.' Or it can be
a change in business model: 'We were doing transaction-based pricing, but we've realized we should be doing subscription-
based pricing.' ^he notion of a pivot is to make a change, and ideally, after you pivot, you have a new set of assumptions and
hypotheses that you're going to test. And what we're learning in the course is that pivoting is really hard."
^here's a core problem inherent in pivoting²the risk of looking disloyal to the company vision. A startup's founders have
worked so hard to sell employees, investors, customers, and partners on an idea that switching gears can feel almost like a
betrayal.

"So much of what a CEO has to do is talk people into things," Eisenmann says. "If you have to take people away from what
you sold them on, that's hard. A fascinating issue for the students has been, how do you square the need to do that with the
need to be flexible and pivot?"

Eisenmann was surprised by students' fascination with this issue, and modified class discussions accordingly.

"In many ways I'm using the lean startup strategy. A lot of the course is cobbled together²it's an MVP in itself," he says.
"When you teach a case for the first time you're often surprised at what does and doesn't work. So this issue of the tension
between vision and feedback is something I had thought about a little. But the students really seized on the question: When is
the product shaped by the founder's vision, and when is it shaped by market feedback?"

Eisenmann acknowledges that the lean startup methodology is easier to apply in the field of web-based startups than in the
clean tech and biotech fields, both of which often require a great deal of time and capital to create any workable product. ^he
same is true of the transportation industry²inventor Dean Kamen's Segway, for example, or startup ^errafugia's flying car.
"It's the nature of some products that you have to spend a whole lot of money before you know if the product is going to
work," he says.

^o that end, Eisenmann teaches the cases "Predictive Biosciences" and "Aquion Energy." In studyingPredictive, a venture-
backed, "pee-in-a-cup," cancer diagnostic testing company, students ask themselves whether lean startup principles are
applicable at all. With Aquion , they talk about the "clean-tech valley of death"²meaning that a firm is able to raise enough
money to fund the bench science, but not enough money to build a workable prototype.

Eisenmann hopes to sell students on the idea of first working as high-tech product managers before jumping into CEO roles.

"I would love Harvard Business School to crank out a 100 high-tech product managers per year," he says. "Nobody reports to
the product manager, so there's very little direct authority. But there's lots of responsibility. It's their job to figure out what the
product should look like. It's their job to persuade the engineers that this is what they need to build, and to persuade the sales
team that this is what they need to sell. It's a wonderful job²perfect for an MBA who wants an early general management
role."