Entrepreneurship 101

Kit Needham
 Not all Startups are the Same
Small Business/Life-Style Investment/Exit
Ø  Known business Ø  Untested business
examples to learn from model with a high
Ø  Funded by banks or degree of uncertainty
stockholders Ø  Funded by investors
Ø  Business plan (angels and VCs)
Ø  Sustain a particular Ø  Business model
level of income Ø  Grow big quickly and
Ø  Provide dividends or sell (exit)
increased stock price Ø  Provide a 5x-10x return
to 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 Innovation
FOR INVESTMENT/EXIT START-UPS

Idea Startup Early Growth Rapid Growth EXIT

Development

O
L
Y
leveraging $$ billion$$ research and
M
P
U
S

I F
student innovation

D O
E U
Incubators
UNIVERSITIES

A N
D
R
Y

I I
N N
N S
O T
V I
A T
T U
I T
0 E
N
 Accelerators
•  Fixed term, cohort-based programs
–  Provide mentorship and educational
components
–  Highly competitive to get in
–  Get seed investment ($20k-$50k) in exchange
for equity
•  Goal – “Demo Day” to attract follow-on investment
•  Examples: AlphaLab/Gear, Idea Foundry, Tech
Stars, Y Combinator, DreamIt Ventures, etc
Pittsburgh: A Community of Innovation
Idea Startup Early Growth Rapid Growth EXIT
Development

O
L
Y AlphaLab
leveraging $$ billion$$ research and
M SOFTWARE
P
U
AlphaLab Gear
S
HARDWARE &
ROBOTICS
I F

ACCELERATORS
student innovation

D O
E U
Incubators
UNIVERSITIES

A N Idea Foundry
D HEALTHCARE &
R
LIFE SCIENCES
Y
ENTERTAINMENT &
EDUCATION
I I SOC. ENTERPRISES
N N WATER
N S
O T
V I
THRILLMILL
A T
T U DemandCo
I T
0 E
N
Pittsburgh: A Community of Innovation

Idea Startup Early Growth Rapid Growth EXIT

Development

O
L
Y AlphaLab INNOVATION
leveraging $$ billion$$ research and
M SOFTWARE WORKS
P
U
AlphaLab Gear IT
S
HARDWARE & MEDICAL
ROBOTICS DEVICES
I F

ACCELERATORS
student innovation

D O
E U
Incubators
UNIVERSITIES

A N Idea Foundry Idea

D HEALTHCARE &
R
Foundry
LIFE SCIENCES
Y
ENTERTAINMENT &
EDUCATION
I I SOC. ENTERPRISES
N N
WATER
N S
O T
V I THRILLMILL
A T
T U
THINKTIV
I T
0 E
N PITTSBURGH
LIFE SCIENCES GREENHOUSE
 MONEY/FUNDING
Investors
•  INVESTORS
–  FRIENDS & FAMILY (& FOOLS)
–  CROWDFUNDING
–  ANGELS and ANGEL GROUPS
–  SUPER ANGELS
–  VENTURE CAPITALISTS
 Angels vs VCs
Angels Venture Capitalists
Ø  High net-worth Ø  Create a fund using
individuals i.e. their other people’s money
own money)
Ø  Tend to invest locally Ø  Seek deals from
Ø  Tend to invest early everywhere and often
($25k - $50k) require them to relocate
Ø  Often form Angel nearby
Groups to research and
co-invest in deals (e.g.
BlueTree)
 Angels: Majority of Startup Funding

$12.4B

$9.5B $9.8B $9.9B

$8.4B

$1.0B
$0.45B* $0.22B*

*es$mated  

Angel Investors 2011 Venture Capital 2011

•  $22.5B •  $29B
•  ~66,000 deals •  ~3,750 deals
•  42% seed/startup •  3.5% seed/startup
•  55% early stage •  68% later/expansion capital
•  ~ 318,500 individuals •  Total 791 firms (not all active)
Sources: UNH Center for Venture Research, PwC MoneyTree and NVCA
 MONEY/FUNDING
Terms
Terms
-  Seed Funding
-  Series A, B, etc.
-  Valuation
-  Convertible Debt
-  10x return
-  Exit (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 Loop
Build

