Archive for January, 2012

Yesterday, the Tbird 2012 Entrepreneurship Winterim group (#EWinterim on Twitter) visited some exciting companies in the San Diego area, all involving a Tbird founder or driving force. First we met with Zuumcraft President, Jim Scott, who talked with us about his product (an electric scooter that is between the scooter and electric bicycle space) and gave us a demo. He already has a product built, and is leveraging a manufacturer he met through a third party to produce the initials, with investment from friends and family. He is currently in the fundraising phase, and has some interesting thoughts on the type of investors he wanted.  For Jim, one big donor is the ideal situation, rather than lots of smaller donors. The obvious benefit of one big donor is removing complexity introduced by adding stakeholders to deal with and report too, but the chief negative is the likelihood of that one donor to want to meddle in the day to day issues of the company (not that the small donors wouldn’t also have a propensity to meddle). However does it really matter where the money is coming from? Sure, it is good to target a specific type of investor (big daddy or small fish), and if you have the network to get what you want (like Jim probably does) that is the ideal situation. But if you are a small-time player, first-time entrepreneur, do NOT discount any source of money! All money is green after all.

We also spoke about overseas plays, including manufacturing in zero tax zones, and serving markets like India and China. The main issues that came up revolved around the price point (the unit is currently priced at $2499 in the US, and would be introduced around $800 in the Asian markets), and how he priced the unit (cost pricing). Will $800 be low enough in China and India? A lot of international students in our group seemed to think that the pricepoint needed to come down further still for it to really take off, and that infrastructure problems may limit the mobility of the unit in these countries. For example, the robustness of the machine may be in question on less than perfect roads. Certainly additional suspension is needed and more testing required before introducing the product to developing markets. From a cost side also, a local manufacturer would obviosly be required to reach a lower number (probably even to reach $800), but luckily Jim already has manufacturers overseas that can be used.  More important than Asia, though, is the European market since it is the most mature in adopting green transportation solutions. And of course he can charge more in Europe than in the US because there is a higher demand, and because costs (including manufacturing in Europe) would be higher (and of course the currency differential).  What is the bottom line? While BRICS may be sexy, you still have to cater to your core market.

The second visit was with Tbird alum Pekka Laine, CEO of Photon Solar Power. This talk brought back memories of Global Political Economy (GPE) at Tbird, where one has to stay ahead of the regulatory changes by the government to stay viable. This can’t be more true in the solar industry. Government incentives to consumers (and producers) can make or break a company’s product.  The ecosystem is so fragile elastic, that even a small change in consumer subsidies or ta rebates one way or the other dramatically changes demand. Nevertheless, there is a lot of excitement in the solar and alternative energy domain, including from conventional electric companies, who can also benefit through installations of more electric power docking stations etc. for consumers to plug-in to. It is an industry with a widening pie.

According to Pekka, “Solar business is nothing more than glorified construction.” Because of this outlook, his default position has been to outsource everything that he can–in fact Pekka is the only full-time employee in his company (even though he started with 5 employees). Typical to the construction industry, he works on a regular basis with 10-12 sub-contractors. This is the game of construction management, and also relates to regulations. Apparently, CA labor laws dictate, to some extent, the decision between hire or outsource; the law is such that you can’t have a sub-contractor when you are their sole source of income. Question to the readers: are there other states with more lenient labor laws in this regard, perhaps with more favorable terms for the founder?

Finally, Pekka discussed his decision to incorporate, and the decision on where to incorporate. His biggest takeaway, and I have heard this fro many entrepreneurs, is that incorporating (or doing business) in CA needs a very good CPA because CA has too much paperwork to deal with and stay on top of over time.  In fact, CA, while the breeding ground for startups, is one of the most unfavorable places to incorporate a business.  High on the list in 2011, for the best overall states to do business, (http://www.cnbc.com/id/41665883) are Virginia, Texas, North Carolina, Georgia, and Colorado. While CA tops the list for access to capital, costs of doing business are high, both in paperwork and resources. Personally, my company is incorporated in VA, which offers a very simple incorporation and renewal process.  However, the proximity to investors still often outweighs all else–many entrepreneurs I have known has physically incorporated in one state, and set up shop in CA to be closer to the capital.  Pekka, for example, is incorporated in Delaware, with an office in CA. Calling all Tbirds–what is the best state to incorporate?

