On Vacation

In Prague for the last three days and heading to Berlin tonight.  Had an impromptu meet up with the local Prague entreprenuerial community. Smart group. It just reminds me that the worldwide democratization of entreprenuership is real. However, as in many other countries the lack of local “risk capital”, startup business expertise, infrasturcture and startup culture, forces most of the Czech startups to leave and head to Silicon Valley.

Warning very large (>20mb) files below. Click only for a panorama.

Charles Bridge over the Vltava River.

I saw two of the most beautiful libraries ever in the Starhov Monastery in Prague.

Theological Hall Strahov Monastery.

Now the question is – can I add one of them onto the ranch?

Philosophical Hall Strahov Monastery.

Making a Dent in the Universe – Results from the NSF I-Corps

Our goal teaching for the National Science Foundation was to make a dent in the universe.

Could we actually teach tenured faculty how to turn an idea into a company?  And if we did, could it change their lives?

We can now answer these questions.

Hell yes.

———–

The Lean LaunchPad class for the National Science Foundation (NSF)
Over the last 6 months, we’ve been teaching a version of the Lean LaunchPad class for the National Science Foundation Innovation Corps.  We’ve taught two cohorts: 21 teams ending in December 2011, and 24 teams ending in May 2012. In July 2012 we’ll teach 50 more teams, and another 50 in October. Each 3-person team consists of a Principal Investigator, an Entrepreneurial Lead and a Mentor.

The Principal Investigator (average age of ~45) is a tenured faculty running their own research lab who has had an active NSF grant within the last 5 years. The Principal Investigator forms the team by selecting one of his graduate students to be the Entrepreneurial Lead.

The Entrepreneurial Lead is a graduate student or post doc (average age ~ 28) who works within the Principal Investigator’s lab. If a commercial venture comes out of the I-Corps, it’s more than likely that the Entrepreneurial Lead will take an active role in the new company. (Typically Principal Investigators stay in their academic role and continue as an advisor to the new venture.)

Mentors (average age ~50) are an experienced entrepreneur located near the academic institution and has experience in transiting technology out of academic labs. Mentors are recommended by the Principal Investigator (who has worked with them in the past) or they may be a member of the NSF I-Corps Mentor network. Some mentors may become an active participant in a startup that comes out of the class.

The NSF I-Corps: Class Goals
The NSF I-Corps Lean LaunchPad class has different goals then the same class taught in a university or incubator. In a university, the Lean LaunchPad class teaches a methodology the students can use for the rest of their careers. In an incubator, the Lean LaunchPad develops angel or venture-funded startups.

Unlike an incubator or university class, the goal of the NSF I-Corps is to teach researchers how to move their technology from an academic lab into the commercial world. A successful outcome is a startup or a patent or technology license to a U.S. company.

(While many government agencies use Technology Readiness Levels to measure a projects technical maturity, there are no standards around Business Maturity Levels. The output of the NSF I-Corps class provides a proxy.)

The NSF I-Corps doesn’t pick winners or losers. It doesn’t replace private capital with government funds. Its goal is to get research the country has already paid for educated to the point where they can attract private capital. (It’s why we teach the class with experienced Venture Capitalists.)

Teaching Objectives
Few of the Principal Investigators or Entrepreneurial Leads had startup experience, and few of the mentors were familiar with Business Model design or Customer Development.

Therefore, the teaching objectives of the I-Corps class are:

1) Help each team understand that a successful company was more than just their technology/invention by introducing all the parts of a business model (customers, channel, get/keep/grow, revenue models, partners, resources, activities and costs.)

2) Get the teams out of the building to test their hypotheses with prospective customers. The teams in the first cohort averaged 80 customer meetings per team; the second cohort spoke to an average of 100.

3) Motivate the teams to pursue  commercialization of their idea. The best indicators of their future success were whether they a) found a scalable business model, b) had an interest in starting a company, and c) would pursue additional funding.

Methodology
The National Science Foundation worked with NCIIA to establish a baseline of what the students knew before the class and followed it up with a questionaire after the class.

While my experience in teaching students at Stanford, Berkeley and Columbia told me that this class was an effective way to teach all the parts that make up a startup, would the same approach work with academic researchers?

Here’s what they found.

Results
Teams came into the class knowing little about what parts made up a company business model (customers, channel, get/keep/grow, revenue models, partners, resources, activities and costs.) They left with very deep knowledge.

I-Corps teams spent the class refining their business model and minimum viable product. By the end of the class:

  • Over 95% believed that they found a scalable business model.
  • 98% felt that they had found “product/market fit”.

The class increased everyones interest in starting a company. 92% said they were going to go out and raise money – either from the NSF or with private capital. (This was a bit astonishing. Given that most of them didn’t know what a startup was coming in. These are new jobs being created.)

One of the unexpected consequences of the class was its effect on the Principal Investigators, (almost all tenured professors.)  A surprising number said the ideas for the class will impact their research, and 98% of all of the attendees said it was going to be used in their careers.

Another unexpected result was the impact the class had on the professors own thinking about how they would teach their science and engineering students. We got numerous comments about “I’m going to get my department to teach this.”

What’s Next
The NSF and NCIIA understand that the analysis doesn’t end by just studying the results of each cohort. We need to measure what happens to the teams and each of the team members (Principal Investigator, Entrepreneurial Lead and Mentor) over time. It’s only after a longitudinal study that will take years, can we see how deep of a dent we made in the universe.

But I think we’ve made a start.

Acknowledgements
Thanks to the team at NCIIA that provided the questionaire and analytical data (Angela Shartrand) and the logistical support (Anne Hendrixson) to run these NSF classes.

The National Science Foundation (Errol Arkilic, Babu DasGupta) took a chance at changing the status quo.

