by Jeff Bussgang
For the second year, Fred Wilson of Union Square Ventures was kind enough to come to HBS to meet with the class Professor Tom Eisenmann and I co-teach called Launching Technology Ventures. Similar to last year, it was a terrific session.
I started the class off by encouraging the students to live tweet the entire 90 minute session. The Twitter stream (which you can see here, using the hash tag #hbsltv) nicely captured our dialog. The class is made up of 100 "start-up ninjas", half of whom will start their own companies in the next year or two and half of whom will join start-ups. The class covers the fundamentals of lean start-up theory, seeking product-market fit, and scaling challenges post product-market fit. We do not have a final exam. Instead, students need to write two blog posts, comment on two of their classmate's posts and participate in a business model excercise modeled after Steve Blank's "business model canvass" exercise at Stanford. You can see the course blog here.
A few of the takeaways that struck me:- Fred observed that failure is typically a valuable and powerful experience - forcing introspection, humility and an extra drive to prove something to others. He observed that the entrepreneurs he has been most successful with typically had a major and personally defining failure in their career.
- He repeated a comment that we drew out from last year's conversation, which I particularly like: "Start-ups should be hunch-driven early on and data-driven as they scale". What was interesting was discussing the profile of the entrepreneur that has good hunches - often they come from outside the domain, yet are obsessed with the opportunity to disrupt the new field with a fresh perspective.
- We discussed the role of gate-keepers in start-ups. Fred is skeptical of businesses that involve gate-keepers. In fact, he encouraged the students to look for industries that have gate-keepers, and compete directly with them (e.g., education).
- When evaluating whether you want to join a company, think like an investor. Conduct extensive due diligence on the team, the product and the market opportunity. Ask yourself whether you would invest your money in the company before deciding to invest your career.
- Entrepreneur and start-ups have many varied models for success. Don't try to follow someone else's model. Stick with your personal passion and your authentic leadership model. If you don't have your own start-up idea, go join a 50 person company and leave when there are 500 employees. And if you have an idea and no one can talk you out of it, go be an entrepreneur. (Interstingly, Fred confessed that if he could have done it over again, he wishes he had joined a start-up for the first 10 years of his career.)
- We had an interesting dialog about the various start-up ecosystems - Silicon Valley, Boston, NYC - and how long it takes to build that ecosystem. Our mutual friend Brad Feld has written extensively about this topic and is writing a book on it that should be coming out shortly.
At the end of the class, Fred had an encouraging perspective for MBAs around the world, not just in today's classroom. He observed that the start-up community is all the richer due to the contributions of MBAs. Just be sure not to be arrogant about your knowledge or degree - instead, put your head down and do great work!
by Cyrena ChihEver since I was 12, I wanted to help kids globally and make them smile. As I grew up, the “How” started to take various different forms. Over the last two years at HBS, I have started to gain a more refined view. I’ve headed down this path of applying gamification to education. Why can’t learning be the most engaging and fun-filled experience in this day and age?
After looking at the children’s online education and entertainment (edutainment) space for over four years, I still can’t tell you the direct answer. Even nine intelligent people with education passions struggled at a Harvard Ideabomb this week with the same problem. As a result, I decided to look at the challenges and barriers for edutainment through a Launching Tech Ventures lense. - Product Market Fit for who? The definition of PMF is “demonstrating demand from early adopters with solid profit potential”. In the world of edutainment does it mean creating something parents will pay for their kids, something schools will pay for or something kids will want their parents to pay for? The profit side of things often become acutely focused on parents or schools as a source of funds. The challenge here is that the children are the real consumers although they have zero purchasing power.
- Demonstrating PMF. In the world of children, the demonstration part becomes an even larger barrier. Existing COPA regulations limit the amount of information, data collecting and tracking permitted on kids (anyone under the age of 13).1 Therefore collecting reliable, defensible and statistical data on child engagement or education becomes very difficult on a large scale. For edutainment efforts, this increases the time and cost investment for MVP. Even conducting surveys on children is very difficult, since parents often can’t accurately depict their child’s actions. Furthermore, in-person surveys require parental approval and ideally have children in separate spaces so their responses aren’t affected by their parent’s expectations. Given how difficult it is to accurately conduct consumer testing with children, it makes false negatives a lot more likely with this demographic. Overall the ability to demonstrate demand and fit for children is drastically harder.