–Chandra Jacobs, Global MBA 2012

www.unemployedMBA.com

Renewable resource of energy has been a topic that is so often discussed amongst people who do care about this world. Today we met Mr. Pekka Laine who saw this as a good business opportunity, and took initiative to set up a private firm Photon Solar Power (www.photonsolarpower.com ) involved in distributing and installing solar power panels for residential purposes and for corporate offices. It was interesting to know his opinion that if you want to learn the domain in the business you should be actually doing it. When he started establishing the firm, the biggest challenge he faced (as does every entrepreneur) was in actually implementing the initial arrangement and the infrastructure. The strategy he had devised and the ground work done on segmenting the market was appreciable. He mentioned about the difficulties in getting the paper work done for officially registering the company. As far as marketing is concerned, the firm also has taken care that their company is well advertised and people are aware about the services offered to them.
Talking about the team he had in the firm, he was modest enough to accept that the small team he has is a weakness and is a setback at times when it comes to outplay your competitors. And he also has taken into his stride that his team members are leaving the organization just when business was booming and mentioned that it can only improve his network by getting to know more people and better business. He has understood that competition is high especially in the near future, and there is a level of uncertainty in support for the domain as well. But nevertheless he has gone ahead in expanding his business on an optimistic note, which is good for an entrepreneur. Hopefully business establishments like this, which deals with clean technology, will benefit by spreading the word about its advantages to us and our world.

Ramkumar Ganesan (1460530)
MBA Candidate, 2013

Jim Scott, an ambitious entrepreneur, introduced his new concept of electric bike, Zuum Craft ( www.zuumcraft.net ) at San Diego. The bike’s design constitutes of a tri-wheeler model, and a battery in the beneath the body. The wheels of the bike also swerve when you want to make a turn, while the body remains stable, which is a very different design from the kind of bikes available. When the idea was introduced to him by the designers, he immediately started planning for the finance and the production. Though there are competitive products available, he states that the design is unique and not available in market yet. He planned strategically for the manufacturing of the bike, by choosing a factory in China, where the facilities were already available at an affordable cost. For the launch of the product, I liked the method in which he advertised, by making his team ride the bikes across the California State, and they ended up letting the public use it too. They have also targeted a different section of market such as the Police & Security department to use their bikes.

Upon questions asked on why he decided to go for the full launch instead of stalled distribution, he mentioned that it is like a flight take off, which goes at full throttle initially and steadies once it has reached its peak. That was a good exuberance of confidence in the product, which an entrepreneur must possess. Another question asked on how he has raised funds for the production, to which he mentions that it was the network he had and how successfully he used it to get potential investors. On a question asked if the investors were actively involved in the business, he mentioned that it will be difficult if the original product designers are not given freedom and control and in his company, the investors, though are there in the board of directors, they are not there in the management team.  After the session we T-birds had a trial run of the bike and everyone enjoyed it.

Ramkumar Ganesan (1460530)

MBA Candidate, 2013

The winterim started off with the perfect note. Mr. Howard Lindzon, entrepreneur and CEO of StockTwits shared his experience of angel investment and start-up firms with the Thunderbird students today at San Diego.  Mr. Lindzon, a Thunderbird alumni himself, and with a rich financial experience started his firm StockTwits, which is a social network for investors, traders and speculators. In the Q&A session, he talked about how he decided to leave his career to exploit the ideas present at that point. This was very interesting, as it reflected how much an individual has to be aware of current trends and how to harness it. An idea can be turned to reality only when we donate most of our time and work completely on the project. It is also important to know how to present your idea to the angel investors. We need to have our concept, the team to implement it, identification of resources, and the future prospects, ready before requesting an investment. One important suggestion given by him was, if you have an idea, implement it immediately to protect it. A good offense is better than a good defense. This can actually stir a thought in one’s mind on how can we actually implement it before a proper plan is in place. But it is important to consider the time value of money.

The other topics touched upon were mainly connected to how to find investors who will be interested in your idea and have been traditionally investing in the same industry. We learnt from an investor’s perspective on what he looks in a product before taking the decision to support the firm. At the end of the session, he shared some of his bad decisions in which he rejected the proposal of certain projects which are now running well. Finally we learnt how StockTwits was conceived and how big a part it has played in every team members’ life. It is also important to foster your product over the years and the team shared how they started off and how they are progressing. As a whole the session was interesting and the perfect commencement to the Entrepreneurship Winterim.