Members of Congress on both sides of the aisle who’ve realized cracking the code on how to teach starting companies means a brighter day for the future of  all jobs in the United States – not just tech startups.

And thanks to the venture capitalists and entrepreneurs who volunteer their time for their country; Jon Feiber from MDV, John Burke from True Ventures, Jim Hornthal from CMEA, Jerry Engel from Monitor Ventures (and the U.C. Berkeley Haas Business School,) Oren Jacob from ToyTalk and Lisa Forssell of Pixar.

And to our new teaching teams at University of Michigan and Georgia Tech – It’s your turn.

Lessons Learned

  • The Lean LaunchPad class (Business Model design+Customer Development+ extreme hands-on) works
  • They leave knowing:
    • how to search for a business model (customers, channel, get/keep/grow, revenue models, partners, resources, activities and costs,)
    • how to find product/market fit, and a scalable business model
  • It has the potential to change careers, lives and our country

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Entrepreneurship for the 99%

This is a guest post from Jerry Engel, the Faculty Director of the National Science Foundation Innovation Corps (and the Founding Faculty Director of the Lester Center for Entrepreneurship at UC Berkeley.)

———–

The 99%
As the morning fog burns off the California coast, I am working with Steve Blank, preparing for the Lean LaunchPad Faculty Development Program we are running this August at U.C. Berkeley. This is a 3-day program for entrepreneurship faculty from around the world how to teach entrepreneurship via the Lean LaunchPad approach (business model canvas + customer development) and bring their entrepreneurship curriculums into the 21st century. Over the past couple of years this Lean LaunchPad model has proven immensely effective at Berkeley, Stanford, Columbia and, of course, the National Science Foundations Innovation-Corps program. The data from the classes seem to indicate that we’ve found have a method how to make scalable startups fail less.

While we’re excited by the results, we’ve realized that we’ve been solving the problem for the 1% of new ventures that are technology startups. The reality is that the United States is still a nation of small businesses. 99.7% of the ~6 million companies in the U.S. have less than 500 people and they employ 50% of the 121 million workers getting a paycheck. They accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. And while they increasingly use technology as a platform and/or a way of reaching and managing customers, most are in non-tech businesses (construction, retail, health care, lodging, food services, etc.)

While we were figuring out how to be incredibly more efficient in building new technology startups, three out out of 10 new small businesses will fail in 2 years, half fail within 5 years.  The tools and techniques available to small businesses on Main Street are the same ones that were being used for the last 75 years.

Therefore, our remaining challenges are how to make them fail less – and how can we make the Lean LaunchPad approach relevant to the rest of the 99% of startups.

Serendipity
A serendipitous answer came to us around noon. His name is Alex Lawrence. Alex, vice provost for Innovation & Economic Development at Weber State University in Utah and completing his first year of teaching entrepreneurship. Alex is a successful serial entrepreneur –with the same drive and energy of many we have known here in Silicon Valley, but different. His nine startups have ranged from franchised fruit juice shops to Lendio a financial services company for small businesses. Alex had been recruited back by his Alma Matter to create an entrepreneurship program. In fact he had just been charged with creating an entrepreneurship minor – five or six courses for students of any major at the University that would help prepare them for the challenge of starting their own businesses.

Alex’s first insight was that the traditional “how to write a business plan” was as obsolete for Main Street as it is for Silicon Valley. So he had adopted Steve’s Lean LaunchPad class and was using The Startup Owner’s Manual as his core text. He had contacted us seeking advice on developing his curriculum, and it just seemed natural to invite him out to the ranch for a deeper dive.

As we dug into learning about Alex’s teaching experience we naturally asked him about the ventures his own students were creating. It was clear Alex was a bit apologetic; photo studios, online retail subscriptions to commodity household and personal hygiene products, etc. Alex explained that in his community building a successful venture that generated nice cash flows – not IPO’s – were the big win. To his students these were not “small businesses”, but ‘their businesses’, their livelihoods and their opportunities to create wealth and independence for themselves and their families.

Mismatch for Main Street
As we walked out to the pond, Alex explained that while he found the teachings of the Lean LaunchPad directly applicable and effective, there was a mismatch for his students in the size of the end goal (a great living versus a billion dollar IPO) and the details of the implementation of the business model (franchise and multilevel marketing versus direct sales, profit sharing versus equity for all, family and SBA loans versus venture capital, etc.)

Sitting by the pond we had a second epiphany: we could easily adjust the Lean LaunchPad class to bring 21st century entrepreneurship techniques to ‘Main Street’. To do this we needed to do is change the end goals and implementation details to match the aspirations and realities that these new small businesses face.

We called this Mainstream Entrepreneurship.

Mainstream Entrepreneurship
Mainstream Entrepreneurship recognizes that with the Lean LaunchPad class we now have a methodology of making small businesses fail less.  That accelerating business model search and discovery and using guided customer engagement as a learning process, we could help founders of mainstream businesses just like those starting technology ventures.

For the rest of the afternoon, Steve and I brainstormed with Alex about how he could take his 20 years of entrepreneurial small business experience and use the Business Model Canvas and Customer Development to create a university entrepreneurship curriculum and vocabulary for the mainstream of American Business.

We think we got it figured out.

Alex Lawrence will be one of the presenters at the Lean LaunchPad Educators Program August 22-24th in Berkeley.

Lessons Learned

  • Small businesses make up 99.7% of U.S. companies
  • “How to write a business plan” is as obsolete for Main Street as it is for Silicon Valley
  • Using the Lean LaunchPad (the business model canvas and Customer Development) are the right tools
  • Small businesses have different end goals and implementation details
  • We can adapt/modify the Lean LaunchPad approach to embrace these goals/details

Listen to the post here:


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