Technology Entrepreneurship

Taking Innovation to the Marketplace

Thomas N. Duening,Robert A. Hisrich,Michael A. Lechter

• Publisher: Academic Press
• Year: 2014
• ISBN:
  9780124202344
• Edition: 2
• Topic: Technik & Maschinenbau
• Subtopic: Maschinenbau Allgemein

The focus of this book is on technology ventures — how they start, operate, and sometimes exit profitably. In short, it covers all the elements required to launch a successful technology company, including discussion of cutting-edge trends such as "entrepreneurial method" and "lean startup, " emphasis on the ideation process and development of an effective business plan, coverage of product and market development, intellectual property, structuring your venture, raising capital, sales and marketing, people management, and even strategies for exiting your venture. This is not another armchair book about entrepreneurship. It's a working guide for engineers and scientists who want to actually be entrepreneurs.

• An intense focus on product design and development, with customers and markets in mind
• Extensive discussion of intellectual property development, management, and protection
• Potent insights into marketing and selling technology products to the global marketplace
• Techniques for forecasting financials, raising funds, and establishing venture valuation
• Best practices in venture leadership and managing growth
• Overview of various exit strategies and how to prepare the venture for exit

Part 1

You Are Here: X

Chapter 1

Technology Entrepreneurship Today

Trends, Opportunities, Challenges

Abstract

This chapter will provide you with insights into trends, challenges, and opportunities for today’s technology entrepreneur. Much has changed since we wrote the first edition of this book in 2009, and we are excited to write about and reflect on these changes. We think this new book provides useful, practical, and impactful tools to help today’s technology entrepreneurs turn their ideas into new products.

Keywords

Technology entrepreneurship

Effectuation

Minimal viable product

Innovation

Global markets

Hike Leverages Local Market Knowledge to Succeed in India

In just its fourth month since its launch, Indian startup Hike, a mobile messaging app, had more than five million registered users who exchanged over one billion messages per month. The app allows users to send free SMS messages, even to contacts that do not have Hike on their mobile phones. Users can also share location information, photos, and videos. Of course, compared to some more established firms like WhatsApp, which have more than 200 million active users and 600 billion messages per month, Hike seems like a small player. But Hike is using its knowledge of the Indian market to develop features that serve the unique needs of the Indian user.

For example, Hike has developed a patent-pending SMS conversion tool into its app to manage the fragmentation in the Indian market that has resulted in relatively low distribution of data-capable smart phones. If it was just a matter of incorporating SMS messages into a unified app, that has already been done by Google’s Hangouts app. Instead, Hike focused on making sure data messages can reach users who don’t have data via the SMS channel. This feature differentiates Hike nicely in its home market (about 60% of users are in India) and in other emerging markets like Indonesia and Malaysia.

Hike received about $7 million in funding from Japan-based Softbank in April 2013. The founders believe that their primary goal in the short term is to aggregate users and build a dominant position in India and other markets with similar telecom dynamics. They believe that their main source of revenue will come from content that is relevant to the local market, such as entertainment and games.

Hike founder Kavin Mittal explained why it is so important for his company to be located in India and serving the market there: “India is a country of 20 countries. There’s so much diversity, cultural differences, dialects, languages that one has to cater to … There are about 150 million people that are experimenting with the Internet, but they have a lot of churn because the Internet is still not a utility for these guys; and then you have a billion people at the bottom of the pyramid that have no clue what the Internet is. As you go further down in India, how do you tackle the one billion people? No one knows, but we’re in India here, and we’re the guys to figure it out.”

Sources: Adapted from Natasha Lomas, “How Hike, India’s Fastest Growing Mobile Messaging App is Banking on SMS & Local Diversity to Beat the Big Boys,” TechCrunch.com, May 18, 2013; “Free Mobile Messaging App ‘Hike’ Crosses 5 Million Users,” Hindu Times Business Line, April 21, 2013.

1.1 Introduction

This chapter will provide you with insights into trends, challenges, and opportunities for today’s technology entrepreneur. Much has changed since we wrote the first edition of this book in 2009, and we are excited to write about and reflect on these changes. We think this new book provides useful, practical, and impactful tools to help today’s technology entrepreneurs turn their ideas into new products.