Ramkumar Ganesan   ( 1460530  )

MBA Candidate, 2013

Today, the 2012 Thunderbird Entrepreneurship Winterim students got a taste of the entrepreneur lifestyle via alum, and successful founder, investor, and entrepreneur, Howard Lindzon, who was also a speaker at the 11-11-11 Global Dialogue. One of the key messages of the session was that the basic ingredient substrate for a successful entrepreneur (or investor) is subject knowledge depth coupled with passion.  Take StockTwits, Howard’s own company, which he started on Coronado Island in San Diego.  Even though he is in a “small pond” (his words), he has proved that this model can still work because of his subject matter depth (focus), and passion for the subject matter itself.  This disciplined focus was something that he did not necessarily have early on in his career, as he drifted in and out of different phases, ideas, and adventures–he reflected back on many missed opportunities, and how he could have been even more ahead of the curve in his chosen field if he had continued with it from his first moment of interest, rather than putting it down and picking it up over several years. He likened it to a game of Risk, explaining that you often need to start in a deep, recessed niche of the world to win the game.  Do what you’re good at, differentiate from other players, keeping chipping away at the problem, and eventually (maybe) you’ll win.  The best way to make wealth over time is to be consistent. Diversification is OK, but if you are an entrepreneur, why should you diversify? You should FOCUS 100% to rise above the noise.  Focus + Passion (and probably some luck too) = Success. Right?

Wrong. While I agree with the “focus” approach for discrete intervals of time, measured, perhaps in years, taking this timeline to its natural conclusion of a lifetime becomes patently absurd, at least as long as it is applied to one, and only one idea/product/thing that sill hasn’t “taken off.”  There is a point when  an entrepreneur needs to give up, and find something else (or maybe work for somebody else).  Hindsight in 20/20.  There are always going to be missed opportunities due to ADD attention spans, shallow wallets, poor-timing, egoism, or just plain bad luck.  None of us know what the future holds–so how will we be able to predict which of the 20 things we are passionate about will be the next “big bet” of the decade?  Sure, we can all look back and say “Hmm, if only I…(focused on that)” but I do not believe this eureka moment will actually change our future behavior. We will either be right in our focused passion, or not.  Those are the options.  Simply having focused passion is not enough.

Look, we all have core beliefs of what will and won’t work, and half the time our beliefs are divorced from the reality of the market.  Put simply, is it better to be tenacious about a losing product over one’s lifetime, acquiring subject matter depth and demonstrating expertise, while simultaneously contributing passion, only to have it basically flop (assuming that one can make enough money for sustenance’s sake)?  Maybe this is a good strategy if one is working for a corporate, without much personally to lose. Or, is it better to put the passion and depth aside as soon as the moment of realization (of an impending failure) precipitates, and look for something else, something better suited to a changing market?  Of course it is better to pick (and play) the winning hands all the time, and then ALSO have these winning bets line up with one’s passion and knowledge–but vision and drive, combined with luck, is rare indeed.  The best most of us can probably ever do is look back 20 years from now and merely wish that we had invested in X company while we had the chance, given up on Y idea, or pursued Z opportunity when we had the chance.  It’s easy to say after the fact, but nearly impossible to do in the moment–none of us have a crystal ball.  Maybe it’s enough just to be happy in the pursuit? (I would love to hear the community’s thoughts on this.)

What I did agree with, 100%, however, was his other main advice to aspiring entrepreneurs–speed.  Now we have the missing puzzle piece to frame passion and focus.  Put aptly and simply, Howard explained: “Once you know what you want to do, then you have to do it. Find what you’re good at, and DO IT.”  As cliche (and Nike) as it sounds, he is actually right.  Fast (and effective) execution is probably 80% of the uphill battle towards entrepreneurial success.  This reminded me of Mike Cassidy’s “Speed as THE primary business strategy” approach, which I mostly subscribe to for web and mobile apps, as well as, to a limited extent, consumer goods.  Howard’s advice: “Get the product up. Speed is important. Keep launching stuff incrementally.” The world is moving so fast now, especially in apps and software, that if you do not immediately implement, someone else will.  Implement now, refine later, and always have a constant feedback loop between the two, connected by your strategy fabric. Regardless of whether we make the right “bets” in our lifetime in terms of where we apply our passion and focus, the overall lesson that I learned today was: if you are going to fail, fail quickly. Fail with a bang. Put everything you have into that failure.

Focus, Passion, AND Speed.  Now there’s the stuff an entrepreneur’s dreams are made of.

–Chandra Jacobs, Global MBA 2012

www.unemployedMBA.com