Learn Measure
 People and Terms
•  Steve Blank – “Get out of the building”
•  Eric Reis – “The Lean Startup”
•  Business Model Canvas
 Pittsburgh: A Community of Innovation
Funding for investment/Exit Startups
Idea
Development Startup Early Growth Rapid Growth EXIT

ANGELS
BlueTree Allied Angels
Keiretsu Forum
Funds startups
*FOUNDATIONS
FUNDING

Funds startups
VCs: Adams, Birchmere,
PEP, Draper, etc.
Funds startups
FEDERAL GOVT
SBIRS/STTRs
Funds startups
*FEDERAL
GOVERNMENT STATE: DCED
Funds research Funds IW and subs, PLSG

CROWD Local: URA

FUNDING Funds Startups

PUBLIC PRIVATE
SECTOR; SECTOR
 Pittsburgh: A Community of Innovation
LifeStyle and Investment/Exit Startups

Idea
Development Startup Early Growth Rapid Growth Maturity

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
Development Startup Early Growth Rapid Growth Maturity

Chatham’s Center for Women’s Entrepreneurship (CWE)

(CWE
Small Business Development Centers- Pitt; Duquesne
Innovation Practice Institute –Pitt Law SCORE
School (Start Smart) with CMU
CWE IEE - Pitt

Powerlink

Education Mentoring
 Pittsburgh: A Community of Innovation
LifeStyle and Investment/Exit Startups

Idea
Development Startup Early Growth Rapid Growth Maturity

Chatham’s Center for Women’s Entrepreneurship (CWE)

(CWE
Small Business Development Centers- Pitt; Duquesne
Innovation Practice Institute –Pitt Law SCORE
School (Start Smart) with CMU
CWE IEE - Pitt

Powerlink
Riverside Center for Innovation
Revv I, II, III?
Startup Town Former Paramont Studio
The Beauty Shop

Education Mentoring Space/Support

Services
 Pittsburgh: A Community of Innovation
LifeStyle and Investment/Exit Startups

Idea
Development Startup Early Growth Rapid Growth Maturity

Chatham’s Center for Women’s Entrepreneurship (CWE)

(CWE
Small Business Development Centers- Pitt; Duquesne
Innovation Practice Institute –Pitt Law SCORE
School (Start Smart) with CMU
CWE IEE - Pitt

Powerlink
Riverside Center for Innovation
Revv I, II, III?
Startup Town Former Paramont Studio
The Beauty Shop

Tech Shop Pgh Tech

Council

Education Mentoring Space/Support Resources

Services
 Q&A

kit@cs.cmu.edu
 Pittsburgh: A Community of Innovation
FOR INVESTMENT/EXIT START-UPS

Idea Startup Early Growth Rapid Growth EXIT

Development

O
L
Y AlphaLab
leveraging $$ billion$$ research and
M SOFTWARE
P
U
INNOVATION
AlphaLab Gear WORKS
S
HARDWARE &
ROBOTICS IT
I F

ACCELERATORS
student innovation

D O MEDICAL
E U DEVICES
Incubators
UNIVERSITIES

A N Idea Foundry
D HEALTHCARE &
R
LIFE SCIENCES
Y
ENTERTAINMENT &
EDUCATION
I I SOC. ENTERPRISES
N N WATER
N S
O T THRILLMILL
V I
A T
T U THINKTIV
I T
0 E
PGH LIFE SCIENCES GREENHOUSE
N

ANGELS
FUNDING

FED STATE BlueTree Allied Angels

GOVERNMENT
SBIRS DCED Keiretsu Forum

FOUNDATIONS VCs: Adams, PEP,

Birchmere, Draper,