Recent and important new research into what is referred to as “entrepreneurial expertise” has revealed that successful technology entrepreneurs tend to launch new ventures only after taking thorough stock of the resources to which they have access and over which they have control. That is, seasoned technology entrepreneurs don’t sit around dreaming about or endlessly investigating what venture to start. Instead, they tend to ask questions such as, “With the resources I currently control, people I know, and talents I possess, what type of business venture might I be able to create?” or, recognizing a need, want, or problem in the marketplace, “With the resources and talents I can bring to the table (my own or through other people I can bring into the venture), what type of business venture might I create to fill that need or want?”

Expert entrepreneurs begin their quest to launch a new venture by taking stock of who they are, what they know, who they know, and the resources they control, a process referred to as effectuation. This term is not just another bit of academic jargon. In fact, the term has some powerful and important operational components and meanings that aspiring and practicing technology entrepreneurs should learn. One of the more important discoveries made by effectuation researchers is the difference between “causal logic” (selecting between given means to achieve a predetermined goal) and “effectual logic” (imagining a possible new goal using a given set of means). This difference is depicted in Exhibit 1.1.

Exhibit 1.1 Causal versus effectual reasoning.

This figure is a useful illustration of the difference between the way problems are approached by most businesspeople (managers and business leaders) and the way they are approached by expert entrepreneurs. Most business people think in terms of setting a clear goal and then aggregating the resources necessary to pursue that singular goal, as illustrated on the left side of Exhibit 1.1. Indeed, the mark of an “expert manager” is the ability to set goals, persuade the organization to allocate the necessary resources, and then rally the troops to pursue the goal with single-mindedness and determination.

By way of contrast, the expert entrepreneur is aware that bringing new products to the market and building successful ventures is fraught with uncertainty. As we mentioned above, the expert entrepreneur begins the venture building process by taking stock of the resources available and currently controlled. This is illustrated on the right side of the diagram in Exhibit 1.1. This figure highlights the fact that expert entrepreneurs create value for target customers with the resources available to them and that any one of a number of different and varied “imagined ends” could count as a successful outcome. Clearly, this “entrepreneurial” way of creating value differs radically from the way corporate managers are trained to create value.

The experienced technology entrepreneur knows that customers may react in unexpected and unpredictable ways to the products they bring to the market. As such, the entrepreneur must approach the market with an open mind, a willingness to listen, and an ability to pivot to new business models and/or offerings as warranted by market response. One currently popular phrase that illustrates this perspective is: “No business plan survives first contact with the customer.”¹

A startup venture is not merely a “small” version of a large company. The startup is different from an established business in a number of important ways. For example, the startup venture has no customers. Thus, the startup cannot simply execute a proven business model because it hasn’t yet determined which model will work best with its target customers. This contradicts a common understanding that entrepreneurship is all about execution. In fact, in the early days of a startup there is nothing really to execute because the entrepreneur has not yet found a way to consistently attract and deliver value to target customers. The goals of a startup are often different from those of an established business. For example, the immediate goal of a startup may be to become credible, show proof of customer demand, or market viability, as opposed to demonstrating sales and revenue.

The focus of the startup technology entrepreneur is to run experiments with products, features, and customers to discover a scalable, repeatable business model. The mantra for technology entrepreneurs during this startup phase is: “Fail often, fail fast.” In other words, run experiments that expose your products to the market, gather feedback, and refine your offering based on that feedback until you have a viable product that customers want to buy. We will explore the process of experimenting to find a business model in greater detail in Chapter 2.

The product that the startup brings to market in these early days is not necessarily its ultimate product, but rather what is referred to as the minimal viable product (MVP). The MVP is a product having only those features (1) necessary to get the product into the hands of early adopters and (2) sufficient to demonstrate future benefit. Successive versions of MVPs are introduced into the market to test fundamental business hypotheses as part of an iterative product development process.

One outcome of this fail often, fail fast revolution in technology startups is the advent of a new type of venture capital firm referred to as an accelerator. Ycombinator was one of the first of this new genre, which has now become global. An accelerator generally invests small amounts of capital—usually less than $50 K—in a large number of promising ideas and entrepreneurial teams. Typically, following the investment, the accelerator will require their portfolio companies to attend a venture development “boot camp” that builds the team and the product. For example, Kyron Global Accelerator, based in...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Dedication
• Acknowledgments
• About the Authors
• Preface
• Part 1: You Are Here: X
• Part 2: Countdown to Launch
• Part 3: Into the Breach
• Part 4: Growth and Exit
• Appendix I: Example of a Generic Confidentiality Agreement
• Appendix II: Example Executive Summary
• Appendix III: Sample Development Agreement
• Appendix IV: Example of an Employment Agreement
• Index