- Scaling versus safety. What many people often forget with children’s products is: the consistent level of quality and trust the product has to reach and maintain. In developing a new product, this often means longer development timelines to accommodate the testing and infrastructure required to ensure safety. If you don’t want to “know” anything about your customers (the children) and choose to turn a blind eye, then you can plead ignorance if and when things go wrong. (For example facebook is technically meant for adults even though children are a significant proportion).
But if you really want to address and engage children, then turning your back on them won’t build a better product. For kids-focused companies, a lot of investment and time is spent on determining safe COPA compliant standards for security, potential moderation facilities, etc. Scaling quickly often requires either a lot of resources to ensure safety or greater exposure to risk. With children, it just takes one incident to ruin the brand and trust of an entire company.
- Where is the Teach in the Ying and the Yang? In most startups we’ve see there are already competing tensions between engineering and product, as explained by Fred Wilson in his blog post. However in edutainment industries you have a third dimension – the educators who want to ensure the learning effectiveness. All three have very different priorities that have their own priorities but must be able to communicate and work productively together and resist a standstill.
Are these just some of the reasons why developing children’s edutainment products are that much harder?
Notes:
1 http://www.ftc.gov/privacy/coppafaqs.shtm
by George Levitte
Earlier this week we were fortunate to have Fred Wilson, from Union Square Ventures, visiting our LTV class. Towards the end he remarked offhandedly that as a VC he refuses to invest in copycat startups. He said that it’s not because copycats are always bad financial investments, but rather because copying just isn’t right. It seems like stealing. So he doesn’t have much respect for copycats and doesn’t want to be involved with startups like that.
Unrelated to LTV, a couple days later HBS also hosted a recruiting presentation from Oliver Samwer, one of the cofounders of Berlin-based Rocket Internet. Rocket is best known for incubating and quickly scaling many startups in countries outside the U.S. that have business models which closely resemble those of successful U.S. startups like Amazon, eBay, Zappos, Groupon, and others. Although wildly successful, Rocket is often cast in a negative light for using the business innovations created by others.
One common rationale for the copycat hate is that copying reduces the upside potential for inventors, so it leads to the creation of fewer cool new inventions. Society would love to have both a plethora of new inventions and a highly competitive marketplace, but to encourage innovation we have decided to sacrifice one for the other. Providing a 20-year monopoly to patent-holders greatly boosts the incentive to invent new things, even if it reduces competition for making a particular widget. Copycats erode this incentive.
Although certain types of innovations are protected from copying by law (e.g. technical patents) and some are protected by secrecy (e.g. the recipe for making Coca-Cola), business model innovations are not. Nor should they be, because society has a vested interest in promoting competition. It forces companies to move faster than their peers, to price lower than their peers, and to execute more efficiently than their peers. Consumers, and society at large, benefit tremendously from this. If businesses were unable to use and adapt others’ ideas then many of today’s companies would never have existed. Google search in many ways copied the business model of Yahoo search, which in turn had copied earlier search innovators. Microsoft’s office suite applications copied ideas from a variety of earlier (and arguably more inventive) companies, its browser copied Netscape, and many elements of its Windows user interface were copied from Apple.
In fact, most innovation actually seems to come from people building off of each others’ ideas. One person creates something, and somebody else sees a way to make it better. So they do. The important thing to highlight is that they make it better. Copying somebody else’s microchip exactly does not create anything new, so it doesn’t benefit society and as a result we prevent such behavior with patents. But getting the idea to make a microchip from someone else’s success and then making a different microchip that works better than the existing one does create value for society, so we allow it. And the new inventor patents the new chip.
Similarly, taking somebody else’s business model idea and making it better can create a lot of value. I agree that exact copying is not a great thing, but it turns out that many businesses that people dismissively label as “copycats” are actually improving on existing ideas. For example, some of Rocket’s businesses create ecommerce websites that look similar to other businesses, but they innovate on how the product gets delivered. Developing countries don’t have USPS and many don’t have a reliable, timely local equivalent for delivering items. So Rocket hires people to drive around on mopeds or bicycles to deliver small items, and they innovate on delivery to adapt an existing business model to the country in which they’re operating. In that sense, they’re not too different from Microsoft trying to build a spreadsheet product or from Google trying to build products in search, email, maps, browsers, and mobile operating systems.
